<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 2, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
LASER POWER CORPORATION
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
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DELAWARE 3827 95-3423358
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
12777 HIGH BLUFF DRIVE
SAN DIEGO, CA 92130
(619) 755-0700
(ADDRESS, TELEPHONE NUMBER, OF PRINCIPAL EXECUTIVE OFFICES)
------------------------
12777 HIGH BLUFF DRIVE
SAN DIEGO, CA 92130
(ADDRESS OF PRINCIPAL PLACE OF BUSINESS OR INTENDED PRINCIPAL PLACE OF BUSINESS)
------------------------
GLENN H. SHERMAN, PH.D.
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
LASER POWER CORPORATION
12777 HIGH BLUFF DRIVE
SAN DIEGO, CA 92130
(619) 755-0700
(NAME, ADDRESS, TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
COPIES TO:
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D. BRADLEY PECK, ESQ. PAUL E. KREUTZ, ESQ.
EDWARD C. Y. YIP, ESQ. REBECCA SCHMITT, ESQ.
ALEXANDER A. FITZPATRICK, ESQ. MARK LEHBERG, ESQ.
COOLEY GODWARD LLP GRAY CARY WARE & FREIDENRICH
4365 EXECUTIVE DRIVE, SUITE 1100 4365 EXECUTIVE DRIVE, SUITE 1600
SAN DIEGO, CA 92121 SAN DIEGO, CA 92121
(619) 550-6000 (619) 677-1400
</TABLE>
------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
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CALCULATION OF REGISTRATION FEE
==============================================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE
- ------------------------------------------------------------------------------------------------------------------------------
Common Stock, $0.001 par value................... 2,817,500 $8.50 $23,948,750 $7,257
==============================================================================================================================
</TABLE>
(1) Includes 367,500 shares that the Underwriters have the option to purchase
solely to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(a) under the Securities Act of
1933.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED APRIL 2, 1997
PROSPECTUS
2,450,000 SHARES
[LASER POWER LOGO]
COMMON STOCK
------------------------
Of the 2,450,000 shares of Common Stock offered hereby, 2,000,000 shares
are being sold by Laser Power Corporation ("Laser Power" or the "Company") and
450,000 shares are being sold by certain stockholders of the Company (the
"Selling Stockholders"). The Company will not receive any portion of the
proceeds from the sale of shares by the Selling Stockholders. See "Principal and
Selling Stockholders."
Prior to this offering, there has been no public market for the Common
Stock of the Company. It is estimated that the initial public offering price
will be between $6.50 and $8.50 per share. See "Underwriting" for a discussion
of the factors to be considered in determining the initial public offering
price. The Company has applied for quotation of the Common Stock on the Nasdaq
National Market under the symbol "LPWR."
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR INFORMATION
PROSPECTIVE INVESTORS SHOULD CONSIDER.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
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CRIMINAL OFFENSE.
=======================================================================================================
UNDERWRITING PROCEEDS TO
DISCOUNTS PROCEEDS TO SELLING
PRICE TO PUBLIC AND COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
- -------------------------------------------------------------------------------------------------------
Per Share......................... $ $ $ $
- -------------------------------------------------------------------------------------------------------
Total(3).......................... $ $ $ $
=======================================================================================================
</TABLE>
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Act"). The Company has also agreed
to sell to the Representatives of the Underwriters warrants to purchase up
to 200,000 shares of Common Stock exercisable at 130% of the initial public
offering price per share (the "Representatives' Warrants"). See
"Underwriting."
(2) Before deducting expenses payable by the Company estimated at $912,500,
including the Representatives' non-accountable expense allowance.
(3) The Company has granted to the Underwriters a 45-day option to purchase up
to 367,500 additional shares of Common Stock solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions and Proceeds to
Company will be $ , $ and $ , respectively. See
"Underwriting."
------------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject to
the right of the Underwriters to withdraw, cancel or modify such offer and
reject orders in whole or in part. It is expected that delivery of the
certificates for the Common Stock will be made at the offices of Cruttenden Roth
Incorporated, Irvine, California on or about , 1997.
CRUTTENDEN ROTH L.H. FRIEND, WEINRESS, FRANKSON & PRESSON, INC.
INCORPORATED
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE> 3
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
------------------------
The Company intends to furnish annual reports to stockholders containing
audited financial statements, quarterly reports and such other periodic reports
as it may determine to be appropriate or as may be required by law.
------------------------
Turbo-Cooled(R) is a registered trademark and Laser Power (stylized), the
Laser Power logo and MP-5 are trademarks of the Company. All other trademarks or
service marks used in this Prospectus are the property of their respective
holders.
2
<PAGE> 4
PROSPECTUS SUMMARY
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in this Prospectus.
The following summary is qualified in its entirety by the more detailed
information and the consolidated financial statements, including the notes
thereto, appearing elsewhere in this Prospectus. Except as otherwise noted, all
information in this Prospectus (i) assumes no exercise of the Underwriters'
over-allotment option, the Representatives' Warrants, other warrants outstanding
as of the date of this Prospectus, or options granted or reserved under the
Company's stock option plans, (ii) assumes no conversion of the outstanding
Series A Convertible Subordinated Debentures (the "Debentures"), (iii) reflects
the 1-for-1.5 reverse stock split of the Common Stock to be effected prior to
the closing of this offering, and (iv) reflects the exchange of all outstanding
shares of the Company's Preferred Stock for 1,193,252 shares of Common Stock
immediately prior to the closing of this offering. See "Certain Transactions,"
"Principal and Selling Stockholders," "Description of Capital Stock,"
"Underwriting" and Note 5 of Notes to Consolidated Financial Statements.
THE COMPANY
Laser Power Corporation ("Laser Power" or the "Company") designs,
manufactures and markets high performance laser optics for industrial, medical
and military lasers and laser systems. Laser optics are precision lenses,
reflectors and mirrors used to reflect, collect and focus laser beams. The
Company's products are sold to laser system OEMs and end users as original and
replacement components in high power CO(2) and other lasers. The Company's core
competencies lie in its surface finishing and thin film coatings, which are key
elements involved in all high-performance laser optics. The Company believes
that its expertise in these areas provides it with a significant competitive
advantage.
The Company's customers use high power CO(2) lasers in a variety of
industrial processing applications, such as sheet metal cutting, automobile body
welding, surface hardening for engine components and scribing and drilling
delicate ceramic circuits. The Company also sells high performance laser optics
to medical equipment OEMs for lower power CO(2) lasers used in certain
therapeutic and cosmetic procedures, including surgery and skin wrinkle removal.
In addition, the Company has developed very low absorption thin film coatings
for optics for laser anti-missile systems. The Company also conducts contract
research in the development and applications of advanced solid state lasers.
Substantially all of the Company's product revenues to date are attributable to
the sale of laser optics products for the industrial processing and medical
industries.
The Company has leveraged its expertise in thin film coatings, surface
finishing and solid state lasers to develop proprietary miniature solid state
lasers that are excited or "pumped" by diode lasers. These "microlasers" have
significant size advantages, are generally 100 times more energy efficient and
have longer estimated lifetimes than conventional gas and solid state lasers.
Laser Power shipped the first microlaser evaluation units in March 1997, and
expects to begin commercial deliveries of microlasers to a medical equipment OEM
to replace gas lasers in dermatology systems by the end of fiscal 1997. The
Company believes that microlasers can replace other lasers in additional medical
equipment. The Company is also developing microlasers for projection display and
telecommunications applications.
STRATEGY
The Company's strategy is to expand its existing high performance laser
optics business through a continual improvement in quality and customer service
while introducing new products, such as the Company's low absorption,
non-radioactive MP-5 thin film coatings and Turbo-Cooled optics. The Company
also plans to leverage its optics expertise to enter new high margin markets for
high performance optics for neodymium-yttrium aluminum garnet ("YAG") and
visible lasers and thin film filters for dense wavelength division multiplexers
("WDM"). In addition, to increase margins on optics sales, the Company plans to
increase manufacturing automation and transfer additional labor intensive
operations to its facility in Mexico.
The Company's strategy is to build its microlaser infrastructure by
entering lower volume medical, biotechnology and industrial markets where its
blue and green microlasers can replace other lasers. This infrastructure will
then serve as the platform for launching microlasers in higher volumes for
projection display applications. In addition, the Company has developed
prototypes of microlaser based projectors for the high end, high resolution
projector market. The Company also is developing a microlaser for fiber optic
telecommunications applications. The Company's strategy is to use this
microlaser as a platform to build a family of telecommunications products.
The Company was incorporated in California in August 1979 and
reincorporated in Delaware in July 1983. The Company's executive offices are
located at 12777 High Bluff Drive, San Diego, California 92130, and its
telephone number is (619) 755-0700.
3
<PAGE> 5
THE OFFERING
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Common Stock offered by the Company.......... 2,000,000 shares
Common Stock offered by Selling 450,000 shares
Stockholders...............................
Common Stock outstanding after the 6,202,354 shares
offering...................................
Use of Proceeds.............................. Additions to plant and equipment, repayment of
debt, working capital and other general
corporate purposes. See "Use of Proceeds."
Proposed Nasdaq National Market Symbol....... LPWR
</TABLE>
- ---------------
(1) Excludes: (i) 1,291,619 shares of Common Stock reserved for issuance upon
exercise of outstanding options; (ii) 386,660 shares of Common Stock
issuable upon exercise of outstanding warrants; (iii) 200,000 shares of
Common Stock issuable upon exercise of the Representatives' Warrants; (iv)
up to 368,888 shares of Common Stock issuable upon conversion of the
Debentures; and (v) an aggregate of 1,250,000 shares of the Common Stock
reserved for future issuance under the Company's 1997 Equity Incentive Plan
(the "1997 Plan") and the Employee Stock Purchase Plan.
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS EXCEPT PER SHARE DATA)
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<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED AUGUST 31, FEBRUARY 29/28,
--------------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
------ ------ ------- ------- ------- ------- -------
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CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues:
Product sales............................. $8,622 $8,720 $10,158 $11,859 $15,194 $ 6,880 $ 7,995
Contract research and development......... 1,149 963 1,727 2,714 3,713 1,682 3,129
------ ------ ------- ------- ------- ------- ------
Total revenues..................... 9,771 9,683 11,885 14,573 18,907 8,562 11,124
Cost of revenues:
Product sales............................. 5,125 5,392 6,550 7,994 9,888 4,601 5,475
Contract research and development......... 941 766 1,308 2,059 2,942 1,262 2,502
------ ------ ------- ------- ------- ------- ------
Total cost of revenues............. 6,066 6,158 7,858 10,053 12,830 5,863 7,977
Gross profit:
Product sales............................. 3,497 3,328 3,608 3,865 5,306 2,279 2,520
Contract research and development......... 208 197 419 655 771 420 627
------ ------ ------- ------- ------- ------- ------
Total gross profit................. 3,705 3,525 4,027 4,520 6,077 2,699 3,147
Income (loss) from operations............... 485 (629) (745) (1,920) (918) (845) 480
Net income (loss)........................... $ 312 $ (816) $(1,013) $(2,269) $(1,231) $(1,004) $ 313
Pro forma net income (loss) per share(1).... $ (0.29) $ 0.06
Shares used in per share computations(1).... 4,311 4,887
OTHER DATA:
Effect of microlaser operations on income
(loss) from operations(2)............... $ -- $ (294) $ (983) $(2,104) $(2,035) $(1,161) $ (164)
</TABLE>
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<CAPTION>
FEBRUARY 28, 1997
--------------------------
PRO FORMA
ACTUAL AS ADJUSTED(3)
-------- --------------
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CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.................................................. $ 128 $ 11,951
Working capital............................................................ 1,992 14,112
Total assets............................................................... 12,728 24,551
Long-term debt, net of current portion..................................... 687 582
Subordinated convertible debentures........................................ 1,660 1,660
Total stockholders' equity................................................. 5,557 18,557
</TABLE>
- ---------------
(1) See Note 1 of Notes to Consolidated Financial Statements for a description
of the computation of the pro forma net income (loss) per share and the
number of shares used in the pro forma per share calculation.
(2) The effect of microlaser operations on income (loss) from operations
includes gross profit, research and development expenses and incremental
selling, general and administrative expenses. It does not include any
allocations of corporate expenses, interest or taxes.
(3) As adjusted to reflect the exchange of all outstanding convertible Preferred
Stock for 1,193,252 shares of Common Stock immediately prior to the closing
of this offering and to give effect to the sale of 2,000,000 shares of
Common Stock to be sold in the offering by the Company hereby at an assumed
initial public offering price of $7.50 and after deducting estimated
underwriting discounts and commissions and offering expenses and the
application of the net proceeds from the sale of such shares. See "Use of
Proceeds" and "Capitalization".
4
<PAGE> 6
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following risk factors should be considered carefully in evaluating the Company
and its business before purchasing shares of the Common Stock offered hereby.
This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements that involve risks and
uncertainties. Factors that might cause such a difference include, but are not
limited to, those discussed in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business" as well as those
discussed elsewhere in this Prospectus.
HISTORY OF OPERATING LOSSES AND ACCUMULATED DEFICIT
As a result of substantial investments in research and development, the
Company incurred operating losses in each of the last three fiscal years and at
February 28, 1997 had an accumulated deficit of $4.9 million. The development,
sales, marketing and support of new products will require continued substantial
expenditures for the foreseeable future, which could result in additional
operating losses. The Company has funded a substantial portion of its product
development efforts through development contracts. Any failure by the Company to
maintain its external funding sources could result in increased operating
losses. There can be no assurance that the Company will maintain its external
funding sources or be profitable in the future or that the net proceeds of this
offering, together with any funds provided by operations and present capital,
will be sufficient to fund the Company's future capital requirements. See "Use
of Proceeds," "Selected Consolidated Financial Information," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business -- Research and Development."
COMPETITION
The industries in which the Company sells its products, and will sell its
products under development, are highly competitive. In each of the markets it
serves, the Company faces intense competition from established competitors, many
of which have substantially greater financial, engineering, research and
development, manufacturing, sales, marketing, service and support resources,
including greater name recognition, a larger installed base of products and
longer standing customer relationships. There can be no assurance that the
Company will be able to compete successfully in the laser optics, laser and
laser systems industries in the future, that the Company will be able to make
the technological advances necessary to maintain its competitive position or
that its new products will receive market acceptance. In addition, there can be
no assurance that technological changes or development efforts by the Company's
competitors will not render the Company's products or technologies obsolete or
uncompetitive. See "Business -- Sales and Marketing" and "-- Competition."
DEVELOPMENT RISKS RELATING TO MICROLASER TECHNOLOGIES
The Company has devoted substantial resources to developing its microlasers
and future microlaser based products. To date, sales of the Company's
microlasers have been limited to customer evaluation sales. Other microlasers
and microlaser based products are still in the early stages of development.
There can be no assurance that the Company will successfully develop any
microlaser or microlaser based products. There also can be no assurance that the
Company's microlasers will be successfully designed into customers' products or
that the Company's products under development will achieve commercial sales
volumes. The Company believes that it will be necessary to continue to reduce
the cost of manufacturing and to broaden the variety of wavelengths provided by
its microlaser to achieve commercial acceptance. If the Company is unable to
successfully gain market acceptance of its microlasers and microlaser based
products, its business, operating results and financial condition will be
materially and adversely affected. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business -- Products and
Products under Development," "-- Laser Power's Strategy" and "-- Research and
Development."
5
<PAGE> 7
DEPENDENCE ON SOLE AND LIMITED SOURCE SUPPLIERS
Certain materials and components used in the manufacture of the Company's
products are currently obtained from single or limited source suppliers. The
Company purchases all of its zinc selenide (a critical raw material used in the
manufacture of the Company's optics) from Morton International, Inc. ("Morton").
In addition, the Company believes that Cerac Incorporated ("Cerac"), from which
the Company purchases all of its thorium fluoride for use in its low absorption
thin film coatings, is the sole source for high quality thorium fluoride. Any
interruption or cessation of supply by Morton or Cerac would have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company does not have long term or volume purchase agreements
with its suppliers, and there can be no assurance that materials and components
needed by the Company will be available in the quantities required by the
Company, if at all. See "Business -- Manufacturing."
DEPENDENCE ON NEW PRODUCTS AND PROCESSES
To meet its strategic objectives, the Company must continue to develop,
manufacture and market new products, develop new processes and improve its
existing processes. As a result, the Company expects to continue to make
significant investments in research and development and to continue to consider
from time to time the strategic acquisition of businesses, products, or
technologies complementary to the Company's business. The success of the Company
in developing, introducing and selling new and enhanced products depends upon a
variety of factors, including product selection, timely and efficient completion
of product design and development, timely and efficient implementation of
manufacturing and assembly processes, effective sales and marketing and product
performance in the field. There can be no assurance that the Company will be
able to develop and introduce new products or enhancements to its existing
products and processes in a manner that satisfies customer needs or achieves
market acceptance. The failure to do so would have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Business -- Laser Power's Strategy" and "-- Research and Development."
DEPENDENCE ON PATENTS AND PROPRIETARY RIGHTS
The Company's success will depend in large part on its ability, and the
ability of its licensees and licensors, to obtain patents for its technologies
and any products resulting from the application of such technologies, to defend
such patents once obtained and to maintain trade secrets, both in the United
States and in foreign countries. The commercial success of the Company will also
depend upon avoiding the infringement of patents issued to others and
maintaining the technology licenses upon which certain of the Company's current
products are, or any future products might be, based.
The Company owns certain U.S. patents and has filed additional patent
applications in the United States and foreign jurisdictions. There can be no
assurance that other patents will be issued to the Company or its licensors as a
result of pending or future patent applications or that, if issued, such patents
will contain claims sufficiently broad to afford protection against competitors
with similar technology. Although the Company may file additional patent
applications outside the United States, the Company believes that obtaining
foreign patents may be more difficult than obtaining U.S. patents because of
differences in patent laws and believes the protection provided by foreign
patents, if obtained, and any other foreign intellectual property protection may
be weaker than that provided in the United States. There can be no assurance
that any patents issued to the Company or for which the Company has license
rights, will not be challenged, narrowed, invalidated or circumvented, or that
the rights granted under such patents will provide competitive advantages to the
Company. Litigation, which could result in substantial cost to the Company, may
be necessary to enforce the Company's patent and license rights, to enforce or
defend an infringement claim, or to determine the scope and validity of others'
proprietary rights. Some of the Company's competitors have, or are affiliated
with companies having, substantially greater resources than the Company, and
such competitors may be able to sustain the costs of complex patent litigation
to a greater degree and for longer periods of time than the Company.
Uncertainties resulting from the initiation and continuation of any patent or
related litigation could have a material adverse effect on the Company's
business, financial condition and results of operations. If others file patent
applications that claim technology also claimed by the Company, the Company may
have to
6
<PAGE> 8
participate in interference proceedings declared by the U.S. Patent and
Trademark Office (the "USPTO") to determine the priority of invention, or
opposition proceedings in a foreign patent office, either of which could result
in substantial cost to the Company, even if the outcome is favorable to the
Company. An adverse outcome could subject the Company to significant liabilities
to third parties and require the Company to cease using the technology or to
license disputed rights from third parties, which licenses may not be available
at reasonable cost, if at all.
The Company has a license to certain technology used in its blue
microlaser. The Company has received a letter from a third party claiming that
the Company's license was granted improperly by the licensor. While the Company
believes that such license was properly granted, there can be no assurance that
the Company's license would not be voided if subjected to a legal challenge. In
such an event, there can be no assurance that the Company would be able to
obtain a replacement license on favorable terms, if at all. Failure to obtain
such a license would have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company is aware that patents held by other parties may relate to the
Company's microlaser technology. The Company believes that it does not infringe
on such patents and that it has adequate design-arounds if it is held to
infringe such patents. The Company may, however, decide to enter into license
agreements with such patent holders to avoid costly litigation. There can be no
assurance that the Company will obtain any licenses that it might seek on
favorable terms, if at all. If it is determined that the patents held by these
other laser companies cover the Company's technology, the Company's inability to
obtain licenses for such technology could have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company has developed certain of its proprietary technology pursuant to
development contracts, including contracts with federal government agencies.
Under standard provisions in government contracts, the government may retain
certain rights in technology developed under such contracts. In addition, under
its other development contracts, the Company has granted significant rights to
third parties under such contracts. The Company's strategy is to continue to
develop a significant portion of its proprietary technology pursuant to funding
received from development contracts. There can be no assurance that the Company
will be able to continue to obtain funding for the development of its
proprietary technology, or that, if received, the Company will obtain rights to
such technology sufficient to permit the Company to develop and market new
products or to prevent third parties from using such technology to compete with
the Company.
The Company relies substantially on certain technologies that are not
patentable or proprietary and are therefore available to the Company's
competitors. The Company also relies on certain proprietary trade secrets and
know-how that are not patentable. Although the Company has taken steps to
protect its unpatented trade secrets and know-how, in part through the use of
confidentiality agreements with its employees, consultants and certain of its
contractors, there can be no assurance that such agreements will not be
breached, that the Company would have adequate remedies for any breach, or that
the Company's trade secrets will not otherwise become known or be independently
developed or discovered by competitors.
The Company's academic collaborators have certain rights to publish data
and information in which the Company has rights. There is considerable pressure
on academic institutions to publish discoveries in the high-technology and
physics fields. There can be no assurance that such publication would not
adversely affect the Company's ability to obtain patent protection for certain
technologies in which it may have a commercial interest. See
"Business -- Patents and Proprietary Rights."
LIMITED MICROLASER MANUFACTURING EXPERIENCE; SCALE-UP RISK
The Company has no experience in producing microlasers other than in small
developmental quantities. The Company's microlasers are assembled from component
parts at the Company's San Diego facility. The Company purchases component parts
for its microlasers, including laser crystals, nonlinear crystals and diode
lasers, from various sources around the world. However, none of the Company's
suppliers of microlaser component parts have experience in supplying components
with the Company's specifications at such increased volumes. The Company does
not have long term or volume purchase agreements with any of its
7
<PAGE> 9
suppliers and currently purchases components on a purchase order basis. There
can be no assurance that these suppliers will be able to provide components to
the Company in the quantities, with the quality or at the prices necessary for
production quantities of the Company's products under development. The Company
must increase its manufacturing capacity to polish and coat crystals and to
perform the required complex assembly steps. Such an increase in its
manufacturing capacity will require significant scale-up expenditures and
additions to the Company's facilities. See "Use of Proceeds." In the event the
Company is unable to locate sufficient sources of supply of microlaser component
parts, or is unable to expand its manufacturing capacity to produce microlasers
and microlaser based products, the Company will not be able to manufacture its
products on commercially reasonable terms, if at all, which would have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Manufacturing."
LIMITED MICROLASER SALES, MARKETING AND DISTRIBUTION EXPERIENCE
The Company has only limited experience marketing and selling its
microlasers, and does not have experience marketing and selling such products in
commercial quantities. The Company intends to sell its microlasers and
microlaser based products through a direct sales force in North America and a
direct sales force and distributors in Europe. In Asia, the Company intends to
sell its microlasers and microlaser based products primarily through agreements
with distributors or representatives, although the Company has not entered into
any such agreements or arrangements to date. To the extent that the Company
enters into distribution or representation arrangements for the sale of its
microlasers and microlaser based products, the Company will be dependent upon
the efforts of third parties. There can be no assurance that the Company will be
able to build a direct sales force or marketing organization for microlasers or
microlaser based products, that establishing such a direct sales force or
marketing organization will be cost effective, or that the Company's sales and
marketing efforts will be successful. There can be no assurance that the Company
will be able to enter into agreements with distributors or representation
arrangements on a timely basis, if at all, or that such distributors or
representatives will devote adequate resources to selling the Company's
microlasers and microlaser-based products. Failure to build an effective sales
and marketing organization or to establish effective distribution or
representation arrangements for the Company's microlaser products would have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Sales and Marketing."
FUTURE CAPITAL REQUIREMENTS
Although the Company believes that the net proceeds from the sale by the
Company of Common Stock in this offering, together with existing cash balances,
cash flow from operations and available lines of credit, will be sufficient to
meet its capital requirements for at least the next 12 months, the Company may
seek additional equity or debt financing to compete effectively in these
markets. The timing and amount of the Company's capital requirements cannot be
precisely determined at this time and will depend on a number of factors,
including the demand for the Company's products and products under development.
There can be no assurance that such additional financing will be available when
needed, or, if available, will be on terms satisfactory to the Company. If
additional funds are raised by issuing equity securities, further dilution to
then existing stockholders will result. See "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
FLUCTUATION IN QUARTERLY PERFORMANCE
The Company has experienced and expects to continue to experience
significant fluctuations in its quarterly results. The Company may incur
significant losses in the future due to product design, development,
manufacturing and marketing expenditures, especially in connection with its
microlasers and microlaser based products. If significant variations were to
occur between forecasts and actual orders with respect to its laser optics
business or microlasers and microlaser based products, the Company may not be
able to reduce its expenses proportionately and in a timely manner, and
operating results could be adversely affected. Such variations have occurred in
the past and could occur again in the future as a result of increases in
development expenditures for proposed new products, product introductions by
competitors, changes in customer ordering
8
<PAGE> 10
patterns and other factors. In addition, the Company's practice of filling
orders in a timely and responsive manner requires the Company to maintain
significant inventories of raw material and finished optics for replacement
orders. If product sales or prices were to decline substantially, inventory
writedowns could occur. Price reductions or increases in material costs could
also have an adverse effect on the Company's business, financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Results of Operations."
RISKS ASSOCIATED WITH INTERNATIONAL SALES
International sales accounted for approximately 43%, 45%, 44%, 43% and 48%
of the Company's total revenues in fiscal years 1994, 1995, 1996 and the six
months ended February 29, 1996 and February 28, 1997, respectively, and the
Company expects that international sales will continue to account for a
substantial portion of total revenues. The Company may continue to expand its
operations outside of the United States and to enter additional international
markets, both of which will require significant management attention and
financial resources. International sales are subject to inherent risks,
including unexpected changes in regulatory requirements, tariffs and other trade
barriers, political and economic instability in foreign markets, difficulties in
staffing and management and integration of foreign operations, longer payment
cycles, greater difficulty in accounts receivable collection, currency
fluctuations and potentially adverse tax consequences. Since substantially all
of the Company's foreign sales are denominated in U.S. dollars, the Company's
products may also become less price competitive in countries in which local
currencies decline in value relative to the U.S. dollar. The Company's business
and operating results may also be materially and adversely affected by lower
sales levels which typically occur during the summer months and the calendar
year end in Europe and certain other overseas markets. The sales of many of the
Company's OEM customers are dependent on international sales, which increases
the Company's exposure to the risks associated with international sales. See
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations," "Business -- Sales and Marketing" and "-- Competition."
DEPENDENCE ON KEY PERSONNEL
The Company is highly dependent upon the experience and continuing services
of certain scientists, engineers and production and management personnel.
Competition for the services of these personnel is intense, and there can be no
assurance that the Company will be able to retain or attract the personnel
necessary for the Company's success. The loss of the services of the Company's
key personnel would have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Employees",
"Management -- Executive Officers and Directors" and "-- Other Key Employees."
ENVIRONMENTAL, HEALTH AND SAFETY CONCERNS
The Company is subject to a variety of federal, state and local
governmental regulations related to the storage, use and disposal of hazardous
materials used by the Company in connection with the manufacture of laser
optics. Both the governmental regulations and the costs associated with
complying with such regulations are subject to change in the future. There can
be no assurance that any such change will not have a material adverse effect on
the Company's business, financial condition and results of operations. The
Company has made and continues to make substantial investments in protective
equipment, process controls, manufacturing procedures and training to minimize
the risks to employees, surrounding communities and the environment due to the
presence and handling of such hazardous materials. The failure to properly
handle such materials could lead to harmful exposure to employees or to the
improper discharge of hazardous materials. Since the Company does not carry
environmental impairment insurance, such a failure could result in a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business -- Environmental, Health and Safety Matters."
9
<PAGE> 11
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of shares by existing security holders could have an adverse
effect on the market price of the Company's Common Stock. Upon completion of
this offering, the Company will have outstanding 6,202,354 shares of Common
Stock. In addition to the 2,450,000 shares sold in this offering which are
freely tradable, approximately 230,000 shares which are currently outstanding
will be eligible for immediate sale on the date of this Prospectus. In addition,
upon the expiration of lock-up agreements, 180 days after the effective date of
the registration statement of which this Prospectus is a part, an aggregate of
approximately 3,520,000 shares will be eligible for sale subject to compliance
in some cases with Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act"). Approximately an additional 1,426,000 shares issuable upon
exercise or conversion of outstanding vested options, warrants and debentures
will also be eligible for sale upon expiration of the lock-up agreements, 180
days after the Effective Date, subject in some cases to compliance with Rule
144. Commencing one year after the completion of this offering, Proxima
Corporation ("Proxima") and Union Miniere, which beneficially own an aggregate
of approximately 2,200,000 shares of Common Stock, will be entitled to certain
registration rights with respect to such shares. The exercise of such rights by
either Proxima or Union Miniere could result in a large number of shares being
sold in the public market after one year from the closing of this offering.
Future sales of shares by existing stockholders could have an adverse effect on
the market price of the Common Stock or otherwise impair the Company's ability
to raise additional capital. See "Certain Transactions," "Description of Capital
Stock" and "Shares Eligible for Future Sale."
RIGHTS TO ACQUIRE SHARES
As of the date of this Prospectus, options to purchase 950,290 shares under
the Company's option plans, additional options to purchase 341,329 shares and
warrants to purchase 386,660 shares of Common Stock are outstanding. In
addition, the Debentures will remain outstanding following the offering and will
be convertible into up to 368,888 shares of Common Stock. At the completion of
this offering, the Representatives will receive the Representatives' Warrants to
purchase up to 200,000 shares of Common Stock at an exercise price equal to 130%
of the initial public offering price per share. The Representatives, Warrants
will be exercisable during a period of four years commencing one year from the
date of this Prospectus. During the terms of the outstanding options, warrants
and Debentures and the Representatives' Warrants, the holders are given the
opportunity to profit from a rise in the market price of the Common Stock, and
their exercise or conversion of such options, warrants or Debentures will dilute
the ownership interest of existing stockholders, including investors in this
offering. The existence of the options, warrants and Debentures may adversely
affect the market price of the Common Stock or otherwise impair the Company's
ability to raise additional capital. See "Management -- Stock Option Plans,"
"Certain Transactions," "Description of Capital Stock -- Debentures" and
"Underwriting."
CONTROL BY EXECUTIVE OFFICERS, DIRECTORS AND AFFILIATED ENTITIES
Upon completion of this offering, the Company's executive officers and
directors and their affiliated entities will, in the aggregate, beneficially own
approximately 56.3% of the outstanding shares of Common Stock. As a result,
these stockholders will be able to exercise control over matters requiring
stockholder approval, including the election of directors, mergers,
consolidations and sales of all or substantially all of the assets of the
Company. This control may prevent or discourage tender offers for the Company's
Common Stock unless the terms are approved by such stockholders. See
"Management" and "Principal and Selling Stockholders."
IMMEDIATE AND SUBSTANTIAL DILUTION
Investors participating in this offering will incur immediate, substantial
dilution of $4.67 per share, assuming an initial public offering price of $7.50
per share. To the extent options or warrants to purchase
10
<PAGE> 12
Common Stock are exercised or the Debentures are converted into Common Stock,
there will be further dilution. See "Dilution" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
EFFECT OF CERTAIN CHARTER AND BYLAW PROVISIONS
Certain provisions of the Company's Amended and Restated Certificate of
Incorporation (the "Restated Certificate") and Bylaws, including the inability
of stockholders to effect actions by written consent or to remove directors
without cause, may have the effect of making it more difficult for a third party
to acquire, or of discouraging a third party from attempting to acquire, control
of the Company. Such provisions could limit the price that certain investors
might be willing to pay in the future for shares of the Common Stock. Certain
provisions of the Restated Certificate allow the Company to issue Preferred
Stock without any vote or further action by the stockholders. These provisions
may make it more difficult for stockholders to take certain corporate actions
and could have the effect of delaying or preventing a change in control of the
Company. See "Management" and "Description of Capital Stock."
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Restated Certificate limits, to the maximum extent permitted by
Delaware General Corporation Law ("Delaware Law"), the personal liability of
directors for monetary damages for any breach of fiduciary duty as a director.
The Company's Bylaws provide that the Company shall indemnify its executive
officers and directors and may indemnify its other officers, employees and
agents to the fullest extent permitted by law. The Company has entered into
indemnification agreements with its executive officers and directors containing
provisions which are in some respects broader than the specific indemnification
provisions contained in Delaware Law. The indemnification agreements may require
the Company, among other things, to indemnify such officers and directors
against certain liabilities arising by reason of their status or service as
directors or officers (other than liabilities arising from willful misconduct of
a culpable nature) and to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified. The Company has
purchased directors' and officers' liability insurance, however, there can be no
assurance that the Company will be able to obtain such liability insurance in
the future. Section 145 of the Delaware Law provides that a corporation may
indemnify a director, officer, employee or agent made or threatened to be made a
party to an action by reason of the fact that he was a director, officer,
employee or agent of the corporation or was serving at the request of the
corporation against expenses actually and reasonably incurred in connection with
such action if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, if he had no reasonable cause to believe
his conduct was unlawful. Delaware Law does not permit a corporation to
eliminate a director's duty of care, and the provisions of the Restated
Certificate have no effect on the availability of equitable remedies, such as
injunction or rescission, for a director's breach of the duty of care. See
"Management -- Limitations of Directors Liability and Indemnification."
DISCRETION OF MANAGEMENT AND THE BOARD OF DIRECTORS IN USE OF PROCEEDS
Although the Company intends to apply the net proceeds of this offering in
the manner described under "Use of Proceeds," the Company's management and the
Board of Directors have broad discretion within such proposed uses as to the
precise allocation of the net proceeds, the timing of expenditures and all other
aspects of the use thereof. The Company reserves the right to reallocate the net
proceeds of this offering among the various categories set forth under "Use of
Proceeds" as it, in its sole discretion, deems necessary or advisable based upon
prevailing business conditions and circumstances. See "Use of Proceeds."
NO PRIOR PUBLIC MARKET FOR COMMON STOCK; VOLATILITY OF STOCK PRICE
Prior to this offering, there has been no public market for the Common
Stock, and there can be no assurance that an active public market for the Common
Stock will develop or be sustained after the offering. The initial public
offering price has been determined by negotiations between the Company and the
Representatives. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. The trading price
of the Common Stock could be subject to significant fluctuations in
11
<PAGE> 13
response to variations in quarterly operating results, the gain or loss of
significant orders, changes in earning estimates by analysts, announcements of
technological innovations or new products by the Company or its competitors,
general conditions in the laser optics and laser industries and other events or
factors. In addition, the stock market in general has experienced extreme price
and volume fluctuations that have affected the market price for many companies
in industries similar or related to that of the Company and that have been
unrelated to the operating performance of those companies. These market
fluctuations may materially and adversely affect the market price of the Common
Stock.
12
<PAGE> 14
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered by the Company hereby at an assumed public offering price
of $7.50 per share, after deducting estimated underwriting discounts and
commissions and initial offering expenses payable by the Company, are estimated
to be $13.0 million ($15.5 million if the Underwriters' over-allotment option is
exercised in full). The Company will not receive any proceeds of the sale of the
shares of Common Stock offered by the Selling Stockholders.
The Company anticipates that it will use approximately $4.7 million in net
proceeds of this offering for expansion of its facilities and additions to its
equipment for production of its current products, and microlasers and microlaser
based products under development. The Company intends to use approximately $1.0
million in net proceeds for prepayment of its term loan and repayment of amounts
outstanding under its line of credit with Wells Fargo Bank N.A. and
approximately $0.2 million in net proceeds for payment of certain promissory
notes issued to Proxima in connection with certain equipment financing. At
February 28, 1997, the term loan, line of credit and Proxima promissory notes
bore interest at the annual rates of 10.25%, 9.50% and 9.75%, respectively, and
have due dates of December 31, 1997, March 1, 1998 and May 30, 1999,
respectively. The Company intends to use the remaining net proceeds for working
capital and general corporate purposes. The Company may use a portion of the net
proceeds to acquire other businesses, products or technologies; the Company
currently has no plans, agreements or commitments, oral or written, with respect
to any such transaction. Pending such uses, the net proceeds will be invested in
interest bearing investment grade securities. Although the Company believes that
the net proceeds from the sale of the Common Stock in this offering, together
with existing cash balances, cash flow from operations and available lines of
credit, will be sufficient to meet its capital requirements for at least the
next 12 months, the Company may be required to seek additional equity or debt
financing. There can be no assurance that such additional financing will be
available when needed, or, if available, will be on terms satisfactory to the
Company.
DIVIDEND POLICY
To date, the Company has not declared nor paid any cash dividends on its
Common Stock. The Company currently intends to retain any future earnings to
finance the growth and development of its business and therefore does not
anticipate paying any cash dividends in the foreseeable future. In addition, the
Company's credit agreement with Wells Fargo Bank prohibits the payment of cash
dividends on its capital stock without the consent of the bank, and the
Debentures restrict payment of cash dividends in accordance with certain
financial covenants. See "Descriptions of Capital Stock -- Convertible
Subordinated Debentures."
13
<PAGE> 15
CAPITALIZATION
The following table sets forth as of February 28, 1997 (i) the actual
capitalization of the Company and (ii) the pro forma capitalization as adjusted
to give effect to the exchange of all outstanding shares of Preferred Stock for
1,193,252 shares of Common Stock and the sale of 2,000,000 shares of Common
Stock offered by the Company hereby at an assumed initial public offering price
of $7.50 per share (after deducting the estimated underwriting discounts and
commissions and offering expenses) and the application of the estimated net
proceeds therefrom.
<TABLE>
<CAPTION>
FEBRUARY 28, 1997
-------------------------
PRO FORMA, AS
ACTUAL ADJUSTED
------- -------------
<S> <C> <C>
Short-term debt, including current portion of long-term debt......... $ 1,178 $ 106
======= =======
Long-term debt, net of current portion(1)............................ $ 687 $ 582
Subordinated convertible debentures(1)............................... 1,660 1,660
------- -------
Total long term debt....................................... 2,347 2,242
Stockholders' equity:
Preferred Stock, $0.125 par value, 3,000,000 shares authorized,
1,610,891 shares issued and outstanding actual; $0.001 par
value, 3,000,000 shares authorized and no shares issued and
outstanding, pro forma as adjusted.............................. 201 --
Common Stock, $0.001 par value, 15,000,000 shares authorized,
3,009,102 shares issued and outstanding actual; $0.001 par value
15,000,000 shares authorized and 6,202,354 issued and
outstanding, pro forma as
adjusted (2).................................................... 3 6
Additional paid-in capital......................................... 10,264 23,462
Foreign currency translation adjustment............................ 6 6
Accumulated deficit................................................ (4,917) (4,917)
------- -------
Total stockholders' equity...................................... 5,557 18,557
------- -------
Total capitalization....................................... $ 7,904 $20,799
======= =======
</TABLE>
- ---------------
(1) See Note 3 of the Notes to Consolidated Financial Statements for a
description of the Company's long-term obligations and the Debentures.
(2) Excludes: (i) 1,224,953 shares of Common Stock issuable upon exercise of
outstanding options at a weighted average exercise price of $3.92 per share;
(ii) 386,660 shares issuable upon exercise of outstanding warrants at a
weighted average exercise price of $3.21 per share; (iii) 200,000 shares of
Common Stock issuable upon exercise of the Representatives' Warrants at an
exercise price equal to 130% of the initial public offering price per share;
(iv) up to 368,888 shares issuable upon conversion of Debentures; and (v) an
aggregate of 1,250,000 shares reserved for future issuance under the 1997
Plan and the Employee Stock Purchase Plan. See "Management -- Stock Option
Plans," "Certain Transactions," "Description of Capital Stock" and Note 5 of
the Notes to Consolidated Financial Statements.
14
<PAGE> 16
DILUTION
The pro forma net tangible book value of the Company as of February 28,
1997 was approximately $4.6 million or $1.09 per share. Pro forma net tangible
book value per share is equal to the Company's total tangible assets less its
total liabilities, divided by the number of outstanding shares of Common Stock,
assuming the exchange of all outstanding shares of Preferred Stock for 1,193,252
shares of Common Stock. After giving effect to the sale of the 2,000,000 shares
of Common Stock offered by the Company hereby (at an assumed initial public
offering price of $7.50 per share and after deducting estimated underwriting
discounts and commissions and offering expenses), the pro forma net tangible
book value of the Company at February 28, 1997 would have been approximately
$17.6 million or $2.83 per share. This represents an immediate increase in such
net tangible book value of $1.74 per share to existing stockholders and an
immediate dilution of $4.67 per share to new investors purchasing shares in this
offering. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.............................. $7.50
Pro forma net tangible book value per share as of February 28, 1997........ $1.09
Increase per share attributable to this offering........................... 1.74
-----
Pro forma net tangible book value per share after this offering.............. 2.83
-----
Dilution per share to new investors.......................................... $4.67
=====
</TABLE>
The following table summarizes, on a pro forma basis, as of February 28,
1997, the differences between the number of shares purchased from the Company,
assuming the exchange of all outstanding shares of Preferred Stock for Common
Stock, the total consideration paid and the average price paid per share by the
existing holders of Common Stock and by the new investors at an assumed initial
public offering price of $7.50 per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ----------------------- AVERAGE PRICE
NUMBER(1) PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............... 4,202,354 68% $10,495,000 41% $2.50
New investors....................... 2,000,000 32 15,000,000 59 $7.50
--------- --- ----------- ---
Total..................... 6,202,354 100% $25,495,000 100%
========= === =========== ===
</TABLE>
- ---------------
(1) The sale of 450,000 shares by the Selling Stockholders in this offering will
reduce the number of shares held by existing stockholders to 3,752,354, or
60% of the total shares of Common Stock outstanding and will increase the
number of shares held by new investors to 2,450,000 or 40% of the total
shares of Common Stock outstanding after this offering. See "Principal and
Selling Stockholders."
The foregoing tables excludes: (i) 1,224,953 shares of Common Stock
reserved for issuance upon exercise of outstanding options at a weighted average
exercise price of $3.92 per share; (ii) 386,660 shares of Common Stock issuable
upon exercise of outstanding warrants at a weighted average exercise price of
$3.21 per share; (iii) 200,000 shares of Common Stock issuable upon exercise of
the Representatives' Warrants at an exercise price equal to 130% of the initial
public offering price per share; (iv) up to 368,888 shares issuable upon
conversion of the Debentures; and (v)an aggregate of 1,250,000 shares of the
Common Stock reserved for future issuance under the 1997 Plan and the Employee
Stock Purchase Plan. To the extent that options, warrants or Debentures are
exercised or converted in the future, there will be further dilution to new
stockholders. See "Management -- Stock Option Plans."
15
<PAGE> 17
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and the
Notes thereto included elsewhere in this Prospectus. The Consolidated Statements
of Operations Data for the years ended August 31, 1992, 1993, 1994, 1995 and
1996 and the Consolidated Balance Sheets Data as of August 31, 1992, 1993, 1994,
1995 and 1996 are derived from the Company's Consolidated Financial Statements,
which financial statements have been audited by Ernst & Young LLP, independent
auditors. The Consolidated Statements of Operations Data for the six months
ended February 29, 1996 and February 28, 1997 and the Consolidated Balance
Sheets Data as of February 28, 1997, are derived from the unaudited financial
statements of the Company. The results of operations for the six months ended
February 28, 1997 are not necessarily indicative of the results for the full
year or future periods. The unaudited financial statements have been prepared on
a basis consistent with the Company's audited financial statements and include
all adjustments, consisting only of normal recurring adjustments, that
management believed necessary for a fair presentation of the Company's financial
position and results of operations for such periods.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED AUGUST 31, FEBRUARY 29/28,
---------------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues:
Product sales............................ $8,622 $ 8,720 $10,158 $11,859 $15,194 $ 6,880 $ 7,995
Contract research and development........ 1,149 963 1,727 2,714 3,713 1,682 3,129
------ ------- ------- ------- ------- ------- -------
Total revenues.................... 9,771 9,683 11,885 14,573 18,907 8,562 11,124
------ ------- ------- ------- ------- ------- -------
Costs and expenses:
Product sales............................ 5,125 5,392 6,550 7,994 9,888 4,601 5,475
Contract research and development........ 941 766 1,308 2,059 2,942 1,262 2,502
Microlaser internal research and
development............................ -- 294 983 2,071 1,968 1,115 99
Other internal research and
development............................ 481 890 585 786 721 346 290
Selling general and administrative....... 2,739 2,971 3,204 3,583 4,306 2,083 2,278
------ ------- ------- ------- ------- ------- -------
Total costs and expenses.......... 9,286 10,313 12,630 16,493 19,825 9,407 10,644
------ ------- ------- ------- ------- ------- -------
Income (loss) from operations.............. 485 (630) (745) (1,920) (918) (845) 480
Interest expense, net...................... 128 186 268 326 300 152 145
------ ------- ------- ------- ------- ------- -------
Income (loss) before income taxes.......... 357 (816) (1,013) (2,246) (1,218) (997) 335
Income taxes............................... 45 -- -- 23 13 7 22
------ ------- ------- ------- ------- ------- -------
Net income (loss)................. $ 312 $ (816) $(1,013) $(2,269) $(1,231) $(1,004) $ 313
====== ======== ======== ======== ======== ======== ========
Pro forma net income (loss) per share(1)... $ (0.29) $ 0.06
======== ========
Shares used in per share computations(1)... 4,311 4,887
======== ========
OTHER DATA:
Effect of microlaser operations on income
(loss) from operations(2).............. $ -- $ (294) $ (983) $(2,104) $(2,035) $(1,161) $ (164)
====== ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AUGUST 31,
---------------------------------------------- FEBRUARY 28,
1992 1993 1994 1995 1996 1997
------ ------- ------- ------- ------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEETS DATA:
Cash and cash equivalents.................. $ 621 $ 109 $ 394 $ 257 $ 298 $ 128
Working capital............................ 2,457 1,745 1,723 2,311 2,838 1,992
Total assets............................... 8,005 7,899 9,444 10,207 11,194 12,728
Long-term debt, net of current portion..... 895 943 1,049 802 559 687
Subordinated convertible debt.............. 1,660 1,660 1,660 1,660 1,660 1,660
Total stockholders' equity................. 3,783 3,234 3,787 4,670 5,320 5,557
</TABLE>
- ---------------
(1) See Note 1 of Notes to Consolidated Financial Statements for a description
of the computation of the pro forma net income (loss) per share and the
number of shares used in the pro forma per share calculation.
(2) The effect on microlaser operations on income (loss) from operations
includes gross margin, research and development expenses and incremental
selling, general and administrative expenses. It does not include any
allocations of corporate expenses, interest or taxes.
16
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following contains forward-looking statements that involve risk and
uncertainties. The Company's actual results may differ materially from the
results discussed. Factors that might cause such a difference include, but are
not limited to, those discussed in "Risk Factors," as well as those discussed
elsewhere in this Prospectus.
OVERVIEW
Laser Power designs, manufactures and sells a broad range of optics and
optical assemblies for lasers used in industrial, medical and military
applications. The Company sells its optics products to major domestic and
foreign laser and laser system manufacturers and end users as original and
replacement components in high power CO2 and other lasers. The Company also
conducts contract research in advanced applications of lasers and optics,
primarily for U.S. government departments and agencies. The Company has also
developed miniature solid state lasers, or microlasers, which it expects to
manufacture, market and sell by the end of fiscal 1997.
The Company manufactures optics primarily for customer orders for scheduled
deliveries and to a lesser extent for inventory for same day delivery orders,
and ships in annual volumes ranging from several units to end user customers to
thousands of units to OEM customers and major distributors. As manufacturing
volume has increased, the Company has experienced longer manufacturing cycle
times due to capacity constraints in its polishing and coating operations. The
Company has recently made investments in additional manufacturing equipment and
facilities in the United States and Mexico that it believes will result in
reduced manufacturing costs when fully integrated into operations. See "Risk
Factors -- Dependence on New Products and Processes" and "-- Fluctuations in
Quarterly Performance."
Contract research and development allows the Company to develop
technologies that the Company believes may have significant commercial
applications without bearing all of the economic risks of such development.
Revenues from contract research are recognized based on the ratio of costs
incurred to total estimated costs. Typically, contract gross margins are lower
than gross margins on product sales. Revenues from contract research are
expected to remain relatively stable in absolute dollar terms and to decrease as
a percentage of revenues due to the higher anticipated growth rate of sales of
optics and the anticipated commencement of sales of microlasers.
A substantial portion of microlaser internal research and development has
been funded by the Company through the sale of equity securities. In the future,
the Company anticipates funding these development activities through funds
provided by operations or research and development contracts.
While optics and contract research operations (excluding interest and
taxes) have been profitable for all periods presented, the investment in
microlaser internal research and development has resulted in consolidated losses
for fiscal 1994, 1995 and 1996. Microlaser research has been primarily funded by
contracts since July 1996. As a result, the Company has operated profitably for
the six months ended February 28, 1997. Continued profitable operations will
depend on the cost and the period of time until development and
commercialization of microlasers are completed, pricing and other factors which
determine customer acceptance of these new products, and the success of
competing products and alternative technologies.
17
<PAGE> 19
RESULTS OF OPERATIONS
The following table sets forth certain statements of operations and other
data expressed as a percentage of revenues for the periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS
FISCAL YEAR ENDED AUGUST ENDED
31, FEBRUARY 29/28,
------------------------- ---------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues:
Product sales.................................. 85.5% 81.4% 80.4% 80.4% 71.9%
Contract research and development.............. 14.5 18.6 19.6 19.6 28.1
----- ----- ----- ----- -----
Total revenues......................... 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- -----
Costs and expenses:
Cost of product sales(1)....................... 64.5 67.4 65.1 66.9 68.5
Contract research and development(1)........... 75.7 75.9 79.2 75.1 80.0
Microlaser internal research and
development(2).............................. 8.3 14.2 10.4 13.0 0.9
Other internal research and development........ 4.9 5.4 3.8 4.0 2.6
Selling, general and administrative............ 27.0 24.6 22.8 24.3 20.5
Total cost and expenses................ 106.3 113.2 104.9 109.8 95.7
Income(loss) from operations..................... (6.3) (13.2) (4.9) (9.8) 4.3
Interest expense, net............................ 2.2 2.2 1.6 1.8 1.3
Income(loss) before income taxes................. (8.5) (15.4) (6.5) (11.6) 3.0
Income taxes................................... -- 0.2 -- 0.1 0.2
Net income(loss)................................. (8.5) (15.6) (6.5) (11.7) 2.8
OTHER DATA:
Effect of microlaser operations on income
(loss) from operations(3)................... (8.3) (14.4) (10.8) (10.4) (1.9)
</TABLE>
- ---------------
(1) Cost of product sales and cost of contract research and development revenues
are stated as percentages of product sales and contract research and
development revenues, respectively.
(2) Prior to fiscal 1997, microlaser research was funded internally by the
Company primarily through the sale of equity securities.
(3) The effect of microlaser operations on income (loss) from operations
includes gross margin, research and development expenses and incremental
selling, general and administrative expenses. It does not include any
allocations of corporate expenses, interest or taxes.
Six Months Ended February 28, 1997 Compared to Six Months Ended February 29,
1996
For the six months ended February 28, 1997, product sales were $8.0 million
compared to $6.9 million for the same period in fiscal 1996, an increase of $1.1
million or 16%. Contract research and development revenues were $3.1 million for
the six months ended February 28, 1997 compared to $1.7 million for the same
period in fiscal 1996, an increase of $1.4 million or 86%. The increase in
product sales was primarily due to increased worldwide demand for the Company's
laser optics as OEM customers increased sales of high power CO(2) lasers and
laser systems, the installed base of such systems increased, and end users
replaced optics more frequently due to increased utilization. The increase in
contract research and development revenues was due primarily to work performed
on a commercial microlaser display development contract that began in July 1996.
The Company's ability to maintain or improve on the increased product sales
in the first six months for the remainder of fiscal 1997 will depend on
maintaining increased orders for products, integrating into operations
additional manufacturing equipment purchased and facilities leased during the
first six months of
18
<PAGE> 20
fiscal 1997, hiring and training new employees for its expanded facility in
Mexico and commencing planned shipments of microlasers for medical and other
applications. The growth in contract research and development revenues is
expected to slow for the full year because the commercial display development
contract is scheduled to be completed prior to year end.
Gross profit on product sales was $2.5 million for the six months ended
February 28, 1997 compared to $2.3 million for the same period in fiscal 1996,
an increase of $241,000 or 11%. Gross profit on contract research and
development revenues was $627,000 for the six months ended February 28, 1997
compared to $420,000 for the same period in fiscal 1996, an increase of $207,000
or 49%. Gross margin on product sales decreased to 31.5% for the six months
ended February 28, 1997 from 33.1% for the same period in fiscal 1996. The
decrease was primarily due to manufacturing inefficiencies related to capacity
constraints and facility expansion to accommodate the increased volume of orders
and to a lesser extent reduced average selling prices of optics in certain
markets. Gross margin on contract research and development revenues decreased to
20.0% for the six months ended February 28, 1997 from 25.0% for the same period
in fiscal 1996 due to the lower negotiated gross profit on the commercial
display development contract.
Microlaser internal research and development expenses were $99,000 for the
six months ended February 28, 1997, compared to $1.1 million for the same period
in fiscal 1996, a decrease of $1.0 million or 91%. The decrease was due to the
transition of funding for certain microlaser development effects from internal
sources to contract sources. Microlaser internal research and development
expenses are expected to increase over the last six months of fiscal 1997.
Selling, general and administrative expenses were $2.3 million for the six
months ended February 28, 1997 compared to $2.1 million for the same period in
fiscal 1996, an increase of $194,000 or 9%. These expenses have decreased as a
percentage of revenues as absolute spending has increased at a slower rate than
the growth in revenues.
Income taxes were $22,000 for the six months ended February 28, 1997
compared to $7,000 for the same period in fiscal 1996, an increase of $15,000 or
218%. The increase was due to increased taxable income. The Company's effective
tax rate was reduced substantially by the utilization of federal and state tax
net operating loss carryforwards. The future availability of carryforwards may
be limited by the application of rules relating to a change in control as a
result of this offering.
Fiscal Year Ended August 31, 1996 Compared to Fiscal Year Ended August 31,
1995
Product sales were $15.2 million in fiscal 1996 compared to $11.9 million
in fiscal 1995, an increase of $3.3 million or 28%. Contract research and
development revenues were $3.7 million in fiscal 1996 compared to $2.7 million
in fiscal 1995, an increase of $1.0 million or 37%. The increase in product
sales was due to increased acceptance of the Company's OEM customers' lower
power lasers for certain industrial and medical applications and increased
worldwide demand for laser optics for new high power lasers and as replacement
parts in installed lasers. The increase in contract research and development
revenues was due to the increased number and average size of contracts awarded
to the Company.
Gross profit on product sales was $5.3 million in fiscal 1996 compared to
$3.9 million in fiscal 1995, an increase of $1.4 million or 37%. Gross profit on
contract research and development revenues was $771,000 in fiscal 1996 compared
to $655,000 in fiscal 1995, an increase of $116,000 or 18%. Gross margin on
product sales increased to 34.9% in fiscal 1996 from 32.6% in fiscal 1995. The
increase in gross margin was primarily due to improved manufacturing
efficiencies resulting from higher manufacturing volume and from increased
production in Mexico. Gross margin on contract research and development revenues
decreased to 20.8% in fiscal 1996 from 24.1% in fiscal 1995. The decrease was
primarily due to a cost-sharing contract that supplemented internal funding of
technology development for microlasers and microlaser based projection displays.
Microlaser internal research and development expenses were $2.0 million in
fiscal 1996 compared to $2.1 million in fiscal 1995, a decrease of $103,000 or
5%, due to the transition of certain microlaser development from internal
funding to contract funding late in fiscal 1996.
19
<PAGE> 21
Selling, general and administrative expenses were $4.3 million in fiscal
1996 compared to $3.6 million in fiscal 1995, an increase of $724,000 or 20%,
due primarily to the addition of personnel necessary to support the growth in
product sales and the anticipated production of microlasers and to a lesser
extent Company-wide bonus accruals; no bonuses were accrued in 1995. These
expenses decreased as a percentage of revenues as absolute spending increased at
a slower rate than the growth in revenues.
Fiscal Year Ended August 31, 1995 Compared to Fiscal Year Ended August 31,
1994
Product sales were $11.9 million in fiscal 1995 compared to $10.2 million
in fiscal 1994, an increase of $1.7 million or 17%. Contract research and
development revenues were $2.7 million in fiscal 1995 compared to $1.7 million
in fiscal 1994, an increase of $1.0 million or 57%. The increase in product
sales was due to increased worldwide demand in both industrial and medical
markets for laser optics for new lasers and as replacement parts in installed
lasers. The increase in contract research and development revenues was due to
the increased number and average size of contracts awarded to the Company.
Gross profit on product sales was $3.9 million in fiscal 1995 compared to
$3.6 million in fiscal 1994, an increase of $257,000 or 7%. Gross profit on
contract research and development revenues was $655,000 in fiscal 1995 compared
to $419,000 in fiscal 1994, an increase of $236,000 or 56%. Gross margin on
product sales decreased to 32.6% in fiscal 1995 from 35.5% in fiscal 1994,
primarily due to competitive pricing pressures. Gross margin on contract
research and development revenues decreased to 24.1% in fiscal 1995 from 24.3%
in fiscal 1994, due to cost increases that were not covered by increased prices.
Microlaser internal research and development expenses were $2.1 million in
fiscal 1995 compared to $1.0 million in fiscal 1994, an increase of $1.1 million
or 111%. Fiscal 1995 expenditures included a full year of development activity
under a joint development agreement with Proxima compared to seven months in
fiscal 1994. Other internal research and development expenses were $786,000 in
fiscal 1995 compared to $585,000 in fiscal 1994, an increase of $201,000 or 34%,
due to increased internal funding of new product development of laser optics and
optical assemblies.
Selling, general and administrative expenses were $3.6 million in fiscal
1995 compared to $3.2 million in fiscal 1994, an increase of $378,000 or 12%,
due to the addition of personnel and related increases in compensation. These
expenses have decreased as a percentage of revenues as absolute spending has
increased at a slower rate than the growth in revenues.
Net interest expense was $326,000 in fiscal 1995 compared to $268,000 in
fiscal 1994, an increase of $58,000 or 22%, due primarily to higher interest
rates on the portion of the Company's debt with interest rates based on the
prime rate.
Income taxes were $23,000 in fiscal 1995 and were for state income taxes.
There were no income taxes in fiscal 1994.
20
<PAGE> 22
QUARTERLY RESULTS
The following table presents certain unaudited consolidated quarterly
financial information for fiscal 1996 and the first two quarters of fiscal 1997.
In the opinion of the Company, this information has been prepared on the same
basis as the audited consolidated financial statements appearing elsewhere in
this Prospectus and includes all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the unaudited quarterly
results set forth herein. Operating results for any quarter are not necessarily
indicative of results for any future period or for a full fiscal year.
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------
FISCAL 1996 FISCAL 1997
---------------------------------------- -------------------
NOV. 30, FEB. 29, MAY 31, AUG. 31, NOV. 30, FEB. 28,
1995 1996 1996 1996 1996 1997
-------- -------- ------- -------- -------- --------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Product sales............................... $3,352 $ 3,528 $4,262 $4,052 $4,060 $ 3,935
Contract research and development........... 782 900 980 1,051 1,562 1,567
------ ------ ------ ------ ------ ------
Total revenues...................... 4,134 4,428 5,242 5,103 5,622 5,502
------ ------ ------ ------ ------ ------
Costs and expenses:
Cost of product sales....................... 2,224 2,377 2,879 2,408 2,730 2,745
Contract research and development........... 581 681 769 911 1,315 1,187
Microlaser internal research and development(1)... 477 638 554 299 48 51
Other internal research and development..... 179 167 172 203 152 138
Selling, general and administrative......... 1,039 1,044 1,079 1,144 1,169 1,109
------ ------ ------ ------ ------ ------
Total cost and expenses............. 4,500 4,907 5,453 4,965 5,414 5,230
------ ------ ------ ------ ------ ------
Income (loss) from operations................. (366) (479) (211) 138 208 272
Interest expense, net....................... 70 82 74 74 67 78
------ ------ ------ ------ ------ ------
Income (loss) before income taxes............. (436) (561) (285) 64 141 194
Income taxes.................................. 4 3 3 3 12 10
------ ------ ------ ------ ------ ------
Net income (loss)............................. $ (440) $ (564) $ (288) $ 61 $ 129 $ 184
====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
(AS A PERCENTAGE OF REVENUES)
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Product sales............................... 81.1% 79.7% 81.3 % 79.4% 72.2% 71.5%
Contract research and development........... 18.9 20.3 18.7 20.6 27.8 28.5
------ ------ ------ ------ ------ ------
Total revenues...................... 100.0 100.0 100.0 100.0 100.0 100.0
------ ------ ------ ------ ------ ------
Costs and expenses:
Cost of product sales(2).................... 66.3 67.4 67.6 59.4 67.2 69.8
Contract research and development(2)........ 74.3 75.7 78.5 86.6 84.2 75.8
Microlaser internal research and
development(1)........................... 11.5 14.4 10.6 5.9 0.9 0.9
Other internal research and development..... 4.3 3.8 3.3 4.0 2.7 2.5
Selling, general and administrative......... 25.1 23.6 20.6 22.4 20.8 20.2
Total cost and expenses............. 108.9 110.8 104.0 97.3 96.3 95.1
Income (loss) from operations................. (8.9) (10.8) (4.0) 2.7 3.7 4.9
Interest expense, net....................... 1.7 1.8 1.4 1.5 1.2 1.4
Income (loss) before income taxes............. (10.6) (12.6) (5.4) 1.2 2.5 3.5
Income taxes........................ 0.1 0.1 0.1 -- 0.2 0.2
Net income (loss)............................. (10.7) (12.7) (5.5) 1.2 2.3 3.3
</TABLE>
- ---------------
(1) Prior to fiscal 1997, microlaser research was funded internally primarily
using funds provided through the sale of equity securities.
(2) Cost of product sales and cost of contract research and development revenues
are stated as percentages of product sales and contract research and
development revenues, respectively.
The Company's results of operations may vary significantly from time to
time due to a number of factors, including the timing of receipt of orders from
customers, the timing of new product introductions, variations in product mix,
competitive pricing pressures, the delay between incurring expense to expand
manufacturing
21
<PAGE> 23
capacity, and the realization of benefits from the added capacity, and seasonal
and foreign exchange factors related to international sales. See "Risk
Factors -- Fluctuation in Quarterly Performance."
Product sales include high unit price orders for custom optics and coating
and diamond turning services. Shipments of custom orders can cause significant
fluctuations in product sales from quarter to quarter. For example, the results
of operations for the quarter ended May 31, 1996 included unusually high product
sales attributable to custom orders. In addition, actions taken by the Company
to increase capacity in the latter part of the first quarter and throughout the
second quarter of fiscal 1997 restricted the Company's ability to maintain
shipments to keep pace with increased orders. As a result, product sales were
slightly lower in the second quarter of fiscal 1997 when compared to the
preceding three quarters, and the backlog of product orders increased 20% from
the start of the fiscal year to $3.6 million at February 28, 1997. The Company
believes that recent expansion of operations in Mexico and the addition of
polishing and thin film coating equipment will enable it to increase product
shipments to meet customer demand.
In the second quarter of fiscal 1997, gross margin on product sales was
30.2%, compared to an average of 36.7% for the preceding two quarters. The lower
gross margin was due to the impact on ongoing operations of facility expansion
in the United States and Mexico, additional engineering and material costs to
improve manufacturing processes and discounts provided to foreign distributors
to offset the impact of the stronger U.S. dollar.
Based on all of the above factors, as well as factors discussed elsewhere
in this Prospectus, the Company believes that quarter-to-quarter comparisons of
its results of operations and components thereof are not necessarily meaningful
and should not be relied upon as indications of future performance.
LIQUIDITY AND CAPITAL RESOURCES
From inception, the Company has financed operations through cash generated
by operating activities, private placements of debt and equity securities and
bank loans. In 1987, Union Miniere purchased the Debentures and shares of Common
Stock for total consideration of $2.8 million. From May 1993 to June 1996,
Proxima purchased shares of Common Stock and shares of Series A Preferred Stock
for total consideration of $6.7 million.
For the three year period ended August 31, 1996, purchases of capital
equipment and investments in other assets were funded by equity investments and
by long term borrowings. For the six months ended February 28, 1997, purchases
of capital equipment and investments in other assets were funded by available
cash and bank advances that will be converted to a term loan on August 1, 1997.
The Company maintains a $2.0 million secured bank line of credit which had
outstanding borrowings of $774,000 at February 28, 1997. The line of credit
expires on March 1, 1998 and bears interest at the bank's prime rate plus one
percent. The Company intends to use a portion of the net proceeds to the Company
from the offering to repay the outstanding balance on the line of credit. See
"Use of Proceeds."
Substantial additional capital funds will be required to acquire capital
equipment to increase capacity and automate production of laser optics and to
manufacture, assemble and test planned new microlaser products. The Company will
also require funds for facility expansion and investments in working capital and
other assets. The Company anticipates that net proceeds of this offering,
together with existing sources of cash and anticipated funds from operations,
will satisfy the Company's projected working capital and capital expenditure
requirements for at least the next 12 months. The timing and amount of
additional capital requirements depend on a number of factors, including
successful completion of development and commercialization efforts, the cost of
plant, equipment and infrastructure to support manufacturing of products under
development, and the amount of working capital necessary to start-up and
maintain operations supporting new products. There can be no assurance that
additional capital would be available. The lack of such capital would have a
material adverse effect on the Company's business, financial condition and
results of operations.
INFLATION
The Company does not believe that inflation has had a material impact on
its operations or financial results.
22
<PAGE> 24
BUSINESS
The following contains forward-looking statements that involve risk and
uncertainties. The Company's actual results may differ materially from the
results discussed. Factors that might cause such a difference include, but are
not limited to, those discussed in "Risk Factors," as well as those discussed
elsewhere in this Prospectus.
Laser Power designs, manufactures and markets high performance laser optics
for industrial, medical and military lasers and laser systems. Laser optics are
precision lenses, reflectors and mirrors used to reflect, collect and focus
laser beams. The Company's products are sold to laser system OEMs and end users
as original and replacement components in high power CO(2) and other lasers. The
Company's core competencies lie in its surface finishings and thin film
coatings, which are key elements involved in all high-performance laser optics.
The Company believes that its expertise in these areas provides it with a
significant competitive advantage.
The Company's customers use high power CO(2) lasers in a variety of
industrial processing applications, such as sheet metal cutting, automobile body
welding, surface hardening for engine components and scribing and drilling
delicate ceramic circuits. The Company also sells high performance laser optics
to medical equipment OEMs for lower power CO(2) lasers used in certain
therapeutic and cosmetic procedures, including surgery and skin wrinkle removal.
In addition, the Company has developed very low absorption thin film coatings
for optics for laser anti-missile systems. The Company also conducts contract
research in the development and applications of advanced solid state lasers.
Substantially all of the Company's product revenues to date are attributable to
the sale of laser optics products for the industrial processing and medical
industries.
The Company has leveraged its expertise in thin film coatings, surface
finishing and solid-state lasers to develop proprietary miniature solid-state
lasers that are excited or "pumped" by diode lasers. These "microlasers" have
significant size advantages, are generally 100 times more energy efficient and
have longer estimated lifetimes than conventional gas and solid state lasers.
Laser Power shipped the first microlaser evaluation units in March 1997, and
expects to begin commercial deliveries of microlasers to a medical equipment OEM
to replace gas lasers in dermatology systems by the end of fiscal 1997. The
Company believes that microlasers can replace other lasers in additional medical
equipment. The Company is also developing microlasers for projection display and
telecommunications applications.
INDUSTRY AND MARKET OVERVIEW
LASER TECHNOLOGY
The term "laser" is an acronym for "light amplification by the simulated
emission of radiation." A laser converts energy into an intense beam of light
comprised of a single or limited number of wavelengths. A laser beam may be
strong enough to cut sheet metal or may be precise enough to perform eye
surgery. To create a laser beam, an external source of energy, such as
electricity, light or a chemical reaction, is applied to a lasing medium which
becomes excited and emits light. The emitted light is then collected and
directed through or by a series of precision optics to form a laser beam.
The wavelength of the laser beam and therefore its use are determined by
the lasing medium. The most common types of lasing mediums are gases, such as
CO(2) or argon, semiconductor materials, and solid state crystals, such as YAG.
The precision optics which collect, form, reflect and transmit the laser
beam are crucial to a laser's function. In gas lasers, the lasing medium is
encased in a tube with precision optics at either end. These internal optics may
direct the beam from one tube to another, may turn the beam back on itself to
further energize the lasing medium or may allow part of the beam to exit the
tube while turning the rest of the beam back on itself. Conventional solid state
lasers are similar except that the tube is replaced by a laser crystal rod. In
addition to the internal optics, a number of external precision optics may be
used to deliver the beam for its intended application. These external optics may
include mirrors, beam splitters, focusing lenses and other special function
optics.
23
<PAGE> 25
High power CO(2) lasers are widely used in industrial applications, such as
welding automobile bodies, scribing delicate ceramic circuits and sheet metal
cutting. CO(2) lasers offer greater quality, speed, flexibility and automation
than conventional cutting and welding technologies. There are an estimated
24,000 CO(2) laser systems currently installed with approximately 3,200
additional systems estimated to be installed in 1997. These systems generally
contain 10 or more optics which must be replaced regularly as they become worn
or are contaminated. The Company estimates that in 1997 the market for optics
for use in high power CO(2) lasers will be approximately $60 million, of which
$40 million will be sales of optics to replace worn or contaminated optics.
[line drawing of CO(2) laser]
Lower power CO(2) lasers and argon lasers are used in medical and cosmetic
procedures, including heart surgery and the removal of tattoos and skin
wrinkles. Laser procedures reduce blood loss and post-operative pain compared to
other procedures.
Lasers employing a semiconductor medium (diode lasers) are used in
printers, compact disk players and telecommunications equipment. Diode lasers
can also be used to excite or "pump" solid state lasers. Solid state lasers,
which employ crystals as the lasing medium and are energized by light from
lamps, are used in various industrial, medical and biotechnology applications.
Recently, laser engineers have developed small, highly efficient solid state
lasers that are energized by diode lasers (diode pumped solid state lasers or
"DPSSLs"). Because of their small size and high efficiency, DPSSLs may address
many of the applications currently served by other lasers and may create new
applications. Microlasers are miniature DPSSLs.
PRODUCTS AND PRODUCTS UNDER DEVELOPMENT
HIGH PERFORMANCE LASER OPTICS PRODUCTS
The Company produces optics, including total reflectors, output couplers,
beam splitters and lenses, for use in high power industrial, medical, scientific
and military lasers. The Company's expertise in the area of surface finishing
and, in particular, thin film coatings, are critical to producing high
performance laser optics. In general, the performance of an optic is primarily
dependent on the quality of the thin film coating. Thin film coatings include
various reflective coatings for mirrors and transmissive and partially
transmissive coatings for lenses, beam splitters and output couplers. The
Company believes that the high quality of its thin film coatings and its
commitment to customer service enhance its reputation as a supplier of high
power and technically advanced laser optics.
CO(2) Optics. Reliable operation of high power CO(2) lasers requires high
quality, low absorption optical elements. The Company supplies substantially all
types of optics used in CO(2) lasers and laser systems. Such optics fall broadly
into two categories: transmissive zinc selenide and reflective metal optics.
Zinc selenide is the substrate material of choice for high power CO(2)
laser transmissive optics such as lenses, output couplers and beam splitters
because of its low absorption of laser energy. Generally, zinc selenide optics
with low absorption thin film coatings are able to handle up to three kilowatts
of power. As laser power increases to the multi-kilowatt range, reflective metal
optics replace transmissive optics in certain applications.
Reflective metal optics (such as folding mirrors, phase shifting mirrors,
beam bending mirrors and focusing mirrors) utilize a metal substrate, such as
copper. Metal optics are fabricated by conventional polishing or single-point
diamond turning, a process which involves cutting by gem quality diamonds to
create a mirror finish. The Company is a leader in the uses of state-of-the-art,
single-point diamond turning methods to produce both standard metal optics and
those with complicated surfaces such as aspheres, parabolas and hyperbolas,
which are used with higher power CO(2) lasers. The Company's state-of-the-art
fabrication and thin
24
<PAGE> 26
film coating technologies have earned Laser Power a reputation as a leading
manufacturer of zinc selenide and metal optics.
The Company supplies zinc selenide and metal optics to high power CO(2)
laser and laser system manufacturers and to the aftermarket as replacement
parts. The aftermarket portion of the Company's optics business is growing
rapidly as industrial applications of CO(2) lasers proliferate worldwide.
Because CO(2) laser optics wear or become contaminated (average lifetime is
estimated to be 1,000 to 2,000 hours), every new laser installed increases the
market for replacement optics. In order to meet this growing aftermarket demand,
the Company provides same day shipment of critical replacement optics for most
high power CO(2) lasers.
Military Products. Working with Lockheed Martin Corporation ("Lockheed
Martin") and TRW, Inc. ("TRW"), the Company has developed thin film coatings
utilized in ongoing U.S. government programs to develop laser weapons for
missile defense. The Company has developed very low absorption thin film
coatings for uncooled optics, which are critical to a space-based laser for
defense against long range ballistic missiles. By using uncooled optics, the
weight of the laser system is reduced by approximately one-half, allowing the
laser to be boosted into orbit using one rocket instead of two. The Company
continues to develop these coatings for Lockheed Martin. The Company has also
developed coatings for TRW for use in ground-based lasers to defend against
short-range missiles. In addition, the Company has supplied coatings for
uncooled optics to TRW for an airborne laser defense system for use against
shorter range battlefield theater ballistic missiles.
The technology used to produce coatings for these weapons-grade lasers is
derived from technology used by the Company for CO(2) laser optics. The Company
believes that participation in these military programs fosters continued
improvement in CO(2) optics technology and that these improvements provide a
significant competitive advantage.
PRODUCTS UNDER DEVELOPMENT
Optics Products
At laser power levels above three kilowatts, zinc selenide loses its
ability to resist distortion and is often replaced by more expensive, beam
quality limiting solutions such as aspheric metal optics or aerodynamic windows.
However, the Company's Turbo Cooled technology enables zinc selenide optics to
function efficiently even at power levels up to the 10 to 20 kilowatt range. In
addition, the Company's MP-5 technology will enhance the performance of zinc
selenide optics because it has 25%-50% less absorption than many commercial thin
film coatings. The Company believes it will continue to be a leading supplier in
CO(2) laser optics as the industrial CO(2) laser industry continues to use
higher laser power.
Turbo Cooled refers to the Company's patented proprietary cooling design
for optical assemblies. Turbo Cooled optical assemblies incorporate transmissive
zinc selenide optics that operate with less distortion of the laser beam and at
much higher power levels than conventionally cooled optics. This capacity is
important for the industrial CO(2) laser industry's continual drive for higher
power and better beam quality. The Company has also developed laser output
couplers, focusing systems and beam integrators using this technology.
MP-5 refers to the Company's new class of proprietary low absorption
coatings to replace thorium fluoride based thin film coatings for CO(2) laser
optics. Thorium fluoride, a low-level radioactive material, is used by virtually
every manufacturer of high performance CO(2) laser optics. MP-5 coatings are
significantly less absorbing than thorium fluoride based coatings and are
non-radioactive. Low absorption reduces optic heating by the laser beam. Optic
heating causes the beam quality to deteriorate diminishing the ability of the
laser to perform a useful function. In addition, MP-5 technology will not
require the expense of handling, storage and disposal of low level radioactive
wastes associated with thorium fluoride. The Company has filed a patent
application covering the MP-5 technology. The Company believes that optics
manufactured with MP-5 coatings will gain market share and command premium
pricing in certain markets. The Company has performed successful beta-site
testing and expects to release MP-5 products for commercial sale by the third
quarter of fiscal year 1997.
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Microlaser Based Products
Recently, the Company has developed microlasers, which are miniature
DPSSLs. The miniaturization is accomplished by reducing the size of the solid
state material to mm or sub-mm dimensions and using laser diodes rather than
lamps as an energizing source. Microlasers have significant size advantages over
gas and other lasers in areas such as medicine, biotechnology and projection
displays. In addition, microlasers are generally 100 times more energy efficient
than gas lasers because they consume less electricity in creating their optical
output and require less cooling. Microlasers also have longer estimated
lifetimes than gas lasers. For example, an argon-ion tube will burnout after
5,000 to 10,000 hours, compared to an estimated lifetime of 10,000 to 15,000
hours for a microlaser. To date, revenues from sales of its microlaser products
have been insignificant.
[line drawing depicting the difference in size and power requirements
between a microlaser and an argon-ion laser]
Green and Blue Microlasers. The Company's green microlaser has size and
energy efficiency advantages over gas lasers used in certain medical
applications. The Company anticipates manufacturing and selling production
quantities of its green microlaser for use in ophthalmology and dermatology in
the fourth quarter of fiscal 1997.
The Company believes its 0.5 blue watt microlaser is the only high power
all solid state compact blue laser in existence. This laser has a number of
applications in which it can successfully replace argon-ion lasers, such as
dentistry, certain biomedical applications, dermatology and printing
applications.
The Company has developed prototype projectors using its blue and green
microlasers with red diode lasers to produce high quality images with color
quality equaling color movie film. The Company believes that such projectors
produce higher resolution and more colors than commercially available
projectors. In addition, microlaser based projectors are smaller and microlaser
light sources have longer estimated lifetimes compared to conventional light
sources. Conventional light sources have average lifetimes of 500-3,000 hours
compared to an estimated lifetime of 10,000-15,000 hours for microlaser light
sources. The Company expects that microlaser based projectors may also provide
advantages in a number of additional applications, including entertainment
displays, flight simulators, process and system control room displays, portable
large-venue projectors, videowalls and electronic cinema.
The Company has been awarded several government contracts to develop
advanced multi-beam, direct write microlaser projector technology, for which the
Company retains commercial rights. Such direct write technology will impress
video information directly on the microlaser beams. The beam writes the image
directly on to a screen similar to the way an electron beam writes a television
image, except that multiple lines are written simultaneously, which enables
super high resolution up to 5,000 by 4,000 pixels. The Company has been issued a
U.S. patent covering such technology. Since the beam from red diode lasers is
not suitable for use in direct write projection systems, the Company plans to
develop or acquire a suitable red microlaser to complete development of the
technology. There can be no assurance that the Company will be able to complete
development of a red microlaser, or if it is unable to develop such a
microlaser, that it will be able to acquire the rights to a suitable red laser
technology, at a commercially reasonable cost, if at all. If development of
direct write technology can be completed, the Company believes that such
technology may be the best method to produce the colorful super high resolution
images required by electronic cinema.
In addition, the Company currently has a collaborative arrangement to
develop microlasers for a conventional single beam direct write laser based
projection display system. Such systems have been commercially available using
gas lasers for approximately the past 20 years at very high prices ($200,000 to
$500,000). The Company's partner is developing technology which, when available,
and when combined with
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the Company's microlasers, will enable compact high resolution projectors to be
built with the ultimate aim of producing high volume, low cost home
entertainment systems.
1550 nm Microlaser. Distributed feedback ("DFB") diode lasers emitting at
1550 nm wavelength are used in the telecommunications industry to transmit fiber
optic signals. Such lasers are gaining widespread acceptance in upgrades and new
installations of cable television ("CATV") and other telecommunications systems
worldwide. Microlasers generally create less signal noise and are capable of
generating higher power than DFB lasers. As a result, CATV fiber optic systems
employing 1550 nm microlasers will not require amplification to the same extent
as DFB lasers and will deliver a higher quality, lower noise signal to the
receiver. The Company's 1550 nm microlaser under development employs much of the
same design philosophy and proprietary technology developed for its blue and
green microlasers, especially key aspects which permit scaling to high power.
The Company believes that, if successfully developed, the high output power of a
1550 nm microlaser could eliminate erbium-doped fiber amplifiers ("EDFAs") which
are needed to increase the power of existing DFB lasers in CATV head-ends and
point-to-point transmitters thereby reducing the system costs. The Company
expects to sell its 1550 nm high power microlaser for substantially less than
the typical DFB laser EDFA combination, providing an impetus for industry
adoption of its 1550 nm microlaser in head-end and high power transmitters.
The ability of an EDFA to amplify any wavelength between 1530 nm and 1560
nm enables a cost-effective method of increasing information bandwidth and is
known as dense wavelength division multiplexing ("WDM"). WDM allows multiple
laser beams with different wavelengths to be launched into a single fiber optic
and amplified by a single EDFA. Dense WDM has been rapidly embraced by the
long-haul carriers for digital transmission because of significant cost and time
savings over laying additional fiber optic cable. In addition, the Regional Bell
Operating Companies ("RBOCs") and CATV operators are beginning to use dense WDM
increasingly as the technology advances, cost of equipment decreases and digital
transmission becomes more popular for local traffic. One telecommunications
industry market research firm estimates that the market for dense WDM
transmitters will grow to $1.3 billion in 2000 and $4.3 billion in 2005, a
substantial portion of which will consist of sales of lasers.
The wavelengths used for dense WDM must be precisely controlled. DFB laser
manufacturers are not able to control their semiconductor processes to the level
required to produce precise wavelength devices on demand and therefore existing
manufacturers must go through a selection process to find devices with the
desired wavelengths. Precise temperature control with active feedback is
required to keep the wavelength constant over the lifetime of the device. The
Company's 1550 nm microlaser under development is expected to be capable of
being tuned to any wavelength over the entire dense WDM band. The wavelength
could be controlled with a low-cost, passive optical element, and all devices
could be manufactured identically, with the desired wavelength selected with an
adjustment of the passive optic element. The Company believes these
characteristics will provide significant advantages for its 1550 nm microlaser
under development in the dense WDM market.
STRATEGY
The Company's strategy is to expand its current precision optics business
and to leverage its core expertise in high performance laser optics, low
absorption thin film coatings and solid-state lasers to become a world leader in
the manufacture, marketing and sale of microlasers and microlaser based
products. Key aspects of the Company's strategy include:
Continue to Grow High Performance CO(2) Laser Optics Business
The Company's core competencies in the design and manufacture of high
performance laser optics, including its advanced super polishing, diamond
turning technologies and thin film coatings have made Laser Power one of the
leading suppliers of such components, especially for high power CO(2) lasers.
The Company's strategy is to continually improve quality and customer service
while lowering production costs and introducing new products, such as the
Company's MP-5 coatings and Turbo-Cooled optics. See "-- Products and Products
under Development." The Company expects the high power CO(2) laser segment to
continue to
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grow and power levels to continue to rise. As the power of CO(2) lasers
increases, an increasing proportion of optics will be Turbo Cooled and metal
optics. To meet this increasing demand, the Company will continue to enhance its
Turbo Cooled and diamond turned metal optics technologies. The Company believes
it is well positioned to meet more stringent requirements for optics used in
higher power CO(2) lasers because of its proprietary and state-of-the-art
technologies.
Expand Markets for High Performance Optics Products
The Company believes that its technologies have applications in markets not
currently served by the Company. The Company has developed a coating technology
for optics used in weapons-grade lasers, which the Company believes is
applicable to the emerging erbium-YAG medical laser optics market as well. The
Company also plans to use its technology base developed for CO(2) laser optics
and microlaser crystal polishing and coating to produce certain optics for
neodymium-YAG lasers, visible lasers and thin film filter coatings for use in
dense WDMs.
In the industrial CO(2) laser market, the Company from time to time designs
solutions to customers material processing problems with unique
optical-mechanical systems employing the Company's optics and mechanical
components. The Company plans to expand this service in the future to increase
revenues and enhance the Company's technical reputation in the industrial CO(2)
laser market.
Increase Margins on Optics Products
The Company has a multifaceted strategy to reduce costs and increase
margins on its optics products. To reduce costs, the Company plans to increase
automation which will reduce labor costs and improve yields on certain
manufacturing processes. The Company also plans to transfer additional
labor-intensive operations to its facility in Mexico. To increase margins, the
Company plans to intensify its sales efforts on higher margin products such as
Turbo Cooled optics, and to serve high-performance, high-margin niches in such
markets as the emerging high power neodymium-YAG laser market and the dense WDM
telecommunication market.
Market Microlasers for Existing Industrial and Medical Applications
The Company intends to exploit the superior size and energy efficiency
characteristics of its microlasers to replace existing gas and solid state
lasers currently utilized in certain medical, industrial and other applications.
The Company has recently shipped three prototype green microlasers to a medical
laser OEM and negotiated a supply contract under which it expects to begin
shipping small quantities per month prior to fiscal year end 1997.
Develop and Market Microlasers for CATV and Telecommunications Applications
The Company is developing a high power, low noise 1550 nm microlaser that
it believes will provide substantial performance and cost advantages over
certain existing CATV transmission systems that are based on 1550 nm
semiconductor diode DFB lasers and EDFAs. In addition, the ability to tune and
control the microlaser's wavelength at any point over the entire EDFA wavelength
acceptance band will provide advantages over existing lasers used in digital
CATV and telecommunications applications.
Develop and Market Microlasers for High End Projection Display Applications
The Company has developed blue and green microlasers and is developing a
red microlaser, all of which can be arrayed together as the light source for a
high-end display projector. The Company believes that microlaser based
projectors will have significant performance and size advantages over existing
high-end lamp based and CRT based projectors.
Supplement Product Development Activities Through Contract Funding
The Company will opportunistically secure research contracts that will
enhance and advance its products under development. The Company has spent
approximately $9.4 million on microlaser development and
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related display technology programs, substantially all of which was paid for
through joint ventures with strategic partners such as the U.S. government and
Proxima. See "-- Research and Development" and "Certain Transactions."
Expand Capabilities Through Strategic Alliances and Acquisitions
Through alliances with other companies, Laser Power has enhanced its high
performance laser optics technologies, broadened its research activities and
developed its microlaser technology. The Company believes that similar
relationships with leading companies in the medical equipment, high end
projection display and telecommunications industries will facilitate its entry
into those markets. In addition, the Company will continue to acquire
technologies or other companies that complement its current technologies.
SALES AND MARKETING
As of February 28, 1997, Laser Power employed 19 persons in sales and
marketing at sales offices in the U.S. and Belgium. The Company promotes its
optics and intends to promote its microlaser based products to OEM and end-user
customers through a multi-faceted program which includes trade journal
advertising, catalog distribution, direct mail promotion, field sales
presentations, technical seminars, trade show exhibits and direct telemarketing.
The Company sells its optics products through its direct sales force in the U.S.
and Belgium and through its distributors in the rest of the world. The Company
intends to sell its microlaser based products in North America, Europe and Asia
through a direct sales force and through distributors.
RESEARCH AND DEVELOPMENT
The Company believes that future success depends in large part on its
ability to complete products under development, to continue to enhance its
existing products and to develop new products. As of February 28, 1997, the
Company had 54 employees performing research and development in the U.S. and
Belgium. Under contracts for customers and strategic partners as well as
internal Company funds, the Company spent $2.9 million, $4.9 million and $5.6
million during fiscal years 1994, 1995 and 1996, respectively, and $2.7 million
and $2.9 million in the six months ended February 29, 1996 and February 28,
1997, respectively.
The Company expended $1.7, $3.0 and $1.9 million in fiscal years 1994, 1995
and 1996, respectively, and $0.8 and $0.6 million in the six months ended
February 29, 1996 and February 28, 1997 respectively, or approximately 57%, 61%,
34%, 29%, and 22% of the total research and development funds, respectively, to
fund core optical research and development and to increase manufacturing
efficiency. For example, the Company has been developing MP-5, a new class of
proprietary low absorption, non-radioactive coatings for high power CO(2)
lasers. The Company also has developed optics and thin film coatings for lasers
used in the defense industry. Current products under development include low
absorption thin film coatings for non-metal uncooled optics in sizes up to
approximately one-half meter in diameter. If adequate contract funding can be
secured, the Company intends to extend this production technology to produce
thin film coatings for uncooled optics in sizes greater than one meter in
diameter. There can be no assurance that the red microlaser, the 1550 nm
microlaser, MP-5, uncooled optics on the scale required by the military or any
of the Company's products under development will be successfully developed or
commercially available in the future. See "-- Products Under Development" and
"Risk Factors -- Development and other Risks Relating to Microlasers
Technologies."
The Company expended $1.2, $1.9 and $3.7 million in fiscal years 1994, 1995
and 1996, respectively, and $1.9 and $2.3 million in the six months ended
February 29, 1996 and February 28, 1997, respectively, or approximately 43%,
39%, 66%, 71% and 78% of the total research and development funds, respectively,
to fund research and development, for microlasers and microlaser based
projection technology. The Company has developed proprietary technologies which
allow the extraction of large amounts of power out of small laser crystals,
enabling the production of lasers producing more visible power per unit volume
than existing gas or solid-state laser technology. The Company's 0.5 watt blue
microlaser and 3.0 watt green microlaser are the first products to be developed
using these technologies. The Company has been able to leverage its microlaser
technology to secure projection display contracts leading to the development of
proprietary, large screen
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projection display and head-mounted display technologies. The Company believes
that the development stage 1550nm microlaser has significant advantages over
existing 1550nm laser technology. The Company expects this microlaser,
originally developed under a U.S. Air Force satellite communications contract,
to have broad applications for CATV and long-haul, head-end and dense WDM
fiber-optic telecommunications.
As of February 28, 1997, the Company had contracts with $2.5 million in
future funding for continued research on various display technologies, including
the continued development of the Company's red microlaser for its projector. The
Company is developing a high resolution multimedia microlaser projector in
partnership with Proxima, under a contract with the U.S. Department of Commerce.
In addition, Laser Power is developing what it believes to be the first digital
color technology to project accurate colors for front and rear projection
systems under a contract with Defense Advanced Research Projects Agency. In July
1996, the Company entered into a collaborative agreement to develop microlasers
for a development stage projection display system. Additionally, the Company and
Evans and Sutherland Computer Corporation have been funded by the U.S. Air Force
to jointly develop advanced microlaser based projection displays for advanced
military training systems.
The Company is also continuing to develop its 1550nm microlaser technology
for telecommunications applications. Additionally, the Company has contracts
with the U.S. Army, Air Force and Navy to develop microlasers for various other
telecommunication applications.
MANUFACTURING
The Company manufactures high performance laser optics, microlasers and
related components. Some materials and components are available only from single
suppliers. See "Risk Factors -- Dependence on Sole and Limited Source
Suppliers."
The Company manufactures optics at its San Diego and Mexico facilities.
Thorium fluoride and zinc selenide are important to the manufacture of optics.
The Company purchases all of its thorium fluoride for use in its low absorption
thin film coating processes from Cerac, who the Company believes is the sole
source for high quality thorium fluoride. Any interruption or cessation of
supply by Cerac would have a material adverse effect on the Company's business,
financial condition and results of operations. While the Company is developing
MP-5, an alternate low absorption thin film coating technology, there can be no
assurance that such an alternative can be fully developed. See "Risk
Factors -- Dependence on Sole and Limited Source Suppliers."
In the case of zinc selenide, a critical raw material in the manufacture of
optics, the Company currently relies exclusively on one supplier, Morton's
Advanced Materials Division. To date, the Company has not experienced any
material difficulties in the adequacy or the quality of the zinc selenide
delivered. If any such problem arises in the future, the Company would have to
seek an alternate supplier. However, there can be no assurance that the Company
would be able to secure sufficient inventory of zinc selenide to produce
sufficient product to meet its customers' needs. A transition to alternate
arrangements would involve additional costs and delays in production. See "Risk
Factors -- Dependence on Sole and Limited Source Suppliers."
The Company's microlasers are assembled from component parts at the
Company's San Diego facility. The Company purchases component parts for its
microlasers, including laser crystals, nonlinear crystals, and semiconductor
diode lasers, from various sources around the world. The Company believes its
suppliers can supply the components in the quantities, with the quality and at
the prices required by the Company for volume production of microlasers for
medical, dental, telecommunications, industrial, display and other general
applications of the Company's microlaser products under development. However,
none of the Company's suppliers of microlaser component parts have experience in
supplying these components with the Company's specifications at the increased
volumes that the Company needs to achieve its growth goals. The Company does not
have long term or volume purchase agreements with any of its suppliers and
currently purchases components on a purchase order basis. See "Risk
Factors -- Limited Microlaser Manufacturing Experience; Scale-up Risk."
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Moreover, the Company has no experience in producing microlasers other than
in small developmental quantities. The Company must increase its manufacturing
capability to polish and coat volume quantities of microlaser and nonlinear
crystals and to perform the required complex assembly steps. Such an increase in
its manufacturing capabilities will require significant scale-up expenditures
and additions to the Company's facilities. See "Risk Factors -- Limited
Microlaser Manufacturing Experience; Scale-Up Risk."
PATENTS AND PROPRIETARY RIGHTS
Laser Power's patent portfolio includes four patents issued by the USPTO
and one patent granted by the European Patent Office (the "EPO"), subsequently
filed in five European countries. The Company has filed nine patent applications
with the USPTO, two patent applications in foreign jurisdictions and has been
granted licenses to two patent applications owned by Proxima filed with the
USPTO. One of the Company's U.S. patents, issued in November 1996, covers
certain aspects of the Company's blue microlaser technology and another, issued
in July 1996, covers the Company's direct write concept and other aspects of
display technology associated with microlasers. One of the Company's U.S.
patents, issued in July 1992, covers basic technology behind the Company's
Turbo-Cooled optic products; the Company's patent granted by the EPO in April
1993 covers this same technology. Many of the Company's pending patent
applications relate to microlaser technology. One pending U.S. patent
application relates to the Company's MP-5 low absorption coating. The two
pending U.S. patent applications licensed from Proxima cover certain aspects of
microlaser display technology.
Because of lesser protection afforded by and the high cost of pursuing
patents in certain foreign jurisdictions, the Company has elected not to seek
patent protection for certain of its inventions covered by its U.S. patents in
foreign jurisdictions. Nevertheless, the Company intends to selectively pursue
foreign patent filings where the cost of and protection afforded by such
patents, if issued, are justified. However, the Company in general believes that
in certain cases obtaining foreign patents may be much less useful than
obtaining domestic patents because of differences in patent laws and costs of
patent enforcement, and further believes that the protection provided by foreign
patents, if obtained, and any other foreign intellectual proprietary protection
may be weaker than that provided domestically.
Laser Power's continued success will depend in part on its ability to
obtain patent protection for its products and processes, and to operate without
infringing the proprietary rights of third parties. There can be no assurance
that patent applications filed by Laser Power will result in patents being
issued, that the claims of such patents will offer significant protection of the
Company's technology, or that any patents issued to or licensed by Laser Power
will not be challenged, narrowed, invalidated or circumvented. The Company may
also be subject to legal proceedings that result in the revocation of patent
rights previously owned by or licensed to Laser Power, as a result of which the
Company may be required to obtain licenses from others to continue to develop,
test or commercialize its products. There can be no assurance that Laser Power
will be able to obtain such licenses on acceptable terms, if at all.
In addition, there may be pending or issued patents held by parties not
affiliated with Laser Power that relate to the technology utilized by Laser
Power. As a result, Laser Power may need to acquire licenses, to assert
infringement of, or contest the validity of, such patents or other similar
patents which may be issued. Laser Power could incur substantial costs in
defending itself against patent infringement claims, interference proceedings,
opposition proceedings or other challenges to its patent rights made by third
parties, or in bringing such proceedings or enforcing any patent rights of its
own.
The laser optics and laser industries have a history of patent litigation
and will likely to continue to have patent litigation suits concerning laser
technologies. A number of laser optic, laser component and laser manufacturing
companies maintain and continue to develop patent positions that could prevent
Laser Power from using technology covered by these patent positions. However,
the commercial success of the Company depends in part on neither infringing
patents or misappropriating proprietary rights of third parties nor breaching
licenses that may relate to the Company's technologies and products. The patent
positions of laser optic, laser component and laser manufacturing companies,
including the Company, are generally uncertain and involve complex legal and
factual questions. In addition, the Company has received invitations from third
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parties to license patents owned by third parties. Any action against the
Company or its collaborative partners claiming damages and seeking to enjoin
commercial activities relating to the affected products and processes could, in
addition to subjecting the Company to potential liability for damages, require
the Company or its collaborative partners to obtain a license in order to
continue to develop, manufacture or market the affected products and processes.
There can be no assurances that the Company or its collaborative partners would
prevail in any such action or that any license (including licenses proposed by
third parties) required would be made available on commercially acceptable
terms, if at all. There are a significant number of United States and foreign
patents and patent applications in the Company's area of interest, and the
Company believes that there may be significant litigation in the industry
regarding patent and other intellectual property rights. If the Company becomes
involved in such litigation, it could consume a substantial portion of the
Company's managerial and financial resources, which could have material adverse
effect on the Company's business, financial condition and results of operations.
The Company has a license to certain technology used in its blue
microlaser. The Company has received a letter from a third party claiming that
the Company's license was granted improperly by the licensor. While the Company
believes that such license was properly granted, there can be no assurance that
the Company's license would not be voided if subjected to a legal challenge. In
such an event, there can be no assurance that the Company would be able to
obtain a replacement license on favorable terms, if at all. Failure to obtain
such a license would result in a material adverse effect to the Company's
business, financial condition and results of operations.
The Company is aware that patents held by other laser companies may relate
to the Company's microlaser technology. The Company does not believe it
infringes on such laser companies' patents and that it has adequate
design-arounds if it is held to be infringing. Nevertheless, for certain cost or
strategic reasons, the Company believes it may be advantageous to enter into
license agreements with such laser companies. The Company is currently
negotiating to obtain licenses from such parties for certain technology covered
by such patents. However, there can be no assurance that the Company will obtain
the license(s) on favorable terms, if at all. If it is determined that the
patents held by these other laser companies do cover the Company's technology,
the Company's inability to obtain licenses for such technology could have a
material adverse effect on the Company's business, financial condition and
results of operations.
The Company has developed certain of its proprietary technology pursuant to
development contracts including contracts with federal government agencies.
Under standard provisions in government contracts, the government may retain
certain rights in technology developed under such contracts. In addition, the
Company has granted significant rights to third parties under such contracts.
The Company's strategy is to continue to develop a significant portion of its
proprietary technology pursuant to funding received from development contracts.
There can be no assurance that the Company will be able to continue to obtain
funding for the development of its proprietary technology, or that, if received,
the Company will obtain rights to such technology sufficient to permit the
Company to develop and market new products or to prevent third parties from
using such technology to compete with the Company.
In addition to patent protection, Laser Power also relies on copyright
protection, trade secrets, know-how, continuing technological innovation and
licensing opportunities to expand and bolster its competitive position. In an
effort to maintain the confidentiality and ownership of trade secrets and
proprietary information, the Company requires employees, consultants and certain
collaborators to execute confidentiality and invention assignment agreements
upon commencement of a relationship with the Company. These agreements are
intended to enable the Company to protect its proprietary information by
controlling the disclosure and use of technology to which it has rights and
provide for ownership by the Company of proprietary technology developed at the
Company or with the Company's resources. There can be no assurance, however,
that these agreements will provide meaningful protection for the Company's trade
secrets or other confidential information in the event of unauthorized use or
disclosure of such information or that adequate remedies would exist in the
event of such unauthorized use or disclosure. The loss or exposure of trade
secrets possessed by Laser Power could adversely affect its business. See "Risk
Factors -- Dependence on Patents and Proprietary Rights."
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The Company's academic collaborators have certain rights to publish data
and information in which the Company has rights. There is considerable pressure
on academic institutions to publish discoveries in the high technology and
physics fields. There can be no assurance that such publication would not
adversely affect the Company's ability to obtain patent protection for certain
technologies in which it may have a commercial interest.
COMPETITION
The industries in which the Company sells its products are highly
competitive. Laser Power's competitive position depends upon a number of
factors, including the price and performance of its products, the level of
customer service, the quality of its manufacturing processes, the compatibility
of its products with existing laser systems and Laser Power's ability to
participate in the growth of emerging technologies, such as microlasers and
their application to industries already served by gas and solid state lasers. In
the optics market, Laser Power primarily competes with II-VI, Coherent and
Sumitomo. In the combined industrial and medical laser optics market, the
Company estimates that it had a 27% market share in 1996, compared to a 50%
share held by II-VI for the same period. In addition, II-VI produces its own
supply of zinc selenide. The Company uses zinc selenide as the substrate for 40%
to 50% of the CO(2) laser optics sold by the Company and purchases this raw
material from Morton.
With regard to the Company's microlaser based products under development,
the Company faces competition from gas, solid-state and DFB laser manufacturers
who already service this market as well as from lamp manufacturers who are
developing lamps with extended lives for projection display. Competitive factors
in the market for microlaser applications include price, product performance and
reliability, strong customer support and service, customer relationships and the
breadth of product line. In this market, the Company faces competition from
companies that have substantially greater financial, engineering, research,
development, manufacturing, marketing, service and support resources, greater
name recognition than the Company and long-standing customer relationships.
Specifically, the Company believes that its main competitors regarding its
products under development will be Spectra Physics, Coherent, Uniphase,
Lightwave Electronics, Liconix, Omnichrome and Edinburgh Instruments. With
respect to CATV 1550 nm microlaser transmitters for supply to OEMs, the Company
believes its competitors will be Harmonic Lightwave, Ortel, Synchronous
Communications, Uniphase, SDL, ATx-Scientific Atlanta, Fujitsu, Lucent and
Nortel. Other CATV equipment suppliers as well as other laser companies who may
develop microlaser based products which compete directly with the Company's
microlaser based products may also enter this market.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
The Company uses or generates certain hazardous substances in its research
and manufacturing facilities. The Company believes that its handling and
disposal of such substances is in material compliance with applicable local,
state and federal environmental, safety and health regulations at each operating
location. The Company invests substantially in proper protective equipment,
process controls and specialized training to minimize risks to employees,
surrounding communities and the environment due to the presence and handling of
such hazardous substances. The Company conducts monthly workplace monitoring
regarding such substances. When exposure problems or potential problems have
been indicated, corrective actions have been implemented and re-occurrence has
been minimal or non-existent. The Company does not carry environmental
impairment insurance.
The Company uses a low-level radioactive material called thorium fluoride
to manufacture low absorption thin film coatings. The use, storage and disposal
of this material is governed by the State of California which recently inspected
and licensed the Company's facilities and procedures. All thorium fluoride
bearing by-products are collected and stored on site at the Company until
California develops low-level radioactive waste storage capability. The
Company's non-radioactive coating under development, MP-5, will provide superior
performance to certain thorium fluoride coated optics and lessen the
environmental hazards associated with the special use, storage and handling of
the low-level radioactive substance. See "-- Research and Development."
33
<PAGE> 35
The generation, use, collection, storage and disposal of all other
hazardous by-products resulting from the Company's manufacturing of its products
and research and development of new products, such as suspended solids
containing heavy metals or airborne particulates, are believed by the Company to
be in material compliance with local, state and federal regulations. The Company
believes that it possesses all of the permits and licenses required for
operation. Although the Company is not aware of any material environmental,
safety and health problems in its properties or processes, there can be no
assurance that problems will not develop in the future which would have a
materially adverse effect on the Company.
BACKLOG
With the exception of military contracts, most customer orders for optics
are from stock or for deliveries within one to two months. As a result, backlog
of optics orders is typically two to three times monthly sales and was $3.6
million at February 28, 1997, as compared with $3.0 million at February 29,
1996. Backlog of research contracts fluctuates based on the timing of contract
awards and was $3.9 million at February 28, 1997, as compared with $3.6 million
at February 29, 1996. Backlog of microlaser orders is expected to reflect the
longer-term commitments of OEM customers. At February 29, 1997, microlaser
backlog was $871,000, consisting of development funding and the purchase of
several prototype lasers.
EMPLOYEES
As of February 28, 1997, the Company had 189 full time and 4 part time
employees in the U.S. and 37 full time employees in its foreign subsidiaries. Of
the Company's U.S. employees, 14 were engaged in marketing, sales and related
customer-support services, 50 in research and development and 129 in operations,
administration and finance. See "Risk Factors -- Dependence Upon Key Personnel."
None of the Company's employees is represented by a labor union or covered by a
collective bargaining agreement. The Company has not experienced any work
stoppages and considers its relations with its employees to be good.
FACILITIES
The Company's main facilities and headquarters are located in San Diego,
California. These facilities are leased through December 31, 2001. The Company
leases approximately 44,000 square feet of space used for manufacturing,
research and administrative purposes. The Company also leases facilities in
Plymouth, Michigan, Tijuana, Mexico and Ghent, Belgium, consisting of
approximately 1,000, 6,000 and 3,900 square feet, respectively. The lease on the
Michigan facility is month to month and the leases on the Mexico and Belgium
facilities expire in September 1998 and December 1999, respectively. The Company
believes that, upon expansion of its manufacturing, research and office space,
the Company's facilities will be adequate for its current and projected needs
and that additional space will be available as needed.
LEGAL MATTERS
The Company is not a party to any litigation.
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<PAGE> 36
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers of the Company and directors of the Company
continuing after the offering and their ages are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- --- ----------------------------------------------------
<S> <C> <C>
Glenn H. Sherman, Ph.D........... 54 Chairman of the Board and Chief Executive Officer
President, Laser Power Research Division and
Douglas H. Tanimoto, Ph.D........ 57 Director
Richard P. Scherer............... 58 President, Laser Power Optics Division
Dean Hodges, Ph.D................ 53 President, Laser Power Microlasers Division
Arthur P. Minich................. 54 President, Laser Power Display Division
Paul P. Wickman, Jr.............. 47 Senior Vice President and Chief Financial Officer
William G. Fredrick(1)........... 56 Director
Robert G. Klimasewski............ 53 Director
Richard C. Laird(2).............. 50 Director
Kenneth E. Olson(1)(2)........... 60 Director
John C. Stiska(1)(2)............. 55 Director
</TABLE>
- ---------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
Glenn H. Sherman, Ph.D., the founder of the Company, has served as Chairman
of the Board and Chief Executive Officer and a director of the Company since
1979. From 1972 to 1979, Dr. Sherman served as a director and Vice President of
II-VI, Inc., an electro-optical component manufacturer. Dr. Sherman received a
B.S., M.S. and Ph.D. in Electrical Engineering from the University of Illinois
at Urbana.
Douglas H. Tanimoto, Ph.D. has served as the President of the Laser Power
Research Division since 1986 and has served as a director of the Company since
1984. Dr. Tanimoto served as the President of the Laser Power Optics Division
from 1986 to 1988. Dr. Tanimoto received a B.A. from the University of
California, Berkeley and an M.S. and Ph.D in Physics from the University of
Oregon.
Richard P. Scherer has served as President, Laser Power Optics Division,
since March 1996. Mr. Scherer served as Senior Vice President, Marketing and
Business Development of the Company from 1992 to March 1996. Mr. Scherer
received a B.S. in Electrical Engineering from Marquette University.
Dean T. Hodges, Ph.D. has served as the President of the Laser Power
Microlasers Division since March 1996. Dr. Hodges served as President of the
Laser Power Optics Division from March 1994 to March 1996. From 1984 to March
1994, Dr. Hodges served as Senior Vice President of Newport Corporation, a
manufacturer of instruments for the laser and optics industries. Dr. Hodges
received a B.S. in mathematics and physics from Humboldt State College and a
Ph.D. in Applied Physics from Cornell University.
Arthur P. Minich, a consultant of the Company, has served as President of
the Laser Power Display Division since December 1996. Mr. Minich has agreed to
become an employee of the Company upon the closing of this offering. From 1992
to November 1996, Mr. Minich served as Chief Technical Officer and Vice
President, Research and Development of Proxima Corporation, a manufacturer of
computer display projectors. From 1990 to 1992, Mr. Minich founded and served as
Chairman of the Board of Directors of PIVOTAL Corp., a developer of object
oriented business process engineering software. From 1988 to 1990, Mr. Minich
served as the Business Unit/Group General Manager of Eastman Kodak Company's
digital imaging systems business. Mr. Minich received a B.S. in Electrical
Engineering
35
<PAGE> 37
from Iowa State University and an M.S. in Electrical Engineering/Computer
Science from the Hewlett-Packard Honors Cooperative Program.
Paul P. Wickman, Jr. has served as Senior Vice President and Chief
Financial Officer of the Company since September 1992. From 1983 to 1992, he
served as Group Vice President, Finance and Controller of The Titan Corporation,
a diversified high technology company. Mr. Wickman received a B.S. in Accounting
from San Diego State University and is a Certified Public Accountant.
William G. Fredrick has served as a director of the Company since 1980. Mr.
Fredrick is the founder and President of Laser Mechanisms, Inc., a laser device
and accessory manufacturer, since 1980 and Oxid Corporation a laser device and
accessory manufacturer, since 1986. Mr. Fredrick received a B.S. in Engineering
Physics from the University of Michigan.
Robert G. Klimasewski has served as a director of the Company since 1980.
Mr. Klimasewski has been the President and Chief Executive Officer of
Transmation, Inc., an electronic instrumentation manufacturer since 1994. In
1972, Mr. Klimasewski founded Burleigh Instruments, Inc., a scientific
instrument and laser manufacturer, and has been Vice Chairman of Burleigh
Instruments since 1972. Mr. Klimasewski is also a director of Transmation and
Burleigh Instruments. Mr. Klimasewski received a B.S. and M.S. in Optical
Engineering from the University of Rochester.
Richard C. Laird has served as a director of the Company since 1987. Mr.
Laird joined Union Miniere Inc. in 1980 and currently serves as Executive Vice
President and director. Mr. Laird received a B.S. in Metallurgical Engineering
from Michigan Technological University.
Kenneth E. Olson has served as a director of the Company since October
1994. Mr. Olson is Chairman of Board and acting President and Chief Executive
Officer of Proxima. Mr. Olson previously served as President and Chief Executive
Officer of Proxima from December 1990 to January 1996. Mr. Olson is a director
of Proxima, Lidak Pharmaceuticals and Applied Digital Access, Inc. Mr. Olson
received an M.B.A. from Pepperdine University.
John C. Stiska has served as a director of the Company since April 1987.
Mr. Stiska served as outside legal counsel to the Company from 1983 to 1990. In
February 1996, Mr. Stiska joined QUALCOMM Incorporated as Corporate Senior Vice
President and has served as General Manager of the Technology Applications
Division since January 1997. From 1990 to January 1996, Mr. Stiska served as
President and Chief Executive Officer of Triton Group Ltd., an operating-holding
company that emerged in 1993 from the Chapter 11 bankruptcy proceedings of
Triton Group Ltd. and Intermark, Inc. Mr. Stiska received a B.B.A. and J.D. from
the University of Wisconsin.
DIRECTORS NOT CONTINUING AFTER OFFERING
Alain Godefroid, 48, has served as a director of the Company since November
1987 representing Union Miniere, s.a., one of the Company's investors. Mr.
Godefroid joined Union Miniere, s.a. as General Counsel in 1978 and currently
serves as Corporate Vice President, Legal and Environmental Affairs. Mr.
Godefroid received an L.L.M. from the University of Texas and a J.D. from the
Universite Libre de Bruxelles, Belgium.
Siegfried Meder, 68, has served as a director of the Company since February
1980. From 1976 until his retirement in 1996, Mr. Meder served as President of
American Schack, Inc., a subsidiary of the Schack Corporation, an engineering
firm specializing in improving the energy efficiency of industrial processes.
Mr. Meder received a Diplom Ingenieur in Chemical Engineering from the Technical
University of Aachen, Germany.
Marc Van Sande, Ph.D., 45, has served as a director of the Company since
July 1993. Since 1993, Dr. Van Sande has served as Business Unit Manager,
Electro Optic Materials, Union Miniere, s.a. From 1989 to 1993, Mr. Van Sande
served as Marketing and Research and Development Manager of the Business Unit
Germanium. Dr. Van Sande received a Ph.D. in Solid State Physics from the
University of Antwerp, Belgium and an Executive Master in Business
Administration from the Institute of Commerce in Antwerp.
36
<PAGE> 38
OTHER KEY EMPLOYEES
J. Bryan Blasutta, 44, has served as Vice President of North American Sales
of the Laser Power Optics Division since 1995. Prior to 1995, Mr. Blasutta
served in a number of managerial positions at the Company. Mr. Blasutta received
a B.A. in Communications from Ohio State University and an A.A.S. in Laser
Electro Optics from Texas State Technical Institute.
Dirk Claeys, 46, has served as Commercial Director of Radius Engineering
N.V., a wholly owned subsidiary of the Company since 1993. From 1990 to 1993,
Mr. Claeys served as Sales Manager of Oerlikon Precision Laser, a Swiss
manufacturer of industrial lasers. Mr. Claeys received a degree in electronics
engineering from the S.T.S. Institute in Ghent, Belgium.
Edward J. Danielewicz, Ph.D. 47, has served as Vice President of
International Sales of the Laser Power Optics Division since 1993. Dr.
Danielewicz has since served in a number of managerial positions since joining
the Company in 1981. From 1978 to 1981, Dr. Danielewicz served as Section Leader
of the Lasers and Optics Department of the Aerospace Corporation. Dr.
Danielewicz received a B.S. in Electrical Engineering from the University of
Pennsylvania and a Ph.D. in Electrical Engineering from the University of
Illinois at Urbana.
David Erickson, 47, has served as Vice President of Engineering and
Manufacturing Technology of the Laser Power Optics Division since May 1996. From
1986 to 1996, Mr. Erickson served as Director of Manufacturing of Optical
Corporation of America.
Graham Flint, 59, has served as the Company's Chief Technical Officer and
Vice President, of the Laser Power Research Division since 1988. From 1977 to
1988, Mr. Flint served as Director of the Air Force Developmental Optics
Facility at Martin Marietta Corporation. Mr. Flint received a B.S. in Physics
from the University of Birmingham, United Kingdom.
David E. Hargis, 32, has served as Vice President, Microlaser Technology in
the Laser Power Research Division since 1994. Mr. Hargis joined the Company in
1990 as a senior scientist. From 1988 to 1990, Mr. Hargis served as Research
Physicist at Energy Compression Research Corporation. Mr. Hargis received a B.S.
and M.S. in Physics from the University of California, San Diego.
Pedram Leilabady, Ph.D., 37, has served as Vice President,
Telecommunications Products in the Laser Power Microlasers Division since March
1997. From 1995 to 1997, he served as Market Operations Manager for Lucent
Technologies Inc. From 1988 to 1995, Dr. Leilabady held a variety of managerial
positions at ATx Telecom Systems, Inc., including Director of Product
Management. Dr. Leilabady received a Ph.D. in Physics from the University of
Kent, United Kingdom.
James D. McFarland, 41, has served as Vice President, General Counsel and
Secretary since August 1996. From 1995 to August 1996, Mr. McFarland practiced
with the law firm of Baker, Maxham, Jester & Meador in San Diego and, from 1991
to 1995, with the firm of Blakely, Sokoloff, Taylor & Zafman in Sunnyvale,
California. Mr. McFarland received a B.A. in Economics from the University of
Florida, a B.S. in Electrical Engineering from the University of California, San
Diego and a J.D. from the University of Florida School of Law.
Peter Muys, 44, has served as the General Manager of Radius Engineering
N.V. since 1990. From 1988 to 1990, Mr. Muys served as Manager of Research and
Development at Eurolaser Technology. Mr. Muys received a University Engineer
degree in Computer Science from the University of Leuven, Belgium and a
University Engineer degree in Physics from the University of Ghent, Belgium.
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee consists of Messrs. Laird, Olson and Stiska. The Audit
Committee makes recommendations to the Board of Directors regarding the
selection of independent auditors, reviews the results and scope of the audit
and other services provided by the Company's independent auditors and reviews
and evaluates the Company's audit and control functions.
37
<PAGE> 39
The Compensation Committee consists of Messrs. Frederick, Olson and Stiska.
The Compensation Committee makes recommendations regarding the Company's 1997
Plan and Employee Stock Purchase Plan as well as decisions concerning salaries
and incentive compensation for employees and consultants of the Company.
DIRECTOR COMPENSATION
The Company's outside directors receive $1,000 per meeting and $500 per
committee meeting as payment for their services as a member of the Board of
Directors and are reimbursed for certain expenses in connection with attendance
at Board and committee meetings. In January 1995, the Company issued a warrant
to purchase 16,666 shares of the Company's Common Stock at an exercise price of
$4.50 per share to Kenneth E. Olson. The warrant may be exercised in whole or in
part at any time by the holder as long as the holder remains a member of the
Board of Directors. The warrant expires in January 2005. In December 1996, the
Company issued warrants to purchase up to 20,000 shares of the Company's Common
Stock to Union Miniere Inc. and warrants to purchase up to 6,666 shares of the
Company's Common Stock to each of John Stiska, Kenneth Olson, Siegfried Meder,
Robert Klimasewski and William Fredrick at an exercise price of $4.50 per share.
The warrants expire in December 2006. Union Miniere Inc.'s warrant may be
exercised in whole or in part at any time by the holder as long as at least one
representative of the holder remains a member of the Board of Directors.
Following the completion of this offering, non-employee directors will be
eligible to participate in the 1997 Plan. In addition, entities affiliated with
certain of the directors have, from time to time, entered into transactions with
the Company. See "-- Stock Option Plans" and "Certain Transactions."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee of the Company was at any time an
officer or an employee of the Company or serves as a member of the Board of
Directors or Compensation Committee of any entity that has one or more executive
officers serving as a member of the Company's Board of Directors or Compensation
Committee other than Mr. Olson who is a director of Proxima.
38
<PAGE> 40
EXECUTIVE COMPENSATION
The following table sets forth the compensation awarded or paid to, or
earned by, the Company's Chief Executive Officer and the four other most highly
compensated executive officers of the Company who earned in excess of $100,000
in salary and bonus (collectively, the "Named Executive Officers") for services
rendered to the Company during the year ended August 31, 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION(1)
-------------------- ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY($) BONUS($) COMPENSATION($)(2)
- ------------------------------------------ ----------- ------- -------- ------------------
<S> <C> <C> <C> <C>
Glenn H. Sherman, Ph.D.................... 1996 170,600 25,000 12,200
Chairman of the Board and Chief
Executive Officer
Douglas H. Tanimoto, Ph.D................. 1996 145,500 14,500 8,300
President, Laser Power Research Division
and Director
Dean T. Hodges, Ph.D...................... 1996 140,500 24,000 4,200
President, Laser Power Microlasers
Division
Richard P. Scherer........................ 1996 139,000 18,000 2,100
President, Laser Power Optics Division
Paul P. Wickman........................... 1996 110,400 16,000 5,300
Senior Vice President and Chief
Financial Officer
</TABLE>
- ---------------
(1) In accordance with the rules of the Securities and Exchange Commission (the
"Commission"), the compensation described in this table does not include
medical, group life insurance or other benefits received by the Named
Executive Officers which are available generally to all salaried employees
of the Company and certain perquisites and other personal benefits received
by the Named Executive Officers which do not exceed the lesser of $50,000 or
10% of any such officer's salary and bonus disclosed in this table. There
were no long-term compensation awards granted to the Named Executive
Officers during the fiscal year ended August 31, 1996.
(2) Includes the value of underlying term life insurance for split dollar life
insurance policies that are owned by Named Executive Officers. The policy
owners have assigned to the Company the proceeds from termination of the
policies or from payment of death benefits in an amount equal to the lesser
of the cash surrender value or the cumulative payments made by the Company
on their behalf. The insurance premium payments in fiscal 1996 amounted to
$10,000, $5,900, $3,800, $2,100 and $3,000 for Messrs. Sherman, Tanimoto,
Hodges, Scherer and Wickman, respectively. Also includes 401(k) Plan
employer matching contributions of $2,200, $2,400, $400, $0 and $2,300 for
Messrs. Sherman, Tanimoto, Hodges, Scherer and Wickman, respectively.
STOCK OPTION PLANS
1997 Equity Incentive Plan
In March 1997, the Company adopted the 1997 Plan. The 1997 Plan provides
for incentive stock options for employees (including officers and employee
directors), and nonstatutory stock options, stock bonuses, rights to purchase
restricted stock and stock appreciation rights (either independent of or
appurtenant to an option) for employees (including officers and employee
directors) and non-employee directors and consultants. The 1997 Plan is
administered by the Board of Directors, or a Committee appointed by the Board,
which determines the option awards to be granted, including exercise prices,
number of shares subject to the
39
<PAGE> 41
awards and the exercisability thereof, provided that such terms comply with the
provisions of the plan under which the option award is granted. The Company has
reserved 1,000,000 shares under the 1997 Plan.
The term of the stock options granted under the 1997 Plan may not exceed 10
years. The exercise price of options granted under the 1997 Plan is determined
by the Board of Directors, but in the case of an incentive stock option, cannot
be less than 100% of the fair market value of the Common Stock on the date of
grant, and, in the case of a nonstatutory stock option, cannot be less than 85%
of the fair market value of the Common Stock on the date of grant. Options
granted under the plans vest at the rate specified in the option agreement. No
stock option may be transferred by the optionee other than by will or the laws
of descent or distribution or, in certain limited instances, pursuant to a
domestic relations order, provided that an optionee may designate a beneficiary
who may exercise the option following the optionee's death and provided further
that a nonstatutory option may be transferred to the extent provided in the
nonstatutory option agreement. An optionee whose relationship with the Company
or any related corporation ceases for any reason (other than by death or
permanent and total disability) may exercise options in the three-month period
following such cessation (unless such options terminate sooner or later by their
terms). Options may be exercised for up to twelve months after an optionee's
relationship with the Company and related corporations ceases due to death or
disability (unless such options terminate sooner or later by their terms).
No incentive stock option or award to purchase restricted stock may be
granted to any person who, at the time of the grant, owns (or is deemed to own)
stock representing more than 10% of the total combined voting power of the
Company or any affiliate of the Company, unless the option exercise price is at
least 110% of the fair market value of the stock subject to the option (100% of
the fair market value in the case of restricted stock) on the date of the grant,
and the term of the option does not exceed five years from the date of the
grant. The aggregate fair market value, determined at the time of the grant, of
the shares of Common Stock with respect to which incentive stock options are
exercisable for the first time by an optionee during any calendar year (under
all such plans of the Company and its affiliates) may not exceed $100,000. No
optionee shall be eligible for option grants or stock appreciation rights under
the 1997 Plan covering more than 300,000 shares at such time as Section
162(m) of the Internal Revenue Code of 1986 as amended (the "Code") becomes
applicable to the 1997 Plan.
Pursuant to the 1997 Plan, shares subject to stock awards that have expired
or otherwise terminated without having been exercised in full again become
available for the grant, but shares subject to exercised stock appreciation
rights will not again become available for the grant. The Board of Directors has
the authority to reprice outstanding options and stock appreciation rights and
to offer optionees and holders of stock appreciation rights the opportunity to
replace outstanding options and stock appreciation rights with new options or
stock appreciation rights for the same or a different number of shares.
Restricted stock purchase awards granted under the plan may be granted
pursuant to a repurchase option in favor of the Company in accordance with a
vesting schedule and at a price determined by the Board of Directors. Restricted
stock purchases must be at a price equal to at least 85% of the stock's fair
market value on the award date, but stock bonuses may be awarded in
consideration of past services without a purchase payment. Rights under a stock
bonus or restricted stock bonus agreement may not be transferred other than by
will, the laws of descent and distribution or a domestic relations order while
the stock awarded pursuant to such an agreement remains subject to the
agreement. Stock appreciation rights granted under the 1997 Plan may be tandem
rights, concurrent rights or independent rights.
Upon certain changes in control of the Company, all outstanding awards
under the 1997 Plan must either be assumed or substituted by the surviving
entity. If the surviving entity determines not to assume or substitute such
awards, then with respect to persons then performing services as employees,
directors or consultants, the time during which such awards may be exercised
shall be accelerated and the awards terminated if not exercised prior to such
change in control. All other awards shall be terminated if not exercised prior
to such event.
As of April 1, 1997, no options were outstanding under the 1997 Plan. The
1997 Plan will become effective upon the effectiveness of the initial public
offering of the Company's Common Stock. The 1997 Plan will terminate in March
2007 unless sooner terminated by the Board of Directors.
40
<PAGE> 42
1981 Stock Option Plan
The Company's Second Amended and Restated 1981 Stock Option Plan (the "1981
Plan") was adopted by the Board of Directors in September 1980, and was
subsequently amended in April 1986 and October 1990. The Board has authorized
and reserved an aggregate of 666,666 shares of Common Stock for issuance under
the 1981 Plan. The 1981 Plan provided for the grant of incentive stock options
under the Code and nonstatutory stock options to employees of the Company.
As of February 28, 1997, the Company had outstanding options to purchase
404,324 shares of Common Stock at a weighted average exercise price of $3.00
under the 1981 Plan. The 1981 Plan has been terminated by the Board of
Directors, and no additional options will be granted thereunder, but outstanding
options remain exercisable and continue to vest until they terminate in
accordance with their terms.
1993 Stock Option Plan
The Company's 1993 Stock Option Plan (the "1993 Plan") was adopted by the
Board of Directors in September, 1993. The Board has authorized and reserved an
aggregate of 666,666 shares of Common Stock for issuance under the 1993 Plan.
The 1993 Plan provided for the grant of incentive stock options to employees and
nonstatutory stock options to employees, directors and consultants of the
Company and its affiliates.
As of February 28, 1997, the Company had granted options to purchase
545,966 shares of Common Stock at a weighted average exercise price of $4.49
under the 1993 Plan. The 1993 Plan has been terminated by the Board of
Directors, and no additional options will be granted thereunder, but outstanding
options remain exercisable and continue to vest until they terminate in
accordance with their terms.
AGGREGATED FISCAL YEAR-END OPTION VALUES
The following table sets forth for each of the Named Executive Officers the
number and value of securities underlying unexercised options and warrants held
by the Named Executive Officers at August 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
AUGUST 31, 1996 (#) AUGUST 31, 1996 ($)(1)
------------------------------- ---------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Glenn H. Sherman, Ph.D............... 66,666 10,000 300,000 30,000
Douglas H. Tanimoto, Ph.D............ 200,000 6,666 900,000 20,000
Richard P. Scherer................... 120,000 86,666 540,000 380,000
Dean T. Hodges, Ph.D................. 80,000 126,666 240,000 380,000
Paul P. Wickman...................... 26,666 46,664 110,000 160,000
</TABLE>
- ---------------
(1) Based on the difference between the assumed initial public offering price of
$7.50 per share and the exercise price.
EMPLOYEE STOCK PURCHASE PLAN
In March 1997 the Company adopted the Employee Stock Purchase Plan (the
"Purchase Plan") covering an aggregate of 250,000 shares of Common Stock. The
Purchase Plan is intended to qualify as an employee stock purchase plan within
the meaning of Section 423 of the Code. Under the Purchase Plan, the Board may
authorize participation by eligible employees, including officers, in periodic
offerings following the commencement of the Purchase Plan. The offering period
for any offering may be no more than 27 months. The initial offering under the
Purchase Plan shall commence on the closing of the Company's initial public
offering date of the IPO date and terminate on February 28, 1998. Sequential
six-month offerings will occur thereafter.
Employees are eligible to participate if they are employed by the Company
or a subsidiary of the Company designated by the Board for at least 20 hours per
week and are customarily employed by the Company or a subsidiary of the Company
designated by the Board for at least five months per calendar year.
41
<PAGE> 43
Employees who participate in an offering have up to 15% of their earnings
withheld pursuant to the Purchase Plan. The amount withheld is then used to
purchase shares of the Common Stock on specified dates determined by the Board.
The price of Common Stock purchased under the Purchase Plan will be equal to 85%
of the lower of the fair market value of the Common Stock at the commencement
date of each offering period or the last day of the offering. Employees may end
their participation in the offering at any time during the offering period
except as otherwise provided in the offering. Participation ends automatically
on termination of employment with the Company.
In the event of a merger, reorganization, consolidation or liquidation
involving the Company, the Board has discretion to provide that each right to
purchase Common Stock will be assumed or an equivalent right substituted by the
successor corporation, or the Board may shorten the offering period and provide
for all sums collected by payroll deductions to be applied to purchase stock
immediately prior to such merger or other transaction. The Purchase Plan will
terminate in March 2007. The Board has the authority to amend or terminate the
Purchase Plan, provided, however, that no such action may adversely affect any
outstanding rights to purchase Common Stock.
401(K) PLAN
In September 1988, the Board adopted a tax qualified employee savings and
retirement plan covering the Company's employees, as amended and restated
effective January 1, 1997 (the "401(k) Plan"). Pursuant to the 401(k) Plan,
eligible employees may elect to reduce their current compensation by up to the
lesser of 16% of such compensation or the statutorily prescribed annual limit
($9,500 in 1997) and have the amount of such reduction contributed to the 401(k)
Plan. The 401(k) Plan provides for Company matching and profit sharing
contributions of 50% of the employee's contributions to a maximum of 6% of the
employee's compensation. Employees become 20% vested in the Company's matching
contributions after two years of service, and increase their vested percentages
by an additional 20% for each year of service thereafter. The 401(k) Plan is
intended to qualify under Section 401 of the Code, so that contributions to the
401(k) Plan, and income earned on the 401(k) Plan contributions, are not taxable
to employees until withdrawn from the 401(k) Plan, and so that contributions by
the Company will be deductible by the Company when made. The trustee under the
401(k) Plan, at the discretion of each participant, invests the 401(k) Plan
employee salary deferrals and Company contributions in selected investment
options.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements, dated April 1, 1997,
with the following executive officers: (1) Glenn Sherman, Ph.D., Chairman of the
Board and Chief Executive Officer, (2) Dean Hodges, Ph.D., President, Laser
Power Microlasers Division, (3) Richard Scherer, President, Laser Power Optics
Division, (4) Douglas Tanimoto, Ph.D., President, Laser Power Research Division,
and (5) Paul Wickman, Jr., Senior Vice President, Treasurer and Chief Financial
Officer. Pursuant to such employment agreements, Messrs. Sherman, Hodges,
Scherer, Tanimoto and Wickman receive annual salaries of $185,000, $145,000,
$147,000, $150,000 and $120,000, respectively. In addition, the Company will
enter into an employment agreement with Arthur Minich, President, Laser Power
Display Division, upon the closing of this offering at an annual salary of
$150,000. Annual bonuses are determined by the Board of Directors. The term of
each employment agreement is three years and may be extended by mutual written
consent of the parties. Each employment agreement also provides that if
employment is terminated for cause or the employee voluntarily resigns, the
employee shall receive only the salary payments earned prior to the date of
termination. If employment is terminated without cause, the employee will
receive consulting fees equal to his base salary times the number of months
equal to the number of years he would have been employed at the next anniversary
date of his employment. As consideration for the consulting fees, the employee
will provide consulting services on an as needed basis. In addition, during the
term of employment and for as long as the employee is receiving consulting fees,
he will not, subject to certain limitations, compete with the Company.
42
<PAGE> 44
LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Bylaws provide that the Company will indemnify its directors
and executive officers and may indemnify its other officers, employees and other
agents to the fullest extent not prohibited by Delaware law as in effect from
time to time. The Company is also empowered under its Bylaws to enter into
indemnification contracts with its directors and officers and to purchase
insurance on behalf of any person it is required or permitted to indemnify.
Pursuant to this provision, the Company has entered into indemnification
agreements with each of its directors and executive officers.
In addition, the Company's Restated Certificate of Incorporation (the
"Restated Certificate") provides that directors of the Company shall not be
personally liable to the Company or its stockholders for monetary damages for
any breach of fiduciary duty as a director, except for liability (i) for any
breach of the directors' duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) in respect of certain unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the Delaware General Corporation Law or (iv) for any
transaction from which the director derives any improper personal benefit. The
Restated Certificate also provides that if the Delaware General Corporation Law
is amended to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of the Company's directors
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law. The provision also does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws.
43
<PAGE> 45
CERTAIN TRANSACTIONS
In November 1987, Union Miniere, s.a. purchased the Debentures in the
aggregate principal amount of $1,660,000 from the Company. The Debentures are
currently held by Union Miniere Inc. The Debentures bear interest at a rate
which is equal to Wells Fargo Bank's prime rate plus 1%; provided, however, that
the rate of interest shall in no event be less than 5 1/2% per annum nor higher
than the lesser of 11 1/2% per annum or the maximum rate then permitted by law.
The Company has paid interest on the Debentures semi-annually. The Debentures
were originally due and payable on October 30, 1992, which was extended to
October 30, 1997. In December 1996, the Company issued warrants to purchase
20,000 shares of Common Stock at an exercise price of $4.50 per share to Union
Miniere Inc. in connection with the service of certain directors of the Company.
In March 1997, the Company entered into a letter agreement with Union Miniere
Inc. to extend the maturity date of the Debentures to November 2, 2000 and to
adjust the conversion price to $5.25 per share. In the event the per share price
of this offering is less than $6.75, the conversion price will be adjusted
downward so that for every cent the offering price is below $6.75 per share, the
conversion price will be reduced by one-half of one cent; provided however, that
in no event will the conversion price be reduced below $4.50 per share. As a
result, the maximum number of shares of Common Stock issuable upon conversion of
the Debentures is 368,888. In addition, Union Miniere Inc. was granted certain
registration rights covering all shares of Common Stock now owned by it or
acquired by it upon conversion of the Debentures or exercise of its warrants,
including the right to request that the Company register the resale of such
shares no earlier than one year after the closing of this offering. See
"Management -- Director Compensation," "Description of Capital
Stock -- Convertible Subordinated Debentures" and "Shares Eligible for Future
Sale."
In May 1993, Proxima purchased 83,333 shares of Common Stock from the
Company for $250,000. In January 1994, the Company entered into a Stock Purchase
Agreement with Proxima, pursuant to which Proxima has purchased shares of Series
A Preferred Stock for an aggregate purchase price of $6.4 million. In July 1996,
Proxima stated that it had written down a majority of its investment in the
Company because the microlaser technology developed by the Company will
initially be suited for the higher cost specialty projector markets that will
not be served by Proxima's products. In March 1997, the Company entered into a
letter agreement with Proxima, pursuant to which Proxima will exchange the
Series A Preferred Stock for 1,193,252 shares of Common Stock (an effective
conversion price of $5.40 per share) immediately prior to the completion of the
offering. In addition, Proxima was granted certain registration rights covering
all shares of Common Stock now owned by it or acquired by it in exchange for the
Series A Preferred Stock, including the right to request that the Company
register the resale of such shares no earlier than one year after the closing of
this offering. See "Shares Eligible for Future Sale."
In January 1994, the Company entered into a Cooperative Development and
License Agreement with Proxima which provides Proxima with certain rights to
display technology developed by the Company so long as Proxima continues to
provide funding to the Company or aggressively markets products using such
technology. Proxima has a right of first refusal regarding certain other
technologies developed by the Company relating to the video display market.
In June 1994, Proxima Corporation extended to the Company a $500,000 line
of credit to finance the purchase of equipment to support microlaser
development. In May 1995, the outstanding balance under the line of credit was
converted into a term note due and payable May 30, 1999. As of February 28,
1997, $218,000 principal amount was outstanding on the note. The note bears
interest at Imperial Bank's prime rate plus 1 1/2%. Principal and interest
payments under the note are due monthly. The amount owing under the note has
been guaranteed by Glenn H. Sherman, the Company's Chairman of the Board and
Chief Executive Officer. The Company intends to repay the outstanding principal
balance and any outstanding accrued interest upon the closing of this offering.
44
<PAGE> 46
The Company purchases a number of products for resale from Laser
Mechanisms, Inc. ("LMI"). William G. Fredrick, Jr., a director of the Company,
is the founder and president of LMI. In addition, LMI purchases laser optics
from the Company. The Company believes that such transactions between the
Company and LMI are on terms as favorable to the Company as such terms would
have been if negotiated between the Company and unaffiliated persons.
In December 1996, the Company issued an option to purchase 200,000 shares
of the Company's Common Stock at an exercise price of $4.50 per share to Arthur
P. Minich. The option vests over five years and may be exercised at any time
until its expiration in December 2006.
In addition, the Company has entered into indemnification agreements with
each of its directors and executive officers. See "Management -- Limitation of
Liability and Indemnification Matters."
45
<PAGE> 47
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of February 28, 1997, and as
adjusted to reflect the sale of this offering, by (i) each person who is known
by the Company to own beneficially more that 5% of the Company's outstanding
Common Stock, (ii) each Named Executive Officer, (iii) each of the Company's
directors, (iv) all current directors and executive officers as a group, and (v)
each Selling Stockholder. Except as indicated in the footnotes to this table,
the persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
DIRECTORS, OFFERING(1) OFFERING(1)
EXECUTIVE OFFICERS ------------------- SHARES -------------------
AND 5% STOCKHOLDERS NUMBER PERCENT BEING OFFERED NUMBER PERCENT
- --------------------------------------------- ---------- ------- -------------- ---------- -------
<S> <C> <C> <C> <C> <C>
Proxima Corporation.......................... 1,276,585 30.4% -- 1,276,585 20.6%
9440 Carroll Park
San Diego, CA 92121-2298
Union Miniere Inc.(2)........................ 924,683 19.9 -- 924,683 13.9
13847 West Virginia Dr.
Lakewood, CO 80228
Glenn H. Sherman, Ph.D.(3)................... 629,082 14.7 -- 629,082 10.0
Laser Power Corporation
12777 High Bluff Road
San Diego, CA 92130
William G. Fredrick, Jr.(4).................. 372,122 8.8 -- 372,122 6.0
Laser Mechanisms, Inc.
P.O. Box 2064
Southfield, MI 48037
Douglas H. Tanimoto, Ph.D.(5)................ 283,933 6.4 -- 283,933 4.4
Laser Power Corporation
12777 High Bluff Road
San Diego, CA 92130
Dean T. Hodges, Ph.D.(6)..................... 121,333 2.8 -- 121,333 1.9
Richard P. Scherer(7)........................ 161,333 3.7 -- 161,333 2.5
Arthur P. Minich............................. -- -- -- -- --
Paul P. Wickman, Jr.(8)...................... 46,676 1.1 -- 46,676 *
James D. McFarland........................... -- -- -- -- --
Robert G. Klimasewski(9)..................... 69,491 1.6 -- 69,491 1.1
Richard C. Laird............................. 4,465 * -- 4,465 *
Kenneth E. Olson(10)......................... 25,798 * -- 25,798 *
John C. Stiska(11)........................... 126,564 3.0 -- 126,564 2.0
Alain Godefroid(12).......................... -- -- -- -- --
Siegfried Meder(13).......................... 93,469 2.2 -- 93,469 1.5
Marc Van Sande, Ph.D......................... -- -- -- -- --
All directors and executive officers as a
group (14 persons)(14)..................... 4,135,534 77.3 -- 4,135,534 56.3
SELLING STOCKHOLDERS
Milton M.T. & Rosalind Pao Chang............. 197,594 4.7 66,666 130,928 2.1
Tony & Lily Hsu Family Trust dated 11/8/89... 81,350 1.9 24,666 56,684 *
Other selling stockholders(15)............... 371,361 8.8 284,002 87,359 1.4
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1%.
46
<PAGE> 48
(1) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect
to securities. Except as indicated by footnote, and subject to community
property laws where applicable, the persons named in the table above have
sole voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them. Percentage of beneficial ownership is
based on 4,202,354 shares of Common Stock outstanding as of February 28,
1997 assuming the issuance of 1,193,252 shares of Common Stock in exchange
for the outstanding Series A Preferred Stock and 6,202,354 shares of Common
Stock outstanding after completion of this offering.
(2) Includes 368,888 shares subject to convertible debentures and 70,000 shares
subject to warrants exercisable within 60 days of February 28, 1997.
(3) Includes 82 shares held by Inamaria Sherman, wife of Mr. Sherman and 68,666
shares subject to options exercisable within 60 days of February 28, 1997.
(4) Includes 10,666 shares held of record by Laser Mechanisms, Inc., of which
Mr. Fredrick is the President, and 23,332 shares subject to warrants
exercisable within 60 days of February 28, 1997.
(5) Includes 201,333 shares subject to options exercisable within 60 days of
February 28, 1997.
(6) Includes 121,333 shares subject to options exercisable within 60 days of
February 28, 1997.
(7) Includes 1,333 shares subject to options exercisable within 60 days of
February 28, 1997 and 160,000 shares subject to a warrant exercisable
within 60 days of February 28, 1997.
(8) Includes 41,332 shares subject to options exercisable within 60 days of
February 28, 1997.
(9) Includes 23,332 shares subject to warrants exercisable within 60 days of
February 28, 1997.
(10) Includes 23,332 shares subject to warrants exercisable within 60 days of
February 28, 1997. Excludes 1,157,260 shares held by Proxima Corporation,
of which Mr. Olson is Chairman of the Board and acting Chief Executive
Officer.
(11) Includes 23,332 shares subject to warrants exercisable within 60 days of
February 28, 1997.
(12) Excludes 924,683 shares held of record by Union Miniere Inc., of which Mr.
Godefroid is the Corporate Vice President, Legal and Environmental Affairs.
(13) Includes 23,332 shares subject to warrants exercisable within 60 days of
February 28, 1997.
(14) Includes 433,970 shares issuable upon exercise of options exercisable
within 60 days of February 28, 1997, and 276,660 shares issuable upon
exercise of warrants exercisable within 60 days of February 28, 1997.
(15) Includes 3,333 shares of Common Stock issuable pursuant to options
exercisable within 60 days of February 28, 1997. Includes stockholders each
of whom owned less than 1% of the Company's Common Stock prior to the
offering and will own less than 1% of the Company's Common Stock following
the offering. Such stockholders (and the number of shares to be sold by
such stockholders in the offering) include: Sodero R. Arcia (735 shares);
Scott Arrington (6,660 shares); Allan R. Beach, Trustee UDT Floyd Earl Roe
Family Trust (502 shares); Andreas Caine (2,666 shares); Angela G. Caine
(1,660 shares); John C. and Isolde M. Caine, (3,333 shares); Hilary K.H.
and Marie Louise Chan, (1,960 shares); The Chicago Corporation (2,666
shares); Daniel Combs (666 shares); Verne R. Costich (4,000 shares); H.
Eugene Davis (33 shares); Jacques DeFrenne (416 shares); 1480 Associates
(34,960 shares); Stephen Fry (10,000 shares); Fulton Street Travel (13
shares); James R. Goode (8,000 shares); Sally A. Goode (6,962 shares);
Harris Bank Winnetka (16,329 shares); Alan D. Hiura (10,586 shares); Hiura
and Hiura DDS Inc. (Pension Trust) (10,000 shares); Ronald Hiura (1,000
shares); Thomas W. and Sharon E. James (4,834 shares); Claude D. Jones
(2,696 shares); Anthony L. and Rita J. Kendziorski (666 shares); Dennis
Kendziorski (3,410 shares); Ervin Kendziorski, (7,943 shares); Richard
Keyzer (8,456 shares); Clifford Kidney (84 shares); James A. King (216
shares); Allan Koljonen, Trustee of the Allan Koljonen Trust (4,300
shares); Roland N. Kumagai DDS Target Benefit Plan (5,751 shares); Ronald
MacFarlane (266 shares); Karen Matic Trustee, Gregory P. Matic Gift Trust
U/A 7/29/82 FBO Claire Matic (2,666 shares); Karen Matic Trustee, Gregory
P. Matic Gift Trust U/A 7/29/82 FBO Lauren Matic (2,000 shares); Karen
Matic Trustee, Gregory P. Matic Gift Trust U/A 7/29/82 FBO Steven Matic
(2,000 shares); John W. Matthews (3,333 shares); William G. May (7,119
shares); Maura Robbins, Trustee of the Maura Robbins Living Trust dated
December 31, 1982 (333 shares); Phillip E. Rollhaus (16,104 shares); L.E.
and Denise Rund (438 shares); Horst Sasse (5,000 shares); Michael A.
Schneider (666 shares); Nikom Shomglin (222 shares); Walter K. Silbert
(2,794 shares); George R. and Janet Lee Snyder (1,860 shares); Robert
Spiegler (33 shares); Bruce Sunderland (1,000 shares); Lee Sutter (2,000
shares); Gary Takessian (2,666 shares); Nora Jean and George Thorwood (333
shares); W. Peter Williams (533 shares); Clifford L. Willis (3,333 shares);
Thomas S. Wilson (40,201 shares); C. Paige Wilson Gift Trust u/a/d 3/18/87,
Arlinton Guenther, Trustee (8,666 shares); Kathryn J. Wilson Gift Trust
u/a/d 3/18/87, Arlington Guenther, Trustee (8,666 shares); and Gary L. Wirt
(10,266 shares).
47
<PAGE> 49
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 15,000,000 shares
of Common Stock, $0.001 par value, and 3,000,000 shares of Preferred Stock.
COMMON STOCK
As of February 28, 1997, there were 3,009,102 shares of Common Stock
outstanding held of record by approximately 182 stockholders. The holders of
Common Stock are entitled to one vote per share on all matters to be voted on by
the stockholders. Subject to preferences that may be applicable to outstanding
shares of Preferred Stock, if any, the holders of Common Stock are entitled to
receive ratably such dividends as may be declared from time to time by the Board
of Directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining after payment of
liabilities, subject to prior liquidation rights of Preferred Stock, if any,
then outstanding. The Common Stock has no preemptive, conversion, subscription
or other such rights. There are no redemption or sinking fund provisions
applicable to the Common Stock. All outstanding shares of Common Stock are fully
paid and nonassessable, and the shares of Common Stock to be sold in this
offering will be fully paid and non-assessable.
PREFERRED STOCK
Immediately prior to the closing of this offering, all outstanding shares
of Series A Preferred Stock will be exchanged for 1,193,252 shares of Common
Stock. See Note 5 of Notes to Consolidated Financial Statements for a
description of the outstanding Series A Preferred Stock.
Under the Restated Certificate, the Board of Directors has the authority to
issue up to 3,000,000 shares of Preferred Stock in one or more series and to fix
the rights, preferences, privileges, and restrictions granted to or imposed upon
such Preferred Stock, including dividend rights, conversion rights, terms of
redemption, liquidation preference, sinking fund terms and the number of shares
constituting any series or the designation of such series, without any further
vote or action by the stockholders. The Board of Directors, without stockholder
approval, can issue additional Preferred Stock with voting and conversion rights
which could adversely affect the voting power of the holders of Common Stock.
The issuance of Preferred Stock could have the effect of delaying, deferring or
preventing a change in control of the Company. The Company has no present plan
to issue any shares of Preferred Stock.
DEBENTURES
Union Miniere Inc. is the holder of the Debentures in the aggregate
principal amount of $1,660,000 from the Company. The Debentures bear interest at
a rate which is equal to Wells Fargo Bank's prime rate plus 1%; provided,
however, that the rate of interest shall in no event be less than 5 1/2% per
annum nor higher than the lesser of 11 1/2% per annum or the maximum rate then
permitted by law. The Debentures are subordinate to all bank debt, limit the
aggregate amount of debt the Company can incur, require that the Company
maintain minimum tangible net worth levels (which vary with the number of
outstanding shares) and require that the Company maintain an average annual cash
flow coverage ratio of 1:1. The Debentures also provide that the Company may
declare dividends only if it meets a minimum average cash flow coverage ratio of
2-to-1. The Debentures were originally due and payable on October 30, 1992,
which maturity date was extended to October 30, 1997. In March 1997, the Company
entered into a letter agreement with Union Miniere Inc. to extend the maturity
date of the Debentures to November 2, 2000 and to adjust the conversion price to
$5.25 per share. In the event the per share price of this offering is less than
$6.75, the conversion price will be adjusted downward so that for every cent the
offering price is below $6.75 per share, the conversion price will be reduced by
one-half of one cent; provided however, that in no event will such conversion
price be reduced below $4.50 per share. As a result, the maximum number of
shares of Common Stock issuable upon conversion of the Debentures is 368,888.
48
<PAGE> 50
WARRANTS
As of February 28, 1997, there were warrants outstanding to purchase an
aggregate of 386,660 shares of Common Stock at a weighted average exercise price
of $3.21 per share.
REPRESENTATIVES' WARRANTS
The Company has also agreed to sell to the Representatives warrants to
purchase up to 200,000 shares of Common Stock at a price of $.001 per warrant.
The Representatives' Warrants will be exercisable for a period of four years,
commencing one year after the date of this prospectus, at an initial per share
exercise price equal to 130% of the price to the public set forth on the cover
page of this prospectus. The Representatives' Warrants are not redeemable by the
Company under any circumstances. Neither the Representatives' Warrants nor the
shares of Common Stock issuable upon exercise thereof may be transferred,
assigned or hypothecated until one year from the date of this prospectus, except
that they may be assigned, in whole or in part, to any successor, officer,
director, member or partner of the Representatives.
The holders of the Representatives' Warrants will have no voting, dividend
or other rights as stockholders of the Company unless and until the exercise of
the Representatives' Warrants. The number of securities deliverable upon any
exercise of the Representatives' Warrants or its underlying securities and the
exercise price of the Representatives' Warrants are subject to adjustment to
protect against any dilution upon the occurrence of certain events, including
issuance of stock dividends, stock splits, subdivision or combination of
outstanding stock and reclassification of stock.
The Company has agreed with the Representatives that if, during the
four-year period commencing one year following the date of this prospectus, the
Company registers any of its Common Stock for sale pursuant to a registration
statement (with the exception of Form S-4, Form S-8 or other inappropriate
form), it will use its best efforts, upon request of any of the holders of the
Representatives' Warrants and/or the underlying shares, to include such
securities as a part of the registration statement. The Company will bear all
the costs, except underwriting discounts and the Representatives' legal fees,
for one "piggy-back" registration.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
The Company is governed by the provisions of Section 203 of the Delaware
Law. In general, Section 203 prohibits a public Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in
a prescribed manner. A "business combination" includes mergers, asset sales or
other transactions resulting in a financial benefit to the stockholder. An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within the preceding three years, did own) 15% or more of
the corporation's voting stock. The statute could have the effect of delaying,
deferring or preventing a change in control of the Company.
The Restated Certificate and Bylaws also require that, effective upon the
closing of this offering, any action required or permitted to be taken by
stockholders of the Company must be effected at a duly called annual or special
meeting of the stockholders and may not be effected by a consent in writing in
lieu of meeting. In addition, special meetings of the stockholders of the
Company may be called only by the Board of Directors, the Chairman of the Board
or the Chief Executive Officer of the Company. The Restated Certificate also
specifies that the authorized number of directors may be changed only by
resolution of the Board of Directors. These provisions may have the effect of
deterring hostile takeovers or delaying changes in control or management of the
Company.
TRANSFER AGENT AND REGISTRAR
American Securities Transfer & Trust Company has been appointed as the
transfer agent and registrar for the Company's Common Stock.
49
<PAGE> 51
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the Common
Stock of the Company. Future sales of substantial amounts of Common Stock in the
public market could adversely affect market prices prevailing from time to time.
Furthermore, since only a limited number of shares will be available for sale
shortly after this offering because of certain contractual and legal
restrictions on resale described below, sales of substantial amounts of Common
Stock of the Company in the public market after the restrictions lapse could
adversely affect the prevailing market price and the ability of the Company to
raise equity capital in the future.
Upon completion of this offering, the Company will have outstanding
6,202,354 shares of Common Stock. Of these shares, the 2,450,000 shares sold in
the offering will generally be freely tradeable without restriction or further
registration under the Securities Act. The remaining approximately 3,750,000
shares of Common Stock may be sold in the public market as follows: (i)
approximately 230,000 shares will be eligible for immediate sale on the date of
this Prospectus; and (ii) upon expiration of lock-up agreements 180 days after
the Effective Date, approximately 475,000 additional shares will be eligible for
sale without restriction pursuant to Rule 144(k) and approximately 3,045,000
shares will be eligible for sale subject to the volume and other restrictions of
Rule 144. In addition, upon the expiration of a lock-up agreement 180 days after
the Effective Date, Union Miniere will be entitled to sell up to approximately
370,000 shares of Common Stock issuable to it upon conversion of the Debentures
subject to the volume and other restrictions of Rule 144. In addition, holders
of vested options to purchase approximately 64,000 shares of Common Stock as of
the date of this Prospectus will be entitled to sell all of such shares upon the
earlier of 90 days after the Effective Date or the filing of a Form S-8
registration statement with respect to such shares. Holders of additional vested
options and warrants to purchase an aggregate of approximately 992,000 shares of
Common Stock as of the date of this Prospectus will be entitled to sell all of
such shares upon expiration of lock-up agreements 180 days after the Effective
Date. Commencing one year after the completion of this offering, Proxima and
Union Miniere, which beneficially own an aggregate of approximately 2,200,000
shares of Common Stock, will be entitled to certain registration rights with
respect to such shares. The exercise of such rights by either Proxima or Union
Miniere could result in a large number of shares being sold in the public market
after one year from its closing of this offering. Future sales of shares by
existing stockholders could have an adverse effect on the market price of the
Common Stock or otherwise impair the Company's ability to raise additional
capital. See "Description of Capital Stock".
The Company's officers, directors and certain stockholders have agreed that
they will not, without the prior written consent of Cruttenden Roth
Incorporated, directly or indirectly offer, sell, contract to sell or otherwise
dispose of approximately 3,521,286 shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock during the
180-day period commencing on the Effective Date. The Company has agreed that it
will not, without the prior written consent of Cruttenden Roth Incorporated,
directly or indirectly offer, sell, contract to sell or otherwise dispose of any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock during such 180-day period except for the sale of
the shares of Common Stock in this offering, the issuance of options and shares
of Common Stock pursuant to employee benefit plans set forth in this Prospectus,
and the issuance of shares of Common Stock upon exercise of warrants or options
presently outstanding. Any shares subject to the lock-up agreements may be
released at any time without notice by Cruttenden Roth Incorporated.
In general, under Rule 144 as currently in effect, beginning 90 days after
the Effective Date, an Affiliate of the Company, or person (or persons whose
shares are aggregated) who has beneficially owned Restricted Shares for at least
one year will be entitled to sell in any three-month period a number of shares
that does not exceed greater of (i) one percent of the then outstanding shares
of the Company's Common Stock or (ii) the average weekly trading volume of the
Company's Common Stock in the Nasdaq National Market during the four calendar
weeks immediately preceding the date on which notice of the sale is filed with
the Securities and Exchange Commission. Sales pursuant to Rule 144 are subject
to certain requirements relating to manner of sale, notice, and the availability
of current public information about the Company. A person (or persons whose
shares are aggregated) who is not deemed to have been an Affiliate of the
Company at any time during the 90
50
<PAGE> 52
days immediately preceding the sale and who has beneficially owned Restricted
Shares for at least two years is entitled to sell such shares under Rule 144(k)
without regard to the limitations described above.
An employee, officer or director of or consultant to the Company who
purchased or was awarded shares or options to purchase shares pursuant to a
written compensatory plan or contract is entitled to rely on the resale
provisions of Rule 701 under the Securities Act, which permits Affiliates and
non-Affiliates to sell their Rule 701 shares without having to comply with Rule
144's holding period restrictions, in each case commencing 90 days after the
date of this Prospectus. In addition, non-Affiliates may sell Rule 701 shares
without complying with the public information, volume and notice provisions of
Rule 144.
The Company intends to file a registration statement under the Securities
Act covering shares of Common Stock reserved for issuance under the Company's
Stock Plans and Purchase Plan. Based on the number of options outstanding and
options and shares reserved for issuance at February 28, 1997, such registration
statement would cover approximately 2,474,953 shares. Such registration
statement is expected to be filed and to become effective as soon as practicable
after the date hereof. Shares registered under such registration statement will,
subject to Rule 144 volume limitations applicable to Affiliates, be available
for sale in the open market, unless such shares are subject to vesting
restrictions with the Company or the lock up agreements described above. See
"Management."
51
<PAGE> 53
UNDERWRITING
Cruttenden Roth Incorporated and L.H. Friend, Weinress, Frankson & Presson,
Inc. are acting as the representatives (the "Representatives") of each of the
underwriters named below (the "Underwriters"). Subject to the terms and
conditions set forth in an underwriting agreement dated as of the date hereof
(the "Underwriting Agreement"), the Underwriters named below have severally
agreed to purchase, and the Company and the Selling Stockholders have agreed to
sell to them, the aggregate number of shares of Common Stock set forth opposite
their respective names:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
--------------------------------------------------------------------- ----------------
<S> <C>
Cruttenden Roth Incorporated.........................................
L.H. Friend, Weinress, Frankson & Presson, Inc.......................
---------
Total...................................................... 2,450,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters are subject to the approval of certain legal matters by counsel and
various other conditions. The nature of the Underwriters' obligations is such
that they are committed to purchase all of the above shares if any are
purchased. The Underwriters propose to offer the shares of Common Stock directly
to the public at the initial public offering price set forth on the cover page
of this prospectus and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow, and such dealers may
re-allow, a concession not in excess of $ per share to certain other
dealers. After the offering, the offering price and other selling terms may be
changed by the Representatives.
Prior to consummation of the offering, there has been no public market for
the Common Stock of the Company. Accordingly, the initial public offering price
has been determined by negotiation between the Company and the Representatives.
Among the factors considered in determining the initial public offering price
were the Company's results of operations, the Company's current financing
condition, its future prospects, the market for its products and services, the
experience of its management, the economics of the industry in general, the
general condition of the equity securities market, the market capitalization and
stages of development of other companies which the Company and the
Representatives believed to be comparable to the Company and other relevant
factors. There can be no assurance that any active trading market will develop
for the Common Stock or as to the price at which the Common Stock may trade in
the public market from time to time subsequent to the offering made hereby.
The Company has granted to the Underwriters an option, expiring 45 days
from the date of this Prospectus, to purchase up to 367,500 additional shares of
Common Stock on the same terms as set forth on the cover page of this
Prospectus, solely to cover over-allotments, if any, incurred in the sale of the
shares of Common Stock offered hereby. If the Underwriters exercise the option,
each Underwriter will have a firm commitment, subject to certain conditions, to
purchase such number of additional shares of Common Stock as is proportionate to
such Underwriter's initial commitment to purchase shares from the Company.
In connection with the Offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in accordance
with the Securities Exchange Act of 1934 pursuant to which such persons may bid
for or purchase Common Stock for the purpose of stabilizing its market price.
The Underwriters also may create a short position for the account of the
Underwriters by selling more Common Stock in connection with the Offering than
they are committed to purchase from the Company and the Selling Stockholders,
and in such case may purchase Common Stock in the open market following
completion of the Offering to convert all or a portion of such shares of Common
Stock or may exercise the Underwriter's over-allotment option referred to above.
In addition, the Representative, on behalf of the Underwriters, may impose
"penalty bids" under contractual arrangements with the Underwriters whereby it
may reclaim from an Underwriter (or dealer participating in the Offering), for
the account of the other Underwriters, the selling concession with respect to
Common Stock that is distributed in the Offering but subsequently purchased for
the account of the Underwriters in the open market. Any of the transactions
described in this paragraph may result in the maintenance of the price of the
Common Stock at a
52
<PAGE> 54
level above that which might otherwise prevail in the open market. None of the
transactions described in this paragraph are required, and, if they are
undertaken, they may be discontinued at any time.
The Company has also agreed to sell to the Representatives warrants to
purchase up to 200,000 shares of Common Stock at a price of $.001 per warrant.
The Representatives' Warrants will be exercisable for a period of four years,
commencing one year after the date of this prospectus, at an initial per share
exercise price equal to 130% of the price to the public set forth on the cover
page of this prospectus. The Representatives' Warrants are not redeemable by the
Company under any circumstances. Neither the Representatives' Warrants nor the
shares of Common Stock issuable upon exercise thereof may be transferred,
assigned or hypothecated until one year from the date of this prospectus, except
that they may be assigned, in whole or in part, to any successor, officer,
director, member or partner of the Representatives.
The holders of the Representatives' Warrants will have no voting, dividend
or other rights as stockholders of the Company unless and until the exercise of
the Representatives' Warrants. The number of securities deliverable upon any
exercise of the Representatives' Warrants or its underlying securities and the
exercise price of the Representatives' Warrants are subject to adjustment to
protect against any dilution upon the occurrence of certain events, including
issuance of stock dividends, stock splits, subdivision or combination of
outstanding stock and reclassification of stock.
The Company has agreed with the Representatives that if, during the
four-year period commencing one year following the date of this prospectus, the
Company registers any of its Common Stock for sale pursuant to a registration
statement (with the exception of Form S-4, Form S-8 or other inappropriate
form), it will use its best efforts, upon request of any of the holders of the
Representatives' Warrants and/or the underlying shares, to include such
securities as a part of the registration statement. The Company will bear all
the costs, except underwriting discounts and the Representatives' legal fees,
for one "piggy-back" registration.
The Company, its executive officers, directors and principal stockholders
and option holders have agreed that for a period of 180 days after the date of
this prospectus they will not, directly or indirectly, offer, sell, contract to
sell, grant any option to sell, or otherwise dispose of shares of Common Stock
or other securities which are substantially similar to the Common Stock or
securities convertible into or exercisable or exchangeable for or any rights to
purchase or acquire Common Stock or securities which are substantially similar
to the Common Stock without the prior written consent of Cruttenden Roth
Incorporated.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof.
The Company has also agreed to pay to the Representatives a non-accountable
expense equal to 2% of the aggregate offering price to the public for due
diligence and other out-of-pocket expenses.
The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by its counsel, Cooley Godward LLP, San Diego, California.
Certain legal matters in connection with the offering will be passed upon for
the Underwriters by Gray Cary Ware & Freidenrich, San Diego, California.
EXPERTS
The Consolidated Financial Statements of Laser Power Corporation at August
31, 1995 and 1996, and for each of the three years in the period ended August
31, 1996 appearing in this Prospectus and Registration Statement have been
audited by Ernst & Young LLP, independent auditors and are included herein in
reliance upon such report given the authority of said firm as experts in
accounting and auditing.
53
<PAGE> 55
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission,
Washington, D.C., a Registration Statement on Form SB-2 under the Act, with
respect to the Common Stock offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and such
Common Stock, reference is made to the Registration Statement and the exhibits
and schedules filed as part thereof. Statements contained in this Prospectus as
to the contents of any contract or document filed as an exhibit to the
Registration Statement is qualified by reference to such exhibit as filed. A
copy of the Registration Statement, and the exhibits and schedules thereto, may
be inspected without charge at the public reference facilities maintained by the
SEC in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
SEC's regional offices located at the Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade
Center, 13th Floor, New York, New York 10048, and copies of all or any part of
the Registration Statement may be obtained from such offices upon the payment of
the fees prescribed by the SEC. The SEC maintains a World Wide Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. The address of the
SEC's World Wide Web site is http://www.sec.gov.
54
<PAGE> 56
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors......................................................... F-2
Consolidated Balance Sheets at August 31, 1995 and 1996 and at February 28, 1997
(unaudited).......................................................................... F-3
Consolidated Statements of Operations for the years ended August 31, 1994, 1995 and
1996 and the six months ended February 29, 1996 (unaudited) and February 28, 1997
(unaudited).......................................................................... F-4
Consolidated Statements of Stockholders' Equity for the years ended August 31, 1994,
1995 and 1996 and the six months February 28, 1997 (unaudited)....................... F-5
Consolidated Statements of Cash Flows for the years ended August 31, 1994, 1995 and
1996 and the six months ended February 29, 1996 (unaudited) and February 28, 1997
(unaudited).......................................................................... F-6
Notes to Consolidated Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE> 57
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Laser Power Corporation
We have audited the accompanying consolidated balance sheets of Laser Power
Corporation at August 31, 1996 and 1995, and the related consolidated statements
of operations, stockholders' equity and cash flows for each of the three years
in the period ended August 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Laser Power
Corporation at August 31, 1996 and 1995, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
August 31, 1996, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
San Diego, California
October 9, 1996,
except for Note 5 ("Changes in Capitalization"), as to which the date is
March 25, 1997
F-2
<PAGE> 58
LASER POWER CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
AUGUST 31, STOCKHOLDERS'
--------------------------- FEBRUARY 28, EQUITY AT
1995 1996 1997 FEBRUARY 28,
----------- ----------- ------------ 1997
(UNAUDITED) ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........... $ 257,309 $ 298,160 $ 128,375
Accounts receivable, net of
allowance for doubtful accounts
of $98,000 in 1995, $107,847 in
1996 and $151,452 in 1997........ 2,453,603 2,992,556 3,211,247
Inventories, net.................... 2,148,621 2,729,865 2,918,771
Other current assets................ 151,867 166,445 288,048
----------- ----------- -----------
Total current assets........ 5,011,400 6,187,026 6,546,441
Property and equipment, net........... 4,408,689 4,187,387 5,194,707
Intangibles and other assets (net of
accumulated amortization)........... 787,351 819,286 986,920
----------- ----------- -----------
Total assets................ $10,207,440 $11,193,699 $ 12,728,068
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable to bank................ $ -- $ -- $ 773,998
Accounts payable.................... 1,269,876 1,339,596 1,927,285
Accrued compensation and related
expenses......................... 424,359 739,385 756,915
Other current liabilities........... 566,942 781,936 692,395
Current portion of long-term debt... 438,687 488,083 403,969
----------- ----------- -----------
Total current liabilities... 2,699,864 3,349,000 4,554,562
Deferred rent......................... 375,699 305,247 270,021
Long-term debt........................ 801,520 558,975 686,822
Subordinated convertible debentures... 1,660,000 1,660,000 1,660,000
Stockholders' equity:
Convertible preferred stock, $.125
par value ($.001 par value pro
forma):
Authorized -- 3,000,000 shares
Issued and
outstanding -- 1,143,196 shares
in 1995, and 1,610,891 shares
in 1996 and 1997 (none pro
forma)......................... 142,899 201,361 201,361 $ --
----------- ----------- -----------
Common stock, par value $.001:
Authorized -- 15,000,000 shares
Issued and
outstanding -- 3,000,475 shares
in 1995, 3,000,106 shares in
1996 and 3,009,102 shares in
1997 (4,202,354 shares pro
forma)......................... 3,001 3,000 3,009 4,202
Additional paid-in capital.......... 8,411,237 10,223,305 10,263,869 10,464,037
----------- ----------- -----------
Foreign currency translation
adjustment....................... 112,690 123,222 5,891 5,891
Accumulated deficit................. (3,999,470) (5,230,411) (4,917,467) (4,917,467)
----------- ----------- ----------- -----------
Total stockholders'
equity.................... 4,670,357 5,320,477 5,556,663 $ 5,556,663
----------- ----------- ----------- ===========
Total liabilities and
stockholders' equity...... $10,207,440 $11,193,699 $ 12,728,068
=========== =========== ===========
</TABLE>
See accompanying notes.
F-3
<PAGE> 59
LASER POWER CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------------
YEARS ENDED AUGUST 31, FEBRUARY FEBRUARY
--------------------------------------- 29, 28,
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales................. $10,157,944 $11,858,713 $15,194,472 $ 6,880,416 $ 7,995,334
Contract research and
development................ 1,727,069 2,714,208 3,712,967 1,682,110 3,128,526
----------- ----------- ----------- ----------- -----------
Total revenues........ 11,885,013 14,572,921 18,907,439 8,562,526 11,123,860
Costs and expenses:
Cost of product sales......... 6,550,060 7,994,255 9,887,809 4,600,566 5,474,848
Contract research and
development................ 1,307,872 2,058,873 2,941,947 1,262,414 2,502,224
Internal research and
development................ 1,567,851 2,857,452 2,689,182 1,460,823 389,409
Selling, general and
administrative............. 3,204,720 3,582,773 4,306,329 2,083,441 2,277,688
----------- ----------- ----------- ----------- -----------
Total costs and
expenses............ 12,630,503 16,493,353 19,825,267 9,407,244 10,644,169
----------- ----------- ----------- ----------- -----------
Income (loss) from operations... (745,490) (1,920,432) (917,828) (844,718) 479,691
Interest expense, net........... 267,849 325,928 299,832 152,626 144,507
----------- ----------- ----------- ----------- -----------
Income (loss) before income
taxes......................... (1,013,339) (2,246,360) (1,217,660) (997,344) 335,184
Income taxes.................... -- 22,523 13,281 6,993 22,240
----------- ----------- ----------- ----------- -----------
Net income (loss)............... $(1,013,339) $(2,268,883) $(1,230,941) $(1,004,337) $ 312,944
=========== =========== =========== =========== ===========
Pro forma net income (loss) per
share......................... $ (0.29) $ 0.06
=========== ===========
Shares used in per share
computations.................. 4,311,000 4,887,000
=========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE> 60
LASER POWER CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CONVERTIBLE FOREIGN
PREFERRED STOCK COMMON STOCK ADDITIONAL CURRENCY
-------------------- -------------------- PAID-IN TRANSLATION ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL ADJUSTMENT DEFICIT TOTAL
--------- -------- --------- -------- ----------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at August 31,
1993...................... -- $ -- 2,987,153 $ 2,988 $ 3,963,166 $ (14,469) $ (717,248) $ 3,234,437
Issuance of preferred
stock warrants.......... -- -- -- -- 5,000 -- -- 5,000
Issuance of preferred
stock, net of issuance
cost of $26,773......... 382,172 47,771 -- -- 1,454,148 -- -- 1,501,919
Foreign currency
translation
adjustment.............. -- -- -- -- -- 58,726 -- 58,726
Net loss.................. -- -- -- -- -- -- (1,013,339) (1,013,339)
--------- -------- --------- ------ ----------- --------- ----------- -----------
Balance at August 31,
1994...................... 382,172 47,771 2,987,153 2,988 5,422,314 44,257 (1,730,587) 3,786,743
Issuance of preferred
stock................... 761,024 95,128 -- -- 2,948,968 -- -- 3,044,096
Issuance of common
stock................... -- -- 13,322 13 39,955 -- -- 39,968
Foreign currency
translation
adjustment.............. -- -- -- -- -- 68,433 -- 68,433
Net loss.................. -- -- -- -- -- -- (2,268,883) (2,268,883)
--------- -------- --------- ------ ----------- --------- ----------- -----------
Balance at August 31,
1995...................... 1,143,196 142,899 3,000,475 3,001 8,411,237 112,690 (3,999,470) 4,670,357
Issuance of preferred
stock................... 467,695 58,462 -- -- 1,812,318 -- -- 1,870,780
Repurchase of common
stock................... -- -- (369) (1) (250) -- -- (251)
Foreign currency
translation
adjustment.............. -- -- -- -- -- 10,532 -- 10,532
Net loss.................. -- -- -- -- -- -- (1,230,941) (1,230,941)
--------- -------- --------- ------ ----------- --------- ----------- -----------
Balance at August 31,
1996...................... 1,610,891 201,361 3,000,106 3,000 10,223,305 123,222 (5,230,411) 5,320,477
Issuance of common
stock................... -- -- 8,996 9 40,564 -- -- 40,573
Foreign currency
translation
adjustment.............. -- -- -- -- -- (117,331) -- (117,331)
Net income................ -- -- -- -- -- -- 312,944 312,944
--------- -------- --------- ------ ----------- --------- ----------- -----------
Balance at February 28, 1997
(Unaudited)............... 1,610,891 $201,361 3,009,102 $ 3,009 $10,263,869 $ 5,891 $ (4,917,467) $ 5,556,663
========= ======== ========= ====== =========== ========= =========== ===========
</TABLE>
See accompanying notes.
F-5
<PAGE> 61
LASER POWER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED AUGUST 31, ---------------------------
--------------------------------------- FEBRUARY 29, FEBRUARY 28,
1994 1995 1996 1996 1997
----------- ----------- ----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) from operations......... $(1,013,339) $(2,268,883) $(1,230,941) $ (1,004,337) $ 312,944
Adjustments to reconcile net income (loss)
to net cash used for operating
activities:
Depreciation and amortization........... 845,762 997,168 1,037,941 493,539 528,862
Loss on disposal of property and
equipment............................. -- -- 84,936 -- --
Deferred rent........................... (70,452) (70,452) (70,452) (35,226) (35,226)
Provision for losses on accounts
receivable............................ 20,000 6,000 9,847 4,510 43,605
Changes in operating assets and
liabilities:
Accounts receivable................... (81,547) (358,550) (548,800) (316,715) (262,296)
Inventories........................... (620,776) (518,900) (581,244) 20,486 (188,906)
Other current assets.................. 32,557 (52,414) (14,578) (19,143) (121,603)
Accounts payable...................... 537,029 294,144 69,720 259,275 587,689
Accrued compensation and related
expenses............................ 105,338 17,526 315,026 (47,323) 17,530
Other current liabilities............. 228,652 135,445 214,994 186,558 (89,541)
----------- ----------- ----------- ----------- -----------
Net cash (used in) provided by
operating activities........... (16,776) (1,818,916) (713,551) (458,376) 793,058
INVESTING ACTIVITIES
Additions to property and equipment....... (1,306,478) (917,125) (813,089) (305,621) (1,616,161)
(Increase) decrease in intangibles and
other assets............................ (90,438) 11,648 (109,889) (71,476) (153,383)
----------- ----------- ----------- ----------- -----------
Net cash used in investing
activities..................... (1,396,916) (905,477) (922,978) (377,097) (1,769,544)
FINANCING ACTIVITIES
Deferred public offering costs............ -- -- -- -- (51,603)
Proceeds from borrowings.................. 2,329,221 -- 251,046 447,933 1,019,950
Payments on borrowings.................... (2,136,975) (496,622) (444,195) (197,715) (202,219)
Net proceeds from issuance and repurchase
of stock................................ 1,506,919 3,084,064 1,870,529 580,000 40,573
----------- ----------- ----------- ----------- -----------
Net cash provided by financing
activities..................... 1,699,165 2,587,442 1,677,380 830,218 806,701
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents............................. 285,473 (136,951) 40,851 (5,255) (169,785)
Cash and cash equivalents at beginning of
the period.............................. 108,787 394,260 257,309 257,309 298,160
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of the
period................................ $ 394,260 $ 257,309 $ 298,160 $ 252,054 $ 128,375
=========== =========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the period for
interest................................ $ 255,000 $ 305,000 $ 313,000 $ 156,000 $ 150,000
=========== =========== =========== =========== ===========
Capital lease obligations................. $ 243,277 $ -- $ 78,880 $ -- $ --
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-6
<PAGE> 62
LASER POWER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO AUGUST 31, 1996 AND PERTAINING TO FEBRUARY 28, 1997
AND THE
SIX-MONTH PERIODS ENDED FEBRUARY 29, 1996 AND FEBRUARY 28, 1997 IS UNAUDITED)
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business and Basis of Presentation
Laser Power Corporation ("Laser Power" or the "Company") operates in one
business segment and designs, manufactures and markets high performance laser
optics for industrial, medical and military lasers and laser systems. Laser
optics are precision reflectors and mirrors used to reflect, collect and focus
laser beams. The Company's products are sold to laser system OEMs and end users
as original and replacement components in high power CO(2) and other lasers. The
Company's core competencies lie in its surface finishings and thin film
coatings, which are key elements involved in all high-performance laser optic
components. Such lasers are used in a variety of industrial processing
applications, such as sheet metal cutting, automobile body welding,
surface-hardening for engine cylinder walls, scribing and drilling delicate
ceramic circuits. The Company also sells high performance laser optics to
medical equipment OEMs for lower power CO(2) lasers used in certain therapeutic
and cosmetic procedures, including heart surgery and skin wrinkle removal. In
addition, the Company has developed very low absorption thin film coatings for
optics for anti-missile laser systems. The Company also conducts contract
research in the development and applications of advanced solid state lasers.
Substantially all of the Company's product revenues to date are attributable to
the sale of laser optics products for the industrial processing and medical
industries.
The accompanying consolidated financial statements present the financial
position, results of operations and cash flows of Laser Power Corporation (the
"Company") and its wholly-owned subsidiaries Laser Power Optics de Mexico S.A.
de C.V. ("Laser Power Mexico") and Radius Engineering N.V. ("Radius"). The
Company operates through three divisions: Laser Power Optics, which manufactures
and sells optics components for lasers; Laser Power Research, which performs
funded contract research for commercial applications and for various agencies
and laboratories of the U.S. federal government; and Laser Power Microlasers,
which performs funded contract research for commercial applications and will be
the entity responsible for manufacturing and marketing the Company's new
microlaser technology. Laser Power Mexico performs a portion of the
manufacturing of Laser Power Optics division and does not sell products to
unaffiliated customers. All significant intercompany accounts and transactions
have been eliminated in consolidation.
Interim Financial Information (Unaudited)
The financial statements at August 31, 1996 and for the six-month periods
ended February 29, 1996 and February 28, 1997 include all adjustments
(consisting only of normal recurring adjustments) which management considers
necessary for a fair statement of the financial position at such dates and the
operating results and cash flows for those periods. Results for interim periods
are not necessarily indicative of results for the entire year or any future
periods.
Revenues
Product sales are recorded upon shipment. No one customer accounted for
more than 10% of revenues in 1994, 1995, 1996 or 1997. Export sales amounted to
43%, 45%, 44%, 43%, and 48% of total revenue in 1994, 1995, 1996 and for the
six-month periods ended February 29, 1996 and February 28, 1997, respectively.
Revenues from contract research and development involve both commercial and
governmental contracts and are recognized using the percentage-of-completion
method based on the ratio of costs incurred to date to total estimated costs.
Total revenues from government contracts were $1,454,000, $2,254,000,
$3,397,000, $1,531,000 and $1,748,000 in 1994, 1995 and 1996 and the six months
ended February 29, 1996 and
F-7
<PAGE> 63
LASER POWER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
February 28, 1997, respectively. Revenue in excess of billings of $326,000 and
$523,000 have been included in accounts receivable at August 31, 1996 and
February 28 1997, respectively. Net billings in excess of revenue of $149,000
have been included as other current liabilities in the accompanying balance
sheet at August 31, 1995. Provisions are made to recognize any anticipated
losses on contracts when losses become evident.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and highly liquid investments
with maturities of three months or less when purchased.
Inventories
Inventories are stated at lower of cost (first-in, first-out) or market.
Market is based upon estimated net realizable value.
Depreciation and Amortization
Machinery, equipment and office furniture are depreciated over their
estimated useful lives (3 to 15 years) on the straight-line method and leasehold
improvements are amortized over the useful life of the asset or the lease term,
whichever is less.
Intangible assets consist primarily of goodwill, patents and licenses.
Goodwill is amortized over 20 years and patents and licenses (which are
primarily related to the microlaser technology) are amortized over the shorter
of the estimated useful life or the legal life. Amortization of patents is
initiated when the related technology is ready for commercial release.
Use of Estimates
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 resources and expenses during the
reporting period. Actual results could differ from those estimates.
Concentration of Credit Risk
The Company primarily sells its products to commercial, military and
medical companies. The Company performs periodic credit evaluations of its
customers and has not experienced significant losses with respect to its
accounts receivable.
Impairment of Long-Lived Assets
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of ("SFAS 121"), effective for fiscal years beginning
after December 15, 1995. SFAS 121 requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. SFAS 121 also addresses the accounting
for long-lived assets that are expected to be disposed of. Effective September
1, 1996, the Company adopted SFAS 121. The adoption of SFAS 121 did not have a
material effect on the Company's financial position or results of operations.
F-8
<PAGE> 64
LASER POWER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Stock Options
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, Accounting for Stock-Based Compensation("SFAS 123"), effective for fiscal
years beginning after December 15, 1995. SFAS 123 established the fair
value-based method of accounting for stock-based compensation arrangements under
which compensation cost is determined using the fair value of the stock option
at the grant date and the number of options vested, and is recognized over the
periods in which the related services are rendered. The Company has elected to
continue with the current intrinsic value-based method, as allowed by SFAS 123,
and will disclose the pro forma effect of adopting the fair value-based method
in future fiscal years beginning with the fiscal year ending August 31, 1997.
Net Income (Loss) Per Share
Historical net income (loss) per share is computed using the weighted
average number of common shares and common stock equivalents outstanding during
the periods presented. Common equivalent shares result from stock options and
warrants. For loss periods, common equivalent shares are excluded from the
computation as their effect would be antidilutive, except that the Securities
and Exchange Commission requires common and common share equivalents issued
during the twelve-month period prior to the initial filing of a proposed public
offering, to be included in the calculation as if they were outstanding for all
periods presented (using the treasury stock method and the assumed initial
public offering price).
Historical net income (loss) per share information is as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED AUGUST 31, -----------------------------
---------------------------- FEBRUARY 29, FEBRUARY 28,
1994 1995 1996 1996 1997
------ ------ ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net income (loss) per share............. $(0.31) $(0.68) $(0.37) $(0.30) $ 0.08
====== ====== ====== ====== ======
Shares used in historical per share
computations (in thousands)........... 3,318 3,325 3,331 3,331 3,817
====== ====== ====== ====== ======
</TABLE>
Supplemental net income (loss) per share has been computed as described
above and also gives effect to the repayment of a portion of the Company's
outstanding debt, and resulting reduction of interest expense, as if the
proceeds, in an amount equal to the outstanding balance under the credit
facility, anticipated by this initial public offering had been received at the
original date of issuance of the credit facility and the number of shares of
common stock whose proceeds are to be used to retire the debt were outstanding
from that same date (see Note 3).
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
AUGUST 31, FEBRUARY 28,
1996 1997
---------- ------------
<S> <C> <C>
Supplemental net income (loss) per share........................... $(0.35) $ 0.09
====== ======
Shares used in computing supplemental net income (loss) per share
(in thousands)................................................... 3,405 3,974
====== ======
</TABLE>
Pro Forma Net Income (Loss) Per Share and Unaudited Pro Forma Stockholders'
Equity
Pro forma net income (loss) per share has been computed as described above
and also gives effect to the conversion of the convertible preferred stock,
which will convert to common stock upon completion of the Company's initial
public offering, using the as if-converted method from the original dates of
issuance.
If the offering contemplated by this Prospectus is consummated, all of
convertible preferred stock outstanding as of the closing date will be converted
into 1,193,252 shares of common stock. Unaudited pro
F-9
<PAGE> 65
LASER POWER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
forma stockholders' equity at February 28, 1997, as adjusted for the conversion
of the convertible preferred stock, is presented in the accompanying balance
sheet.
2. SELECTED BALANCE SHEET DETAILS
<TABLE>
<CAPTION>
AUGUST 31, FEBRUARY
--------------------------- 28,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Inventories:
Raw materials..................................... $ 547,405 $ 909,563 $ 1,095,197
Work in progress.................................. 945,413 1,148,439 1,300,343
Finished goods.................................... 655,803 671,863 523,231
---------- ----------- -----------
$ 2,148,621 $ 2,729,865 $ 2,918,771
========== =========== ===========
Property and equipment, at cost:
Machinery and equipment........................... $ 8,298,670 $ 8,375,250 $ 9,741,675
Leasehold improvements............................ 964,188 1,012,629 1,021,712
Office furniture and equipment.................... 685,975 861,952 880,603
---------- ----------- -----------
9,948,833 10,249,831 11,643,990
Less accumulated depreciation and amortization...... (5,540,144) (6,062,444) (6,449,283)
---------- ----------- -----------
$ 4,408,689 $ 4,187,387 $ 5,194,707
========== =========== ===========
Intangible and other assets:
Goodwill in foreign subsidiary.................... $ 549,100 $ 549,100 $ 549,100
Patents and licenses.............................. 190,915 302,513 457,221
Other............................................. 275,757 274,048 324,326
---------- ----------- -----------
1,015,772 1,125,661 1,330,647
Less accumulated amortization....................... (228,421) (306,375) (343,727)
---------- ----------- -----------
$ 787,351 $ 819,286 $ 986,920
========== =========== ===========
Accrued compensation and related expenses:
Accrued bonuses................................... $ -- $ 240,000 $ 175,938
Other............................................. 424,359 499,385 580,977
---------- ----------- -----------
$ 424,359 $ 739,385 $ 756,915
========== =========== ===========
Other current liabilities:
Customer advances................................. $ 58,597 $ 326,562 $ 222,187
Other............................................. 508,345 455,374 470,208
---------- ----------- -----------
$ 566,942 $ 781,936 $ 692,395
========== =========== ===========
</TABLE>
F-10
<PAGE> 66
LASER POWER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. LONG-TERM DEBT AND OTHER FINANCING AGREEMENTS
In January 1997, the Company renewed a line of credit with a bank, subject
to maximum advances of $2,000,000 and at 1% above the bank's prime rate (9.25%
at February 28, 1997). The line of credit expires on March 1, 1998 and there was
$773,998 outstanding under the line of credit at February 28, 1997.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
AUGUST 31, FEBRUARY
------------------------- 28,
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Promissory note........................................ $ 104,205 $ 90,203 $ 84,020
Term note payable to bank.............................. 500,000 277,779 185,187
Equipment line of credit from bank..................... -- 172,166 418,118
Equipment financing from Proxima....................... 386,161 273,936 217,824
Other equipment financing.............................. 215,541 225,534 179,628
Other.................................................. 34,300 7,440 6,014
---------- ---------- ----------
1,240,207 1,047,058 1,090,791
Less current portion................................... 438,687 488,083 403,969
---------- ---------- ----------
$ 801,520 $ 558,975 $ 686,822
========== ========== ==========
</TABLE>
The promissory note is payable in monthly installments of principal and
interest of $1,840 through September 2001. Borrowings under the promissory note
are secured by equipment and bear interest at 8.25%.
The term note payable to the bank is due in monthly principal payments of
$18,519 plus interest, with the final installment consisting of all remaining
unpaid principal due and payable in full no later than December 31, 1997. The
term note bears interest at 2% above the bank's prime rate (10.25% at February
28, 1997).
In January 1997, the Company renewed an equipment line of credit with a
bank, subject to maximum advances of $1,500,000 at 1.25% above the bank's prime
rate (9.50% at February 28, 1997). Any advances, which will be used to purchase
new machinery, will be converted on August 1, 1997 to a five-year term loan so
long as the Company is in compliance with all the terms of the note. In the
event of noncompliance, the amount outstanding will be payable in full. There
were $418,118 in borrowings under the equipment line of credit at February 28,
1997.
All bank borrowings are secured by accounts receivable, inventory,
intangibles, and property and equipment, and contain restrictive covenants.
Restrictive covenants include the maintenance of minimum tangible net worth,
debt to equity and cash flow ratios, as well as restrictions on capital and
lease expenditures, investment levels in the Company's European subsidiary,
additional borrowings and payment of dividends.
Other equipment financing agreements are payable in monthly installments of
principal and interest through March 2001. Borrowings under this financing
agreements are secured by specific equipment and bear interest at rates ranging
from 9.0% to 10.7% at February 28, 1997.
The Company entered into an equipment line of credit agreement with Proxima
Corporation on June 30, 1994, which provided for maximum borrowings of $500,000.
In May 1995, the outstanding borrowings were converted to a four-year term loan
bearing interest at 1.5% above the bank's prime rate (9.75% at February 28,
1997). The amount owed under the note has been guaranteed by the Company's Chief
Executive Officer.
In November 1987, the Company obtained debt and equity financing from Union
Miniere ("Union"). The Company issued 483,333 shares of common stock for
$1,053,000 cash (net of stock issuance costs of $107,000) and subordinated
convertible debentures amounting to $1,340,000. In December 1988, the
F-11
<PAGE> 67
LASER POWER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company issued an additional $320,000 of subordinated convertible debentures to
Union. In March 1997, the maturity date of the debentures was extended to
November 2, 2000 and the conversion rate for which the debentures are
convertible into common stock was set at $5.25 per share but in no event will be
less than $4.50 per share. The debentures are subordinated to all bank
borrowings and interest is payable semi-annually at 1% above a bank's prime rate
(9.25% at February 28, 1997) subject to a minimum rate of 5 1/2% and a maximum
rate of the lesser of 11.5% or the maximum rate permitted by law. The debentures
provide for restrictive covenants similar to those of the bank borrowings.
Principal maturities on the subordinated convertible debentures and
long-term debt for each of the years ending subsequent to period ended February
28, 1997 are as follows:
<TABLE>
<S> <C>
1998............................................................. $ 404,000
1999............................................................. 296,000
2000............................................................. 137,000
2001............................................................. 1,783,000
2002............................................................. 96,000
2003............................................................. 35,000
----------
$2,751,000
==========
</TABLE>
4. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The components of the
Company's deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
AUGUST 31,
---------------------------
1995 1996
----------- -----------
<S> <C> <C>
Deferred tax liability-depreciation............................... $ (574,000) $ (535,000)
Deferred tax assets:
Tax basis operating loss and credit carryforwards............... 2,091,000 2,504,000
Other........................................................... 148,000 273,000
----------- -----------
Total deferred tax assets......................................... 2,239,000 2,777,000
----------- -----------
Net deferred tax assets........................................... 1,665,000 2,242,000
Valuation allowance............................................... (1,665,000) (2,242,000)
----------- -----------
Net deferred tax accounts......................................... $ -- $ --
=========== ===========
</TABLE>
At August 31, 1996, the Company has net operating loss carryforwards for
federal and California income tax purposes of approximately $5,810,000 and
$2,844,000, respectively, which may be applied against future taxable income.
These carryforwards will begin to expire in 2001 and 1998, respectively, unless
previously utilized.
The Company also has investment tax credit, research and development
credit, and targeted jobs tax credit carryforwards at August 31, 1996
aggregating approximately $300,000. These tax credit carryforwards will expire
in 1997 through 2004 unless previously utilized.
Other than alternative minimum taxes, no income taxes have been provided
for the six-month period ended February 28, 1997 because of the utilization of
tax loss carryforwards.
If the offering contemplated by this Prospectus is consummated, a change in
ownership of more than 50% within a three-year period will have occurred;
however, management believes that the Company's ability to use the net operating
loss and tax credit carryforwards will not be materially impaired.
F-12
<PAGE> 68
LASER POWER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. STOCKHOLDERS' EQUITY
Preferred Stock and Proxima Corporation
In January 1994, the Company executed a Stock Purchase Agreement with
Proxima Corporation ("Proxima"). Under the terms of the agreement, Proxima could
invest in the Company through purchases of Series A Preferred Stock. The Company
and Proxima also entered into an agreement providing for technology licenses and
cooperative development of new technologies (see Note 8). During 1994, 1995 and
1996, Proxima purchased 382,172, 761,024 and 467,695 shares of Series A
Preferred Stock, respectively.
The preferred shares have voting rights and are convertible into the
Company's common shares on a 1 for 1.35 basis, subject to antidilution
adjustments under certain circumstances. The preferred shares may be converted
with the approval of the preferred shareholders. Proceeds on liquidation of the
Company are distributed to holders of the Series A Preferred Stock and common
stock pro rata, on an as-converted basis, except in certain liquidations
involving bankruptcy cases, where the Series A Preferred stockholders will have
preferences. Series A Preferred stockholders are entitled to receive annual
dividends of $0.32 per share, when and if declared by the Company's Board of
Directors, prior to and in preference to any dividends being declared or paid on
the Common Stock. Such dividends are non-cumulative.
Common Stock Warrants
Periodically the Company will issue warrants to purchase common stock to
outside directors and affiliates in lieu of stock options. During the three year
period ended August 31, 1996, and the six months ended February 28, 1997, 83,330
and 53,330 warrants were issued to outside directors, respectively. The warrants
vest over periods of up to five years. Warrants to purchase 333,330 and 386,660
shares of common stock at $3.00 to $4.50 per share are outstanding at December
31, 1996 and February 28, 1997, respectively. The warrants begin to expire from
September 2002 to December 2006.
Stock Option Plans
The Company's 1981 Stock Option Plan was approved by the Board of Directors
and stockholders in 1981, as amended (the "1981 Plan"). The Company's 1993 Stock
Option Plan (the "1993 Plan") was approved by the Board of Directors and
stockholders in September 1993. The exercise price of options granted will be at
fair market value of the stock on the date of grant and the options granted vest
over a five-year period commencing on the date of grant in increments of twenty
percent and are exercisable for a period of ten years after the date of grant.
Options to purchase 249,679 and 120,700 shares of common stock remain eligible
for future grant at August 31, 1996 and February 28, 1997, respectively. (See
"Changes in Capitalization" below).
The Company has 266,665 and 474,663 non-qualified options outstanding as of
August 31, 1996 and February 28, 1997, respectively. These options were issued
to certain employees and an officer and at those dates, 66,665 and 274,663
options were issued outside the Company's option plans. The Company issued stock
options to purchase shares of the Company's common stock at $3.00 to $4.50 per
share. These options will begin to expire on December 2001 to February 2007.
F-13
<PAGE> 69
LASER POWER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes stock option and warrant activity:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
NUMBER OF PRICE PER PRICE PER
SHARES SHARE SHARE
--------- -------------- ---------
<S> <C> <C> <C>
Outstanding at August 31, 1993......................... 966,000 $3.00 -- $4.50 $3.16
Granted.............................................. 241,667 4.50 -- 6.00 4.76
Exercised............................................ -- -- --
Canceled............................................. (8,333) 3.00 -- 4.50 3.00
--------- ----------- -----
Outstanding at August 31, 1994......................... 1,199,334 3.00 -- 6.00 3.48
Granted.............................................. 127,333 4.50 4.50
Exercised............................................ -- -- --
Canceled............................................. (148,358) 3.00 -- 6.00 4.85
--------- ----------- -----
Outstanding at August 31, 1995......................... 1,178,309 3.00 -- 4.50 3.40
Granted.............................................. 131,325 4.50 4.50
Exercised............................................ (6) 4.50 4.50
Canceled............................................. (81,656) 3.00 -- 4.50 3.46
--------- ----------- -----
Outstanding at August 31, 1996......................... 1,227,972 3.00 -- 4.50 3.51
Granted.............................................. 390,307 3.00 -- 4.50 4.49
Exercised............................................ -- -- --
Canceled............................................. (6,666) 3.00 3.00
--------- ----------- -----
Outstanding at February 28, 1997....................... 1,611,613 $3.00 -- $4.50 $3.75
========= =========== =====
</TABLE>
At February 28, 1997, the weighted-average exercise price of outstanding
stock options and warrants is $3.92 and $3.21, respectively, and 912,647
combined options and warrants are exercisable.
In March 1997, the Company recorded $100,000 of deferred compensation for
66,666 options granted in March. This amount represents the difference between
the option exercise price and the deemed fair market value for financial
statement presentation purposes. The deferred compensation will be amortized
over the vesting period.
Shares Reserved for Future Issuance
The following shares of common stock are reserved for future issuance:
<TABLE>
<CAPTION>
AUGUST 31, FEBRUARY 28,
1996 1997
---------- ------------
<S> <C> <C>
Subordinated convertible debentures.......................... 553,333 368,888
Stock options:
Granted and outstanding.................................... 894,642 1,224,953
Reserved for future grants................................. 249,679 120,700
Warrants..................................................... 333,330 386,660
--------- ---------
2,030,984 2,101,201
========= =========
</TABLE>
Changes in Capitalization
On March 25, 1997, the Company's Board of Directors authorized a 1 for 1.5
reverse stock split of all outstanding common stock. In addition, the Board also
approved a change in the par value of the
F-14
<PAGE> 70
LASER POWER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
common stock from $0.125 to $0.001. All share and per share amounts and stock
option and warrants data have been restated to retroactively reflect these
changes in capitalization.
On March 25, 1997, the Company adopted the 1997 Equity Incentive Plan (the
"1997 Plan"). The 1997 Plan provides for incentive stock options and stock
appreciation rights appurtenant thereto for employees (including officers and
employee directors), and nonstatutory stock options, stock appreciation rights
appurtenant thereto, stock bonuses and rights to purchase restricted stock for
employees (including officers and employee directors) and non-employee directors
and consultants. The 1997 Plan is administered by the Board of Directors, or a
Committee appointed by the Board, which determines the option awards to be
granted, including exercise prices, number of shares subject to the awards and
the exercisability thereof, provided that such terms comply with the provisions
of the plan under which the option award is granted. Non-employee directors are
eligible only for nonstatutory grants. The term of the stock options granted
under the 1997 Plan may not exceed 10 years. The exercise price of options
granted under the 1997 Plan is determined by the Board of Directors, but in the
case of an incentive stock option, cannot be less than 100% of the fair market
value of the common stock on the date of grant and in the case of a
non-statutory stock option, cannot be less than 85% of the fair market value of
the common stock on the date of grant. Options granted under the plans vest at
the rate specified in the option agreement. The Board has authorized and secured
an aggregate of 1,000,000 shares of common stock for issuance under the Plan.
The Board also terminated the 1981 and 1993 Plans and no additional options will
be granted thereunder, but outstanding options remain exercisable and continue
to vest until they terminate in accordance with their terms.
On March 25, 1997 the Company adopted the Employee Stock Purchase Plan (the
"Purchase Plan") covering an aggregate of 250,000 shares of common stock. The
Purchase Plan is intended to qualify as an employee stock purchase plan within
the meaning of Section 423 of the Code. Under the Purchase Plan, the Board may
authorize participation by eligible employees, including officers, in periodic
offerings following the commencement of the Purchase Plan. The initial offering
under the Purchase Plan shall commence on the closing of the Company's initial
public offering contemplated by this Prospectus and terminate on February 28,
1998. Sequential six-month offerings will occur thereafter.
6. COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases its operating, office and other facilities as well as
certain vehicles and equipment under noncancellable operating leases. The
operating and office facilities lease contains escalation clauses and an option
for renewal and extends through December 2001. The operating and office
facilities lease also provides for deferred payment terms; however, for
financial reporting purposes, rent expense is recorded evenly over the term of
the lease.
Deferred rent, as reflected in the accompanying consolidated balance sheet,
represents the difference between rent expense accrued and amounts paid under
the terms of the lease agreement. Future minimum rental payments (excluding
common area maintenance charges) required under the operating leases for each of
the remaining fiscal years ending subsequent to February 28, 1997 are as
follows:
<TABLE>
<S> <C>
1997............................................................. $ 403,000
1998............................................................. 788,000
1999............................................................. 714,000
2000............................................................. 688,000
2001............................................................. 684,000
Thereafter....................................................... 228,000
----------
$3,505,000
==========
</TABLE>
F-15
<PAGE> 71
LASER POWER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Rent expense was $849,000, $844,000, $914,000, $508,000, and $540,000 for
the years ended August 31, 1994, 1995, 1996 and the six months ended February
29, 1996 and February 28, 1997, respectively.
Contingency
The Company has a license to certain technology used in its blue
microlaser. During 1996, the Company received a letter from a third party
claiming that the Company's license was granted improperly by the licensor.
While the Company believes that such license was properly granted, there can be
no assurance that the Company's license would not be voided if subjected to a
legal challenge. In such an event, there can be no assurance that the Company
would be able to obtain a replacement license on favorable terms, if at all.
Failure to obtain such a license would result in a material adverse effect to
the Company's business, financial condition and results of operations.
7. EMPLOYEE BENEFIT PLAN
The Company has a defined contribution plan (the "Plan") covering
substantially all employees that have been employed for at least one year and
meet certain age requirements. Employees may contribute up to 16% of their
compensation per year (subject to a maximum limit by federal tax law). The
Company is obligated to make matching contributions equal to 50% of the
employee's contribution up to a maximum of 6% of the employee's compensation. At
the discretion of the Board of Directors, the Company may make additional
contributions. The Company's contributions charged to operations were $42,000,
$57,000, $79,000, $36,000 and $56,000 for the years ended August 31, 1994, 1995,
1996 and the six months ended February 29, 1996 and February 28, 1997,
respectively.
8. AGREEMENT WITH PROXIMA CORPORATION
The Company and Proxima Corporation, a major shareholder, have entered into
a Cooperative Development and License Agreement (the "Agreement") which provides
for licensing of existing technology and technologies being developed under the
terms of the agreement.
Included in internal research and development expenses in the accompanying
statements of operations are $779,000, $2,107,000, $1,630,000 and $981,000 spent
in accordance with the Agreement in 1994, 1995, 1996 and the six months ended
February 29, 1996, respectively. No amounts were spent during the six month
period ended February 28, 1997 and at February 28, 1997, the Company has
committed to spend an additional $131,000.
F-16
<PAGE> 72
======================================================
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, ANY SELLING STOCKHOLDER OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER
OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATIONS THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
The Company........................... 3
Risk Factors.......................... 5
Use of Proceeds....................... 13
Dividend Policy....................... 13
Capitalization........................ 14
Dilution.............................. 15
Selected Consolidated Financial
Information......................... 16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 17
Business.............................. 23
Management............................ 35
Certain Transactions.................. 44
Principal and Selling Stockholders.... 46
Description of Capital Stock.......... 48
Shares Eligible for Future Sale....... 50
Underwriting.......................... 52
Legal Matters......................... 53
Experts............................... 53
Additional Information................ 54
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
======================================================
======================================================
2,450,000 SHARES
[LASER POWER LOGO]
COMMON STOCK
--------------------
PROSPECTUS
--------------------
CRUTTENDEN ROTH
INCORPORATED
L.H. FRIEND, WEINRESS, FRANKSON & PRESSON, INC.
, 1997
======================================================
<PAGE> 73
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the Delaware General Corporation Law, the Registrant
has broad powers to indemnify its Directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act of 1933, as amended (the "Securities Act").
The Registrant's Amended and Restated Certificate of Incorporation and
Bylaws include provisions to (i) eliminate the personal liability of its
directors for monetary damages resulting from breaches of their fiduciary duty
to the extent permitted by Section 102(b)(7) of the General Corporation Law of
Delaware (the "Delaware Law") and (ii) require the Registrant to indemnify its
Directors and officers to the fullest extent permitted by Section 145 of the
Delaware Law, including circumstances in which indemnification is otherwise
discretionary. Pursuant to Section 145 of the Delaware Law, a corporation
generally has the power to indemnify its present and former directors, officers,
employees and agents against expenses incurred by them in connection with any
suit to which they are or are threatened to be made, a party by reason of their
serving in such positions so long as they acted in good faith and in a manner
they reasonably believed to be in or not opposed to, the best interests of the
corporation and with respect to any criminal action, they had no reasonable
cause to believe their conduct was unlawful. The Registrant believes that these
provisions are necessary to attract and retain qualified persons as Directors
and officers. These provisions do not eliminate the Directors' duty of care,
and, in appropriate circumstances, equitable remedies such as injunctive or
other forms of non-monetary relief will remain available under Delaware Law. In
addition, each Director will continue to be subject to liability for breach of
the Director's duty of loyalty to the Registrant, for acts or omissions not in
good faith or involving intentional misconduct, for knowing violations of law,
for acts or omissions that the Director believes to be contrary to the best
interests of the Registrant or its stockholders, for any transaction from which
the Director derived an improper personal benefit, for acts or omissions
involving a reckless disregard for the Director's duty to the Registrant or its
stockholders when the Director was aware or should have been aware of a risk of
serious injury to the Registrant or its stockholders, for acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication of
the Director's duty to the Registrant or its stockholders, for improper
transactions between the Director and the Registrant and for improper
distributions to stockholders and loans to Directors and officers. The provision
also does not affect a Director's responsibilities under any other law, such as
the federal securities law or state or federal environmental laws.
The Registrant has entered into indemnity agreements with each of its
Directors and executive officers that require the Registrant to indemnify such
persons against expenses, judgments, fines, settlements and other amounts
incurred (including expenses of a derivative action) in connection with any
proceeding, whether actual or threatened, to which any such person may be made a
party by reason of the fact that such person is or was a Director or an
executive officer of the Registrant or any of its affiliated enterprises,
provided that such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Registrant and, with respect to any criminal proceeding, had no reasonable cause
to believe his conduct was unlawful. The indemnification agreements also set
forth certain procedures that will apply in the event of a claim for
indemnification thereunder. The Registrant has entered into similar indemnity
agreements with certain of its key employees.
At present, there is no pending litigation or proceeding involving a
Director or officer of the Registrant as to which indemnification is being
sought nor is the Registrant aware of any threatened litigation that may result
in claims for indemnification by any officer or Director.
The Registrant has an insurance policy covering the officers and Directors
of the Registrant with respect to certain liabilities, including liabilities
arising under the Securities Act or otherwise.
II-1
<PAGE> 74
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses payable by the Registrant in
connection with the sale of the Common Stock being registered. All the amounts
shown are estimates except for the SEC registration fee and the NASD filing fee.
<TABLE>
<S> <C>
Registration fee................................................. $ 7,257
NASD filing fee.................................................. 3,091
Nasdaq Stock Market Listing Application fee...................... 32,750
Printing and engraving expenses.................................. 125,000
Underwriters non-accountable expense allowance(1)................ 365,573
Legal fees and expenses.......................................... 250,000
Accounting fees and expenses..................................... 115,000
Transfer agent and registrar fees................................ 10,000
Miscellaneous.................................................... 1,902
----------
Total(2)............................................... $ 912,500
==========
</TABLE>
- ---------------
(1) The expense allowance will be $422,625 if the over-allotment option is
exercised.
(2) The total expenses will be $969,552 if the over-allotment option is
exercised.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
Since April 1, 1994, the Registrant has sold and issued the following
unregistered securities:
(a) From April 1, 1994 to April 1, 1997, the Company issued an
aggregate of 404,324 options to purchase shares of Common Stock under its
1993 Stock Option Plan, and 6 shares of Common Stock through the exercise
of an option granted under such plan. The Registrant relied on the
exemption provided by Rule 701 under the Security Act. See
"Management -- Stock Option Plans."
(b) In January 1995, the Registrant issued and sold an aggregate of
8,879 shares of Common Stock, for an aggregate purchase price of $39,957 to
certain members of the board of directors in lieu of payment of board fees.
The Registrant relied on the exemption provided by Section 4(2) under the
Securities Act.
(c) On January 31, 1995, the Company issued a warrant to purchase
16,666 shares of Common Stock to Kenneth E. Olson, a director. The
Registrant relied on the exemption provided by Section 4(2) under the
Securities Act.
(d) On December 7, 1996, the Company issued warrants to purchase an
aggregate of 53,330 shares of Common Stock to the outside directors of the
Company. The Registrant relied on the exemption provided by Section 4(2)
under the Securities Act.
(e) On December 7, 1996, the Registrant issued an option to purchase
200,000 Shares of Common Stock at an exercise price of $4.50 per share to
Arthur P. Minich, an executive officer of the Company. The Registrant
relied on the exemption provided by Rule 4(2) under the Securities Act.
(f) From January 1994 to December 1996, the Registrant issued and
sold, from time to time, 1,073,927 shares of Series A Preferred Stock at an
aggregate purchase price of $6.4 million to Proxima Corporation. The
Registrant relied on the exemption provided by Section 4(2) under the
Securities Act.
(g) In January 1997, the Registrant issued and sold an aggregate of
6,012 shares of its Common Stock, for an aggregate purchase price of
$27,057, to certain the members of the board of directors in lieu of
payment of board fees. The Registrant relied on the exemption provided by
Section 4(2) under the Securities Act.
(h) In December 1996, the Company issued an option to purchase 66,666
shares of the Company's Common Stock at an exercise price of $4.50 per
share to Pedram Leilabady. The option vests over five years and may be
exercised at any time until its expiration in December 2006. The Registrant
relied on the exemption provided by Rule 701 under the Security Act.
II-2
<PAGE> 75
The recipients of the above-described securities represented their
intention to acquire the securities for investment only and not with a view to
distribution thereof. Appropriate legends were affixed to the stock certificates
issued in such transactions. All recipients had adequate access, through
employment or other relationships, to information about the Registrant.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- ---------------------------------------------------------------------------------
<C> <C> <S>
1.1* -- Form of Underwriting Agreement.
3.1 -- Registrant's Amended and Restated Certificate of Incorporation.
3.2 -- Registrant's Amended and Restated Bylaws.
3.3 -- Registrant's Amended and Restated Certificate of Incorporation, to be effective
upon the closing of this offering.
3.4 -- Registrant's Amended and Restated Bylaws, to be effective upon the closing of
this offering.
4.1 -- Series A Convertible Subordinated Debenture issued by Registrant in favor of
Union Mines, Inc. (currently held by Union Miniere, Inc.) dated December 29,
1988.
4.2 -- Series A Convertible Subordinated Debenture issued by Registrant in favor of
Union Mines, Inc. (currently held by Union Miniere, Inc.) dated June 18, 1990.
5.1* -- Opinion of Cooley Godward LLP.
10.1 -- Form of Indemnity Agreement entered into between Registrant and its directors and
executive officers.
10.2 -- Registrant's Second Amended and Restated 1981 Stock Option Plan (the "1981
Plan").
10.3 -- Incentive Stock Option Agreement Under Registrant's 1981 Plan.
10.4 -- Registrant's 1993 Stock Option Plan (the "1993 Plan").
10.5 -- Form of Incentive Stock Option Agreement under the 1993 Plan.
10.6 -- Form of Nonstatutory Stock Option Agreement under the 1993 Plan.
10.7 -- Registrant's 1997 Equity Incentive Plan (the "1997 Plan").
10.8 -- Form of Incentive Stock Option Agreement under the 1997 Plan.
10.9 -- Form of Nonstatutory Stock Option Agreement under the 1997 Plan.
10.10 -- Registrant's Employee Stock Purchase Plan.
10.11* -- Form of Warrant issued by Registrant in favor of Cruttenden Roth Incorporated and
L. H. Friend, Weinress, Frankson & Pressor, Inc.
10.12 -- Form of Warrant issued by Registrant in favor of certain directors of Registrant
and attached schedule.
10.13+* -- Cooperative Development and License Agreement between Proxima Corporation and
Registrant dated January 11, 1994.
10.14* -- Registration Rights Agreement between Registrant, Union Miniere Inc. and Proxima
Corporation dated April , 1997.
10.15+ -- Assignment Agreement between Registrant and ATx Telecom Systems, Inc. dated
September 30, 1996.
10.16 -- Credit Agreement between Registrant and Wells Fargo dated January 29, 1997.
10.17 -- Form of Employment Agreement and attached schedule.
10.18 -- Consulting Agreement dated December 1, 1996 between Registrant and Arthur P.
Minich.
</TABLE>
II-3
<PAGE> 76
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- ---------------------------------------------------------------------------------
<C> <C> <S>
10.19 -- Lease dated August 30, 1984 between the Registrant and Highlands Park Partnership
and amendments thereto.
11.1 -- Statement re: computation of per share earnings.
21.1 -- Subsidiaries of the Registrant.
23.1 -- Consent of Ernst & Young LLP, Independent Auditors.
23.2 -- Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 -- Power of Attorney. Reference is made to page II-5.
27.1 -- Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by Amendment.
+ Confidential Treatment will be requested with respect to certain portions of
this exhibit. Omitted portions will be filed separately with the Securities
and Exchange Commission.
(b) Schedules
All schedules are omitted because they are not required, are not applicable
or the information is included in the consolidated financial statements or notes
thereto.
ITEM 28. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to provisions described in Item 15 or otherwise, the registrant has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) That, for purposes of determining any liability under the Act,
each filing of the registrant's annual report pursuant to Section 13(a) or
15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to
the securities offered therein and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(2) That, for purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(3) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 77
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, in the
City of San Diego, County of San Diego, State of California, on the 2nd day of
April, 1997.
By: /s/ GLENN H. SHERMAN
------------------------------------
Glenn H. Sherman
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Glenn H. Sherman, Paul P. Wickman, Jr.,
and James D. McFarland and each of them, as his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place, and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments,
exhibits thereto and other documents in connection therewith) to this
Registration Statement and any subsequent registration statement filed by the
registrant pursuant to Rule 462(b) of the Securities Act of 1933, as amended,
which relates to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- ---------------------------------- ---------------
<S> <C> <C>
/s/ GLENN H. SHERMAN, PH.D. Chairman of the Board and Chief March 31, 1997
- ------------------------------------- Executive Officer (Principal
Glenn H. Sherman, Ph.D. Executive Officer)
/s/ PAUL P. WICKMAN, JR. Senior Vice President, Chief March 31, 1997
- ------------------------------------- Financial Officer and Secretary
Paul P. Wickman, Jr. (Principal Financial and
Accounting Officer)
/s/ DOUGLAS H. TANIMOTO, PH.D. Director March 31, 1997
- -------------------------------------
Douglas H. Tanimoto, Ph.D.
/s/ WILLIAM G. FREDRICK Director March 31, 1997
- -------------------------------------
William G. Fredrick
</TABLE>
II-5
<PAGE> 78
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- ---------------------------------- ---------------
<S> <C> <C>
/s/ ALAIN GODEFROID Director March 31, 1997
- -------------------------------------
Alain Godefroid
/s/ ROBERT G. KLIMASEWSKI Director March 31, 1997
- -------------------------------------
Robert G. Klimasewski
/s/ RICHARD C. LAIRD Director March 31, 1997
- -------------------------------------
Richard C. Laird
/s/ SIEGFRIED MEDER Director March 31, 1997
- -------------------------------------
Siegfried Meder
/s/ KENNETH E. OLSON Director March 31, 1997
- -------------------------------------
Kenneth E. Olson
/s/ JOHN C. STISKA Director March 31, 1997
- -------------------------------------
John C. Stiska
/s/ MARC VAN SANDE Director March 31, 1997
- -------------------------------------
Marc Van Sande
</TABLE>
II-6
<PAGE> 79
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGES
- ------ ------------------------------------------------------------------------ ------------
<C> <C> <S> <C>
1.1* -- Form of Underwriting Agreement..........................................
3.1 -- Registrant's Amended and Restated Certificate of Incorporation..........
3.2 -- Registrant's Amended and Restated Bylaws................................
3.3 -- Registrant's Amended and Restated Certificate of Incorporation, to be
effective upon the closing of this offering.............................
3.4 -- Registrant's Amended and Restated Bylaws, to be effective upon the
closing of this offering................................................
4.1 -- Series A Convertible Subordinated Debenture issued by Registrant in
favor of Union Mines, Inc. (currently held by Union Miniere, Inc.) dated
December 29, 1988.......................................................
4.2 -- Series A Convertible Subordinated Debenture issued by Registrant in
favor of Union Mines, Inc. (currently held by Union Miniere, Inc.) dated
June 18, 1990...........................................................
5.1* -- Opinion of Cooley Godward LLP...........................................
10.1 -- Form of Indemnity Agreement entered into between Registrant and its
directors and executive officers........................................
10.2 -- Registrant's Second Amended and Restated 1981 Stock Option Plan (the
"1981 Plan")............................................................
10.3 -- Incentive Stock Option Agreement Under Registrant's 1981 Plan...........
10.4 -- Registrant's 1993 Stock Option Plan (the "1993 Plan")...................
10.5 -- Form of Incentive Stock Option Agreement under the 1993 Plan............
10.6 -- Form of Nonstatutory Stock Option Agreement under the 1993 Plan.........
10.7 -- Registrant's 1997 Equity Incentive Plan (the "1997 Plan")...............
10.8 -- Form of Incentive Stock Option Agreement under the 1997 Plan............
10.9 -- Form of Nonstatutory Stock Option Agreement under the 1997 Plan.........
10.10 -- Registrant's Employee Stock Purchase Plan...............................
10.11* -- Form of Warrant issued by Registrant in favor of Cruttenden Roth
Incorporated and L. H. Friend, Weinress, Frankson & Pressor, Inc........
10.12 -- Form of Warrant issued by Registrant in favor of certain directors of
Registrant and attached schedule........................................
10.13+* -- Cooperative Development and License Agreement between Proxima
Corporation and Registrant dated January 11, 1994.......................
10.14* -- Registration Rights Agreement between Registrant, Union Miniere Inc. and
Proxima Corporation dated April , 1997................................
10.15+ -- Assignment Agreement between Registrant and ATx Telecom Systems, Inc.
dated September 30, 1996................................................
10.16 -- Credit Agreement between Registrant and Wells Fargo dated January 29,
1997....................................................................
10.17 -- Form of Employment Agreement and attached schedule......................
10.18 -- Consulting Agreement dated December 1, 1996 between Registrant and
Arthur P. Minich........................................................
10.19 -- Lease dated August 30, 1984 between the Registrant and Highlands Park
Partnership and amendments thereto......................................
</TABLE>
<PAGE> 80
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGES
- ------ ------------------------------------------------------------------------ ------------
<C> <C> <S> <C>
11.1 -- Statement re: computation of per share earnings.........................
21.1 -- Subsidiaries of the Registrant..........................................
23.1 -- Consent of Ernst & Young LLP, Independent Auditors.
23.2 -- Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.........
24.1 -- Power of Attorney. Reference is made to page II-5.......................
27.1 -- Financial Data Schedule.................................................
</TABLE>
- ---------------
* To be filed by Amendment.
+ Confidential Treatment will be requested with respect to certain portions of
this exhibit. Omitted portions will be filed separately with the Securities
and Exchange Commission.
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF LASER POWER CORPORATION,
A DELAWARE CORPORATION
Laser Power Corporation, a corporation organized and existing under
the laws of the General Corporation Law of the State of Delaware, hereby
certifies as follows:
1. The name of the Corporation is Laser Power Corporation (the
"Corporation"). The Corporation was originally incorporated under the same
name, and the original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on July 11, 1983 and
has been subsequently amended from time to time (the original Certificate of
Incorporation and all amendments thereto are hereinafter collectively referred
to as the "Certificate of Incorporation, as amended").
2. Pursuant to Sections 242 and 245 of the General Corporation
Law of the State of Delaware, this Restated Certificate of Incorporation
restates and integrates and further amends the provisions of the Certificate of
Incorporation, as amended.
3. This Restated Certificate of Incorporation set forth below was
approved by the Corporation's Board of Directors and stockholders and was duly
adopted in accordance with the provisions of Section 242 and 245 of the
Delaware General Corporation Law, the stockholders of the Corporation having
approved this resolution by the written consent of the holders of a majority of
the outstanding shares in accordance with Section 228, with the notice required
by said Section having been duly given:
4. The text of the Certificate of Incorporation, as amended, is
hereby restated and further amended to read in its entirety as follows:
ARTICLE I
The name of the Corporation is Laser Power Corporation.
ARTICLE II
The Corporation's registered office in the State of Delaware is
located at 15 North Street, City of Dover, County of Kent. The registered
agent in charge thereof is Incorporating Services, Ltd., whose address is the
same as above.
<PAGE> 2
ARTICLE III
The nature of the business and the objects and purposes transacted,
promoted and carried on, are to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of Delaware.
ARTICLE VI
A. Classes of Stock. This Corporation is authorized to issue two
classes of stock to be designated, respectively, "Common Stock" and "Preferred
Stock." The total number of shares which the Corporation is authorized to
issue is Eighteen Million (18,000,000) shares, par value $.125 per share.
Fifteen Million (15,000,000) shares shall be Common Stock and Three Million
(3,000,000) shall be Preferred Stock. The Preferred Stock may be issued from
time to time in one or more series. Except for the Series A Preferred Shares,
the Board of Directors is authorized to fix the number of shares of any series
of Preferred Stock and to determine the designation of any such series. The
Board of Directors is also authorized to determine or alter the rights,
preferences, privileges and restrictions granted to or imposed upon any wholly
unissued series of Preferred Stock and, within the limits and restrictions
stated in any resolution or resolutions constituting any series, to increase or
decrease (but not below the number of shares of any such series then
outstanding) the number of shares of any series subsequent to the issue to
shares of that series.
B. Determination of Preferences of Series A Preferred Shares.
The rights, preferences, privileges, restrictions and other matters relating to
the Shares of Series A Preferred Stock are as follows:
1. Designation of Preferred Shares. Two Million
(2,000,000) shares of Preferred Stock are designated "Series A Preferred
Shares."
2. Dividend Provisions. Subject to the rights of series
of Preferred Stock (where such rights will be subject to the Protective
Provisions of the Series A Preferred Stock as set forth in Section 6 of
Division (B) of Article IV hereof) which may from time to time come into
existence, the holders of the outstanding shares of Series A Preferred Stock
shall be entitled to receive, prior and in preference to any declaration and
payment of any dividend (payable other than in stock of the Corporation) on the
Common Stock, dividends at a rate equal to $0.32 per share of Series A
Preferred Stock per annum, out of any assets legally available therefor, when
and if declared by the Board of Directors; provided that any offering of shares
of Common Stock of the Corporation to all of its existing shareholders (whether
holding Common Stock or Preferred Stock), regardless of the amount of the
purchase price for such shares, shall not be deemed to be a dividend for
purposes of this provision. Such dividends shall not be cumulative.
3. Liquidation Preference.
(a) Subject to the rights of series of Preferred
Stock (where such rights will be subject to the Protective Provisions of the
Series A Preferred Stock as set forth in Section 6 of Division (B) of Article
IV hereof) which may from time to time come into existence, in the event of any
liquidation, dissolution or winding up of this Corporation,
2
<PAGE> 3
either voluntary or involuntary, the assets of the Corporation available for
distribution to stockholders shall be distributed among the holders of the
Series A Preferred Stock and Common Stock pro rata based upon the number of
shares of Common Stock held by each (assuming conversion of all Series A
Preferred Stock); provided, however, that if such liquidation, dissolution or
winding up of the Corporation arises out of the Corporation voluntarily filing,
or having filed against it, any petition for bankruptcy, arrangement,
reorganization, liquidation or other protection under federal bankruptcy laws,
then the holders of the Series A preferred Stock shall be entitled to receive,
prior and in preference, to any distribution of any of the assets of the
Corporation to the holders of Common Stock by reason of their ownership thereof,
an amount equal to $4.00 per share plus any declared but unpaid dividends for
each share of Series A preferred Stock then held by them. If, upon the
occurrence of such event, the assets and funds thus distributed among the
holders of Series A Preferred Stock shall be insufficient to permit the payment
to such holders of the full aforesaid preferential amounts then, subject to the
rights of Preferred Stock (where such rights will be subject to the Protective
Provisions of the Series A Preferred Stock as set forth in Section 6 of Division
(B) of Article IV hereof) which may from time to time come into existence, the
entire assets of the Corporation then legally available for distribution shall
be distributed pro rata among the holders of Series A Preferred Stock. After
payment has been made to the holders of Series A Preferred Stock of the full
preferential amounts to which they shall be entitled as aforesaid, then any
remaining assets available for distribution shall be distributed among the
holders of the Series A Preferred Stock and Common Stock pro rata based upon the
number of shares of Common Stock held by each (assuming conversion of all Series
A Preferred Stock).
(b) A consolidation or merger of this Corporation
with or into any other corporation or corporations, or a sale, conveyance or
disposition of all or substantially all of the assets of this Corporation or
the effectuation by the Corporation of a transaction or series of related
transactions in which more than fifty percent (50%) of the voting power of the
Corporation is disposed of, shall be deemed to be a liquidation, dissolution or
winding up within the meaning of this Section 3.
4. Conversion. The Series A Preferred Stock
shall be convertible into Common Stock as follows (the "Conversion Rights"):
(a) Right to Convert by Holders. Subject to
Section 4(c) hereof, each share of Series A Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date
which is four years since the date of the first issuance of any of the Series A
Preferred Stock, at the office of this Corporation or any transfer agent
therefor, into such number of fully paid and nonassessable shares of Common
Stock as is determined by dividing Four Dollars ($4.00) per share (the "Original
Series A Issue Price") by the Series A Conversion Price at the time in effect
for such share. The initial Conversion Price per share for shares of Series A
Preferred Stock shall be the Original Series A Issue Price; provided, however,
that the Conversion Price for the Series A Preferred Stock shall be subject to
adjustment as set forth in Sections 4(c) and 4(d) hereof.
(b) Option to Require Conversion by the
Corporation. During any time which is within thirty-one (31) calendar days
after the closing selling price of one share of the Corporation's Common Stock,
if the Common Stock is listed or admitted to trading on
3
<PAGE> 4
any stock exchange, or after the mean between the highest bid and lowest asked
price (or if such information is available, the closing selling price) in the
over-the-counter market, as such prices are reported by the National Association
of Securities Dealers through its NASDAQ system or any successor system, if the
Common Stock is not listed or admitted to trading on any stock exchange, has for
twenty-one (21) consecutive trading days been equal to or exceeded $7.50 per
share (as appropriately adjusted for any stock dividend, stock split or
combination, recapitalization, consolidation or the like of the Common Stock),
the Company may, but is not required to, automatically convert each share of
Series A Preferred Stock then outstanding into shares of Common Stock at the
Conversion Price at the time in effect for such shares, effective upon the
Corporation giving written notice by mail, postage prepaid of such automatic
conversion to each holder of record of Series A Preferred Stock, at each such
holder's respective address as it shall appear on the records of the
Corporation, (i) notifying each such holder of the Corporation's election to
convert such shares, (ii) stating the Conversion Price, and (iii) stating the
place or places at which the Certificates evidencing the Series A Preferred
Stock shall be surrendered.
(c) Mechanics of Conversion. Before any holder of
Series A Preferred Stock shall be entitled to convert the same into shares of
Common Stock under Section 4(a) hereof, such holder shall surrender the
certificate or certificates therefor, duly endorsed, at the office of this
Corporation or of any transfer agent therefor, and shall give written notice by
mail, postage prepaid, to this Corporation at its principal corporate office, of
the election to convert the same and shall state therein the name or names in
which the certificate or certificates for shares of Common Stock are to be
issued. Such conversion shall be deemed to have been made immediately prior to
the close of business on the date of such surrender of the shares of Preferred
Stock to be converted, and the person or persons entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder or holders of such shares of Common Stock as of such date.
If the conversion is in connection with an underwritten offer of securities
registered pursuant to the Securities Act of 1933, the conversion may, at the
option of any holder tendering Series A Preferred Stock for conversion under
Section 4(a) hereof, be conditioned upon the closing with the underwriter of the
sale of securities pursuant to such offering, in which event the person(s)
entitled to receive the Common Stock issuable upon such conversion of the
Preferred Stock shall not be deemed to have converted such Preferred Stock until
immediately prior to the closing of such sale of securities. In the event of a
conversion exercised by the Corporation pursuant to Section 4(b) hereof, from
and after the date of the notice given by the Corporation in accordance with
Section 4(b) hereof, the shares of Series A Preferred Stock shall no longer be
deemed to be outstanding, and all rights of the holders of Series A Preferred
Stock shall cease and terminate, except the right of the holders of such shares,
upon surrender of certificates therefor, to receive shares of Common Stock in
exchange therefor. This Corporation shall, as soon as practicable thereafter
after the surrender of certificates of Series A Preferred Stock, whether
pursuant to Section 4(a) or 4(b) hereof, issue and deliver to such holder, or to
the nominee or nominees of such holder, a certificate or certificates for the
number of shares of Common Stock to which such holder shall be entitled as
aforesaid.
(d) Adjustments to Conversion Price. In the
event of any dividend on the Common Stock payable in Common Stock, the
Conversion Price for the Series A Preferred Stock shall on the record date for
determining holders of Common Stock entitled to
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<PAGE> 5
such dividend be decreased proportionately. In the event of any subdivision
(split) of the Common Stock, the Conversion Price for the Series A Preferred
Stock shall on the effective date thereof be proportionately decreased. In the
event of any combination (reverse split) of the Common Stock, the Conversion
Price for the Series A Preferred Stock shall on the effective date thereof be
proportionately increased. In the event of any reclassification of the Common
Stock, the Conversion Price for the Series A Preferred Stock shall be adjusted
in good faith by the Board of Directors of the Corporation appropriately to
reflect such reclassification or recapitalization and to protect the rights of
holders of Series A Preferred Stock to receive upon conversion the same amount
of securities or property that they would have received had they converted
immediately prior to the date for determination of holders of Common Stock
entitled to receive securities or property as a result of such reclassification
or recapitalization, and their rights to appropriate adjustments upon any
further stock dividend, stock split, reclassification or recapitalization. In
the event the Corporation at any time or from time to time makes, or fixes a
record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities of the
Corporation other than shares of Common Stock, then and in each such event
provision shall be made so that the holders of Series A Preferred shall receive
upon conversion thereof, in addition to the number of shares of Common Stock
receivable thereupon, the amount of securities of the Corporation which they
would have received had their Preferred Stock been converted into Common Stock
on the date of such event and had they thereafter, during the period from the
date of such event to and including the date of conversion, retained such
securities receivable by them as aforesaid during such period, subject to all
other adjustments called for during such period under this Section 4 with
respect to the conversion rights of the holders of the Series A Preferred Stock.
(e) Further Adjustment of Series A Preferred Stock
Conversion Price. In connection with a conversion of Series A Preferred Stock
by a holder thereof pursuant to Section 4(a) hereof, if the closing selling
price of one share of the Corporation's Common Stock, if the Common Stock is
listed or admitted on any stock exchange, or if the highest bid price (or if
such information is available, the closing selling price) in the
over-the-counter market, as such prices are reported by the National Association
of Securities Dealers through its NASDAQ system, if the Common Stock is not
listed or admitted to trading on any stock exchange, has for the twenty-one (21)
consecutive trading days immediately prior to the date of such holder's notice
of conversion pursuant to Section 4(c) hereof been less than $4.00 per share (as
appropriately adjusted for any stock dividend, stock split or combination,
recapitalization, consolidation or the like of the Common Stock) then, in that
event, the Conversion Price then in effect for the Series A Preferred Stock
being so converted shall be reduced to the greater of (i) the average closing
price, or average highest bid price, as the case may be, for such twenty-one
(21) day period and (ii) $2.00 per share (as appropriately adjusted for any
stock dividend, stock split or combination, recapitalization, consolidation or
the like of the Common Stock). Such adjustment shall only apply to any Series A
Preferred Stock being converted pursuant to such notice of conversion, and shall
not apply to any Series A Preferred Stock not being converted at such time (or
in the event that the notice of conversion is withdrawn by such holder prior to
the consummation of such conversion).
(f) Consolidation or Merger. If any
consolidation or merger of the Corporation with another corporation, or the
sale of all or substantially all its assets to
5
<PAGE> 6
another corporation, shall be effected, then, as a condition of such
consideration, merger or sale, lawful and adequate provision shall be made
whereby the holders of shares of Series A Preferred Stock shall thereafter have
the right to receive upon the basis and upon the terms and conditions specified
herein and in lieu of the shares of Common Stock of the Corporation immediately
theretofore receivable upon the conversion of the Series A Preferred Stock, such
shares of stock, securities or assets as may be issued or payable with respect
to or in exchange for a number of outstanding shares equal to the number of
shares of Common Stock immediately theretofore so receivable by such holder had
such consolidation, merger or sale not taken place, and in any such case
appropriate provision shall be made with respect to the rights and interests of
such holder to the end that the provisions hereof (including without limitation
provisions for adjustment of the Conversion Price) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise of such conversion rights.
The Corporation shall not effect any such consolidation, merger or sale, unless
prior to or simultaneously with the consummation thereof the successor
corporation (if other than the Corporation) resulting from such consolidation or
merger or the corporation purchasing such assets shall assume by written
instrument executed and mailed or delivered to the holder hereof, the obligation
to deliver to such holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
receive.
(g) No Impairment. This Corporation will not, by
amendment of its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this Corporation, but will at all times in good faith assist in
the carrying out of all the provisions of this Section 4 and in the taking of
all such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Preferred Stock against
impairment.
(h) No Fractional Shares and Certificate as to
Adjustments.
(i) No fractional shares shall be issued upon
conversion of the Series A Preferred Stock, and the number of shares of Common
Stock to be issued shall be rounded to the nearest whole share. Whether or not
fractional shares are issuable upon such conversion shall be determined on the
basis of the total number of shares of Series A Preferred Stock the holder is at
the time converting into Common Stock and the number of shares of Common Stock
issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment
or readjustment of the Conversion Price of Series A Preferred Stock pursuant to
this Section 4, this Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Series A Preferred Stock a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. This Corporation shall, upon the written
request at any time of any holder of Series A Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (A) such
adjustment and readjustment, (B) the Conversion Price at the time in effect,
and (C) the number of shares of
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<PAGE> 7
Common Stock and the amount, if any, of other property which at the time would
be received upon the conversion of a share of Series A Preferred Stock.
(i) Notice of Certain Actions. In case at any
time:
(1) The Corporation shall declare any
dividend upon its Common Stock payable in securities or make any special
dividend or other distribution (other than a cash dividend to the holders of
its Common Stock);
(2) The Corporation shall offer for
subscription pro rata to the holders of its Common Stock any additional
securities of any class or other rights;
(3) There shall be any capital
reorganization, or reclassification of the capital stock of the Corporation, or
consolidation or merger of the Corporation with, or sale of all or
substantially all its assets to, another corporation;
(4) There shall be a voluntary or
involuntary dissolution, liquidation or winding up of the Corporation; or
(5) The Corporation shall enter into an
agreement or adopt a plan for the purpose of effecting a consolidation, merger,
or sale of all or substantially all of its assets;
then, in any one or more of said cases, the Corporation shall give written
notice, by first class mail, postage prepaid, to each holder of record of shares
of Series A Preferred Stock, of the date on which (a) the books of the
Corporation shall close or a record shall be taken for such dividend,
distribution or subscription rights, or (b) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding upon shall take place, as the case may be. Such notice shall also
specify the date as of which the holders of Shares of record shall participate
in such dividend, distribution or subscription rights, or shall be entitled to
exchange their Shares for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding up, as the case may be. Such written notice shall be
given at least 30 days prior to the action in question and not less than 30 days
prior to the record date or the date on which the Corporation's transfer books
are closed in respect thereto.
(j) Reservation of Stock Issuable Upon
Conversion. This Corporation shall at all times reserve and keep available out
of its authorized but unissued shares of Common Stock solely for the purpose of
effecting the conversion of the shares of the Series A Preferred Stock such
number of its shares of Common Stock as shall from time to time be sufficient
to effect the conversion of all outstanding shares of the Series A Preferred
Stock; and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Series A Preferred Stock, in addition to such other
remedies as shall be available to the holder of such Preferred Stock, this
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes.
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<PAGE> 8
(k) Notices. Any notice required by the
provisions of this Section 4 to be given to the holders of shares of Series A
Preferred Stock shall be deemed given if deposited in the United States mail,
postage prepaid, and addressed to each holder of record at his address
appearing on the books of this Corporation.
5. Voting Rights.
The holder of each outstanding share of Series A
Preferred Stock shall have the right to one vote for each share of Common Stock
into which such Series A Preferred Stock could then be converted (with any
fractional share determined on an aggregate conversion basis being rounded to
the nearest whole share), and with respect to such vote, such holder shall have
full voting rights and powers equal to the voting rights and powers of the
holders of Common Stock, and shall be entitled, notwithstanding any provision
hereof, to notice of any stockholders' meeting in accordance with the Bylaws of
this Corporation, and shall be entitled to vote, together with holders of
Common Stock, except as otherwise expressly provided herein or as required by
law, voting together with the Common Stock as a single class, with respect to
any question upon which holders of Common Stock have the right to vote.
6. Protective Provisions. In addition to any other
rights provided by law, the Corporation shall not, without first obtaining the
approval (by vote or written consent, as provided by law) of the holders of not
less than a majority of the then outstanding shares of Series A Preferred
Stock:
(a) alter or change the rights, preferences or
privileges of the shares of Series A Preferred Stock so as to affect adversely
the shares; or
(b) increase the authorized number of shares of
Series A Preferred Stock; or
(c) create any new class or series of stock having a
preference over shares of Series A Preferred Stock with respect to voting,
dividends or upon liquidation.
8
<PAGE> 9
7. Status of Converted or Redeemed Stock. In the event
any shares of Series A Preferred Stock shall be converted pursuant to Section 4
hereof, the shares so converted shall be canceled and shall not be issuable by
the Corporation.
C. Common Stock.
1. Dividend Rights. Subject to the prior rights of holders
of all classes of stock at the time outstanding having prior rights as to
dividends, the holders of the Common Stock shall be entitle to receive, when
and as declared by the Board of Directors, out of any assets of the Corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or
winding up of the Corporation, the assets of the Corporation shall be
distributed as provided in Section 3 of Division (B) of this Article IV hereof.
3. Redemption. The Common Stock is not redeemable.
4. Voting Rights. The holder of each share of Common Stock
shall have the right to one vote, and shall be entitled to notice of any
stockholders' meeting in accordance with the Bylaws of this Corporation, and
shall be entitled to vote upon such matters and in such manner as may be
provide by law.
ARTICLE V
The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors, and the directors need not be
elected by written ballot unless required by the Bylaws of the Corporation.
ARTICLE VI
The affirmative vote of the holders of two-thirds (66-2/3%) of the
outstanding common shares of this Corporation shall be required for the
approval, adoption or authorization of a business combination (as hereinafter
defined) and no business combination (as hereinafter defined) and no business
combination shall be entered into without such affirmative vote.
As used in this Article VI, the term "business combination" means:
(a) the merger of this Corporation into, or its consolidation with,
any other corporation, person or business entity;
(b) the merger of any other corporation, person or business entity
into, or its consolidation with, this Corporation;
(c) the sale, exchange, lease, transfer or other disposition by this
Corporation of sixty percent (60%) or more of its assets or business to any
other corporation, person or business entity;
9
<PAGE> 10
(d) the issuance or transfer at any one time by this Corporation, or
by any subsidiary of this Corporation, of fifty percent (50%) or more of voting
securities issued pursuant to a stock option, purchase, bonus, performance unit
or other plan or agreement for natural persons who are directors, employees,
consultants, and/or agents of this Corporation and/or a subsidiary thereof to
any other corporation, person or business entity in exchange for cash, assets,
or securities or any combination thereof; or
(e) any agreement, contract or other arrangement between this
Corporation and any other corporation, person or business entity providing for
any of the transactions described in clauses (a), (b), (c) or (d) immediately
preceding this clause (e).
The provisions of this Article VI shall not apply to any transaction
described in this Article VI, (i) if the Board of Directors of this Corporation
has approved a memorandum of understanding with such other corporation, person
or business entity with respect to and substantially consistent with such
transaction, or (ii) to any corporation, person or business entity which is an
owner of five percent (5%) of the outstanding shares of Common Stock of this
Corporation at the time of adoption of this Article VI.
The affirmative vote of the holders of two-thirds (66-2/3%) of the
outstanding shares of Common Stock of this Corporation shall be required for
the amendment of all or any part of this Article VI.
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<PAGE> 11
ARTICLE VII
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, repeal, alter,
amend and rescind the Bylaws of this Corporation, but any Bylaw amendment by
the Board of Directors increasing or reducing the authorized number of
directors shall require a resolution adopted by the affirmative vote of not
less than two-thirds (2/3) of the then authorized number of directors. Bylaws
shall not be made, repealed, altered, amended or rescinded by the stockholders
of the Corporation except by the vote of the holders of not less than 66-2/3%
of the total voting power of all outstanding shares of voting stock of the
Corporation.
ARTICLE VIII
Election of directors need not be by written ballot unless the Bylaws
of the Corporation shall so provide.
ARTICLE IX
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. Special meetings of the stockholders of
the Corporation for any purpose or purposes may be called at any time by the
Board of Directors, or by a committee of the Board of Directors which has been
duly designated by the Board of Directors and whose powers and authority, as
provided in a resolution of the Board of Directors or in the Bylaws of the
Corporation, include the power to call such meetings, but such special meetings
may not be called by any other person or persons. The books of the Corporation
may be kept (subject to any provision contained in the statutes) outside the
State of Delaware at such place or places as may be designated from time to
time by the Board of Directors or in the Bylaws of the Corporation.
ARTICLE X
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived
any improper personal benefit. If the Delaware General Corporation Law is
hereafter amended to authorize, with the approval of a Corporation's
stockholders, further reductions in the liability of the Corporation's
directors for breach of fiduciary duty, then a director of the Corporation
shall not be liable for any such breach to the fullest extent permitted by the
Delaware General Corporation Law as so amended. Any repeal or modification of
the foregoing provisions of this Article X by the stockholders of the
Corporation shall not adversely affect any right or protection of a director of
the Corporation existing at the time of such repeal or modification.
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<PAGE> 12
ARTICLE XI
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred on stockholders
herein are granted subject to this reservation. Notwithstanding the foregoing,
the provisions set forth in Articles VI, VII, IX, X and this Article XI may not
be repealed or amended in any respect unless such repeal or amendment is
approved by the affirmative vote of the holders of not less than 66-2/3% of the
total voting power of all outstanding shares of voting stock of this
Corporation.
IN WITNESS WHEREOF, Laser Power Corporation has caused this Second
Restated Certificate of Incorporation to be signed and attested by its duly
elected officers this 12th day of June, 1996.
LASER POWER CORPORATION
By: /s/ Glenn H. Sherman
______________________________
Glenn H. Sherman,
Chief Executive Officer
ATTEST:
/s/ Paul P. Wickman
_________________________
Paul P. Wickman, Jr.,
Secretary
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<PAGE> 1
EXHIBIT 3.2
RESTATED AND AMENDED BYLAWS
OF
LASER POWER CORPORATION
AS AMENDED APRIL 15, 1994
<PAGE> 2
AMENDED AND RESTATED
BYLAWS
OF
LASER POWER CORPORATION
ARTICLE 1
OFFICES
SECTION 1.1 The registered office shall be in the State of Delaware, 15
East North Street, City of Dover, County of Kent 19901.
SECTION 1.2 The corporation may also have offices at such other places
both within and without the State of Delaware as the Board of Directors may from
time to time determine or the business of the corporation may require.
ARTICLE 2
MEETINGS OF STOCKHOLDERS
SECTION 2.1 Annual meetings of stockholders, commencing with the year
1993, shall be held on such date and at such time as shall be designated from
time to time by the Board of Directors and stated in the notice of the meeting,
at which they shall elect by a plurality vote a board of directors, and transact
such other business as may properly be brought before the meeting.
SECTION 2.2 Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten (10) nor more than sixty (60) days before the
date of the meeting. If mailed, notice is given when deposited in the United
States mail, postage prepaid, directed to the stockholder at his address as it
appears on the records of the corporation.
SECTION 2.3 The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to
2.
<PAGE> 3
be held, which place shall be specified in the notice of the meeting, or, if not
so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
SECTION 2.4 Special meetings of the stockholders of the Corporation, for
any purpose or purposes, may be called at any time by the Board, by the holders
of shares entitled to cast at least ten percent (10%) of the votes at such
meeting or by a committee of the Board which has been duly designated by the
Board and whose powers and authority, as provided in a resolution of the Board
or in these Bylaws, include the power to call such meetings, but such special
meetings may not be called by any other person or persons.
SECTION 2.5 Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not less than ten (10) nor more than sixty (60) days
before the date of the meeting, to each stockholder entitled to vote at such
meeting. If mailed, notice is given when deposited in the United States mail,
postage prepaid, directed to the stockholder at his address as it appears on the
records of the corporation.
SECTION 2.6 Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
SECTION 2.7 The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
SECTION 2.8 When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different
3.
<PAGE> 4
vote is required, in which case such express provision shall govern and control
the decision of such question.
SECTION 2.9 Unless otherwise provided in the certificate of incorporation
each stockholder shall at every meeting of the stockholders be entitled to one
vote in person or by proxy for each share of the capital stock having voting
power held by such stockholder, but no proxy shall be voted on after three
years from its date, unless the proxy provides for a longer period.
SECTION 2.10 Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
where present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
SECTION 2.11 Whenever notice is required to be given to the stockholders
of the corporation under the provisions of statutes, the certificate of
incorporation of the corporation or these bylaws, a written waiver thereof,
signed by the person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning'
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the stockholders, need be
specified in any written waiver of notice unless so required by the certificate
of incorporation of the corporation or these bylaws.
ARTICLE 3
BOARD OF DIRECTORS
SECTION 3.1 The authorized number of directors which shall constitute the
whole Board shall be not less than five (5) nor more than eleven (11). The exact
number of authorized directors shall be nine (9) until changed, within the
limits specified above, by affirmative vote of not less than two-thirds (2/3) of
the then authorized number of directors. The directors shall be elected at the
annual meeting of the stockholders, except as provided in Section 3.2 of this
Article, and each director elected shall hold office until his successor is
elected and qualified. Directors need not be stockholders.
4.
<PAGE> 5
SECTION 3.2 Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by unanimous vote
of all of the directors then in office, though less than a quorum, or by a sole
remaining director, and the directors so chosen shall hold office until the next
annual election and until their successors are duly elected and shall qualify,
unless sooner displaced. If there are no directors in office, then an election
of directors may be held in the manner provided by statute.
SECTION 3.3 The business of the corporation shall be managed by or under
the direction of its board of directors which may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by the certificate of incorporation or by these bylaws directed or required to
be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
SECTION 3.4 The Board of Directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
SECTION 3.5 The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
Board of Directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors.
SECTION 3.6 Regular meetings of the Board of Directors may be held without
notice at such time and at such place as shall from time to time be determined
by the Board.
SECTION 3.7 Special meetings of the Board for any purpose or purposes may
be called at any time by the Chairman of the Board, the Chief Executive Officer,
or by any Vice President or the Secretary or any two directors. Special meetings
of the Board may be held at such times and places within or without the state as
may be designated in the notice of the meeting or which are designated by
resolution of the Board.
SECTION 3.8 When notice of a meeting of the Board is required, at least
three (3) days' notice by mail or eighteen (18) hours' notice delivered
personally or by telephone or telegraph shall be given to each director. Notice
to any director who is not a resident of the Continental United States shall not
be effective unless delivered personally, or by
5.
<PAGE> 6
telephone or telegraph, or, if mailed, until eighteen (18) hours after actual
receipt of such notice, of a meeting. Such notice need not specify the purpose
of the meeting. Notice of a meeting need not be given to any director who signs
a waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or who attends the meeting
without protesting, prior thereto or at its commencement, the lack of notice to
such director. All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
SECTION 3.9 At all meetings of the Board a majority of the directors shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors, except as may be otherwise specifically provided by
statute or by the certificate of incorporation or by any other provision of
these bylaws. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
SECTION 3.10 Unless otherwise restricted by the certificate of
incorporation or these bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writings are filed with the minutes of
proceedings of the Board or committee.
SECTION 3.11 Unless otherwise restricted by the certificate of
incorporation or these bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
SECTION 3.12 No person other than a director may attend any meeting of the
Board without the consent of a majority of the directors present; provided,
however, that a representative of legal counsel for the corporation may attend
any such meeting upon the invitation of any director; and provided further that
any Designated Director, as such term is defined in Section 4 of that certain
Securities Purchase Agreement dated October 30, 1987 by and between the
corporation and Union Miniere S.A. and Section 3 of that certain Shareholders
Agreement dated October 30, 1987 by and between the corporation and Union
Miniere S.A. may appoint an alternate to attend any meeting at which such
Designated Director cannot be present. Any such alternate shall be entitled to
participate in the meeting and express the views of the Designated Director who
is absent but such alternate shall not be entitled to vote upon any matter voted
upon by the directors.
6.
<PAGE> 7
COMMITTEES OF DIRECTORS
SECTION 3.13 The Board of Directors may, by resolution passed by all of
the directors then in office, designate one or more committees, each committee
to consist of one or more of the directors of the corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
In the absence of disqualification of a member of a committee, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member.
Any such committee, to the extent provided in the resolution of the Board
of Directors, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the bylaws of the corporation; and,
unless the resolution or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the Board of Directors.
SECTION 3.14 Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
SECTION 3.15 Unless otherwise restricted by the certificate of
incorporation or these bylaws, the Board of Directors shall have the authority
to fix the compensation 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. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
7.
<PAGE> 8
ARTICLE 4
OFFICERS
SECTION 4.1 The officers of the Corporation shall be a elected by the
Board of Directors and shall include a Chief Executive Officer and a Secretary.
The Board of Directors may elect from among its members a Chairman of the Board
and a Vice Chairman of the Board. The Board of Directors may also elect a
Treasurer and/or one or more Vice Presidents, Assistant Secretaries and
Assistant Treasurers. Any number of offices may be held by the same person,
unless the certificate of incorporation or these bylaws otherwise provide.
SECTION 4.2 The Board of Directors at its first meeting after each annual
meeting of stockholders shall elect a Chief Executive Officer and a Secretary
and may also elect Vice Presidents and a Treasurer.
SECTION 4.3 The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board.
SECTION 4.4 The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
SECTION 4.5 The officers of the corporation shall hold office until their
successors are chosen and qualified. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
THE CHAIRMAN OF THE BOARD
SECTION 4.6 The Chairman of the Board, if any, shall preside at all
meetings of the Board of Directors and of the stockholders at which he shall be
present. He shall have and may exercise such powers as are from time to time,
assigned to him by the Board and as may be provided by law.
SECTION 4.7 In the absence of the Chairman of the Board, the Vice Chairman
of the Board, if any, shall preside at all meetings of the Board of Directors
and of the stockholders at which he shall be present. He shall have and may
exercise such powers as are, from time to time, assigned to him by the Board and
as may be provided by law.
8.
<PAGE> 9
THE CHIEF EXECUTIVE OFFICER AND VICE PRESIDENT
SECTION 4.8 The Chief Executive Officer shall be the chief executive
officer of the corporation; and in the absence of the Chairman and Vice Chairman
of the Board he shall preside at all meetings of the stockholders and the Board
of Directors. He shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect.
SECTION 4.9 He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the corporation.
SECTION 4.10 In the absence of the Chief Executive Officer, or in the
event of his inability or refusal to act, the Vice President, if any (or in the
event there be more than one Vice President, the Vice Presidents in the order
designated by the directors, or in the absence of any designation, then in the
order of their election), shall perform the duties of the Chief Executive
Officer, and when so acting, shall have all the powers of and be subject to all
the restrictions upon the Chief Executive Officer. Each Vice President shall
perform such other, duties and have such other powers as the Board of Directors
may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
SECTION 4.11 The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all proceedings of the
meetings of the corporation and of the Board of Directors in a book to be kept
for that purpose and shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all meetings of the
stockholders and special meetings of the Board of Directors, and shall perform
such other duties as may be prescribed by the Board of Directors or Chief
Executive Officer, under whose supervision he shall be. He shall have custody of
the corporate seal of the corporation and he, or an Assistant Secretary, shall
have authority to affix the same to any instrument requiring it and when so
affixed, it may be attested by his signature or by the signature of such
Assistant Secretary. The Board of Directors may give general authority to any
other officer to affix the seal of the corporation and to attest the affixing by
his signature.
SECTION 4.12 The Assistant Secretary, or, if there is more than one, the
Assistant Secretaries in the order determined by the Board of Directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the Secretary, or in the event of his inability or refusal to
act, perform the duties and exercise the powers of
9.
<PAGE> 10
the Secretary and shall perform such other duties and have such other powers as
the Board of Directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
SECTION 4.13 The Treasurer shall have custody of all corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors.
SECTION 4.14 He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Chief Executive Officer and the Board of
Directors, at its regular meetings, or when the Board of Directors so requires,
an account of all his transactions as Treasurer and of the financial condition
of the Corporation.
SECTION 4.15 If required by the Board of Directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
SECTION 4.16 The Assistant Treasurer, of if there shall be more than one,
the Assistant Treasurers in the order determined by the Board of Directors (or
if. there by no such determination, then in the order of their election) shall,
in the absence of the Treasurer or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the Treasurer and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
ARTICLE 5
MISCELLANEOUS
SECTION 5.1 Every holder of stock in the corporation shall be entitled to
have a certificate, signed by, or in the name of the corporation by, the
Chairman or Vice Chairman of the Board of Directors, or the Chief Executive
Officer or a Vice President and the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the corporation, certifying the number of
shares owned by him in the corporation.
10.
<PAGE> 11
Certificate may be issued for partly paid shares and in such case upon the
face or back of the certificates issued to represent any such partly paid
shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in Section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
SECTION 5.2 Any of or all the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
SECTION 5.3 The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
SECTION 5.4 Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to
11.
<PAGE> 12
issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
FIXING RECORD DATE
SECTION 5.5 In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty more less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
SECTION 5.6 The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware
ARTICLE 6
GENERAL PROVISIONS
DIVIDENDS
SECTION 6.1 Dividends upon the capital stock of the corporation, subject
to the provisions of the certificate of incorporation, if any, may be declared
by the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
SECTION 6.2 Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of
12.
<PAGE> 13
the corporation, or for such other purposes as the directors shall think
conducive to the interest of the corporation, and the directors may modify or
abolish any such reserve in the manner in which it was created.
CHECKS
SECTION 6.3 All checks or demand for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
FISCAL YEAR
SECTION 6.4 The fiscal year of the corporation shall be fixed by
resolution of the. Board of Directors.
SEAL
SECTION 6.5 The Board of Directors may adopt a corporate seal having
inscribed thereon the name of the corporation, the year of its organization
and the words "Corporate Seal, Delaware." The seal may be used by causing it or
a facsimile thereof to be impressed of affixed or reproduced or otherwise.
ARTICLE 7
INDEMNIFICATION
SECTION 7.1 The corporation shall indemnify and hold harmless, to the
fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he or she, or a person for whom he or she is the legal
representative, is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust enterprise or non-profit entity, including service with
respect to employee benefit plans, against all liability and loss suffered and
expenses reasonably incurred by such person. The corporation shall be required
to indemnify a person in connection with a proceeding initiated by such person
only if the proceeding was authorized by the Board of Directors of the
corporation.
SECTION 7.2 The corporation shall pay the expenses incurred in defending
any proceeding in advance of its final disposition, provided, however, that the
payment of expenses incurred by a director or officer in advance of the final
disposition of the proceeding shall be made only upon receipt of an undertaking
by the director or officer to
13.
<PAGE> 14
repay all amounts advanced if it should be ultimately determined that the
director or officer is not entitled to be indemnified under this Article VII or
otherwise.
SECTION 7.3 If a claim for indemnification or payment of expenses under
this Article Vii is not paid in full within sixty (60) days after a written
claim therefor has been received by the corporation, the claimant may file suit
to recover the unpaid amount of such claim and, if successful in whole or in
part, shall be entitled to be paid the expense of prosecuting such claim. In any
such action the corporation shall have the burden of proving that the claimant
was not entitled to the requested indemnification or payment of expenses under
applicable law.
SECTION 7.4 The rights conferred on any person by this Article VII shall
not be exclusive of any other rights which such person may have or hereafter
acquire under any statute, provision of the certificate of incorporation, these
by-laws, agreement, vote of stockholders or disinterested directors or
otherwise.
SECTION 7.5 The corporation's obligation, if any, to indemnify any person
who was or is serving at its request as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust, enterprise or
non-profit, entity shall be reduced by any amount such person may collect as
indemnification from such other corporation, partnership, joint venture, trust,
enterprise or non-profit enterprise.
SECTION 7.6 Any repeal or modification of the foregoing provisions of this
Article VII shall not adversely affect any right or protection hereunder of any
person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE 8
AMENDMENT
SECTION 8.1 These bylaws may be altered, amended or repealed or new bylaws
may be adopted by the affirmative vote of stockholders holding sixty-six and
two-thirds percent (66 2/3%) of the entire stock of the corporation issued and
outstanding and entitled to vote or by the vote of the Board of Directors, when
such power is conferred upon the Board of Directors by the certificate of
incorporation at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
bylaws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal bylaws is conferred upon the Board of Directors by the
certificate of incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal bylaws.
14.
<PAGE> 15
CERTIFICATE OF SECRETARY
The undersigned, being the Secretary of Laser Power, Corporation, a
Delaware corporation, does hereby certify the foregoing to be the Amended and
Restated Bylaws of said Corporation, as adopted by the directors of the
Corporation and which remain in full force and effect as of the date hereof.
Executed at San Diego, California effective April 15, 1994.
-------------------------------------------
Paul P. Wickman, Jr., Secretary
15.
<PAGE> 1
EXIBHIT 3.3
RESTATED CERTIFICATE OF INCORPORATION
OF
LASER POWER CORPORATION
Laser Power Corporation, a corporation organized and existing under
the laws of the General Corporation Law of the State of Delaware, hereby
certifies as follows:
1. The name of the corporation is Laser Power
Corporation. The corporation was originally incorporated under the same name,
and the original Certificate of Incorporation of the corporation was filed with
the Secretary of State of the State of Delaware on July 11, 1983 and has been
subsequently amended from time to time.
2. Pursuant to Sections 242 and 245 of the General
Corporation Law of the State of Delaware, this Restated Certificate of
Incorporation restates and integrates and further amends the provisions of the
Certificate of Incorporation.
3. This Restated Certificate of Incorporation set forth
below was approved by the corporation's Board of Directors and stockholders and
was duly adopted in accordance with the provisions of Section 228, 242 and 245
of the General Corporation Law of the State of Delaware.
4. The text of the Certificate of Incorporation is
hereby restated and further amended to read in its entirety as follows:
I.
The name of this corporation is Laser Power Corporation.
II.
The address of the registered office of the corporation in the State
of Delaware is 15 North Street, City of Dover, County of Kent, and the name of
the registered agent of the corporation in the State of Delaware at such
address is the Incorporating Services, Ltd. whose address is the same as above.
III.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
IV.
A. CLASSES OF STOCK. This Corporation is authorized to issue two
classes of stock to be designated, respectively, "Common Stock" and "Preferred
Stock." The total
1.
<PAGE> 2
number of shares which the Corporation is authorized to issue is Eighteen
Million (18,000,000) shares, par value $.001 per share. Fifteen Million
(15,000,000) shares shall be Common Stock and Three Million (3,000,000) shares
shall be Preferred Stock.
B. The Preferred Stock may be issued from time to time in one or
more series. The Board of Directors is authorized to fix the number of shares
of any series of Preferred Stock and to determine the designation of any such
series. The Board of Directors is also authorized to determine or alter the
rights, preferences, privileges and restrictions granted to or imposed upon any
wholly unissued series of Preferred Stock and, within the limits and
restrictions stated in any resolution or resolutions constituting any series,
to increase or decrease (but not below the number of shares of any such series
then outstanding) the number of shares of any series subsequent to the issue to
shares of that series.
C. Effective at the time of filing with the Secretary of State of
the State of Delaware of this Amended and Restated Certificate of Incorporation
(the "Effective Time"), each one and one-half (1-1/2) shares of the
Corporation's Common Stock, par value $.001 per share, issued and outstanding
or held in treasury at the Effective Time shall, automatically and without any
action on the part of the respective holders thereof, be reclassified into one
(1) share of Common Stock, par value $.001 per share, of the Corporation. No
fractional shares will be issued and, in lieu thereof, any holder of less than
one share of Common Stock shall be entitled to receive cash for such holder's
fractional share based on the fair market value per share as of the Effective
Time as determined by the Board of Directors.
V.
For the management of the business and for the conduct of the affairs
of the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any
class thereof, as the case may be, it is further provided that:
A. 1. The management of the business and the conduct of the
affairs of the corporation shall be vested in its Board of Directors. The
number of directors which shall constitute the whole Board of Directors shall
be fixed exclusively by one or more resolutions adopted by the Board of
Directors.
2. Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances,
directors shall be elected at each annual meeting of stockholders for a term of
one year. Each director shall serve until his successor is duly elected and
qualified or until his death, resignation or removal. No decrease in the
number of directors constituting the Board of Directors shall shorten the term
of any incumbent director.
2.
<PAGE> 3
3. A. Prior to the date on which the corporation is
no longer subject to Section 2115 of the California Corporations Code (the
"Qualifying Record Date") and subject to the rights of the holders of any
series of Preferred Stock, the Board of Directors or any individual director
may be removed from office at any time (i) with cause by the affirmative vote
of the holders of a majority of the voting power of all the then-outstanding
shares of voting stock of the corporation, entitled to vote at an election of
directors (the "Voting Stock") or (ii) without cause by the affirmative vote of
the holders of at least sixty-six and two-thirds percent (66 2/3%) of the
voting power of all the then-outstanding shares of the Voting Stock.
B. After the Qualifying Record Date and subject
to any limitations imposed by law, Section A(3)(a) above shall no longer apply
and subject to the rights of the holders of any series of Preferred Stock, no
director shall be removed without cause. Subject to any limitations imposed by
law, the Board of Directors or any individual director may be removed from
office at any time with cause by the affirmative vote of the holders of a
majority of the Voting Stock.
4. Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance
with the preceding sentence shall hold office for the remainder of the full
term of the director for which the vacancy was created or occurred and until
such director's successor shall have been elected and qualified.
B. 1. Subject to paragraph (h) of Section 43 of the Bylaws,
the Bylaws may be altered or amended or new Bylaws adopted by the affirmative
vote of at least sixty-six and two-thirds percent (66-2/3%) of the voting power
of all of the then-outstanding shares of the Voting Stock. The Board of
Directors shall also have the power to adopt, amend, or repeal Bylaws.
2. The directors of the corporation need not be elected
by written ballot unless the Bylaws so provide.
3. No action shall be taken by the stockholders of the
corporation except at an annual or special meeting of stockholders called in
accordance with the Bylaws or by written consent of stockholders in accordance
with the Bylaws prior to the closing of the Initial Public Offering. Following
the closing of the Initial Public Offering no action shall be taken by the
stockholders by written consent.
3.
<PAGE> 4
4. Special meetings of the stockholders of the
corporation may be called, for any purpose or purposes, by (i) the Chairman of
the Board of Directors, (ii) the Chief Executive Officer, (iii) the Board of
Directors pursuant to a resolution adopted by a majority of the total number of
authorized directors (whether or not there exist any vacancies in previously
authorized directorships at the time any such resolution is presented to the
Board of Directors for adoption), or (iv) by the holders of shares entitled to
cast at least fifty percent (50%) of the votes at such meeting, and shall be
held at such place, on such date, and at such time as the Board of Directors
shall fix.
5. Advance notice of stockholder nominations for the
election of directors and of business to be brought by stockholders before any
meeting of the stockholders of the corporation shall be given in the manner
provided in the Bylaws of the corporation.
VI.
A. A director of the corporation shall not be personally liable
to the corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. If the Delaware General Corporation Law is amended
after approval by the stockholders of this Article to authorize corporate
action further eliminating or limiting the personal liability of directors,
then the liability of a director shall be eliminated or limited to the fullest
extent permitted by the Delaware General corporation Law, as so amended.
B. Any repeal or modification of this Article VII shall be
prospective and shall not affect the rights under this Article VII in effect at
the time of the alleged occurrence of any act or omission to act giving rise to
liability or indemnification.
VII.
A. The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, except as provided in paragraph
B. of this Article VIII, and all rights conferred upon the stockholders herein
are granted subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser
vote or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this
Certificate of Incorporation or any Preferred Stock Designation, the
affirmative vote of the holders of at least sixty-six and two-thirds percent
4.
<PAGE> 5
(66-2/3%) of the voting power of all of the then-outstanding shares of the
Voting Stock, voting together as a single class, shall be required to alter,
amend or repeal Articles V, VI, VII and VIII.
IN WITNESS WHEREOF, Laser Power Corporation has caused this Second
Restated Certificate of Incorporation to be signed and attested by its duly
elected officers this ___ day of _______________, 1997.
LASER POWER CORPORATION
By:___________________________________
Glenn H. Sherman,
Chief Executive Officer
ATTEST:
___________________________________________________
Paul P. Wickman, Jr.,
Secretary
5.
<PAGE> 1
EXHIBIT 3.4
AMENDED AND RESTATED
BYLAWS
OF
LASER POWER CORPORATION
(A DELAWARE CORPORATION)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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PAGE
<S> <C>
ARTICLE I. OFFICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Registered Office. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Other Offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. CORPORATE SEAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3. Corporate Seal.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE III. STOCKHOLDERS' MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 4. Place Of Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 5. Annual Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 6. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 7. Notice Of Meetings.. . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 8. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 9. Adjournment And Notice Of Adjourned Meetings . . . . . . . . . . . . . 5
Section 10. Voting Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 11. Joint Owners Of Stock. . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 12. List Of Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 13. Action Without Meeting . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 14. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE IV. DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 15. Number And Term Of Office. . . . . . . . . . . . . . . . . . . . . . . 8
Section 16. Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 18. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 19. Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 20. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 21. Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 22. Quorum And Voting. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 23. Action Without Meeting . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 24. Fees And Compensation. . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 25. Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 26. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE V. OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 27. Officers Designated. . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 28. Tenure And Duties Of Officers. . . . . . . . . . . . . . . . . . . . . 13
Section 29. Delegation Of Authority. . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
i.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C>
Section 30. Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 31. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VI. EXECUTION OF CORPORATE INSTRUMENTS AND VOTING . . . . . . . . . . . . . . .
OF SECURITIES OWNED BY THE CORPORATION . . . . . . . . . . . . . . . . . . . 15
Section 32. Execution Of Corporate Instruments . . . . . . . . . . . . . . . . 15
Section 33. Voting Of Securities Owned By The Corporation . . . . . . . . . . . 16
ARTICLE VII. SHARES OF STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 34. Form And Execution Of Certificates . . . . . . . . . . . . . . . . 16
Section 35. Lost Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 36. Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 37. Fixing Record Dates . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 38. Registered Stockholders . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VIII. OTHER SECURITIES OF THE CORPORATION . . . . . . . . . . . . . . . . . . . 19
Section 39. Execution Of Other Securities . . . . . . . . . . . . . . . . . . . 19
ARTICLE IX. DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 40. Declaration Of Dividends . . . . . . . . . . . . . . . . . . . . . 20
Section 41. Dividend Reserve . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE X. FISCAL YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 42. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE XI. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 43. Indemnification Of Directors, Executive Officers,
Other Officers, Employees And Other Agents . . . . . . . . . . . . 20
(a) Directors And Executive Officers . . . . . . . . . . . . . . . . . 20
(b) Other Officers, Employees and Other Agents . . . . . . . . . . . . 21
(c) Expenses . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(d) Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE XII. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 44. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE XIII. AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 45. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
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TABLE OF CONTENTS
<TABLE>
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ARTICLE XIV. LOANS TO OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 46. Loans To Officers . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
iii.
<PAGE> 5
AMENDED AND RESTATED
BYLAWS
OF
LASER POWER CORPORATION
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the
corporation in the State of Delaware shall be in the City of Dover, County of
Kent.
SECTION 2. OTHER OFFICES. The corporation shall also have and
maintain an office or principal place of business at such place as may be fixed
by the Board of Directors, and may also have offices at such other places, both
within and without the State of Delaware as the Board of Directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal shall consist of
a die bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of
the corporation shall be held at such place, either within or without the State
of Delaware, as may be designated from time to time by the Board of Directors,
or, if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
SECTION 5. ANNUAL MEETINGS.
(A) The annual meeting of the stockholders of the
corporation, for the purpose of election of directors and for such other
business as may lawfully come before
1.
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it, shall be held on such date and at such time as may be designated from time
to time by the Board of Directors.
(B) At an annual meeting of the stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be:
(A) specified in the notice of meeting (or any supplement thereto) given by or
at the direction of the Board of Directors, (B) otherwise properly brought
before the meeting by or at the direction of the Board of Directors, or (C)
otherwise properly brought before the meeting by a stockholder. For business
to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary
of the corporation. To be timely, a stockholder's notice must be delivered to
or mailed and received at the principal executive offices of the corporation
not later than the close of business on the one hundred and twentieth (120th)
day prior to the first anniversary of the preceding year's annual meeting;
provided, however, that in the event that no annual meeting was held in the
previous year or the date of the annual meeting has been changed by more than
thirty (30) days from the date contemplated at the time of the previous year's
proxy statement, notice by the stockholder to be timely must be so received not
earlier than the close of business on the ninetieth (90th) day prior to such
annual meeting and not later than the close of business on the later of the
sixtieth (60th) day prior to such annual meeting or, in the event public
announcement of the date of such annual meeting is first made by the
corporation fewer than seventy (70) days prior to the date of such annual
meeting, the close of business on the tenth (10th) day following the day on
which public announcement of the date of such meeting is first made by the
corporation. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting: (i) a
brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting,
(ii) the name and address, as they appear on the corporation's books, of the
stockholder proposing such business, (iii) the class and number of shares of
the corporation which are beneficially owned by the stockholder, (iv) any
material interest of the stockholder in such business and (v) any other
information that is required to be provided by the stockholder pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the "1934
Act"), in his capacity as a proponent to a stockholder proposal.
Notwithstanding the foregoing, in order to include information with respect to
a stockholder proposal in the proxy statement and form of proxy for a
stockholder's meeting, stockholders must provide notice as required by the
regulations promulgated under the 1934 Act. Notwithstanding anything in these
Bylaws to the contrary, no business shall be conducted at any annual meeting
except in accordance with the procedures set forth in this paragraph (b). The
chairman of the annual meeting shall, if the facts warrant, determine and
declare at the meeting that business was not properly brought before the
meeting and in accordance with the
2.
<PAGE> 7
provisions of this paragraph (b), and, if he should so determine, he shall so
declare at the meeting that any such business not properly brought before the
meeting shall not be transacted.
(C) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (c) shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of
the corporation may be made at a meeting of stockholders by or at the direction
of the Board of Directors or by any stockholder of the corporation entitled to
vote in the election of directors at the meeting who complies with the notice
procedures set forth in this paragraph (c). Such nominations, other than those
made by or at the direction of the Board of Directors, shall be made pursuant
to timely notice in writing to the Secretary of the corporation in accordance
with the provisions of paragraph (b) of this Section 5. Such stockholder's
notice shall set forth (i) as to each person, if any, whom the stockholder
proposes to nominate for election or re-election as a director: (A) the name,
age, business address and residence address of such person, (B) the principal
occupation or employment of such person, (C) the class and number of shares of
the corporation which are beneficially owned by such person, (D) a description
of all arrangements or understandings between the stockholder and each nominee
and any other person or persons (naming such person or persons) pursuant to
which the nominations are to be made by the stockholder, and (E) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required,
in each case pursuant to Regulation 14A under the 1934 Act (including without
limitation such person's written consent to being named in the proxy statement,
if any, as a nominee and to serving as a director if elected); and (ii) as to
such stockholder giving notice, the information required to be provided
pursuant to paragraph (b) of this Section 5. At the request of the Board of
Directors, any person nominated by a stockholder for election as a director
shall furnish to the Secretary of the corporation that information required to
be set forth in the stockholder's notice of nomination which pertains to the
nominee. No person shall be eligible for election as a director of the
corporation unless nominated in accordance with the procedures set forth in
this paragraph (c). The chairman of the meeting shall, if the facts warrant,
determine and declare at the meeting that a nomination was not made in
accordance with the procedures prescribed by these Bylaws, and if he should so
determine, he shall so declare at the meeting, and the defective nomination
shall be disregarded.
(D) For purposes of this Section 5, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news service or in a document
publicly filed by the corporation with the Securities and Exchange Commission
pursuant to Section 13, 14 or 15(d) of the Exchange Act.
3.
<PAGE> 8
SECTION 6. SPECIAL MEETINGS.
(A) Special meetings of the stockholders of the
corporation may be called, for any purpose or purposes, by (i) the Chairman of
the Board of Directors, (ii) the Chief Executive Officer, (iii) the Board of
Directors pursuant to a resolution adopted by a majority of the total number of
authorized directors (whether or not there exist any vacancies in previously
authorized directorships at the time any such resolution is presented to the
Board of Directors for adoption), or (iv) by the holders of shares entitled to
cast not less than fifty percent (50%) of the votes at such meeting, and shall
be held at such place, on such date, and at such time as the Board of Directors,
shall fix.
(B) If a special meeting is called by any person or
persons other than the Board of Directors, the request shall be in writing,
specifying the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the Chairman of the Board of Directors, the
Chief Executive Officer, or the Secretary of the corporation. No business may
be transacted at such special meeting otherwise than specified in such notice.
The Board of Directors shall determine the time and place of such special
meeting, which shall be held not less than thirty-five (35) nor more than one
hundred twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within sixty (60) days after the receipt of the request, the person
or persons requesting the meeting may set the time and place of the meeting and
give the notice. Nothing contained in this paragraph (b) shall be construed as
limiting, fixing, or affecting the time when a meeting of stockholders called
by action of the Board of Directors may be held.
SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by
law or the Certificate of Incorporation, written notice of each meeting of
stockholders shall be given not less than ten (10) nor more than sixty (60)
days before the date of the meeting to each stockholder entitled to vote at
such meeting, such notice to specify the place, date and hour and purpose or
purposes of the meeting. Notice of the time, place and purpose of any meeting
of stockholders may be waived in writing, signed by the person entitled to
notice thereof, either before or after such meeting, and will be waived by any
stockholder by his attendance thereat in person or by proxy, except when the
stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Any stockholder so waiving notice
of such meeting shall be bound by the proceedings of any such meeting in all
respects as if due notice thereof had been given.
4.
<PAGE> 9
SECTION 8. QUORUM. At all meetings of stockholders, except
where otherwise provided by statute or by the Certificate of Incorporation, or
by these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a
quorum, any meeting of stockholders may be adjourned, from time to time, either
by the chairman of the meeting or by vote of the holders of a majority of the
shares represented thereat, but no other business shall be transacted at such
meeting. The stockholders present at a duly called or convened meeting, at
which a quorum is present, may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum. Except as otherwise provided by law, the Certificate of Incorporation
or these Bylaws, all action taken by the holders of a majority of the vote
cast, excluding abstentions, at any meeting at which a quorum is present shall
be valid and binding upon the corporation; provided, however, that directors
shall be elected by a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote on the election of
directors. Where a separate vote by a class or classes or series is required,
except where otherwise provided by the statute or by the Certificate of
Incorporation or these Bylaws, a majority of the outstanding shares of such
class or classes or series, present in person or represented by proxy, shall
constitute a quorum entitled to take action with respect to that vote on that
matter and, except where otherwise provided by the statute or by the
Certificate of Incorporation or these Bylaws, the affirmative vote of the
majority (plurality, in the case of the election of directors) of the votes
cast, including abstentions, by the holders of shares of such class or classes
or series shall be the act of such class or classes or series.
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any
meeting of stockholders, whether annual or special, may be adjourned from time
to time either by the chairman of the meeting or by the vote of a majority of
the shares casting votes, excluding abstentions. When a meeting is adjourned
to another time or place, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting, the corporation may transact
any business which might have been transacted at the original meeting. If the
adjournment is for more than thirty (30) days or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
SECTION 10. VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the
stock records of the corporation on the record date, as provided in Section 12
of these Bylaws, shall be entitled to vote at any meeting of stockholders.
Every person entitled to vote shall have the right to do so either in person or
by an agent or agents authorized by a proxy granted in accordance with
5.
<PAGE> 10
Delaware law. An agent so appointed need not be a stockholder. No proxy shall
be voted after three (3) years from its date of creation unless the proxy
provides for a longer period.
SECTION 11. JOINT OWNERS OF STOCK. If shares or other securities
having voting power stand of record in the names of two (2) or more persons,
whether fiduciaries, members of a partnership, joint tenants, tenants in
common, tenants by the entirety, or otherwise, or if two (2) or more persons
have the same fiduciary relationship respecting the same shares, unless the
Secretary is given written notice to the contrary and is furnished with a copy
of the instrument or order appointing them or creating the relationship wherein
it is so provided, their acts with respect to voting shall have the following
effect: (a) if only one (1) votes, his act binds all; (b) if more than one (1)
votes, the act of the majority so voting binds all; (c) if more than one (1)
votes, but the vote is evenly split on any particular matter, each faction may
vote the securities in question proportionally, or may apply to the Delaware
Court of Chancery for relief as provided in the General Corporation Law of
Delaware, Section 217(b). If the instrument filed with the Secretary shows
that any such tenancy is held in unequal interests, a majority or even-split
for the purpose of subsection (c) shall be a majority or even-split in
interest.
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare
and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at said meeting, arranged in
alphabetical order, showing the address of each stockholder and the number of
shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time
thereof and may be inspected by any stockholder who is present.
SECTION 13. ACTION WITHOUT MEETING.
(a) Unless otherwise provided in the Certificate of
Incorporation, any action required by statute to be taken at any annual or
special meeting of the stockholders, or any action which may be taken at any
annual or special meeting of the stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted.
6.
<PAGE> 11
(b) Every written consent shall bear the date of
signature of each stockholder who signs the consent, and no written consent
shall be effective to take the corporate action referred to therein unless,
within sixty (60) days of the earliest dated consent delivered to the
corporation in the manner herein required, written consents signed by a
sufficient number of stockholders to take action are delivered to the
corporation by delivery to its registered office in the State of Delaware, its
principal place of business or an officer or agent of the corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to a corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested.
(c) Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to
those stockholders who have not consented in writing. If the action which is
consented to is such as would have required the filing of a certificate under
any section of the General Corporation Law of the State of Delaware if such
action had been voted on by stockholders at a meeting thereof, then the
certificate filed under such section shall state, in lieu of any statement
required by such section concerning any vote of stockholders, that written
notice and written consent have been given as provided in Section 228 of the
General Corporation Law of Delaware.
(d) Notwithstanding the foregoing, no such action by
written consent may be taken following the closing of the initial public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended (the "1933 Act"), covering the offer and sale of Common
Stock of the corporation (the "Initial Public Offering").
SECTION 14. ORGANIZATION.
(a) At every meeting of stockholders, the Chairman of the
Board of Directors, or, if a Chairman has not been appointed or is absent, the
President, or, if the President is absent, a chairman of the meeting chosen by
a majority in interest of the stockholders entitled to vote, present in person
or by proxy, shall act as chairman. The Secretary, or, in his absence, an
Assistant Secretary directed to do so by the President, shall act as secretary
of the meeting.
(b) The Board of Directors of the corporation shall be
entitled to make such rules or regulations for the conduct of meetings of
stockholders as it shall deem necessary, appropriate or convenient. Subject to
such rules and regulations of the Board of Directors, if any, the chairman of
the meeting shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of such
chairman, are necessary, appropriate or convenient for the proper conduct of
the meeting, including, without limitation, establishing an agenda or order of
7.
<PAGE> 12
business for the meeting, rules and procedures for maintaining order at the
meeting and the safety of those present, limitations on participation in such
meeting to stockholders of record of the corporation and their duly authorized
and constituted proxies and such other persons as the chairman shall permit,
restrictions on entry to the meeting after the time fixed for the commencement
thereof, limitations on the time allotted to questions or comments by
participants and regulation of the opening and closing of the polls for
balloting on matters which are to be voted on by ballot. Unless and to the
extent determined by the Board of Directors or the chairman of the meeting,
meetings of stockholders shall not be required to be held in accordance with
rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE. The authorized number of
directors of the corporation shall be fixed in accordance with the Certificate
of Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws.
SECTION 16. POWERS. The powers of the corporation shall be
exercised, its business conducted and its property controlled by the Board of
Directors, except as may be otherwise provided by statute or by the Certificate
of Incorporation.
SECTION 17. CLASSES OF DIRECTORS. Subject to the rights of the
holders of any series of Preferred Stock to elect additional directors under
specified circumstances, directors shall be elected at each annual meeting of
stockholders for a term of one year. Each director shall serve until his
successor is duly elected and qualified or until his death, resignation or
removal. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
SECTION 18. VACANCIES. Unless otherwise provided in the
Certificate of Incorporation, any vacancies on the Board of Directors resulting
from death, resignation, disqualification, removal or other causes and any
newly created directorships resulting from any increase in the number of
directors, shall unless the Board of Directors determines by resolution that
any such vacancies or newly created directorships shall be filled by
stockholders, be filled only by the affirmative vote of a majority of the
directors then in office, even though less than a quorum of the Board of
Directors. Any director elected in accordance with the preceding sentence
shall hold office for the remainder of the full term of the director for which
the vacancy was created or occurred and until such
8.
<PAGE> 13
director's successor shall have been elected and qualified. A vacancy in the
Board of Directors shall be deemed to exist under this Bylaw in the case of the
death, removal or resignation of any director.
SECTION 19. RESIGNATION. Any director may resign at any time by
delivering his written resignation to the Secretary, such resignation to
specify whether it will be effective at a particular time, upon receipt by the
Secretary or at the pleasure of the Board of Directors. If no such
specification is made, it shall be deemed effective at the pleasure of the
Board of Directors. When one or more directors shall resign from the Board of
Directors, effective at a future date, a majority of the directors then in
office, including those who have so resigned, shall have power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each Director so chosen shall hold
office for the unexpired portion of the term of the Director whose place shall
be vacated and until his successor shall have been duly elected and qualified.
SECTION 20. REMOVAL.
(a) Following the date on which the corporation is no
longer subject to Section 2115 of the California Corporations Code (the
"Qualifying Record Date") and subject to the rights of the holders of any
series of Preferred Stock, the Board of Directors or any individual director
may be removed from office at any time (i) with cause by the affirmative vote
of the holders of a majority of the voting power of all the then-outstanding
shares of voting stock of the corporation, entitled to vote at an election of
directors (the "Voting Stock") or (ii) without cause by the affirmative vote of
the holders of at least sixty-six and two-thirds percent (66 2/3%) of the
voting power of all the then-outstanding shares of the Voting Stock.
(b) After the Qualifying Record Date and subject to any
limitations imposed by law, Section 20(a) above shall no longer apply and
subject to the rights of the holders of any series of Preferred Stock, no
director shall be removed without cause. Subject to any limitations imposed by
law, the Board of Directors or any individual director may be removed from
office at any time with cause by the affirmative vote of the holders of a
majority of the Voting Stock.
SECTION 21. MEETINGS.
(a) ANNUAL MEETINGS. The annual meeting of the Board of
Directors shall be held immediately before or after the annual meeting of
stockholders and at the place where such meeting is held. No notice of an
annual meeting of the Board of Directors shall be necessary and such meeting
shall be held for the purpose of electing officers and transacting such other
business as may lawfully come before it.
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(b) REGULAR MEETINGS. Except as hereinafter otherwise
provided, regular meetings of the Board of Directors shall be held in the
office of the corporation required to be maintained pursuant to Section 2
hereof. Unless otherwise restricted by the Certificate of Incorporation,
regular meetings of the Board of Directors may also be held at any place within
or without the State of Delaware which has been designated by resolution of the
Board of Directors or the written consent of all directors.
(c) SPECIAL MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the Chairman of the Board, the President or any two of the directors
(d) TELEPHONE MEETINGS. Any member of the Board of
Directors, or of any committee thereof, may participate in a meeting by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and participation
in a meeting by such means shall constitute presence in person at such meeting.
(e) NOTICE OF MEETINGS. Notice of the time and place of
all special meetings of the Board of Directors shall be orally or in writing,
by telephone, facsimile, telegraph or telex, during normal business hours, at
least twenty-four (24) hours before the date and time of the meeting, or sent
in writing to each director by first class mail, charges prepaid, at least
three (3) days before the date of the meeting. Notice of any meeting may be
waived in writing at any time before or after the meeting and will be waived by
any director by attendance thereat, except when the director attends the
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called
or convened.
(f) WAIVER OF NOTICE. The transaction of all business at
any meeting of the Board of Directors, or any committee thereof, however called
or noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either
before or after the meeting, each of the directors not present shall sign a
written waiver of notice. All such waivers shall be filed with the corporate
records or made a part of the minutes of the meeting.
SECTION 22. QUORUM AND VOTING.
(a) Unless the Certificate of Incorporation requires a
greater number and except with respect to indemnification questions arising
under Section 43 hereof, for which a quorum shall be one-third of the exact
number of directors fixed from time to
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time in accordance with the Certificate of Incorporation, a quorum of the Board
of Directors shall consist of a majority of the exact number of directors fixed
from time to time by the Board of Directors in accordance with the Certificate
of Incorporation; provided, however, at any meeting whether a quorum be present
or otherwise, a majority of the directors present may adjourn from time to time
until the time fixed for the next regular meeting of the Board of Directors,
without notice other than by announcement at the meeting.
(b) At each meeting of the Board of Directors at which a
quorum is present, all questions and business shall be determined by the
affirmative vote of a majority of the directors present, unless a different
vote be required by law, the Certificate of Incorporation or these Bylaws.
SECTION 23. ACTION WITHOUT MEETING. Unless otherwise restricted
by the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all members of the Board
of Directors or committee, as the case may be, consent thereto in writing, and
such writing or writings are filed with the minutes of proceedings of the Board
of Directors or committee.
SECTION 24. FEES AND COMPENSATION. Directors shall be entitled
to such compensation for their services as may be approved by the Board of
Directors, including, if so approved, by resolution of the Board of Directors,
a fixed sum and expenses of attendance, if any, for attendance at each regular
or special meeting of the Board of Directors and at any meeting of a committee
of the Board of Directors. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity as an
officer, agent, employee, or otherwise and receiving compensation therefor.
SECTION 25. COMMITTEES.
(a) EXECUTIVE COMMITTEE. The Board of Directors may by
resolution passed by a majority of the whole Board of Directors appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and
provided in the resolution of the Board of Directors shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, including without
limitation the power or authority to declare a dividend, to authorize the
issuance of stock and to adopt a certificate of ownership and merger, and may
authorize the seal of the corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in
reference to amending the Certificate of Incorporation (except that a committee
may, to the extent authorized in the resolution or resolutions providing for
the issuance of shares of stock adopted by the Board of Directors fix the
designations and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution,
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any distribution of assets of the corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the corporation or
fix the number of shares of any series of stock or authorize the increase or
decrease of the shares of any series), adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, recommending
to the stockholders a dissolution of the corporation or a revocation of a
dissolution, or amending the bylaws of the corporation.
(b) OTHER COMMITTEES. The Board of Directors may, by
resolution passed by a majority of the whole Board of Directors, from time to
time appoint such other committees as may be permitted by law. Such other
committees appointed by the Board of Directors shall consist of one (1) or more
members of the Board of Directors and shall have such powers and perform such
duties as may be prescribed by the resolution or resolutions creating such
committees, but in no event shall such committee have the powers denied to the
Executive Committee in these Bylaws.
(c) TERM. Each member of a committee of the Board of
Directors shall serve a term on the committee coexistent with such member's
term on the Board of Directors. The Board of Directors, subject to the
provisions of subsections (a) or (b) of this Bylaw may at any time increase or
decrease the number of members of a committee or terminate the existence of a
committee. The membership of a committee member shall terminate on the date of
his death or voluntary resignation from the committee or from the Board of
Directors. The Board of Directors may at any time for any reason remove any
individual committee member and the Board of Directors may fill any committee
vacancy created by death, resignation, removal or increase in the number of
members of the committee. The Board of Directors may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee, and, in addition, in the
absence or disqualification of any member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absent or
disqualified member.
(d) MEETINGS. Unless the Board of Directors shall
otherwise provide, regular meetings of the Executive Committee or any other
committee appointed pursuant to this Section 25 shall be held at such times and
places as are determined by the Board of Directors, or by any such committee,
and when notice thereof has been given to each member of such committee, no
further notice of such regular meetings need be given thereafter. Special
meetings of any such committee may be held at any place which has been
determined from time to time by such committee, and may be called by any
director who is a member of such committee, upon written notice to the members
of such
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committee of the time and place of such special meeting given in the manner
provided for the giving of written notice to members of the Board of Directors
of the time and place of special meetings of the Board of Directors. Notice of
any special meeting of any committee may be waived in writing at any time
before or after the meeting and will be waived by any director by attendance
thereat, except when the director attends such special meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of
any business because the meeting is not lawfully called or convened. A
majority of the authorized number of members of any such committee shall
constitute a quorum for the transaction of business, and the act of a majority
of those present at any meeting at which a quorum is present shall be the act
of such committee.
SECTION 26. ORGANIZATION. At every meeting of the directors, the
Chairman of the Board of Directors, or, if a Chairman has not been appointed or
is absent, the President, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the directors present, shall preside over the meeting.
The Secretary, or in his absence, an Assistant Secretary directed to do so by
the President, shall act as secretary of the meeting.
ARTICLE V
OFFICERS
SECTION 27. OFFICERS DESIGNATED. The officers of the corporation
shall include, if and when designated by the Board of Directors, the Chairman
of the Board of Directors, the Chief Executive Officer, the President, one or
more Vice Presidents and Division Presidents, the Secretary, the Chief
Financial Officer, the Treasurer, the Controller, all of whom shall be elected
at the annual organizational meeting of the Board of Directors. The Board of
Directors may also appoint one or more Assistant Secretaries, Assistant
Treasurers, Assistant Controllers and such other officers and agents with such
powers and duties as it shall deem necessary. The Board of Directors may
assign such additional titles to one or more of the officers as it shall deem
appropriate. Any one person may hold any number of offices of the corporation
at any one time unless specifically prohibited therefrom by law. The salaries
and other compensation of the officers of the corporation shall be fixed by or
in the manner designated by the Board of Directors.
SECTION 28. TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the
pleasure of the Board of Directors and until their successors shall have been
duly elected and qualified, unless sooner removed. Any officer elected or
appointed by the Board of Directors may be
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removed at any time by the Board of Directors. If the office of any officer
becomes vacant for any reason, the vacancy may be filled by the Board of
Directors.
(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The
Chairman of the Board of Directors, when present, shall preside at all meetings
of the stockholders and the Board of Directors. The Chairman of the Board of
Directors shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers as the Board of
Directors shall designate from time to time. If there is no President, then
the Chairman of the Board of Directors shall also serve as the Chief Executive
Officer of the corporation and shall have the powers and duties prescribed in
paragraph (c) of this Section 28.
(c) DUTIES OF PRESIDENT. The President shall preside at
all meetings of the stockholders and at all meetings of the Board of Directors,
unless the Chairman of the Board of Directors has been appointed and is
present. Unless some other officer has been elected Chief Executive Officer of
the corporation, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. The President shall perform other duties commonly incident to his
office and shall also perform such other duties and have such other powers as
the Board of Directors shall designate from time to time.
(d) DUTIES OF VICE PRESIDENTS AND DIVISION PRESIDENTS.
The Vice Presidents and Division Presidents may assume and perform the duties
of the President in the absence or disability of the President or whenever the
office of President is vacant. The Vice Presidents and Division Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(e) DUTIES OF SECRETARY. The Secretary shall attend all
meetings of the stockholders and of the Board of Directors and shall record all
acts and proceedings thereof in the minute book of the corporation. The
Secretary shall give notice in conformity with these Bylaws of all meetings of
the stockholders and of all meetings of the Board of Directors and any
committee thereof requiring notice. The Secretary shall perform all other
duties given him in these Bylaws and other duties commonly incident to his
office and shall also perform such other duties and have such other powers as
the Board of Directors shall designate from time to time. The President may
direct any Assistant Secretary to assume and perform the duties of the
Secretary in the absence or disability of the Secretary, and each Assistant
Secretary shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers as the Board of
Directors or the President shall designate from time to time.
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(f) DUTIES OF CHIEF FINANCIAL OFFICER. The Chief
Financial Officer shall keep or cause to be kept the books of account of the
corporation in a thorough and proper manner and shall render statements of the
financial affairs of the corporation in such form and as often as required by
the Board of Directors or the President. The Chief Financial Officer, subject
to the order of the Board of Directors, shall have the custody of all funds and
securities of the corporation. The Chief Financial Officer shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time. The President may direct the Treasurer or any
Assistant Treasurer, or the Controller or any Assistant Controller to assume
and perform the duties of the Chief Financial Officer in the absence or
disability of the Chief Financial Officer, and each Treasurer and Assistant
Treasurer and each Controller and Assistant Controller shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
SECTION 29. DELEGATION OF AUTHORITY. The Board of Directors may
from time to time delegate the powers or duties of any officer to any other
officer or agent, notwithstanding any provision hereof.
SECTION 30. RESIGNATIONS. Any officer may resign at any time by
giving written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
SECTION 31. REMOVAL. Any officer may be removed from office at
any time, either with or without cause, by the affirmative vote of a majority
of the directors in office at the time, or by the unanimous written consent of
the directors in office at the time, or by any committee or superior officers
upon whom such power of removal may have been conferred by the Board of
Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE
CORPORATION
SECTION 32. EXECUTION OF CORPORATE INSTRUMENTS. The Board of
Directors may, in its discretion, determine the method and designate the
signatory officer or
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officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and
other evidences of indebtedness of the corporation, and other corporate
instruments or documents requiring the corporate seal, and certificates of
shares of stock owned by the corporation, shall be executed, signed or endorsed
by the Chairman of the Board of Directors, or the President or any Vice
President, and by the Secretary or Treasurer or any Assistant Secretary or
Assistant Treasurer. All other instruments and documents requiring the
corporate signature, but not requiring the corporate seal, may be executed as
aforesaid or in such other manner as may be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositories on funds to
the credit of the corporation or in special accounts of the corporation shall
be signed by such person or persons as the Board of Directors shall authorize
so to do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
SECTION 33. VOTING OF SECURITIES OWNED BY THE CORPORATION. All
stock and other securities of other corporations owned or held by the
corporation for itself, or for other parties in any capacity, shall be voted,
and all proxies with respect thereto shall be executed, by the person
authorized so to do by resolution of the Board of Directors, or, in the absence
of such authorization, by the Chairman of the Board of Directors, the Chief
Executive Officer, the President, or any Vice President.
ARTICLE VII
SHARES OF STOCK
SECTION 34. FORM AND EXECUTION OF CERTIFICATES. Certificates for
the shares of stock of the corporation shall be in such form as is consistent
with the Certificate of Incorporation and applicable law. Every holder of
stock in the corporation shall be entitled to have a certificate signed by or
in the name of the corporation by the Chairman of the Board of Directors, or
the President or any Vice President and by the Treasurer or Assistant Treasurer
or the Secretary or Assistant Secretary, certifying the number of
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shares owned by him in the corporation. Any or all of the signatures on the
certificate may be facsimiles. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued with the same effect as if
he were such officer, transfer agent, or registrar at the date of issue. Each
certificate shall state upon the face or back thereof, in full or in summary,
all of the powers, designations, preferences, and rights, and the limitations
or restrictions of the shares authorized to be issued or shall, except as
otherwise required by law, set forth on the face or back a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative, participating, optional, or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.
Within a reasonable time after the issuance or transfer of uncertificated
stock, the corporation shall send to the registered owner thereof a written
notice containing the information required to be set forth or stated on
certificates pursuant to this section or otherwise required by law or with
respect to this section a statement that the corporation will furnish without
charge to each stockholder who so requests the powers, designations,
preferences and relative participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Except as otherwise expressly
provided by law, the rights and obligations of the holders of certificates
representing stock of the same class and series shall be identical.
SECTION 35. LOST CERTIFICATES. A new certificate or certificates
shall be issued in place of any certificate or certificates theretofore issued
by the corporation alleged to have been lost, stolen, or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate of
stock to be lost, stolen, or destroyed. The corporation may require, as a
condition precedent to the issuance of a new certificate or certificates, the
owner of such lost, stolen, or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
or to give the corporation a surety bond in such form and amount as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen, or
destroyed.
SECTION 36. TRANSFERS.
(a) Transfers of record of shares of stock of the
corporation shall be made only upon its books by the holders thereof, in person
or by attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares.
(b) The corporation shall have power to enter into and
perform any agreement with any number of stockholders of any one or more
classes of stock of the
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corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
SECTION 37. FIXING RECORD DATES.
(a) In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the Board of Directors may fix, in advance, a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting. If no record date is fixed by the Board of Directors,
the record date for determining stockholders entitled to notice of or to vote
at a meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
(b) Prior to the Initial Public Offering, in order that
the corporation may determine the stockholders entitled to consent to corporate
action in writing without a meeting, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which date
shall not be more than 10 days after the date upon which the resolution fixing
the record date is adopted by the Board of Directors. Any stockholder of
record seeking to have the stockholders authorize or take corporate action by
written consent shall, by written notice to the Secretary, request the Board of
Directors to fix a record date. The Board of Directors shall promptly, but in
all events within 10 days after the date on which such a request is received,
adopt a resolution fixing the record date. If no record date has been fixed by
the Board of Directors within 10 days of the date on which such a request is
received, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the
Board of Directors is required by applicable law, shall be the first date on
which a signed written consent setting forth the action taken or proposed to be
taken is delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent
of the corporation having custody of the book in which proceedings of meetings
of stockholders are recorded. Delivery made to the corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested. If no record date has been fixed by the Board of Directors and
prior action by the Board of Directors is required by law, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of
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business on the day on which the Board of Directors adopts the resolution
taking such prior action.
(c) In order that the corporation may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose
of any other lawful action, the Board of Directors may fix, in advance, a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted, and which record date shall be
not more than sixty (60) days prior to such action. If no record date is
fixed, the record date for determining stockholders for any such purpose shall
be at the close of business on the day on which the Board of Directors adopts
the resolution relating thereto.
SECTION 38. REGISTERED STOCKHOLDERS. The corporation shall be
entitled to recognize the exclusive right of a person registered on its books
as the owner of shares to receive dividends, and to vote as such owner, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of Delaware.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 39. EXECUTION OF OTHER SECURITIES. All bonds, debentures
and other corporate securities of the corporation, other than stock
certificates (covered in Section 34), may be signed by the Chairman of the
Board of Directors, the President or any Vice President, or such other person
as may be authorized by the Board of Directors, and the corporate seal
impressed thereon or a facsimile of such seal imprinted thereon and attested by
the signature of the Secretary or an Assistant Secretary, or the Chief
Financial Officer or Treasurer or an Assistant Treasurer; provided, however,
that where any such bond, debenture or other corporate security shall be
authenticated by the manual signature, or where permissible facsimile
signature, of a trustee under an indenture pursuant to which such bond,
debenture or other corporate security shall be issued, the signatures of the
persons signing and attesting the corporate seal on such bond, debenture or
other corporate security may be the imprinted facsimile of the signatures of
such persons. Interest coupons appertaining to any such bond, debenture or
other corporate security, authenticated by a trustee as aforesaid, shall be
signed by the Treasurer or an Assistant Treasurer of the corporation or such
other person as may be authorized by the Board of Directors, or bear imprinted
thereon the facsimile signature of such person. In case any officer who shall
have signed or attested any bond, debenture or other corporate security, or
whose facsimile signature shall appear thereon or on any such interest
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coupon, shall have ceased to be such officer before the bond, debenture or
other corporate security so signed or attested shall have been delivered, such
bond, debenture or other corporate security nevertheless may be adopted by the
corporation and issued and delivered as though the person who signed the same
or whose facsimile signature shall have been used thereon had not ceased to be
such officer of the corporation.
ARTICLE IX
DIVIDENDS
SECTION 40. DECLARATION OF DIVIDENDS. Dividends upon the capital
stock of the corporation, subject to the provisions of the Certificate of
Incorporation, if any, may be declared by the Board of Directors pursuant to
law at any regular or special meeting. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of the
Certificate of Incorporation.
SECTION 41. DIVIDEND RESERVE. Before payment of any dividend,
there may be set aside out of any funds of the corporation available for
dividends such sum or sums as the Board of Directors from time to time, in
their absolute discretion, think proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the corporation, or for such other purpose as the Board of
Directors shall think conducive to the interests of the corporation, and the
Board of Directors may modify or abolish any such reserve in the manner in
which it was created.
ARTICLE X
FISCAL YEAR
SECTION 42. FISCAL YEAR. The fiscal year of the corporation
shall be fixed by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
SECTION 43. INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS,
OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS.
(a) DIRECTORS AND EXECUTIVE OFFICERS. The corporation
shall indemnify its directors and executive officers (for the purposes of this
Article XI, "executive officers shall have the meaning defined in Rule 3b-7
promulgated under the 1934 Act)] to the fullest extent not prohibited by the
Delaware General Corporation Law; provided, however, that the corporation may
modify the extent of such indemnification by
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individual contracts with its directors and executive officers; and, provided,
further, that the corporation shall not be required to indemnify any director
or executive officer in connection with any proceeding (or part thereof)
initiated by such person unless (i) such indemnification is expressly required
to be made by law, (ii) the proceeding was authorized by the Board of Directors
of the corporation, (iii) such indemnification is provided by the corporation,
in its sole discretion, pursuant to the powers vested in the corporation under
the Delaware General Corporation Law or (iv) such indemnification is required
to be made under subsection (d).
(b) OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS. The
corporation shall have power to indemnify its other officers, employees and
other agents as set forth in the Delaware General Corporation Law.
(c) EXPENSES. The corporation shall advance to any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was a director or executive officer, of the corporation, or is or was serving
at the request of the corporation as a director or executive officer of another
corporation, partnership, joint venture, trust or other enterprise, prior to
the final disposition of the proceeding, promptly following request therefor,
all expenses incurred by any director or executive officer in connection with
such proceeding upon receipt of an undertaking by or on behalf of such person
to repay said amounts if it should be determined ultimately that such person is
not entitled to be indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Bylaw, no advance shall be made by the corporation to an
executive officer of the corporation (except by reason of the fact that such
executive officer is or was a director of the corporation in which event this
paragraph shall not apply) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, if a determination is reasonably and
promptly made (i) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the proceeding, or (ii) if such
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, that
the facts known to the decision-making party at the time such determination is
made demonstrate clearly and convincingly that such person acted in bad faith
or in a manner that such person did not believe to be in or not opposed to the
best interests of the corporation.
(d) ENFORCEMENT. Without the necessity of entering into
an express contract, all rights to indemnification and advances to directors
and executive officers under this Bylaw shall be deemed to be contractual
rights and be effective to the same extent and as if provided for in a contract
between the corporation and the director or
21.
<PAGE> 26
executive officer. Any right to indemnification or advances granted by this
Bylaw to a director or executive officer shall be enforceable by or on behalf
of the person holding such right in any court of competent jurisdiction if (i)
the claim for indemnification or advances is denied, in whole or in part, or
(ii) no disposition of such claim is made within ninety (90) days of request
therefor. The claimant in such enforcement action, if successful in whole or
in part, shall be entitled to be paid also the expense of prosecuting his
claim. In connection with any claim for indemnification, the corporation shall
be entitled to raise as a defense to any such action that the claimant has not
met the standards of conduct that make it permissible under the Delaware
General Corporation Law for the corporation to indemnify the claimant for the
amount claimed. In connection with any claim by an executive officer of the
corporation (except in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such executive
officer is or was a director of the corporation) for advances, the corporation
shall be entitled to raise a defense as to any such action clear and convincing
evidence that such person acted in bad faith or in a manner that such person
did not believe to be in or not opposed to the best interests of the
corporation, or with respect to any criminal action or proceeding that such
person acted without reasonable cause to believe that his conduct was lawful.
Neither the failure of the corporation (including its Board of Directors,
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant
is proper in the circumstances because he has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the corporation (including its Board of Directors, independent
legal counsel or its stockholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that claimant has not met the applicable standard of conduct.
Following the Qualifying Record Date, in any suit brought by a director or
executive officer to enforce a right to indemnification or to an advancement of
expenses hereunder, the burden of proving that the director or executive
officer is not entitled to be indemnified, or to such advancement of expenses,
under this Article XI or otherwise shall be on the corporation.
(e) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on
any person by this Bylaw shall not be exclusive of any other right which such
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, Bylaws, 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 office. The
corporation is specifically authorized to enter into individual contracts with
any or all of its directors, officers, employees or agents respecting
indemnification and advances, to the fullest extent not prohibited by the
Delaware General Corporation Law.
(f) SURVIVAL OF RIGHTS. The rights conferred on any
person by this Bylaw shall continue as to a person who has ceased to be a
director, officer, employee or
22.
<PAGE> 27
other agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(g) INSURANCE. To the fullest extent permitted by the
Delaware General Corporation Law, the corporation, upon approval by the Board
of Directors, may purchase insurance on behalf of any person required or
permitted to be indemnified pursuant to this Bylaw.
(h) AMENDMENTS. Any repeal or modification of this Bylaw
shall only be prospective and shall not affect the rights under this Bylaw in
effect at the time of the alleged occurrence of any action or omission to act
that is the cause of any proceeding against any agent of the corporation.
(i) SAVING CLAUSE. If this Bylaw or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the corporation shall nevertheless indemnify each director and officer to the
full extent not prohibited by any applicable portion of this Bylaw that shall
not have been invalidated, or by any other applicable law.
(j) CERTAIN DEFINITIONS. For the purposes of this Bylaw,
the following definitions shall apply:
(1) The term "proceeding" shall be broadly
construed and shall include, without limitation, the investigation,
preparation, prosecution, defense, settlement, arbitration and appeal of, and
the giving of testimony in, any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative.
(2) The term "expenses" shall be broadly
construed and shall include, without limitation, court costs, attorneys' fees,
witness fees, fines, amounts paid in settlement or judgment and any other costs
and expenses of any nature or kind incurred in connection with any proceeding.
(3) The term the "corporation" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Bylaw with respect to the resulting or
surviving corporation as he
23.
<PAGE> 28
would have with respect to such constituent corporation if its separate
existence had continued.
(4) References to a "director," "officer,"
"officer," "employee," or "agent" of the corporation shall include, without
limitation, situations where such person is serving at the request of the
corporation as, respectively, a director, officer, officer, employee, trustee
or agent of another corporation, partnership, joint venture, trust or other
enterprise.
(5) References to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee,
or agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this Bylaw.
ARTICLE XII
NOTICES
SECTION 44. NOTICES.
(a) NOTICE TO STOCKHOLDERS. Whenever, under any
provisions of these Bylaws, notice is required to be given to any stockholder,
it shall be given in writing, timely and duly deposited in the United States
mail, postage prepaid, and addressed to his last known post office address as
shown by the stock record of the corporation or its transfer agent.
(b) NOTICE TO DIRECTORS. Any notice required to be given
to any director may be given by the method stated in subsection (a), or by
facsimile, telex or telegram, except that such notice other than one which is
delivered personally shall be sent to such address as such director shall have
filed in writing with the Secretary, or, in the absence of such filing, to the
last known post office address of such director.
(c) AFFIDAVIT OF MAILING. An affidavit of mailing,
executed by a duly authorized and competent employee of the corporation or its
transfer agent appointed with respect to the class of stock affected,
specifying the name and address or the names and addresses of the stockholder
or stockholders, or director or directors, to whom any such
24.
<PAGE> 29
notice or notices was or were given, and the time and method of giving the
same, shall in the absence of fraud, be prima facie evidence of the facts
therein contained.
(d) TIME NOTICES DEEMED GIVEN. All notices given by
mail, as above provided, shall be deemed to have been given as at the time of
mailing, and all notices given by facsimile, telex or telegram shall be deemed
to have been given as of the sending time recorded at time of transmission.
(e) METHODS OF NOTICE. It shall not be necessary that
the same method of giving notice be employed in respect of all directors, but
one permissible method may be employed in respect of any one or more, and any
other permissible method or methods may be employed in respect of any other or
others.
(f) FAILURE TO RECEIVE NOTICE. The period or limitation
of time within which any stockholder may exercise any option or right, or enjoy
any privilege or benefit, or be required to act, or within which any director
may exercise any power or right, or enjoy any privilege, pursuant to any notice
sent him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
(g) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL.
Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is unlawful, the giving of such notice to such person shall
not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to such person.
Any action or meeting which shall be taken or held without notice to any such
person with whom communication is unlawful shall have the same force and effect
as if such notice had been duly given. In the event that the action taken by
the corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate shall state,
if such is the fact and if notice is required, that notice was given to all
persons entitled to receive notice except such persons with whom communication
is unlawful.
(h) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS.
Whenever notice is required to be given, under any provision of law or the
Certificate of Incorporation or Bylaws of the corporation, to any stockholder
to whom (i) notice of two consecutive annual meetings, and all notices of
meetings or of the taking of action by written consent without a meeting to
such person during the period between such two consecutive annual meetings, or
(ii) all, and at least two, payments (if sent by first class mail) of dividends
or interest on securities during a twelve-month period, have been mailed
addressed to such person at his address as shown on the records of the
corporation and have been returned undeliverable, the giving of such notice to
such person shall not be required. Any action
25.
<PAGE> 30
or meeting which shall be taken or held without notice to such person shall
have the same force and effect as if such notice had been duly given. If any
such person shall deliver to the corporation a written notice setting forth his
then current address, the requirement that notice be given to such person shall
be reinstated. In the event that the action taken by the corporation is such
as to require the filing of a certificate under any provision of the Delaware
General Corporation Law, the certificate need not state that notice was not
given to persons to whom notice was not required to be given pursuant to this
paragraph.
ARTICLE XIII
AMENDMENTS
SECTION 45. AMENDMENTS. Subject to paragraph (h) of Section 43
of the Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by
the affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of
the voting power of all of the then-outstanding shares of the Voting Stock.
The Board of Directors shall also have the power to adopt, amend, or repeal
Bylaws.
ARTICLE XIV
LOANS TO OFFICERS
SECTION 46. LOANS TO OFFICERS. The corporation may lend money
to, or guarantee any obligation of, or otherwise assist any officer or other
employee of the corporation or of its subsidiaries, including any officer or
employee who is a Director of the corporation or its subsidiaries, whenever, in
the judgment of the Board of Directors, such loan, guarantee or assistance may
reasonably be expected to benefit the corporation. The loan, guarantee or
other assistance may be with or without interest and may be unsecured, or
secured in such manner as the Board of Directors shall approve, including,
without limitation, a pledge of shares of stock of the corporation. Nothing in
these Bylaws shall be deemed to deny, limit or restrict the powers of guaranty
or warranty of the corporation at common law or under any statute.
26.
<PAGE> 1
EXHIBIT 4.1
No. 2
THIS DEBENTURE AND THE SHARES OF COMMON STOCK INTO
WHICH IT IS CONVERTIBLE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE OFFERED OR SOLD UNLESS REGISTERED PURSUANT
TO THE PROVISIONS OF SUCH ACT OR UNLESS AN EXEMPTION
IS AVAILABLE UNDER THE PROVISIONS OF SUCH ACT.
SERIES A CONVERTIBLE SUBORDINATED DEBENTURE
OF
LASER POWER CORPORATION
Due November 2, 1992
$320,000.00 December 29, 1988
FOR VALUE RECEIVED, Laser Power Corporation, a California corporation
(the "Company"), hereby promises to pay to Union Mines, Inc. or registered
assigns ("the holder"), the principal amount of Three Hundred Twenty Thousand
Dollars ($320,000.00) on or before November 2, 1992 (the "Maturity Date"), in
such coin or currency of the United States of America as at the time of payment
is legal tender for the payment of public and private debts. The Company will
pay interest on the outstanding portion of such principal amount from the date
hereof in like coin or currency at the fluctuating rate per annum (computed on
the basis of a year of 365 or 366 days, as the case may be, for the actual
number of days elapsed) which is equal to the rate of interest announced
publicly by Wells Fargo Bank, N.A. in Los Angeles, California from time to time
as Well Fargo Bank, N.A.'s prime rate; provided, however, that the rate of
interest payable shall in no event be lower than 5-1/2% per annum or higher than
the lesser of 11-1/2% per annum or the maximum rate then permitted by law. The
principal amount of this Debenture shall be paid at 12777 High Bluff Drive, San
Diego, California. Interest on this Debenture shall be payable in arrears on
each May 2 and November 2 from the date of this Debenture to and including the
Maturity Date and shall be paid (without presentation hereof) by check to the
order of the registered holder hereof, mailed to such holder's address as it
appears upon the registry books of the Company
This Debenture is one of a duly authorized issue of Series A
Convertible Subordinated Debentures of the Company due November 2, 1992 (the
"Debentures") limited to the aggregate principal amount of $1,826,000.00, and
this Debenture is issued pursuant to the Securities Purchase Agreement dated
October 30, 1987 between the Company and Union Mines, Inc. (the "Purchase
Agreement").
<PAGE> 2
1. CONVERSION RIGHTS. The holder of this Debenture shall be entitled,
at its option, at any time from and after the date hereof up to and including
the Maturity Date (or if this Debenture shall have been called for redemption,
then on or before the date fixed for such redemption, or if the Company defaults
in making provision for the payment of the redemption price, beyond the date
fixed for redemption) to convert the principal of this Debenture, or any portion
thereof which is $10,000 or a multiple thereof in amount, into fully paid and
nonassessable shares of Common Stock of the Company at
the conversion price ("Conversion Price") set forth below, which conversion
right shall be exercisable upon and subject to the following terms and
conditions:
(a) Conversion Price. The Conversion Price applicable to any
conversion of this Debenture, or any portion thereof, shall be
dependent upon the circumstances causing such conversion and shall be
calculated as follows:
(i) Prior to the Maturity Date and if the Company
shall have elected to redeem the Debenture, then from and
after the date that the Company shall have given notice of
such redemption to the holder pursuant to Section 2(b) hereof
up to and including the date fixed for redemption by such
notice, the Conversion Price shall be $2.00 per share of
Common Stock.
(ii) Prior to the Maturity Date and except to the
extent determined by subparagraph (i) hereof, the Conversion
Price shall be $3.00 per share of Common Stock.
(iii) On the Maturity Date, the Conversion Price
shall be an amount not less than $2.00 nor more than $3.00 per
share of Common Stock which shall be calculated by reference
to the Cumulative Net Income of the Company since August 31,
1987. For the purposes of this Debenture, "Cumulative Net
Income"shall mean the sum of the audited consolidated net
income determined in accordance with generally accepted
accounting principles consistently applied for each completed
fiscal year of the Company commencing after August 31, 1987
and ending on August 31, 1992. If Cumulative Net Income shall
be $X or less, then the Conversion Price per share of Common
Stock will be $2.00. If Cumulative Net Income shall be greater
than $X, the Conversion Price per share of Common Stock shall
be:
$2.00 + Cumulative Net Income - $X
--------------------------
1,800,000
up to a ,maximum Conversion Price of $3.00 per share of Common
Stock. For purposes of the above calculations, X shall equal
7,800,000 for so long as the number of shares of the Company's
Common Stock outstanding, calculated on a fully-diluted basis,
shall be less than or equal to
<PAGE> 3
6,866,053. If the number of shares of the Company's Common
Stock outstanding, calculated on a fully-diluted basis, shall
be greater than 6,866,053, then X shall equal (7,800,000 + Y),
where Y is derived by the following formula:
Number of fully-diluted shares outstanding - 6,866,053 Y
- ------------------------------------------------------ = ---------
6,866,053 7,800,000
(b) In the event that any shares of Common Stock of the Company
issuable upon conversion of this Debenture have not been registered
under the Securities Act of 1933 , as amended, at the time of such
conversion, then (i) any exercise of the conversion right granted hereby
shall constitute a representation and warranty by the holder of this
Debenture that such holder is purchasing the shares to be issued upon
conversion for its own account, for investment and not with a view to
distribution, and (ii) all certificates representing shares of Common
Stock issued upon such conversion shall each bear the following legend:
"These securities have not been registered under the
Securities Act of 1933. By acceptance of delivery hereof the
holder hereof and any subsequent holder hereof has agreed and
agrees not to transfer these securities in violation of the
requirements of the Securities Act of 1933."
(c) The conversion right granted hereby shall be exercised by
the holder of this Debenture by surrendering the same at the principal
office of the Company at 12777 High Bluff Drive, San Diego, California
(or such other address as shall at the time be the principal office of
the Company) together with a written notice that such holder elects to
convert all or a portion of this Debenture (and specifying which
portion). As promptly as practicable after the surrender of this
Debenture and the receipt of such conversion notice, the Company shall
issue and deliver in accordance with such notice a certificate for the
shares of Common Stock into which such Debenture has been converted.
Such conversion shall be deemed to have been made at the close of
business on the day on which this Debenture shall have been surrendered
for conversion and such conversion notice shall have been delivered.
Upon conversion of only a portion of this Debenture, the holder hereof
shall be entitled to receive a new Debenture in aggregate principal
amount equal to the unconverted portion hereof.
(d) The Company shall at all times reserve and retain a
sufficient number of shares of its authorized and unissued Common Stock
to effect the conversion of all then outstanding Debentures.
<PAGE> 4
(e) (i) The number and kind of shares or other securities or
property into which this Debenture may be converted and the Conversion
Price hereunder shall be appropriately adjusted in the event of any
split or combination of the Company's Common Stock, any stock dividend,
any granting of rights to holders of its Common Stock to subscribe for
or purchase any securities of the Company or any other rights for less
than fair market value, any reclassification or change of such Common
Stock, any recapitalization or consolidation of the Company or
consolidation or merger of the Company into another corporation, or any
other event which might materially and adversely affect the conversion
rights of the holders of the Debentures. Any such adjustment shall be
determined by the Company's independent certified public accountants
and promptly thereafter notice of such adjustment together with an
opinion of such accountants setting forth such adjustment and a brief
statement of the facts requiring such adjustment shall be mailed to the
holder of this Debenture. The Conversion Price hereunder shall never be
adjusted upwards except by reason of a combination of the Company's
Common Stock.
(ii) The Company shall give written notice to the
holder of this Debenture of any event described in
subparagraph (i) of this paragraph (e), and of any
dissolution, liquidation, or winding up of the Company. Such
notice shall be mailed not less than twenty (20) days prior to
any date at which a record is to be taken of holders of the
Company's Common Stock in connection with such event or, in
the absence of such record date, the date as of which holders
of such Common Stock are expected to be entitled to receive or
exchange their Common Stock for securities or other property
deliverable in connection therewith. If by reason of
consolidation or merger of the Company, a corporation other
than the Company becomes an obligor upon the Debentures then
the holder hereof shall be entitled to receive in exchange for
this Debenture a new Debenture reflecting such fact.
(f) The conversion rights of the Debentures shall terminate on
the close of business on the date fixed for redemption thereof in
accordance with Section 2 below, unless the Company shall default in
providing for the payment of principal and accrued interest in
accordance therewith.
2. REDEMPTION. The Company may, at its option, redeem the outstanding
portion of the Debenture in whole (but not in part) at any time or from time to
time after the third anniversary of the date hereof. Any such redemption shall
be subject to and upon the following terms and conditions:
(a) The Company shall give notice of any redemption of the
Debenture not less than thirty (30) days prior to the date
<PAGE> 5
fixed for redemption to the holder hereof, specifying the date fixed
for redemption.
(b) On or before the date fixed for redemption in the notice
described in paragraph (a) above (unless the holder shall have
exercised its conversion rights pursuant to Section 1 hereof), the
Company shall tender to the holder against surrender of the Debenture
(i)(A) the principal amount owing on the Debenture, plus (B) all
interest thereon to the close of business on the date fixed for
redemption, plus (C) an amount equal to the interest which would accrue
on the principal amount owing on the Debenture from the date fixed for
redemption through the next succeeding November 2 calculated at the
rate of interest in effect hereunder on the day preceding the date
fixed for redemption, or (ii) in the event of the redemption of the
Debenture pursuant to the provisions of Section 12(a) of the Purchase
Agreement, (A) the principal amount owing on the Debenture, plus (B)
all interest thereon to the close of business on the date fixed for
redemption, plus (C) an amount equal to the interest which would accrue
during a period of 18 months on the principal amount owing on the
Debenture calculated at the rate of interest in effect hereunder on the
day preceding the date fixed for redemption.
(c) No interest shall accrue on the Debenture after the date
fixed for redemption in the notice described in subparagraph (a) above
unless the Company defaults in making provision for payment of the
redemption price set forth in paragraph (b) in accordance with the
terms hereof.
3. RESTRICTIONS ON TRANSFER. This Debenture shall not be transferred,
assigned or encumbered in any manner whatsoever by the holder, except under the
following conditions.
(a) This Debenture may be transferred or assigned in whole or
in part to any entity which directly or indirectly through one or more
intermediaries controls, is controlled by or is under common control
with Union Mines, Inc.; and
(b) This Debenture may be transferred or assigned to any other
transferee provided (i) the holder gives thirty (30) days advance
written notice to the Company, by certified or registered mail, of its
intent to transfer or assign the Debenture, and offers to sell the
Debenture to the Company at the same price and upon the same terms as
the Debenture is thereafter sold, and (ii) within forty-five (45) days
of the date such notice and offer are delivered to the Company, the
Company or its assignee shall not have accepted such offer in writing
by certified or registered mail; and
provided that in any case the Company may require that any other proposed
transferee or assignee deliver to the Company representation that such person is
acquiring the Debenture or any
<PAGE> 6
part thereof for investment and not with a view to distribution and an opinion
of counsel satisfactory to the Company to the effect that any such proposed
transfer or assignment is not in violation of applicable Federal or state
securities laws.
So long as the conditions set forth in this paragraph 3 have been met, the
Company shall, upon receipt of this Debenture duly endorsed for transfer,
reissue this Debenture to the transferees) or assignee(s) in denominations which
will reflect the respective interests of such transferees) or assignee(s).
4. SUBORDINATION. The indebtedness evidenced by this Debenture is and
shall be subordinated and inferior as to payments of principal, premium (if any)
and interest to any existing or future indebtedness in favor of Wells Fargo
Bank, N.A. or any bank or lender from whom the Company has borrowed or will
borrow monies. The holder agrees to enter into a subordination agreement or
agreements with such banks or lenders providing for subordination of the
Debenture on customary and reasonable terms.
5. LOSS, THEFT OR DESTRUCTION. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Debenture, as well as indemnification or security reasonably satisfactory
to it, together with reimbursement to it of all reasonable expenses incidental
thereto, and upon surrender and cancellation of the Debenture if mutilated, the
Company shall make and deliver a new Debenture of like tenor in lieu of this
Debenture.
6. COVENANTS OF THE COMPANY. The Company, so long as any of the
Debentures remain outstanding:
(a) shall take all action necessary to preserve and keep in
full force and effect its corporate existence;
(b) to the extent available at reasonable cost, shall insure
and keep insured to such extent and covering such risks as is usual for
companies engaged in the same or similar business;
(c) shall duly pay and discharge, or cause to be paid and
discharged, all taxes and other claims upon it and its properties which
might give rise to a lien upon any such properties, except such items
as are in good faith appropriately contested;
(d) shall maintain all of its plants, properties and equipment
in good working order;
(e) shall comply with all valid and applicable statutes, rules
and regulations the breach of which would :impair the ability of the
Company to perform its obligations under the terms of the Debenture;
<PAGE> 7
(f) shall, applying generally accepted accounting principles
in a manner consistent with prior periods:
(i) beginning on August 31, 1988, maintain its
tangible net worth (total shareholder's equity, less
non-recourse notes, any treasury stock and intangible assets)
at not less than U.S. $2,400,000.00 for so long as the number
of shares (par value $0.125) outstanding shall be no more than
4,712,231, such amount of tangible net worth to be increased
by one dollar for each share by which the number of
outstanding shares exceeds 4,712,231;
(ii) maintain the ratio of its total debt (including
all subordinated notes) to tangible net worth at no greater
than 2:1, calculated at the end of each fiscal year beginning
with the fiscal year ended August 31, 1988; and
(iii) maintain an average annual cash flow coverage
ratio (pre-tax profits plus depreciation and interest
expenses, divided by the current portion of long term debt
plus one fifth of the principal and interest owing on the
Debentures and all other interest expenses) at not less than
1:1, calculated at the end of each fiscal year beginning with
the fiscal year September 1, 1987 to August 31, 1988; and
(g) shall not declare or pay any cash dividends unless and
until its cash flow coverage ratio (as defined above) has been no less
than 2:1 for the most recently completed fiscal year at the time of
such declaration, and shall not in any event distribute greater than
one quarter of the net cash flow so generated.
7. EVENTS OF DEFAULT. In case one or more of the following events shall
occur and be continuing:
(a) default shall be made in the payment of interest on this
Debenture when and as the same shall become due and payable and such
default shall continue for a period of sixty (60) days; or
(b) default shall be made in the payment of the principal of
this Debenture when the same shall become due and payable either at
maturity, upon redemption, by acceleration, or otherwise; or
(c) default shall be made under any indebtedness of the
Company now existing or created hereafter which shall result in such
indebtedness becoming or being declared due and payable prior to the
date on which it would otherwise become
<PAGE> 8
due and payable and such acceleration shall not be rescinded or
annulled within thirty (30) days; or
(d) failure by the Company to observe or perform any of its
covenants or agreements contained in this Debenture and such failure
shall be continued unremedied for a period of sixty (60) days (or, in
the case of the covenant contained in Section 6(d), failure to commence
to remedy any such failure within sixty (60) days and to diligently
prosecute such remedy to completion) after the Company's receipt of
notice from any Debentureholder requiring the Company to remedy same;
or
(e) the entry of a decree or order by a court adjudging the
Company a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization of the Company under the United States
Bankruptcy Code or any other similar applicable Federal or State law
and such decree or order shall have continued undischarged. or unstayed
for a period of sixty (60) days; or the entry of a decree or order for
the appointment of a receiver or liquidator or trustee or assignee in
bankruptcy or insolvency of the Company or property of the Company, or
for the winding up or liquidation of the affairs of the Company and
such decree or order shall have continued undischarged or unstayed for
a period of sixty (60) days; or
(f) the Company shall institute proceedings to be adjudicated
a voluntary bankrupt, or shall consent to the filing of a bankruptcy
proceeding against it, or shall file a petition or answer or consent
seeking reorganization under the United States Bankruptcy Code or any
other similar applicable Federal or State law, or shall consent to the
filing of any such petition, or shall consent to the appointment of a
receiver or liquidator or trustee or assignee in bankruptcy or
insolvency of it or of its property, or shall make an assignment for
the benefit of creditors, or shall admit in writing its inability to
pay its debts generally as they become due; or
(g) default of any of the Company's obligations under the
provisions of Section 4(h) of the Purchase Agreement and failure to
cure such default within sixty (60) days of the Company's acceptance of
notice from any Debentureholder requiring the Company to remedy such
default;
then the holder of the Debenture (unless all defaults shall theretofore have
been remedied) at its option by written notice to the Company can, at its sole
option, either (i) declare all the Debentures to be due and payable, whereupon
the same shall forthwith mature and become due and payable together with
interest accrued thereon and the holder's costs and expenses of collection
(including reasonable attorneys' fees), without presentment, demand, protest or
notice, all of which are hereby waived, or (ii) convert the Debenture to Common
Stock of the Company at a Conversion Price of $2.00 per share.
<PAGE> 9
8. WAIVER. No delay on the part of the holder hereof in exercising his
rights hereunder shall operate as a waiver of subsequent or successive events of
default.
9. COMMUNICATIONS AND NOTICES. All notices or communications required
or permitted to be given hereunder shall be given by registered or certified
mail to the holder at his address last furnished to the Company and to the
Company at 12777 High Bluff Drive, San Diego, California 92130, unless notice of
change of address is given by the Company to the holder at his last known
address.
10. LAW GOVERNING. This Debenture shall be construed in accordance with
and governed by the laws of the State of California.
11. SUCCESSORS AND ASSIGNS. All the covenants, stipulations, promises
and agreements in this Debenture shall bind and inure to the benefit of the
holder and the maker and their respective heirs, legal representatives,
successors and assigns.
12. WARRANTY. The Company hereby warrants the validity of this
Debenture upon due execution of this instrument by the Chief Executive Officer
and Chairman of the Board and attestation by the Secretary of the Company, and
the Company further represents and warrants that it is authorized to incur and
create this obligation.
IN WITNESS WHEREOF, Laser Power Corporation has caused this Debenture
to be executed in its corporate name by its officers duly authorized and to be
dated as of the day and year first above written.
LASER POWER CORPORATION
By /s/ GLENN H. SHERMAN
----------------------------------------
Chief Executive Officer and Chairman of the
Board of Directors
ATTEST:
/s/ Illegible
- ---------------------------
Secretary
<PAGE> 1
No. 3 Exhibit 4.2
THIS DEBENTURE AND THE SHARES OF COMMON STOCK INTO
WHICH IT IS CONVERTIBLE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE OFFERED OR SOLD UNLESS REGISTERED PURSUANT
TO THE PROVISIONS OF SUCH ACT OR UNLESS AN EXEMPTION
IS AVAILABLE UNDER THE PROVISIONS OF SUCH ACT.
SERIES A CONVERTIBLE SUBORDINATED DEBENTURE
OF
LASER POWER CORPORATION
Due November 2, 1992
$1,340, 000.00 June 18, 1990
FOR VALUE RECEIVED, Laser Power Corporation, a California corporation
(the "Company"), hereby promises to pay to Union Mines, Inc. or registered
assigns ("the holder"), the principal amount of One Million Three Hundred Forty
Thousand Dollars ($1,340,000.00) on or before November 2, 1992 (the "Maturity
Date"), in such coin or currency of the United States of America as at the time
of payment is legal tender for the payment of public and private debts. The
Company will pay interest on the outstanding portion of such principal amount
from the date hereof in like coin or currency at the fluctuating rate per annum
(computed on the basis of a year of 365 or 366 days, as the case may be, for the
actual number of days elapsed) which is equal to the rate of interest announced
publicly by Wells Fargo Bank, N.A. in Los Angeles, California from time to time
as Well Fargo Bank, N.A.'s prime rate; provided, however, that the rate of
interest payable shall in no event be lower than 5-1/2% per annum or higher than
the lesser of 11-1/2% per annum or the maximum rate then permitted by law. The
principal amount of this Debenture shall be paid at 12777 High Bluff Drive, San
Diego, California. Interest on this Debenture shall be payable in arrears on
each May 2 and November 2 from the date of this Debenture to and including the
Maturity Date and shall be paid (without presentation hereof) by check to the
order of the registered holder hereof, mailed to such holder's address as it
appears upon the registry books of the Company.
<PAGE> 2
This Debenture is one of a duly authorized issue of Series A
Convertible Subordinated Debentures of the Company due November 2, 1992 (the
"Debentures") limited to the aggregate principal amount of $1,826,000.00, and
this Debenture is issued pursuant to the Securities Purchase Agreement dated
October 30, 1987 between the Company and Union Mines, Inc. (the "Purchase
Agreement").
1. CONVERSION RIGHTS. The holder of this Debenture shall be entitled,
at its option, at any time from and after the date hereof up to and including
the Maturity Date (or if this Debenture shall have been called for redemption,
then on or before the date fixed for such redemption, or if the Company defaults
in making provision for the payment of the redemption price, beyond the date
fixed for redemption) to convert the principal of this Debenture, or any portion
thereof which is $10,000 or a multiple thereof in amount, into fully paid and
nonassessable shares of Common Stock of the Company at the conversion price
("Conversion Price") set forth below, which conversion right shall be
exercisable upon and subject to the following terms and conditions:
(a) Conversion Price. The Conversion Price applicable to any
conversion of this Debenture, or any portion thereof, shall be
dependent upon the circumstances causing such conversion and shall be
calculated as follows:
(i) Prior to the Maturity Date and if the Company
shall have elected to redeem the Debenture, then from and
after the date that the Company shall have given notice of
such redemption to the holder pursuant to Section 2(b) hereof
up to and including the date fixed for redemption by such
notice, the Conversion Price shall be $2.00 per share of
Common Stock.
(ii) Prior to the Maturity Date and except to the
extent determined by subparagraph (i) hereof, the Conversion
Price shall be $3.00 per share of Common Stock.
(iii) On the Maturity Date, the Conversion Price
shall be an amount not less than $2.00 nor more than $3.00 per
share of Common Stock which shall be calculated by reference
to the Cumulative Net Income of the Company since August 31,
1987. For the purposes of this Debenture, "Cumulative Net
Income"
<PAGE> 3
shall mean the sum of the audited consolidated net
income determined in accordance with generally accepted
accounting principles consistently applied for each completed
fiscal year of the Company commencing after August 31, 1987
and ending on August 31, 1992. If Cumulative Net Income shall
be $X or less, then the Conversion Price per share of Common
Stock will be $2.00. If Cumulative Net Income shall be greater
than $X, the Conversion Price per share of Common Stock shall
be:
$2.00 + Cumulative Net Income - $X
--------------------------
1,800,000
up to a ,maximum Conversion Price of $3.00 per share of Common
Stock. For purposes of the above calculations, X shall equal
7,800,000 for so long as the number of shares of the Company's
Common Stock outstanding, calculated on a fully-diluted basis,
shall be less than or equal to 6,866,053. If the number of
shares of the Company's Common Stock outstanding, calculated
on a fully-diluted basis, shall be greater than 6,866,053,
then X shall equal (7,800,000 + Y), where Y is derived by the
following formula:
Number of fully-diluted shares outstanding - 6,866,053 Y
- ------------------------------------------------------ = ---------
6,866,053 7,800,000
(b) In the event that any shares of Common Stock of the Company
issuable upon conversion of this Debenture have not been registered
under the Securities Act of 1933 , as amended, at the time of such
conversion, then (i) any exercise of the conversion right granted hereby
shall constitute a representation and warranty by the holder of this
Debenture that such holder is purchasing the shares to be issued upon
conversion for its own account, for investment and not with a view to
distribution, and (ii) all certificates representing shares of Common
Stock issued upon such conversion shall each bear the following legend:
"These securities have not been registered under the
Securities Act of 1933. By acceptance of delivery hereof the
holder hereof and any subsequent holder hereof has agreed and
agrees not to transfer these securities in violation of the
requirements of the Securities Act of 1933."
<PAGE> 4
(c) The conversion right granted hereby shall be exercised by
the holder of this Debenture by surrendering the same at the principal
office of the Company at 12777 High Bluff Drive, San Diego, California
(or such other address as shall at the time be the principal office of
the Company) together with a written notice that such holder elects to
convert all or a portion of this Debenture (and specifying which
portion). As promptly as practicable after the surrender of this
Debenture and the receipt of such conversion notice, the Company shall
issue and deliver in accordance with such notice a certificate for the
shares of Common Stock into which such Debenture has been converted.
Such conversion shall be deemed to have been made at the close of
business on the day on which this Debenture shall have been surrendered
for conversion and such conversion notice shall have been delivered.
Upon conversion of only a portion of this Debenture, the holder hereof
shall be entitled to receive a new Debenture in aggregate principal
amount equal to the unconverted portion hereof.
(d) The Company shall at all times reserve and retain a
sufficient number of shares of its authorized and unissued Common Stock
to effect the conversion of all then outstanding Debentures.
(e) (i) The number and kind of shares or other securities or
property into which this Debenture may be converted and the Conversion
Price hereunder shall be appropriately adjusted in the event of any
split or combination of the Company's Common Stock, any stock dividend,
any granting of rights to holders of its Common Stock to subscribe for
or purchase any securities of the Company or any other rights for less
than fair market value, any reclassification or change of such Common
Stock, any recapitalization or consolidation of the Company or
consolidation or merger of the Company into another corporation, or any
other event which might materially and adversely affect the conversion
rights of the holders of the Debentures. Any such adjustment shall be
determined by the Company's independent certified public accountants
and promptly thereafter notice of such adjustment together with an
opinion of such accountants setting forth such adjustment and a brief
statement of the facts requiring such adjustment shall be mailed to the
holder of this Debenture. The Conversion Price
<PAGE> 5
hereunder shall never be adjusted upwards except by reason of a
combination of the Company's Common Stock.
(ii) The Company shall give written notice to the
holder of this Debenture of any event described in
subparagraph (i) of this paragraph (e), and of any
dissolution, liquidation, or winding up of the Company. Such
notice shall be mailed not less than twenty (20) days prior to
any date at which a record is to be taken of holders of the
Company's Common Stock in connection with such event or, in
the absence of such record date, the date as of which holders
of such Common Stock are expected to be entitled to receive or
exchange their Common Stock for securities or other property
deliverable in connection therewith. If by reason of
consolidation or merger of the Company, a corporation other
than the Company becomes an obligor upon the Debentures then
the holder hereof shall be entitled to receive in exchange for
this Debenture a new Debenture reflecting such fact.
22
(f) The conversion rights of the Debentures shall terminate on
the close of business on the date fixed for redemption thereof in
accordance with Section 2 below, unless the Company shall default in
providing for the payment of principal and accrued interest in
accordance therewith.
2. REDEMPTION. The Company may, at its option, redeem the outstanding
portion of the Debenture in whole (but not in part) at any time or from time to
time after the third anniversary of the date hereof. Any such redemption shall
be subject to and upon the following terms and conditions:
(a) The Company shall give notice of any redemption of the
Debenture not less than thirty (30) days prior to the date fixed for
redemption to the holder hereof, specifying the date fixed for
redemption.
(b) On or before the date fixed for redemption in the notice
described in paragraph (a) above (unless the holder shall have
exercised its conversion rights pursuant to Section 1 hereof), the
Company shall tender to the holder against surrender of the Debenture
(i)(A) the principal amount owing on the Debenture, plus (B) all
interest thereon to the close of business on the
<PAGE> 6
date fixed for redemption, plus (C) an amount equal to the interest
which would accrue on the principal amount owing on the Debenture from
the date fixed for redemption through the next succeeding November 2
calculated at the rate of interest in effect hereunder on the day
preceding the date fixed for redemption, or (ii) in the event of the
redemption of the Debenture pursuant to the provisions of Section 12(a)
of the Purchase Agreement, (A) the principal amount owing on the
Debenture, plus (B) all interest thereon to the close of business on
the date fixed for redemption, plus (C) an amount equal to the interest
which would accrue during a period of 18 months on the principal amount
owing on the Debenture calculated at the rate of interest in effect
hereunder on the day preceding the date fixed for redemption.
(c) No interest shall accrue on the Debenture after the date
fixed for redemption in the notice described in subparagraph (a) above
unless the Company defaults in making provision for payment of the
redemption price set forth in paragraph (b) in accordance with the
terms hereof.
3. RESTRICTIONS ON TRANSFER. This Debenture shall not be transferred,
assigned or encumbered in any manner whatsoever by the holder, except under the
following conditions.
(a) This Debenture may be transferred or assigned in whole or
in part to any entity which directly or indirectly through one or more
intermediaries controls, is controlled by or is under common control
with Union Mines, Inc.; and
(b) This Debenture may be transferred or assigned to any other
transferee provided (i) the holder gives thirty (30) days advance
written notice to the Company, by certified or registered mail, of its
intent to transfer or assign the Debenture, and offers to sell the
Debenture to the Company at the same price and upon the same terms as
the Debenture is thereafter sold, and (ii) within forty-five (45) days
of the date such notice and offer are delivered to the Company, the
Company or its assignee shall not have accepted such offer in writing
by certified or registered mail; and
provided that in any case the Company may require that any other proposed
transferee or assignee deliver to the Company
<PAGE> 7
a representation that such person is acquiring the Debenture or any part thereof
for investment and not with a view to distribution and an opinion of counsel
satisfactory to the Company to the effect that any such proposed transfer or
assignment is not in violation of applicable Federal or state securities laws.
So long as the conditions set forth in this paragraph 3 have been met, the
Company shall, upon receipt of this Debenture duly endorsed for transfer,
reissue this Debenture to the transferees) or assignee(s) in denominations which
will reflect the respective interests of such transferees) or assignee(s).
4. SUBORDINATION. The indebtedness evidenced by this Debenture is and
shall be subordinated and inferior as to payments of principal, premium (if any)
and interest to any existing or future indebtedness in favor of Wells Fargo
Bank, N.A. or any bank or lender from whom the Company has borrowed or will
borrow monies. The holder agrees to enter into a subordination agreement or
agreements with such banks or lenders providing for subordination of the
Debenture on customary and reasonable terms.
5. LOSS, THEFT OR DESTRUCTION. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Debenture, as well as indemnification or security reasonably satisfactory
to it, together with reimbursement to it of all reasonable expenses incidental
thereto, and upon surrender and cancellation of the Debenture if mutilated, the
Company shall make and deliver a new Debenture of like tenor in lieu of this
Debenture.
6. COVENANTS OF THE COMPANY. The Company, so long as any of the
Debentures remain outstanding:
(a) shall take all action necessary to preserve and keep in
full force and effect its corporate existence;
(b) to the extent available at reasonable cost, shall insure
and keep insured to such extent and covering such risks as is usual for
companies engaged in the same or similar business;
(c) shall duly pay and discharge, or cause to be paid and
discharged, all taxes and other claims upon it and its properties which
might give rise to a lien upon
<PAGE> 8
any such properties, except such items
as are in good faith appropriately contested;
(d) shall maintain all of its plants, properties and equipment
in good working order;
(e) shall comply with all valid and applicable statutes, rules
and regulations the breach of which would :impair the ability of the
Company to perform its obligations under the terms of the Debenture;
(f) shall, applying generally accepted accounting principles
in a manner consistent with prior periods:
(i) beginning on August 31, 1988, maintain its
tangible net worth (total shareholder's equity, less
non-recourse notes, any treasury stock and intangible assets)
at not less than U.S. $2,400,000.00 for so long as the number
of shares (par value $0.125) outstanding shall be no more than
4,712,231, such amount of tangible net worth to be increased
by one dollar for each share by which the number of
outstanding shares exceeds 4,712,231;
(ii) maintain the ratio of its total debt (including
all subordinated notes) to tangible net worth at no greater
than 2:1, calculated at the end of each fiscal year beginning
with the fiscal year ended August 31, 1988; and
(iii) maintain an average annual cash flow coverage
ratio (pre-tax profits plus depreciation and interest
expenses, divided by the current portion of long term debt
plus one fifth of the principal and interest owing on the
Debentures and all other interest expenses) at not less than
1:1, calculated at the end of each fiscal year beginning with
the fiscal year September 1, 1987 to August 31, 1988; and
(g) shall not declare or pay any cash dividends unless and
until its cash flow coverage ratio (as defined above) has been no less
than 2:1 for the most recently completed fiscal year at the time of
such declaration, and shall not in any event distribute greater than
one quarter of the net cash flow so generated.
<PAGE> 9
7. EVENTS OF DEFAULT. In case one or more of the following events shall
occur and be continuing:
(a) default shall be made in the payment of interest on this
Debenture when and as the same shall become due and payable and such
default shall continue for a period of sixty (60) days; or
(b) default shall be made in the payment of the principal of
this Debenture when the same shall become due and payable either at
maturity, upon redemption, by acceleration, or otherwise; or
(c) default shall be made under any indebtedness of the
Company now existing or created hereafter which shall result in such
indebtedness becoming or being declared due and payable prior to the
date on which it would otherwise become due and payable and such
acceleration shall not be rescinded or annulled within thirty (30)
days; or
(d) failure by the Company to observe or perform any of its
covenants or agreements contained in this Debenture and such failure
shall be continued unremedied for a period of sixty (60) days (or, in
the case of the covenant contained in Section 6(d), failure to commence
to remedy any such failure within sixty (60) days and to diligently
prosecute such remedy to completion) after the Company's receipt of
notice from any Debentureholder requiring the Company to remedy same;
or
(e) the entry of a decree or order by a court adjudging the
Company a bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization of the Company under the United States
Bankruptcy Code or any other similar applicable Federal or State law
and such decree or order shall have continued undischarged. or unstayed
for a period of sixty (60) days; or the entry of a decree or order for
the appointment of a receiver or liquidator or trustee or assignee in
bankruptcy or insolvency of the Company or property of the Company, or
for the winding up or liquidation of the affairs of the Company and
such decree or order shall have continued undischarged or unstayed for
a period of sixty (60) days; or
(f) the Company shall institute proceedings to be adjudicated
a voluntary bankrupt, or shall consent to the filing of a bankruptcy
proceeding against it, or shall
<PAGE> 10
file a petition or answer or consent seeking reorganization under the
United States Bankruptcy Code or any other similar applicable Federal
or State law, or shall consent to the filing of any such petition, or
shall consent to the appointment of a receiver or liquidator or trustee
or assignee in bankruptcy or insolvency of it or of its property, or
shall make an assignment for the benefit of creditors, or shall admit
in writing its inability to pay its debts generally as they become due;
or
(g) default of any of the Company's obligations under the
provisions of Section 4(h) of the Purchase Agreement and failure to
cure such default within sixty (60) days of the Company's acceptance of
notice from any Debentureholder requiring the Company to remedy such
default;
then the holder of the Debenture (unless all defaults shall theretofore have
been remedied) at its option by written notice to the Company can, at its sole
option, either (i) declare all the Debentures to be due and payable, whereupon
the same shall forthwith mature and become due and payable together with
interest accrued thereon and the holder's costs and expenses of collection
(including reasonable attorneys' fees), without presentment, demand, protest or
notice, all of which are hereby waived, or (ii) convert the Debenture to Common
Stock of the Company at a Conversion Price of $2.00 per share.
8. WAIVER. No delay on the part of the holder hereof in exercising his
rights hereunder shall operate as a waiver of subsequent or successive events of
default.
9. COMMUNICATIONS AND NOTICES. All notices or communications required
or permitted to be given hereunder shall be given by registered or certified
mail to the holder at his address last furnished to the Company and to the
Company at 12777 High Bluff Drive, San Diego, California 92130, unless notice of
change of address is given by the Company to the holder at his last known
address.
10. LAW GOVERNING. This Debenture shall be construed in accordance with
and governed by the laws of the State of California.
<PAGE> 11
11. SUCCESSORS AND ASSIGNS. All the covenants, stipulations, promises
and agreements in this Debenture shall bind and inure to the benefit of the
holder and the maker and their respective heirs, legal representatives,
successors and assigns.
12. WARRANTY. The Company hereby warrants the validity of this
Debenture upon due execution of this instrument by the Chief Executive Officer
and Chairman of the Board and attestation by the Secretary of the Company, and
the Company further represents and warrants that it is authorized to incur and
create this obligation.
IN WITNESS WHEREOF, Laser Power Corporation has caused this Debenture
to be executed in its corporate name by its officers duly authorized and to be
dated as of the day and year first above written.
LASER POWER CORPORATION
By /s/ GLENN H. SHERMAN
---------------------------------------
Chief Executive Officer and Chairman of the
Board of Directors
ATTEST:
/s/ JO DEE BECK
- ------------------------
Assistant Secretary
<PAGE> 1
EXHIBIT 10.1
INDEMNITY AGREEMENT
THIS AGREEMENT is made and entered into this ____ day of
______________, 1997 by and between LASER POWER CORPORATION, a Delaware
corporation (the "Corporation"), and _______________________________________
("Agent").
RECITALS
WHEREAS, Agent performs a valuable service to the Corporation in his
capacity as _______________ of the Corporation;
WHEREAS, the stockholders of the Corporation have adopted bylaws (the
"Bylaws") providing for the indemnification of the directors, officers,
employees and other agents of the Corporation, including persons serving at the
request of the Corporation in such capacities with other corporations or
enterprises, as authorized by the Delaware General Corporation Law, as amended
(the "Code");
WHEREAS, the Bylaws and the Code, by their non-exclusive nature,
permit contracts between the Corporation and its agents, officers, employees
and other agents with respect to indemnification of such persons; and
WHEREAS, in order to induce Agent to continue to serve as _________ of
the Corporation, the Corporation has determined and agreed to enter into this
Agreement with Agent;
NOW, THEREFORE, in consideration of Agent's continued service as
_________ after the date hereof, the parties hereto agree as follows:
AGREEMENT
1. SERVICES TO THE CORPORATION. Agent will serve, at the will of
the Corporation or under separate contract, if any such contract exists, as
_______________ of the Corporation or as a director, officer or other fiduciary
of an affiliate of the Corporation (including any employee benefit plan of the
Corporation) faithfully and to the best of his ability so long as he is duly
elected and qualified in accordance with the provisions of the Bylaws or other
applicable charter documents of the Corporation or such affiliate; provided,
however, that Agent may at any time and for any reason resign from such
position (subject to any contractual obligation that Agent may have assumed
apart from this Agreement) and that the Corporation or any affiliate shall have
no obligation under this Agreement to continue Agent in any such position.
1.
<PAGE> 2
2. INDEMNITY OF AGENT. The Corporation hereby agrees to hold
harmless and indemnify Agent to the fullest extent authorized or permitted by
the provisions of the Bylaws and the Code, as the same may be amended from time
to time (but, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than the Bylaws or the Code permitted
prior to adoption of such amendment).
3. ADDITIONAL INDEMNITY. In addition to and not in limitation of
the indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further agrees
to hold harmless and indemnify Agent:
(a) against any and all expenses (including attorneys'
fees), witness fees, damages, judgments, fines and amounts paid in settlement
and any other amounts that Agent becomes legally obligated to pay because of
any claim or claims made against or by him in connection with any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
arbitrational, administrative or investigative (including an action by or in
the right of the Corporation) to which Agent is, was or at any time becomes a
party, or is threatened to be made a party, by reason of the fact that Agent
is, was or at any time becomes a director, officer, employee or other agent of
Corporation, or is or was serving or at any time serves at the request of the
Corporation as a director, officer, employee or other agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise; and
(b) otherwise to the fullest extent as may be provided to
Agent by the Corporation under the non-exclusivity provisions of the Code and
Section 43 of the Bylaws.
4. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to
Section 3 hereof shall be paid by the Corporation:
(a) on account of any claim against Agent for an
accounting of profits made from the purchase or sale by Agent of securities of
the Corporation pursuant to the provisions of Section 16(b) of the Securities
Exchange Act of 1934 and amendments thereto or similar provisions of any
federal, state or local statutory law;
(b) on account of Agent's conduct that was knowingly
fraudulent or deliberately dishonest or that constituted willful misconduct;
(c) on account of Agent's conduct that constituted a
breach of Agent's duty of loyalty to the Corporation or resulted in any
personal profit or advantage to which Agent was not legally entitled;
2.
<PAGE> 3
(d) for which payment is actually made to Agent under a
valid and collectible insurance policy or under a valid and enforceable
indemnity clause, bylaw or agreement, except in respect of any excess beyond
payment under such insurance, clause, bylaw or agreement;
(e) if indemnification is not lawful (and, in this
respect, both the Corporation and Agent have been advised that the Securities
and Exchange Commission believes that indemnification for liabilities arising
under the federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); or
(f) in connection with any proceeding (or part thereof)
initiated by Agent, or any proceeding by Agent against the Corporation or its
directors, officers, employees or other agents, unless (i) such indemnification
is expressly required to be made by law, (ii) the proceeding was authorized by
the Board of Directors of the Corporation, (iii) such indemnification is
provided by the Corporation, in its sole discretion, pursuant to the powers
vested in the Corporation under the Code, or (iv) the proceeding is initiated
pursuant to Section 9 hereof.
5. CONTINUATION OF INDEMNITY. All agreements and obligations of
the Corporation contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Corporation (or is or was
serving at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as
Agent shall be subject to any possible claim or threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Agent was serving
in the capacity referred to herein.
6. PARTIAL INDEMNIFICATION. Agent shall be entitled under this
Agreement to indemnification by the Corporation for a portion of the expenses
(including attorneys' fees), witness fees, damages, judgments, fines and
amounts paid in settlement and any other amounts that Agent becomes legally
obligated to pay in connection with any action, suit or proceeding referred to
in Section 3 hereof even if not entitled hereunder to indemnification for the
total amount thereof, and the Corporation shall indemnify Agent for the portion
thereof to which Agent is entitled.
7. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30)
days after receipt by Agent of notice of the commencement of any action, suit
or proceeding, Agent will, if a claim in respect thereof is to be made against
the Corporation under this Agreement, notify the Corporation of the
commencement thereof; but the omission so to notify the Corporation will not
relieve it from any liability which it may have to Agent
3.
<PAGE> 4
otherwise than under this Agreement. With respect to any such action, suit or
proceeding as to which Agent notifies the Corporation of the commencement
thereof:
(a) the Corporation will be entitled to participate
therein at its own expense;
(b) except as otherwise provided below, the Corporation
may, at its option and jointly with any other indemnifying party similarly
notified and electing to assume such defense, assume the defense thereof, with
counsel reasonably satisfactory to Agent. After notice from the Corporation to
Agent of its election to assume the defense thereof, the Corporation will not
be liable to Agent under this Agreement for any legal or other expenses
subsequently incurred by Agent in connection with the defense thereof except
for reasonable costs of investigation or otherwise as provided below. Agent
shall have the right to employ separate counsel in such action, suit or
proceeding but the fees and expenses of such counsel incurred after notice from
the Corporation of its assumption of the defense thereof shall be at the
expense of Agent unless (i) the employment of counsel by Agent has been
authorized by the Corporation, (ii) Agent shall have reasonably concluded that
there may be a conflict of interest between the Corporation and Agent in the
conduct of the defense of such action or (iii) the Corporation shall not in
fact have employed counsel to assume the defense of such action, in each of
which cases the fees and expenses of Agent's separate counsel shall be at the
expense of the Corporation. The Corporation shall not be entitled to assume
the defense of any action, suit or proceeding brought by or on behalf of the
Corporation or as to which Agent shall have made the conclusion provided for in
clause (ii) above; and
(c) the Corporation shall not be liable to indemnify
Agent under this Agreement for any amounts paid in settlement of any action or
claim effected without its written consent, which shall not be unreasonably
withheld. The Corporation shall be permitted to settle any action except that
it shall not settle any action or claim in any manner which would impose any
penalty or limitation on Agent without Agent's written consent, which may be
given or withheld in Agent's sole discretion.
8. EXPENSES. The Corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all
expenses incurred by Agent in connection with such proceeding upon receipt of
an undertaking by or on behalf of Agent to repay said amounts if it shall be
determined ultimately that Agent is not entitled to be indemnified under the
provisions of this Agreement, the Bylaws, the Code or otherwise.
9. ENFORCEMENT. Any right to indemnification or advances granted
by this Agreement to Agent shall be enforceable by or on behalf of Agent in any
court of competent jurisdiction if (i) the claim for indemnification or
advances is denied, in whole or in part, or (ii) no disposition of such claim
is made within ninety (90) days of request
4.
<PAGE> 5
therefor. Agent, in such enforcement action, if successful in whole or in
part, shall be entitled to be paid also the expense of prosecuting his claim.
It shall be a defense to any action for which a claim for indemnification is
made under Section 3 hereof (other than an action brought to enforce a claim
for expenses pursuant to Section 8 hereof, provided that the required
undertaking has been tendered to the Corporation) that Agent is not entitled to
indemnification because of the limitations set forth in Section 4 hereof.
Neither the failure of the Corporation (including its Board of Directors or its
stockholders) to have made a determination prior to the commencement of such
enforcement action that indemnification of Agent is proper in the
circumstances, nor an actual determination by the Corporation (including its
Board of Directors or its stockholders) that such indemnification is improper
shall be a defense to the action or create a presumption that Agent is not
entitled to indemnification under this Agreement or otherwise.
10. SUBROGATION. In the event of payment under this Agreement,
the Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Agent, who shall execute all documents required and shall
do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.
11. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Agent by
this Agreement shall not be exclusive of any other right which Agent may have
or hereafter acquire under any statute, provision of the Corporation's
Certificate of Incorporation or Bylaws, agreement, vote of stockholders or
directors, or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office.
12. SURVIVAL OF RIGHTS.
(a) The rights conferred on Agent by this Agreement shall
continue after Agent has ceased to be a director, officer, employee or other
agent of the Corporation or to serve at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise and shall inure
to the benefit of Agent's heirs, executors and administrators.
(b) The Corporation shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.
13. SEPARABILITY. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any
provision hereof shall be
5.
<PAGE> 6
held to be invalid for any reason, such invalidity or unenforceability shall
not affect the validity or enforceability of the other provisions hereof.
Furthermore, if this Agreement shall be invalidated in its entirety on any
ground, then the Corporation shall nevertheless indemnify Agent to the fullest
extent provided by the Bylaws, the Code or any other applicable law.
14. ENTIRE AGREEMENT. This Agreement and the agreements
referenced herein constitute the entire agreement between the parties hereto
pertaining to the subject matter hereof, and any and all other written or oral
agreements existing between the parties hereto pertaining to the subject
matters hereof are superseded and expressly canceled.
15. GOVERNING LAW. This Agreement shall be interpreted and
enforced in accordance with the laws of the State of Delaware.
16. AMENDMENT AND TERMINATION. No amendment, modification,
termination or cancellation of this Agreement shall be effective unless in
writing signed by both parties hereto.
17. IDENTICAL COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute but one and the same
Agreement. Only one such counterpart need be produced to evidence the
existence of this Agreement.
18. HEADINGS. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction hereof.
19. NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given (i) upon delivery if delivered by hand to the party to whom such
communication was directed or (ii) upon the third business day after the date
on which such communication was mailed if mailed by certified or registered
mail with postage prepaid:
(a) If to Agent, at the address indicated on the signature page
hereof.
(b) If to the Corporation, to
Laser Power Corporation
12777 High Bluff Drive
San Diego, CA 92130
or to such other address as may have been furnished to Agent by the
Corporation.
6.
<PAGE> 7
IN WITNESS WHEREOF,the parties hereto have executed this Agreement on
and as of the day and year first above written.
LASER POWER CORPORATION
By:____________________________________
Title:_________________________________
AGENT
_______________________________________
Address:
_______________________________________
_______________________________________
INDEMNITY AGREEMENT
7.
<PAGE> 1
EXHIBIT 10.2
LASER POWER CORPORATION
SECOND AMENDED AND RESTATED 1981
STOCK OPTION PLAN
This Second Amended and Restated 1981 Stock Option Plan (the "Amended
Plan") is intended to amend and restate the Amended and Restated Laser Power
Corporation 1981 Incentive Stock Option Plan (the "Plan") as to options to
purchase shares of the Common Stock of Laser Power Corporation which were
authorized pursuant to Section 2 of the Plan, and have not been issued prior to
the effective date of this Amended Plan. This Amended Plan shall govern options
issued on or after the date hereof. Options issued prior to the effective date
hereof shall be governed by the Plan as in existence prior to the effective date
hereof.
1. PURPOSE. This Amended Plan is intended to serve as an incentive to and
to encourage stock ownership by certain officers and employees of LASER POWER
CORPORATION, a Delaware corporation (the "Corporation"), so that they may
acquire or increase their proprietary interest in the success of the
Corporation, and to encourage them to remain in the employ of the Corporation.
This Amended Plan is intended to comply with the provisions of Section 422A of
the Internal Revenue Code of 1986, as amended ("Code"), with respect to the
issuance of incentive stock options.
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<PAGE> 2
2. ADMINISTRATION. The Amended Plan shall be administered by a committee
which shall consist of the Board of Directors of the Corporation (the
"Committee"). The Committee shall select one of its members as Chairman, and
shall hold meetings at such times and places as it may determine. Acts by a
majority of the committee in a meeting at which a quorum is present and acts
approved in writing by a majority of the members of the Committee shall be the
valid acts of the Committee. The Committee as a whole may act on options granted
to officers or employees who are also directors.
The Committee shall be authorized to grant options under the Amended Plan
to such officers and employees of the Corporation at such times and in such
amounts as it may decide.
The interpretation and construction by the Committee of any provisions of
the Amended Plan or of any option granted under it shall be final. No member of
the Committee or the Board of Directors shall be liable for any action or
determination made in good faith with respect to the Amended Plan or any option
granted under it.
3. ELIGIBILITY.
3.1 General. Employees eligible to receive options under the Amended
Plan shall be selected by the Committee from among the officers, executives,
management personnel and key creative personnel of the Corporation, including
those who may be directors. The selection of recipients of options shall be
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<PAGE> 3
within the sole and absolute discretion of the Committee. Directors who are not
officers or employees of the Corporation or a Parent or Subsidiary thereof are
not eligible to participate in the Amended Plan. The Committee shall have sole
and absolute discretion to determine whether the granted option is to be an
incentive stock option which satisfies the requirements of Section 422A of the
Code or a non-statutory option not intended to meet such requirements.
3.2 Termination of Eligibility of Incentive Stock Option Holders. If
the optionee ceases to be employed by the Corporation or a Parent or Subsidiary
thereof, for any reason other than his death, any incentive stock option granted
hereunder to such optionee shall expire no later than one month (12 months in
the case of an optionee whose eligibility has ceased because of his disability)
from the date of the occurrence giving rise to such termination of eligibility
or upon the date it expires by its terms, whichever is earlier. During such
one-month period, the incentive stock option may be exercised in accordance with
its terms, but only in respect of the number of such shares for which the right
to exercise has accrued on the date of such termination of employment. The
Committee shall decide whether an authorized leave of absence or absence for
military or governmental service, or absence for any other reason, shall
constitute termination of eligibility for purposes of this Section.
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<PAGE> 4
3.3 Death of Holder of Incentive Stock Option and Transfer of
option. If the holder of an incentive stock option shall die while eligible to
participate in the Amended Plan or within three months after the termination of
his eligibility and shall not have fully exercised one or more incentive stock
options, such options may, in the discretion of the Committee, be exercised
(provided, however, (i) no option shall be exercisable after its expiration and
(ii) an option may be exercised only to the extent that the optionee's right to
exercise such option had accrued at the time of his death and had not previously
been exercised) at any time up to 12 months after the optionee's death by the
executors or administrators of the optionee or by any person or persons who
shall have acquired the option directly from the optionee by bequest or
inheritance.
No incentive stock option shall be transferable by the optionee otherwise
than by will or the laws of intestate succession.
4. STOCK.
4.1 Identification of Stock. The stock subject to the options shall
be shares of the Corporation's authorized but unissued or acquired or reacquired
$.125 par value Common Stock (the "Stock"). The aggregate number of shares
subject to outstanding options under this Amended Plan shall not exceed
1,000,000 shares of Stock reduced by the aggregate number of shares subject to
outstanding options under the Plan (subject to
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<PAGE> 5
adjustment as provided in Section 5.6). If any option granted hereunder shall
expire or terminate for any reason without having been exercised in full, the
unpurchased shares subject thereto shall again be available for purposes of this
Amended Plan.
4.2 Limitation on Amount of Stock Subject to Incentive Stock
options. The aggregate fair market value of the Stock with respect to which
incentive stock options are exercisable for the first time by any individual
during any calendar year (under all plans of the Corporation, or a parent or
subsidiary thereof) shall not exceed $100,000. The fair market value of the
Stock shall be determined, for this purpose, as of the time the incentive stock
option with respect to such Stock is granted.
5. TERMS AND CONDITIONS OF OPTIONS. Options granted pursuant to the
Amended Plan shall be authorized by the action of the Committee and may, at the
Committee's discretion, be either incentive stock options or non-statutory
options. Any option granted pursuant to the Amended Plan shall be evidenced by
an agreement in such form as the Committee shall from time to time determine,
which agreement shall comply with and be subject to the following terms and
conditions:
5.1 Number of Shares. Each option shall state the number of
shares to which it pertains.
5.2 Option Exercise Price. Each option shall state the option
price.
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<PAGE> 6
5.2.1 Incentive Stock Options Granted to More Than 10%
Shareholders. The option exercise price for options granted to persons who own
more than 10% of the voting power or value of all classes of the Corporation's
stock or of any parent or subsidiary corporation ("Control Person") shall be not
less than 110% of the fair market value of the Stock subject to the option on
the date of granting the option.
5.2.2 Incentive Stock Options Granted to others. The option
exercise price for options granted to persons other than control persons shall
be not less than 100% of the fair market value of the shares of Stock subject to
the option on the date of granting the option.
5.2.3 Non-Statutory Options. The option price per share of
Stock shall be fixed by the Committee. Each nonstatutory option granted under
the plan will be exercisable on such date or dates and during such period as
shall be provided for, in the sole discretion of the Committee, pursuant to the
provisions of the option agreement evidencing such option. The Committee shall
have complete authority, in its discretion, to determine the extent, if any, and
the conditions under which an option may be exercised in the event of the death
of the holder of a non-statutory option or in the event such a holder leaves the
employ of the Corporation or has his employment terminated by the Corporation.
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<PAGE> 7
No non-statutory option shall be transferrable by the optionee
other than by will or the laws of intestate succession.
5.3 Method of Exercise. An option shall be exercised by written
notice to the Corporation stating the number of shares with respect to which the
option is being exercised and designating a time for the delivery thereof, which
time shall be at least fifteen (15) days after the giving of such notice unless
an earlier date shall have been mutually agreed upon. At the time specified in
the notice, the Corporation shall deliver to the optionee at the principal
office of the Corporation, or such other appropriate place as may be determined
by the Committee, a certificate or certificates for such shares of previously
authorized but unissued shares or acquired or reacquired shares of Stock as the
Corporation may elect. Notwithstanding the foregoing, the Corporation may
postpone delivery of any certificate or certificates after notice of exercise
for such reasonable period as may be required to comply with any applicable
listing requirements of any national or other securities exchange. In the event
an option shall be exercisable by any person other than the optionee, the
required notice under this section shall be accompanied by appropriate proof of
the right of such person to exercise the option.
5.4 Medium and Time of Payment. The option price shall be payable in
full upon the exercise of the option by certified or bank cashier's check,
recourse promissory note,
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<PAGE> 8
shares of Stock, or any equivalent form of payment acceptable to the
Corporation.
5.5 Term of Incentive Stock Options.
5.5.1 Incentive Stock options to Control Persons. The term of
an incentive stock option granted to Control Persons shall be determined by the
Committee at the time of grant, but shall not exceed five years from the day of
the grant. In no event shall any option be exercisable after the expiration of
its term.
5.5.2 Incentive Stock Options to Others. The term of an
incentive stock option granted to a person other than a Control Person shall be
determined by the committee at the time of grant, but shall not exceed 10 years
from the date of grant. In no event shall an option be exercisable after the
expiration of its term.
5.6 Adjustments Upon Changes In Capitalization. The number of
shares of Stock covered by each outstanding option, and the price per share
thereof in the case of each such outstanding option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Stock of
the Corporation resulting from a subdivision or consolidation of shares or the
payment of a stock dividend (but only on the Stock) or any other increase or
decrease in the number of issued shares effected without receipt of
consideration by the Corporation or (in the case of Stock issued other than
pursuant to a stock option granted to a director, officer or employee of the
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<PAGE> 9
Corporation), for per share consideration less than the option price of such
option. The adjustments shall be made in such manner as will prevent dilution or
enlargement of the rights granted to or available for participants in this
Amended Plan, except that any fraction of a share subject to an option resulting
from such an adjustment shall be rounded downward to the next full number of
shares without other compensation or consideration to the holder of such option.
Subject to any required action by the shareholders, if the Corporation
shall be the surviving corporation in any merger or consolidation, each
outstanding option shall pertain to and apply to the securities to which a
holder of the number of shares of Stock subject to the option would have been
entitled. Upon a dissolution or liquidation of the Corporation or a merger or
consolidation in which the corporation is not the surviving corporation, the
Board of Directors of the Corporation may grant each optionee the right
immediately prior to such dissolution or liquidation, or merger or consolidation
in which the Corporation is not the surviving corporation, to exercise his
option in whole or in part. If the Corporation should be consolidated with, or
merge into, any other corporation, or if the Corporation should sell or transfer
all or substantially all of its assets, or if any other similar event affecting
shares of Stock of the Corporation should occur, and if the exercisability of
the options is not accelerated by the Board of Directors and the acquiring
corporation assumes the
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<PAGE> 10
corporation's obligations under the options granted under this Amended Plan,
then each optionee shall be entitled thereafter to purchase shares of stock and
other securities and property in the kind and amount, and at the price, which
the optionee would have been entitled had his option been exercised prior to
such event. The Corporation shall make lawful provision therefor as a part of
any such transaction.
To the extent that the foregoing adjustments relate to stock or securities
of the Corporation, such adjustments shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive.
The grant of an option pursuant to the Amended Plan shall not affect in
any way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge or to consolidate or to dissolve, liquidate or sell, or
transfer all or any part of its business or assets.
Whenever the Corporation shall take any action resulting in any adjustment
provided for in this Section 5.6. the Corporation shall forthwith deliver notice
of such action to optionee, which notice shall set forth the number of shares
subject to this Option and the purchase price thereof resulting from such
adjustment.
5.7 Rights as a Shareholder. An optionee or a transferee of an
option shall have no rights as a shareholder with respect to any shares
underlying his option until the date
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<PAGE> 11
of the issuance to him of a certificate for such shares. No adjustment shall be
made for dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distributions or other rights of which the record date is
prior to the date such stock certificate is issued, except as provided in
Section 5.6 hereof.
5.8 Modification, Extension and Renewal of Options. Subject to the
terms and conditions and within the limitations of the Amended Plan, the
Committee may modify, extend or renew outstanding options granted under the
Amended Plan to an optionee, or accept the surrender of his outstanding options
(to the extent not theretofore exercised) and authorize the granting to him of
new options in substitution therefor (to the extent not theretofore exercised);
however, no such modification, extension, renewal or substitution shall be
effective without the written consent of such optionee.
5.9 Other Provisions. The option agreements authorized under the
Amended Plan shall contain such other provisions, including without limitation,
restrictions upon the exercise of the option or disposition of the Stock
acquired pursuant thereto, as the Committee shall deem advisable. Thus, for
example, the Committee may require that all or any portion of an option granted
pursuant hereto not be exercisable until a specified period of time has passed
or some other event has occurred, or that the Corporation shall have the option
to
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<PAGE> 12
purchase Stock acquired upon exercise of an option hereunder upon the occurrence
of some event.
6. TERM OF AMENDED PLAN. Incentive Stock options may be granted pursuant
to the Amended Plan from time to time until January 25, 2001, unless this
Amended Plan is sooner terminated. Termination of the Amended Plan shall not
affect any option theretofore granted.
7. AMENDMENT OF THE AMENDED PLAN. The Board of Directors of the
Corporation may, insofar as permitted by law, from time to time, with respect to
any shares at that time not subject to options, suspend or discontinue the
Amended Plan or revise or amend it in any respect whatsoever, subject to
approval of the shareholders of the Corporation as may be required.
8. APPLICATION OF FUNDS. The proceeds received by the Corporation from the
sale of Stock pursuant to options may be used for general corporate purposes.
9. NO OBLIGATION TO EXERCISE OPTION. The granting of an option shall
impose no obligation upon the optionee to exercise such option.
10. SECURITIES LAWS COMPLIANCE. Notwithstanding anything contained herein,
the Corporation shall not be obligated to grant
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<PAGE> 13
any option under this Amended Plan or to sell or issue any share pursuant to any
option agreement executed pursuant to the Amended Plan unless such grant of
option or sale of shares upon exercise of option is at such time effectively
registered or exempt from registration under the Securities Act of 1933, as
amended, and is qualified or exempt from qualification under the California
Corporate Securities Law of 1968.
As adopted by the Board of Directors on October 20, 1990.
LASER POWER CORPORATION
By: /s/
-------------------------------------
_______________, Chairman
By: /s/
-------------------------------------
_______________, President
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EXHIBIT 10.3
INCENTIVE STOCK OPTION AGREEMENT
UNDER THE LASER POWER CORPORATION
SECOND AMENDED AND RESTATED 1981
STOCK OPTION PLAN
For value received, Laser Power Corporation, a Delaware Corporation
("Grantor"), does hereby grant to _________________ ("Grantee") the right and
option to purchase _____________ shares of Common Stock of Grantor at the price
of ($ __________ ) per share ("Option Price") pursuant and subject to the terms
and conditions set forth in the Laser Power Corporation Second Amended and
Restated 1981 Incentive Stock Option Plan ("Plan"), a copy of which is attached
hereto as Exhibit "A", and in accordance with, and subject to, the following
terms and conditions:
1. Time and Manner of Exercise. From and after _____________, and during
each of the four succeeding one-year periods commencing on the anniversary
thereof, Grantee shall have the right to purchase from Grantor __________ shares
of Common Stock of Grantor on a cumulative basis (total __________ shares) upon
delivery to Grantor of notice of exercise and representations in the form
attached hereto as Exhibit "B" accompanied by a certified or cashier's check in
payment of the aggregate option price. In the event an option shall be
exercisable by any person other than the Grantee, the required notice under this
Paragraph shall be accompanied by appropriate proof of the right of such person
to exercise the option.
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<PAGE> 2
Promptly upon receipt of such material, Grantor will deliver to Grantee stock
certificates representing the number of shares purchased in accordance with the
foregoing and duly registered in the name(s) of Grantee and, at his election,
his or her spouse, or in the name(s) of his or her personal representatives,
devises or heirs, as the case may be. The failure to exercise an option with
respect to any shares of Grantor's Common Stock for which the right has accrued
during any one-year period shall not result in the termination of the option
with respect to such shares of Stock, but rather, the same shall cumulate and be
eligible for exercise during the remainder the option term.
2. Antidilution Provisions. The number of shares that Grantee is entitled
to purchase upon the exercise of this Option and the purchase price of those
shares are subject only to the adjustments set forth in Section 5.6 of the Plan.
3. Investment Undertaking; Nonassignability. This option may be exercised
only by Grantee during his or her lifetime. Grantee will hold this Option and
the rights arising hereunder for investment and not with a view to distribution,
and upon exercise will deliver a letter in the form attached hereto as Exhibit
"B" concerning Grantee's nondistributive intent with respect to the shares of
Common Stock received. Grantee will not transfer or assign this Option, except
by will or the laws of intestate succession.
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<PAGE> 3
4. Expiration. This Option shall terminate and expire at midnight on the
date that is eight (8) years after the date of this Agreement, or one month
after the date that Grantee ceases to be eligible to participate in the Plan in
accordance with Paragraph 3 of said Plan, whichever is earlier; provided,
however, that, in the event of the death of Grantee while still employed by
Grantor, then his executor(s) or administrator(s), or any person or persons who
shall have acquired the Option from the Grantee by bequest or inheritance,
shall, during the 12-month period commencing on the date of the Grantee's death,
have the right to exercise this Option with respect to the shares that remain
subject to this option on that date, subject to the conditions that this Option
(i) shall in no event be exercisable after its expiration in accordance with
this Section 5 and (ii) it shall be exercisable by such representative(s) or
successor(s) only to the extent that the Grantee's right to exercise this Option
had accrued pursuant to Paragraph 2 hereof at the time of the Grantee's death
and had not previously been exercised. Any options not exercisable or not
exercised prior to the end of such 12-month period shall be automatically null
and void.
5. Repurchase Right.
(a) The Stock purchased by the Grantee upon exercise of this Option
shall be subject to repurchase as set forth in the Buy-Out Agreement, a copy of
which is attached hereto as Exhibit "C".
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<PAGE> 4
6. Representations by Grantor. So long as this option remains outstanding
and unexpired, Grantor will reserve for issuance upon the exercise of this
Option such number of shares of Common Stock of Grantor as are subject to this
Option. The shares of Common Stock of Grantor subject to this Option shall, when
issued, be validly issued, fully paid and nonassessable and Grantor will pay,
when due and payable, any and all federal and state taxes or fees that may be
payable by Grantor with respect to the grant of this Option or the issuance of
any shares of Common Stock or certificates therefor subject to this Option not
including, however, any federal, state or other personal income tax payable by
the Grantee by virtue of the grant of this Option, the issuance of any share of
Common Stock upon exercise hereof or any subsequent disposition of such shares
which shall remain the obligation of Grantee.
7. Representations of Grantee. Grantee hereby represents and acknowledges
his understanding that the Common Stock acquired upon exercise of this option
must be held for at least one year after the date of exercise and two years
after the date of grant of this option in order for his Option to be treated as
an incentive stock option under Section 422A of the Internal Revenue Code of
1986, as amended. If the Common Stock is sold prior to the later of either such
period (other than in the case of sale after the death of the Grantee) the tax
benefits of an incentive stock option will not be available.
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<PAGE> 5
8. Notice. Any notice, request, or instructions given in connection
with this Option shall be in writing and shall be delivered in person or by
certified mail as follows:
(a) If to Grantor, at 12777 High Bluff Drive, San Diego,
California 92130, Attention: Corporate Secretary.
(b) If to Grantee, at____________________________________________,
or at such other address as either of the parties shall have given notice to
the other in accordance with the provisions hereof.
9. Committee Determination Final. The interpretation and construction of
the Plan and this Stock Option Agreement, including any inconsistency between
such documents, shall be reserved to and made by the committee of the Board of
Directors provided for under the Plan, the determination of which shall be final
as between the parties hereto unless otherwise determined by the Board of
Directors of Grantor.
10. Governing Law. This Option is granted and delivered in the State
of California and is intended to be construed and enforced under the laws
thereof.
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IN WITNESS WHEREOF, this option is executed on behalf of Grantor and its
officers thereunto duly authorized and by Grantee in his own behalf as of this
____ day of __________, 199___.
GRANTOR
LASER POWER CORPORATION,
a Delaware corporation
By
-----------------------
Glenn H. Sherman
Chairman and
Chief Executive Officer
GRANTEE
--------------------
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EXHIBIT 10.4
LASER POWER CORPORATION
1993 STOCK OPTION PLAN
1. PURPOSES OF THE PLAN
The Laser Power Corporation 1993 Stock Option Plan (the "Plan") is
intended to promote the interests of Laser Power Corporation, a Delaware
corporation (the "Company"), by providing a method whereby (i) key employees
(including officers and directors) of the Company (or its parent or subsidiary
corporations) responsible for the management, growth and financial success of
the Company (or its parent or subsidiary corporations), (ii) the non-employee
members of the Company's Board of Directors (or any parent corporations) and
(iii) consultants and advisors who provide valuable services to the Company (or
its parent or subsidiary corporations) may be offered incentives and rewards
which will encourage them to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Company and continue to render
services to the Company (or its parent or subsidiary corporations).
2. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Company's Board of Directors
("Board") or, to the extent provided by the Board, a committee ("Committee")
appointed by the Board, consisting of three (3) or more members of the Board.
Members of the Committee shall serve for such term as the Board may determine.
No person serving as a member of the Board or the Committee shall act on any
matter relating solely to such person's own interests under the Plan or any
option thereunder. For purposes of the Plan, the term "Plan Administrator" shall
mean the Board, or if the Board delegates responsibility for any matter to the
Committee, the Committee.
(b) At any time at or after the time the Company has a class of equity
securities registered under Section 12 of the Securities Exchange Act of 1934
(the "Exchange Act"), the Board, in its sole discretion (but without any
obligation to do so) may appoint a Committee to administer the Plan in
accordance with the requirements of Rule 16b-3 of the Exchange Act.
(c) Subject to the provisions of this Plan, the Plan Administrator
shall have full power and authority to select the Optionees to be granted the
options hereunder, and to determine (i) whether each granted option is to be an
incentive stock option ("Incentive Option"), which satisfies the requirements of
Section 422A of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"), or a non-statutory option not intended to meet such
requirements; (ii) the number of shares to be subject thereto; (iii) the
exercise prices therefore; (iv) the terms of exercise; (v) the expiration dates
and; (vi) all other terms and conditions upon which such option may be
exercised. The Plan Administrator shall have the full power and authority
(subject to the provisions of the Plan) to establish such rules and regulations
as it may deem appropriate for the proper administration of the Plan and to make
such determinations under, and issue such interpretations of, the Plan and any
outstanding option as it may deem necessary or advisable.
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<PAGE> 2
Decisions of the Plan Administrator shall be final and binding on all parties
who have an interest in the Plan or any outstanding option. No person acting
under this subsection shall be held liable for any action or determination made
in good faith with respect to the Plan or any options granted under the Plan.
3. ELIGIBILITY FOR OPTION GRANTS
The persons eligible to receive option grants pursuant to the Plan
("Optionee") are as follows:
(i) key employees (including officers and directors) of the
Company (or its parent or subsidiary corporations) who render
services which contribute to the success and growth of the
Company (or its parent or subsidiary corporations) or which
may reasonably be anticipated to contribute to the future
success and growth of the Company (or its parent or subsidiary
corporations);
(ii) the non-employee members of the Board or the non-employee
members of the Board of Directors of any parent or subsidiary
corporation; and
(iii) those consultants or advisors who provide valuable services to
the Company (or its parent or subsidiary corporations).
4. STOCK SUBJECT TO THE PLAN
(a) The stock issuable under the Plan shall be shares of the Company's
authorized but unissued or re-acquired common stock (the "Common Stock"). The
aggregate number of shares which may be issued under the Plan shall not exceed
1,000,000 shares of Common Stock. The total number of shares issuable under the
Plan shall be subject to adjustment from time to time in accordance with the
provisions of this Section 4.
(b) Should an option be terminated for any reason without being
exercised or surrendered in whole or in part, the shares subject to the portion
of the option not so exercised or surrendered shall be available for subsequent
option grants under the Plan.
(c) In the event that the outstanding shares of Common Stock issuable
under the Plan as a class are increased or decreased, or changed into or
exchanged for a different number or kind of shares or securities, as a result of
any Corporate Transactions (as defined in Section 7), stock splits, stock
dividends, or the like affecting the outstanding Common Stock as a class, then
appropriate adjustments shall be made to the aggregate number of shares issuable
under the Plan and to the number of shares and price per share of the Common
Stock subject to each outstanding option, in order to prevent the dilution or
enlargement of benefits under such outstanding options.
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5. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Plan shall be authorized by action of
the Plan Administrator and may, at the Plan Administrator's discretion, be
either Incentive Options (as more fully describe in Section 6) or non-statutory
stock options. Individuals who are not employees of the Company or its parent or
subsidiary corporations may only be granted non-statutory options. Each granted
option shall be evidenced by one or more instruments in the form approved by the
Plan Administrator; provided, however, that each such instrument shall comply
with and incorporate the terms and conditions specified below. Each instrument
evidencing an Incentive Option shall, in addition, be subject to the applicable
provisions of Section 6.
(a) Option Price.
(1) The option price per share shall be fixed by the Plan
Administrator, but (subject to the provisions of Section 6 below), in no event
shall it be less than eighty-five percent (85%) of the fair market value of a
share of Common Stock on the date of the option grant for options granted to key
employees, or less than one hundred percent (100%) of the fair market value of a
share of Common Stock on the date of the option grant for options granted to
non-employees.
(2) 10% Shareholder. If any Optionee hereunder is on the date of option
grant the owner of stock (as determined under Section 425 (d) of the Internal
Revenue Code) possessing 10% or more of the total combined voting power of all
classes of stock of the Company or any one of its parent or subsidiary
corporations (a "10% Shareholder"), then the option price per share shall not be
less than one hundred and ten percent (110%) of the fair market value of one
share of Common Stock on the date of grant.
(3) The option price shall become immediately due upon exercise of the
option and shall, subject to the provisions of Section 12 and the instrument
evidencing the grant, be payable in one of the alternative forms specified
below:
(i) full payment in cash or cash equivalents; or
(ii) full payment in shares of Common Stock having a fair market
value on the Exercise Date (as such term is defined below) in
an amount equal to the option price; or
(iii) a combination of shares of Common Stock valued at fair market
value on the Exercise Date and cash or cash equivalents, equal
in the aggregate to the option price; or
(iv) any other form of consideration as the Plan Administrator may
approve.
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<PAGE> 4
For purposes of this Section 5(a)(3), the Exercise Date shall be the
first date on which the Company shall have received both written notice of the
exercise of the option and payment of the option price for the purchased shares.
(4) For all valuation purposes under the Plan, the fair market value of
a share of Common Stock shall be determined in accordance with the following
provisions:
(i) If the Common Stock is not at the time listed or admitted to
trading on any stock exchange but is traded in the
over-the-counter market, the fair market value shall be the
mean between the highest bid and lowest asked prices (or, if
such information is available, the closing selling price) of
one share of Common Stock on the date in question in the
over-the-counter market, as such prices are reported by the
National Association of Securities Dealers through its NASDAQ
system or any successor system. If there are no reported bid
and asked prices (or closing selling price) for the Common
Stock on the date in question, then the mean between the
highest bid price and lowest asked price (or the closing
selling price) on the last preceding date for which such
quotations exist shall be determinative of fair market value.
(ii) If the Common Stock is at the time listed or admitted to
trading on any stock exchange, then the fair market value
shall be the closing selling price of one share of Common
Stock on the date in question on the stock exchange determined
by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is
no reported sale of Common Stock on such exchange on the date
in question, then the fair market value shall be the closing
selling price on the exchange on the last preceding date for
which such quotation exists.
(iii) If the Common Stock at the time is neither listed nor admitted
to trading on any stock exchange nor traded in the
over-the-counter market, then the fair market value shall be
determined by the Plan Administrator after taking into account
such factors as the Plan Administrator shall deem appropriate,
including one or more independent professional appraisals.
(b) Term and Exercise of Options. No option granted under the Plan
shall have a term in excess of ten (10) years from the grant date; provided,
however, that no such option granted to a 10% Shareholder shall have a term in
excess of five (5) years from the grant date. During the lifetime of an
Optionee, the option shall be exerciseable only by such Optionee and shall not
be assignable or transferable by the Optionee otherwise than by Optionee's will
or by the laws of descent and distribution.
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<PAGE> 5
(c) Effect of Termination of Service Provider Status.
(1) Should an Optionee cease to be a service provider to the Company
("Service Provider") for any reason (including death or permanent disability as
defined in Section 105(d) (4) of the Internal Revenue Code), then any option or
options granted hereunder to such Service Provider and outstanding on the
Cessation Date (defined below) shall remain exercisable for a period not to
exceed twelve (12) months from the date of such cessation of Service Provided
status (the "Cessation Date") the specific amount of time to be determined at
the time of granting the option; provided, however, that under no circumstances
shall such options be exercisable after the expiration date of the option term
specified in the instrument evidencing the option grant. Notwithstanding the
foregoing, such shorter period of exercisability following the Cessation Date,
as determined by the Plan Administrator, shall in no event be less than: (i) six
(6) months in the event that employment termination is due to the death or
disability of the Service Provider and (ii) thirty (30) days in the event that
employment termination is due to any other reason, except with respect to
employment termination due to an event described in subparagraph (c) (2) below.
Each such option shall, during such twelve-month or shorter period, be
exercisable only to the extent of the number of shares (if any) for which the
option is exercisable on the Cessation Date (the "Vested Shares"). Upon the
expiration of such twelve-month or shorter period or (if earlier) upon the
expiration of the option term, the option shall terminate and cease to be
exercisable.
(2) If (i) the Optionee's status as a Service Provider is terminated
for willful misconduct, theft, fraud, embezzlement or any unauthorized
disclosure or use of confidential information or trade secrets or (ii) the
Optionee makes or attempts to make any unauthorized use or disclosure of
confidential information or trade secrets of the Company or its parent or
subsidiary corporations, then in any such event all outstanding options granted
the Optionee under the Plan shall terminate and cease to be exercisable
immediately upon such termination of Service Provider status.
(3) Notwithstanding subparagraphs (c) (1) and (2) above, the Plan
Administrator shall have complete discretion, exercisable either at the time the
option is granted or at the Cessation Date to provide that options held by such
Optionee may be exercised not only with respect to Vested Shares under the
option existing as of the Cessation Date but also with respect to one or more
subsequent installments of shares for which the option would otherwise have
become exercisable had such cessation of Service Provider status not occurred.
(4) For purposes of this, the Optionee shall be deemed to be a Service
Provider of the Company for so long as the Optionee renders periodic services to
Company or one or more of its parent or subsidiary corporations.
(d) No Employment or Service Contract. Nothing in the Plan shall confer
upon the Optionee any right to continue in the service of the Company (or any
parent or subsidiary corporation of the Company employing or retaining the
Optionee) for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Company (or parent or subsidiary
corporation of the Company employing or retaining Optionee) or the Optionee, to
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<PAGE> 6
terminate the service provider status of Optionee at any time for any reason
whatsoever, with or without cause.
(e) Stockholder Rights. An Optionee shall have none of the rights of a
stockholder with respect to any shares covered by the option until such
individual shall have duly exercised the option and paid the option price.
6. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable to all
Incentive Options granted under the Plan. Incentive Options may only be granted
to individuals who are Employees of the Company. For purposes of the Plan, the
Optionee shall be deemed to be an Employee of the Company for so long as the
Optionee is employed by the Company or one or more of its parent or subsidiary
corporations. Options which are specifically designated as "non-statutory"
options when issued under the Plan shall not be subject to the terms and
conditions specified below.
(a) Option Price. The option price per share of the Common Stock
subject to an Incentive Option shall in no event be less than one hundred
percent (100%) of the fair market value of a share of Common Stock on the date
of grant (or, in the case of a 10% shareholder, not less than one hundred ten
percent (110%) of the fair market value a share of Common Stock on the date of
grant).
(b) Dollar Limitation. The aggregate fair market value (determined as
of the respective date or dates of grant) of the Common Stock for which one or
more options granted to any Employee under this Plan (or any other option plan
of the Company or its parent or subsidiary corporations) may for the first time
become exercisable as Incentive Options during any one calendar year shall not
exceed the sum of Two Hundred Thousand Dollars ($200,000). In the event that
Section 422A of the Internal Revenue Code is amended to alter the limitation set
forth therein so that following such amendment such limitation shall differ from
the $200,000 limitation set forth above, the dollar limitation of this
sub-paragraph (b) shall be automatically adjusted accordingly. To the extent the
Employee holds two or more such options which become exercisable for the first
time in the same calendar year, the foregoing limitation on the exercisability
thereof as Incentive Options shall be applied on the basis of the order in which
such options are granted, and any Incentive Options subject to the limitations
of this Section 6(b) shall be treated as "non-qualified" options subject to the
applicable terms and conditions of this Plan.
(c) Effect of Termination of Employee Status
(1) Should an Optionee cease to be an employee of the Company for any
reason other than death or permanent disability as defined in Section 105 (d)
(4) of the Internal Revenue Code, while the holder of one or more outstanding
Incentive Options granted to such Optionee under the Plan, then such option or
options shall not remain exercisable for more than a three (3) month period (or
such shorter period determined by the Plan Administrator and specified in the
instrument evidencing the grant) following the date of such cessation of
employee status; provided, however, that under no circumstances shall such
options be exercisable after the
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specified expiration date of the Option Term. Should an Optionee cease to be an
employee of the Company by reason of death or permanent disability, as defined
in Section 105(d) (4) of the Internal Revenue Code, while the Holder of one or
more outstanding options granted to such Optionee under the Plan, then such
option or options shall not remain exercisable for more than a 12-month period
(or such shorter period, determined by the Plan Administrator, and specified in
the instrument evidencing the grant) following the date of such cessation of
employee status.
Except as modified by the preceding provisions of this Section 6, all
the provisions of the Plan shall be applicable to the Incentive Options granted
hereunder.
7. CORPORATE TRANSACTIONS
(a) In the event of any of the following transactions (a
"Corporate Transaction"):
(i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal
purpose of which is to change the State of the Company's
incorporation,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company, or
(iii) any reverse merger in which the Company is the surviving
entity but in which fifty percent (50%) or more of the
Company's outstanding voting stock is transferred to holders
different from those who held the stock immediately prior to
such merger,
then each outstanding option which is not to be assumed by the successor
corporation or parent thereof (or to be replaced with a comparable option to
purchase shares of the capital stock of such successor corporation or parent
thereof) automatically shall be accelerated so that each such option,
immediately prior to the specified effective date for such Corporate
Transaction, shall become fully exercisable with respect to the total number of
shares of Common Stock purchasable under such option. Any such accelerated
options not exercised as of the consummation of the Corporate Transaction shall
terminate and cease to be exercisable, unless assumed by the successor
corporation or parent thereof (or replaced with a comparable option to purchase
shares of the capital stock of such successor corporation or parent thereof).
(b) In connection with any Corporate Transaction, the exercisability of
any accelerated options under the Plan as an Incentive Option shall remain
subject to the applicable dollar limitation of Section 6(b).
(c) The Plan Administrator shall have the right and power at any time
to waive in whole or in part, absolutely or conditionally, any right of the
Company contained in any instrument or option agreement evidencing any options
granted under this Plan.
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(d) The grant of options under this Plan shall in no way affect the
right of the Company to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
8. CANCELLATION AND NEW GRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time,with the consent of the affected Optionees, the
cancellation of any or all outstanding options under the Plan and to grant in
substitution therefor new options under the Plan covering the same or different
numbers of shares of Common Stock but having an option price per share not less
than 85% of fair market value or 100% of fair market value in the case of either
options granted to nonemployee Optionees or Incentive Options or, in the case of
a 10% Shareholder, not less than one hundred and ten percent (110%) of fair
market value on the new grant date.
9. SURRENDER OF OPTIONS FOR CASH OR STOCK
(a) Provided and only if the Plan Administrator determines in its
discretion to implement stock appreciation right provisions of this Section 9,
one or more Optionees may be granted the right, exercisable upon such terms and
conditions as the Plan Administrator may establish at the time of the option
grant or at any time thereafter, to surrender all or part of an unexercised
option under the Plan in exchange for a distribution from the Company equal in
amount to the difference between (i) the fair market value (at date of
surrender) of the number of shares in which Optionee is at the time vested under
the surrendered option or portion thereof and (ii) the aggregate option price
payable for such vested shares.
(b) No surrender of an option shall be effective hereunder unless it is
approved by the Plan Administrator. If the surrender is so approved, then the
distribution to which Optionee shall accordingly become entitled under this
Section 9 may be made in shares of Common Stock valued at fair market value at
date of surrender, in cash, or partly in shares and partly in cash, as the Plan
Administrator shall in its sole discretion deem appropriate.
(c) If the surrender of an option is rejected by the Plan
Administrator, then Optionee shall retain whatever rights Optionee had under the
surrendered option (or surrendered portion thereof) on the date of surrender and
may exercise such rights at any time prior to the later of (i) the receipt of
the rejection notice or (ii) the last day on which the option is otherwise
exercisable in accordance with the terms of the instrument evidencing such
option, but in no event may such rights be exercised at any time after ten (10)
years (or five (5) years in the case of a 10% Shareholder) after the date of the
option grant.
(d) The following special provisions shall be applicable to any
Incentive Option which is surrendered pursuant to the provisions of this Section
9:
(i) The right to surrender the Incentive Option may only be
transferred or assigned in connection with a transfer or
assignment of the Incentive Option in compliance with the
limitations of Section 6(b).
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(ii) The Incentive Option may only be surrendered when there is a
positive spread between the fair market value of the shares
subject to the surrendered option and the aggregate option
price payable for such shares.
(iii) The Incentive Option may not be surrendered at any time after
the expiration or sooner termination of the option term.
10. EXTENSION OF EXERCISE PERIOD
The Plan Administrator shall have full power and authority, exercisable
in its sole discretion, to extend, either at any time while the option is
granted or at the time while the option remains outstanding, the period of time
for which a non-statutory option is to remain exercisable following Optionee's
termination of Service Provider status from the period set forth in the option
agreement to such greater period of time as the Plan Administrator shall deem
appropriate; provided, however, that in no event shall such option be
exercisable after the specified expiration date of the option term and provided
further that the Plan Administrator has no such power to extend the
exercisability of an Incentive Option.
11. AMENDMENT OF THE PLAN
The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects whatsoever; provided, however,
that no such amendment or modification shall, without the consent of the
holders, adversely affect rights and obligations with respect to options at the
time outstanding under the Plan; and provided, further, that the Board shall
not, without the approval of the stockholders of the Company (i) increase the
maximum number of shares issuable under the Plan, except for permissible
adjustments under Section 5(c), (ii) materially modify the eligibility
requirements for the grant of options under the Plan or (iii) otherwise
materially increase the benefits accruing to participants under the Plan.
12. BONUS LOANS OR GUARANTEE OF LOANS
The Plan Administrator may assist any Optionee (including any officer
or director) in the exercise of one or more options granted to such Optionee
under the Plan by (a) authorizing the extension of a loan to such Optionee from
the Company and/or the payment of a bonus by the Company to an Optionee holding
other than an Incentive Option in an amount calculated to assist Optionee in
paying Optionee's federal and state tax obligations upon exercise of one or more
options, (b) permitting Optionee to pay the option price for the purchased
Common Stock in installments over a period of years or (c) authorizing a
guarantee by the Company of a third party loan to Optionee. The terms of any
loan, installment method of payment or guarantee (including the interest rate
and terms of repayment) will be established by the Plan Administrator in its
sole discretion. Loans, installment payments and guarantees may be granted as
full or partial payment for shares hereunder, provided in such event the loan
must be adequately secured by collateral other than the purchased shares), but
the maximum credit available to Optionee shall not exceed
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the sum of (i) the aggregate option price payable for the purchased shares, plus
(ii) any federal and state income and employment tax liability incurred by
Optionee in connection with the exercise of the option.
13. EFFECTIVE DATE AND TERM OF PLAN
(a) The Plan shall become effective when adopted by the Board, but no
option granted under the Plan shall become exercisable unless and until the Plan
shall have been approved by the Shareholders of the Company. If such shareholder
approval is not obtained within twelve (12) months after the date of the Board's
adoption of the Plan, then all options previously granted under the Plan shall
terminate and no further options shall be granted. Subject to such limitation,
the Plan Administrator may grant options under the Plan at any time after the
effective date and before the date fixed herein for termination of the Plan.
(b) Unless sooner terminated in accordance with Section 13(a), the
Plan shall terminate upon the earlier of (i) the expiration of the ten (10) year
period measured from the date of the Board's adoption of the Plan or (ii) the
date on which all shares available for issuance under the Plan shall have been
issued or canceled pursuant to the exercise or surrender of options granted
hereunder. If the date of termination is determined under clause (i) above, then
options outstanding on such date shall thereafter continue to have force and
effect in accordance with the provisions of the instruments evidencing such
options.
14. USE OF PROCEEDS
Any cash proceeds received by the Company from the sale of shares
pursuant to options granted under the Plan shall be used for general corporate
purposes.
15. WITHHOLDING
The Company's obligation to deliver shares upon the exercise or
surrender of any options granted under the Plan shall be subject to the
satisfaction of all applicable federal, state and local income and employment
tax withholding requirements.
16. REGULATORY APPROVALS
The implementation of the Plan, the granting of any option hereunder,
and the issuance of stock upon the exercise or surrender of any such option
shall be subject to the procurement by the Company of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the
options granted under it and the stock issued pursuant to it.
17. REQUESTS FOR INFORMATION
For additional information about the Plan or the Plan Administrator,
please direct all such requests to the Corporate Secretary of Laser Power
Corporation, 12777 High Bluff Drive, San Diego, California 92130, telephone
number (619) 755-0700.
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EXHIBIT 10.5
LASER POWER CORPORATION
STOCK OPTION AGREEMENT
(INCENTIVE)
AGREEMENT made as of the _________ day of ______________________, 1994 by and
between LASER POWER CORPORATION, a Delaware corporation (hereinafter called
"Company"), and ________________________ (hereinafter called "Optionee").
WITNESSETH:
RECITALS
A. The Board of Directors of the Company has adopted the Company's 1993 Stock
Option Plan (the "Plan") for the purpose of attracting and retaining the
services of selected key employees (including officers and directors), and
non-employee directors, consultants or advisors, who contribute to the financial
success of the Company or its parent or subsidiary corporations.
B. Optionee is a key employee of the Company or its parent or subsidiary
corporations, and this Agreement is executed pursuant to, and is intended to
carry out the purposes of, the Plan in connection with the Company's grant of a
stock option to Optionee.
C. The granted option is intended to be an incentive stock option within the
meaning of Section 422A of the Internal Revenue Code ("Incentive Option").
NOW, THEREFORE, it is hereby agreed as follows:
1 . Grant of Option. Subject to and upon the terms and conditions set forth in
this Agreement, there is hereby granted to Optionee, as of the date of this
Agreement (the "Grant Date"), a stock option to purchase up to shares of the
Company's Common Stock (the "Optioned Shares") from time to time during the
option term at the option price of $ per share (the "Option Price").
2. Option Term. This option shall have a maximum term of
___________________(___) years measures from the Grant Date and shall
accordingly expire at the close of business on ____________, (the "Expiration
Date"), unless sooner terminated in accordance with Paragraph 5, 7(a) or 18.
<PAGE> 2
3. Option Nontransferable: Exception. This option shall be neither transferable
nor assignable by Optionee other than by will or by laws of descent, and
distribution and may be exercised, during Optionee's lifetime, only by Optionee.
4. Dates of Exercise. This option may not be exercised in whole or in part at
any time prior to the time the Plan is approved by the Company's stockholders in
accordance with Paragraph 17. Provided such stockholder approval is obtained,
Optionee may, within the specified term of this option and pursuant to the
provisions of this Agreement, purchase the Optioned Shares according to the
vesting schedule set forth in Exhibit "A" hereto, which is incorporated herein
by this reference. Exercisable installments may be exercised in whole or in part
and, to the extent not exercised, will accumulate and be exercisable at any time
on or before the Expiration Date unless sooner terminated.
5. Accelerated Termination of Option Term. The option term specified in
Paragraph 2 shall terminate (and this option shall cease to be exercisable)
prior to the Expiration Date should one of the following provisions become
applicable:
(a) Except as otherwise provided in subparagraphs (b), (c) or (d)
below, should Optionee cease to be an employee of the Company at any time during
the option term, then the Optionee shall have up to a one (1) month period
commencing with the date of such cessation of employee status, in which to
exercise this option for any or all of the Optioned Shares for which this option
is at the time of such cessation of employee status exercisable, but in no event
shall this option be exercisable at any time after the Expiration Date. Upon the
expiration of such one (1) month period or (if earlier) upon the Expiration
Date, this option shall terminate and cease to be outstanding.
(b) Should Optionee die while this option is outstanding, then the
executors or administrators of Optionee's estate or Optionee's heirs or legatees
(as the case may be) shall have the right to exercise this option for the number
of Optioned Shares (if any) for which the option is exercisable on the date of
the Optionee's death. Such right shall lapse and this option shall cease to be
exercisable upon the earlier of (i) the twelve (12) month anniversary of the
date of the optionee's death or (ii) the Expiration Date.
(c) Should Optionee become permanently disabled and cease by reason
thereof to be an employee of the Company at any time during the option term,
then the Optionee shall have a period of six (6) months (commencing with the
date of such cessation of employee status) in which to exercise this option for
any or all of the Optioned Shares for which this option is exercisable at the
time of such cessation of employee status; provided, however, that in no event
shall this option be exercisable at any time after the Expiration Date. Optionee
shall be deemed to be permanently disabled if Optionee is, by reason of any
medically determinable physical or mental impairment expected to result in death
or to be of continuous duration of not less than six (6) months, unable to
perform his/her usual duties for the Company or the parent or subsidiary
corporation retaining his/her services. Upon the expiration of such limited
period of exercisability or (if earlier) upon the Expiration Date, this option
shall terminate and cease to be outstanding.
<PAGE> 3
(d) Should the Optionee's status as an employee be terminated for
willful misconduct, theft, fraud, embezzlement or any unauthorized disclosure or
use of confidential information or trade secrets or should the Optionee make or
attempt to make any unauthorized use or disclosure of the confidential
information or trade secrets of the Company or any parent or subsidiary
corporation, then in any such event this option shall terminate and cease to be
exercisable immediately upon such termination of employee status.
(e) For purposes of this Paragraph 5 and for all other purposes under
this Agreement, the Optionee shall be deemed to be an employee of the Company
and to continue in the Company's employ for so long as the Optionee remains in
the employ of the Company or one or more of its parent or subsidiary
corporations.
6. Adjustment in Option Shares. In THE event any change is made to the Common
Stock issuable under the Plan by reason of any stock split, stock dividend,
combination of shares, or other change affecting THE outstanding Common Stock as
a class without receipt of consideration, then appropriate adjustments will be
made to (i) the total number of Optioned Shares subject to this option and (ii)
the Option Price payable per share in order to reflect such change and thereby
preclude a dilution or enlargement of benefits hereunder.
7. Special Termination of Option
(a) In the event of any of the following transactions (a "Corporate
Transaction"):
(I) a merger or consolidation in which the Company is not
the surviving entity, except for a transaction the
principal purpose of which is to change the State of
the Company's incorporation,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company, or
(iii) any reverse merger in which the Company is the
surviving entity but in which fifty percent (50%) or
more of the Company's outstanding voting stock is
transferred to holders different from those who held
the stock immediately prior to such merger,
then this option, if not to be assumed by the successor Corporation or parent
thereof (or replaced with a comparable option to purchase shares of the capital
stock of such successor corporation or parent thereof), automatically shall be
accelerated so that this option shall, immediately prior to the specified
effective date for such Corporate Transaction, become fully exercisable with
respect to the total number of shares of Common Stock purchasable under this
option and may be exercised for all or any portion of such shares; provided,
however, that the exercisability of the accelerated option as an incentive stock
option under the federal tax laws shall remain subject to the applicable
limitations of Paragraph 20. No such acceleration of this option, however, shall
occur if and to the extent the acceleration of this option would, when added to
the present value of certain other payments in the nature of compensation which
become due and payable to Optionee
<PAGE> 4
in connection of excess parachute payments under Section (28OG(b) of the
Internal Revenue Code. The existence of such excess parachute payment shall be
determined by the Plan Administrator in the exercise of its reasonable business
judgment and on the basis of tax counsel provided the Company. This option, to
the extent not previously exercised, shall terminate upon the consummation of
such Corporate Transaction and cease to be exercisable, unless it is expressly
assumed by the successor corporation or parent thereof (or replaced with a
comparable option to purchase shares of the capital stock of such successor
corporation or parent thereof).
(b) This Agreement shall not in any way affect the right of the Company
to adjust, reclassify, reorganize or otherwise make changes in its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
8. Privilege of Stock Ownership. The holder of this option shall not have any of
the rights of a stockholder with respect to the Optioned Shares until such
individual shall have exercised the option and paid the Option Price.
9. Manner of Exercising Option.
(a) In order to exercise this option with respect to all or any part of
the Option Shares for which this option is at the time exercisable, Optionee (or
in the case of exercise after Optionee's death, the Optionee's executor,
administrator, heir or legatee, as the case may be) must take the following
actions:
(i) Execute and deliver to the Secretary of the Company a
stock purchase agreement in substantially the form of
Exhibit "B" to this Agreement (the "Purchase
Agreement");
(ii) Pay the aggregate option price for the purchased
shares in one or more of the following alternative
forms:
(A) full payment, in cash or cash equivalents;
or
(B) full payment in shares of Common Stock of
the Company having a Fair Market Value on
the Exercise Date (as such terms are defined
below) in an amount equal to the option
price; or
(C) full payment in a combination of shares of
Common Stock of the Company valued at Fair
Market Value on the Exercise Date and cash
or cash equivalents, equal in the aggregate
to the option price; or
(D) any other form which the Plan Administrator
(as that term is defined in the Plan) may,
in its discretion, approve at the time of
exercise, in accordance with the provisions
of paragraph 15 of this Agreement; and
<PAGE> 5
(iii) Furnish to the Company appropriate documentation that
the person or persons exercising the option, if other
than Optionee, have the right to exercise this
option.
(b) For purposes of Paragraph 9 (a) above, the Fair Market Value of a
share of Common Stock shall be determined in accordance with subparagraphs (i)
through (iii) below, and the Exercise Date shall be the first date on which
there shall have been delivered to the Company both (1) the executed Purchase
Agreement and (11) the payment of the option price for the purchased shares.
(i) If the Common Stock is not on the Exercise Date
listed or admitted to trading on any stock exchange,
but is traded in the over-the-counter market, the
Fair Market Value shall be the mean between the
highest bid and lowest asked prices (or if such
information is available, the closing selling price)
of one share of Common Stock on the Exercise Date in
the over-the-counter market, as such prices are
reported by the National Association of Securities
Dealers through its NASDAQ system or any successor
system. If there are no reported bid and asked prices
(or closing selling price) for the Common Stock on
the Exercise Date, then the mean between the highest
bid and lowest asked prices (or closing selling
price) on the last preceding date for which such
quotations exist shall be determinative of Fair
Market Value.
(ii) If the Common Stock is on the Exercise Date listed or
admitted to trading on any stock exchange, then the
Fair Market Value shall be the closing selling price
of one share of Common Stock on the Exercise Date on
the stock exchange determined by the Plan
Administrator to be the primary market for the Common
Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If
there is no reported sale of Common Stock on such
exchange on the Exercise Date, then the Fair Market
Value shall be the closing selling price on the
exchange on the last preceding date for which such
quotation exists.
(iii) If the Common Stock is on the Exercise Date neither
listed or admitted to trading on any stock exchange
nor traded in the over-the-counter market, then the
Fair Market Value shall be determined by the Plan
Administrator after taking into account such factors
as the Plan Administrator shall deem appropriate,
including one or more independent professional
appraisals.
(c) This option shall be deemed to have been exercised with respect to
the number of Optioned Shares specified in the Purchase Agreement at such time
as the executed Purchase Agreement for such shares shall have been delivered to
the Company. Payment of the option price shall immediately become due and shall
accompany the Purchase Agreement. As soon thereafter as practical, the Company
shall mail or deliver to Optionee or to the other person or persons exercising
this option a certificate or certificates representing the shares so purchase
and paid for, with the appropriate legends affixed thereto.
<PAGE> 6
(d) In no event may this option be exercised for any fractional shares.
10. Compliance with Laws and Regulations.
(a) The exercise of this option and the issuance of Optioned Shares
upon such exercise shall be subject to compliance by the Company and the
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange on which shares of the Company's
Common Stock may be listed at the time of such exercise and issuance.
(b) In connection with the exercise of this option, Optionee shall
execute and deliver to the Company such representations in writing as may be
requested by the Company in order for it to comply with the applicable
requirements of federal and state securities law.
11. Representations and Covenants: Restrictions on Transfer.
(a) Optionee acknowledges that this Incentive Option has been issued
pursuant to an exemption from registration under the Securities Act of 1933, as
amended (the "Act"), and an exemption from qualification under the California
Corporate Securities Law of 1968, and that Optionee has acquired the Incentive
Option and will acquire any of the Shares for Optionee's own account, with no
view to any distribution thereof, and that Optionee will not make any
distribution thereof other than pursuant to an exemption from registration under
the Act and an exemption from qualification under the California Corporate
Securities Law of 1968.
(b) Optionee acknowledges that Optionee has received such financial,
business and other information regarding the Company as Optionee has deemed
necessary to evaluate the merits and risks of holding the Incentive Option, and
Optionee has had such opportunity as deemed necessary to ask and receive answers
to questions from personnel of the Company. Optionee further represents and
warrants to the Company that Optionee has a pre-existing personal or business
relationship with the Company and several of its officers and directors, and
that such relationships consist of personal or business contacts of a nature and
duration's such as would enable a reasonably prudent purchaser to be aware of
the character, business acumen and general and financial circumstances of the
Company and such officers and directors.
(c) Optionee acknowledges that the Incentive Option and the Shares must
be held indefinitely unless subsequently registered under the Act and registered
or qualified under applicable state securities laws, or an exemption from such
registration or qualification is available. Optionee acknowledges that the
Company is under no obligation to register any Common Stock acquired by
Optionee. Optionee is aware of the provisions of Rule 144 promulgated under the
Act which permit limited resale of shares purchase in a private placement
subject to the satisfaction of certain conditions. Optionee is aware that the
conditions for resale set forth in Rule 144 have not been satisfied and that the
Company has no plan to satisfy these conditions in the foreseeable future.
<PAGE> 7
(d) Optionee has such knowledge and experience in financial and
business matters that Optionee is capable of evaluating the merits and risks of
Optionee's investment in the Company. Optionee understands that an investment in
the Company is speculative and any possible profits therefrom are uncertain and
that Optionee must bear the economic risks of any investment in the Company for
an indefinite period of time. Optionee is able to bear these economic risks.
(e) Optionee is a bonafide resident and domiciliary, not a temporary
transient resident, of and has his or her principal residence in the State of
California, and does not have any present intention of moving his or her
principal residence from California.
12. Successors and Assigns. Except to the extent otherwise provided in Paragraph
3 or 7(a), the provisions of this Agreement shall inure to the benefit of, and
be binding upon, the successors, administrators, heirs, legal representatives
and assigns of Optionee and the successors and assigns of the Company.
13. Liability of Company.
(a) If the Optioned Shares covered by this Agreement exceed, as of the
Grant Date, the number of shares of Common Stock which may without stockholder
approval be issued under the Plan, then this option shall be void with respect
to such excess shares unless stockholder approval of an amendment sufficiently
increasing the number of shares of Common Stock issuable under the Plan is
obtained in accordance with the provisions of Section 10 of the Plan.
(b) The inability of the Company to obtain approval from any regulatory
body having authority deemed by the Company to be necessary to the lawful
issuance and sale of any Common Stock pursuant to this option shall relieve the
Company of any liability with respect to the nonissuance or sale of the Common
Stock as to which such approval shall not have been obtained. The Company,
however, shall use its best efforts to obtain all such approvals.
14. No Employment or Service Contract. Except to the extent the terms of any
employment contract between the Company and the Optionee may expressly provide
otherwise, the Company (or any parent or subsidiary corporation of the Company
employing Optionee) shall be under no obligation to continue the employee status
of Optionee for any period of specific duration and may terminate such employee
status at any time, with or without cause.
15. Notices. Any notice required to be given or delivered to the Company under
the terms of this Agreement shall be in writing and addressed to the Company in
care of its Secretary at its corporate offices. Any notice required to be given
or delivered to Optionee shall be in writing and addressed to Optionee at the
address indicated below Optionee's signature line on this Agreement. All notices
shall be deemed to have been given or delivered upon personal delivery or upon
deposit in the U.S. mail, postage prepaid and properly addressed to the party to
be notified.
16. Construction. This Agreement and the option evidenced hereby are made and
granted pursuant to the Plan and are in all respects limited by and subject to
the express terms and provisions of the Plan. All decisions of the Plan
Administrator with respect to any questions or
<PAGE> 8
issue arising under the Plan or this Agreement shall be conclusive and binding
on all persons having an interest in this option.
17. Governing Law. The interpretation, performance, and enforcement of this
Agreement shall be governed by the laws of the State of California as applied to
agreements between California residents entered into and to be fully performed
in California.
18. Stockholder Approval. The grant of this option is subject to approval of the
Plan by the Company's stockholders within twelve (12) months after the adoption
of the Plan by the Board of Directors, and this option may not be exercised in
whole or in part until such shareholder approval is obtained. In the event that
such stockholder approval is not obtained, then this option shall thereupon
terminate and the Optionee shall have no further rights to acquire any Optioned
Shares hereunder.
19. Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
20. Withholding. Optionee hereby agrees to make appropriate arrangements with
the Company or parent or subsidiary corporation employing Optionee (if any) for
the satisfaction of any federal, state or local income tax withholding
requirements applicable to the exercise of this option.
21. Loss of Favorable Tax Treatment. No installment under this option shall
qualify for favorable tax treatment as an incentive stock option under the
federal tax laws if (and to the extent) the aggregate fair market value
(determined at the Grant Date) of the Company's Common Stock for which such
installment first become exercisable hereunder in any calendar year would, when
added to the aggregate fair market value (determined as of the respective date
or dates of grant) of the Company's Common Stock for which this option or one or
more post-1986 Incentive Options granted to the Optionee prior to the Grant Date
(whether under the plan or any other option plan of the company or any parent or
subsidiary corporation) first become exercisable during the same calendar year,
exceed $200,000 in the aggregate.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 9
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in duplicate on its behalf by its duly authorized officer and Optionee
has also executed this Agreement in duplicate, all as of the day and year
indicated above.
COMPANY:
LASER POWER CORPORATION
a Delaware Corporation
BY: ____________________________________
TITLE: _________________________________
ADDRESS: 12777 High Bluff Drive
San Diego, California 92130
OPTIONEE:
________________________________________
Name: __________________________________
Address: _______________________________
[SIGNATURE PAGE TO LASER POWER CORPORATION
INCENTIVE STOCK OPTION AGREEMENT]
<PAGE> 10
EXHIBIT "A"
VESTING SCHEDULE
As measured from the Grant Date specified in paragraph 1, this option
is exercisable as follows:
On the first, second, third, fourth and fifth anniversaries of the
grant and thereafter, until the Expiration Date specified in paragraph 2, on a
cumulative basis up to 20%, 40%, 60%, 80%, and 100%, respectively, of the total
shares specified in paragraph 1 may be purchased.
<PAGE> 11
EXHIBIT "B"
LASER POWER CORPORATION
STOCK PURCHASE AGREEMENT
(NOTICE OF EXERCISE OF OPTION)
This Agreement is made as of this _________ day of ______________________
19____, by and between Laser Power Corporation, a Delaware corporation
("Company"), and ____________________________ the holder of a stock option to
purchase shares of the Company's common stock ("Optionee").
1. EXERCISE OF OPTION
1.1 Exercise. As of the date of this Agreement (the "Purchase Date"), Optionee
hereby purchases _______________ shares of Common Stock of the Company
("Purchased Shares") pursuant to that certain option ("Option") granted Optionee
on ________________________ , 19____, ("Grant Date") to purchase up to
_________________ shares of the Company's Common Stock at an option price of $
_____________ per share ("Option Price").
1.2 Payment. Concurrently with the delivery of this Agreement to the
Secretary of the Company, Optionee shall (i) pay the Option Price for the
Purchased Shares in accordance with the provisions of the agreement between the
Company and Optionee evidencing the Option ("Option Agreement"), and (ii)
deliver whatever additional documents may be required by the Option Agreement as
a condition for exercise.
2. INVESTMENT REPRESENTATIONS
2.1, Investment Intent. Optionee hereby warrants and represents that
Optionee is sufficiently aware of the Company's business affairs and financial
condition to reach an informed and knowledgeable decision to acquire the
Purchased Shares. Optionee hereby warrants and represents that Optionee is
acquiring the Purchased Shares for Optionee's own account and not with a view to
their resale or distribution and that Optionee is prepared to hold the Purchased
Shares for an indefinite period and has no present intention to sell, distribute
or grant any participating interests in the Purchased Shares. Optionee hereby
acknowledges the fact that the Purchased Shares have not been registered under
the Securities Act of 1933, as amended (the "1933 Act"), and that the Company is
issuing the Purchased Shares to Optionee in reliance on the representations made
by Optionee herein.
<PAGE> 12
2.2 Restricted Securities. Optionee hereby confirms that Optionee has
been informed that the Purchased Shares may not be resold or transferred unless
the Purchased Shares are first registered under the Federal securities laws or
unless an exemption from such registration is available. Accordingly, Optionee
hereby acknowledges that Optionee is prepared to hold the Purchased Shares for
an in period and that Optionee is aware that Rule 144 of the Securities and
Exchange Commission issued under the 1933 Act is not presently available to
exempt the sale of the Purchased Shares from the registration requirements of
the 1933 Act. Should Rule 144 subsequently become available, Optionee is aware
that any sale of the Purchased Shares effected pursuant to the Rule may,
depending upon the status of Optionee as an "affiliate" or "non-affiliate" under
the Rule, be made only in limited amounts in accordance with provisions of the
Rule, and that in no event may any Purchased Shares be sold pursuant to the Rule
until Optionee has held the Purchased Shares for the requisite holding period
following payment in cash of the Option Price for the Purchased Shares.
2.3 Disposition of Shares. Optionee hereby agrees that Optionee shall
make no disposition of the Purchased Shares unless and until Optionee shall have
provided the Company with written assurances from the Optionee and the opinion
of the Company's counsel (at the Company's expense), in form and substance
reasonably satisfactory to the Company, that (i) the proposed disposition does
not require registration of the Purchase Shares under the 1933 Act or (ii) all
appropriate action necessary for compliance with the registration requirements
of the 1933 Act or of any exemption from registration available under the 1933
Act has been taken.
The Company shall not be required (i) to transfer on its books any
Purchased Shares which have been sold or transferred in violation of the
provisions of this Section 2 or (ii) to treat as the owner of the Purchased
Shares, or otherwise to accord voting or dividend rights to, any transferee to
whom the Purchased Shares have been transferred in contravention of this
Agreement
2.4 Restrictive Legends. In order to reflect the restrictions on
disposition of the Purchased Shares, the stock certificates for the Purchased
Shares will be endorsed with restrictive legends, including one or both of the
following legends:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1993, AS AMENDED, OF THE UNITED STATES OF
AMERICA ("ACT") OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES ("STATE ACT"). THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR OFFERED FOR SALE IN
THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES
UNDER SUCH ACT, (B) A "NO ACTION" LETTER OF THE SECURITIES AND EXCHANGE
COMMISSION WITH RESPECT TO SUCH SALE OR OFFER, OR (C) SATISFACTORY
ASSURANCES TO THE COMPANY THAT REGISTRATION UNDER SUCH ACT AND
QUALIFICATION UNDER APPLICABLE STATE ACTS IS NOT REQUIRED WITH RESPECT
TO SUCH SALE OR OFFER.
<PAGE> 13
2.5 Stockholder Rights. Until such time as the Company actually exercises its
repurchase rights under this Agreement, Optionee (or any successor in interest)
shall have all the rights of a shareholder (including voting and dividend
rights) with respect to the Purchased Shares.
3. GENERAL PROVISIONS
3.1 No Employment or Service Contract. Except to the extent the terms
of any written employment or service contract with the Optionee may expressly
provide otherwise, the Company (or any parent or subsidiary corporation
employing or retaining Optionee) is under no obligation to continue the
engagement of Optionee as a service provider to the Company ("Service Provider")
for any period of specific duration and may terminate such Service Provider
status at any time, with or without cause. For purposes of this Agreement, the
Optionee shall be deemed to be a Service Provider to the Company for so long as
the Optionee renders periodic services to the Company or one or more of its
parent or subsidiary corporations.
3.2 Optionee Undertaking. Optionee hereby agrees to take whatever
additional action and execute whatever additional documents the Company may in
its judgment deem necessary or advisable in order to carry out or effect one or
more of the obligations or restrictions imposed on either the Optionee or the
Purchased Shares pursuant to the express provisions of this Agreement.
3.3 Agreement is Entire Contract. This Agreement constitutes the entire
contract between the parties hereto with regard to the subject matter hereof.
This Agreement is made pursuant to the provisions of the Plan and shall in all
respects be construed in conformity with the express terms and provisions of the
Plan.
3.4 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of California, as such laws are
applied to contracts between California residents entered into and to be fully
performed within California.
3.5 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but all of the which together shall
constitute one and the same instrument.
<PAGE> 14
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first indicated above.
COMPANY:
LASER POWER CORPORATION,
a Delaware Corporation
BY:
TITLE:
ADDRESS: 12777 High Bluff Drive
San Diego, California 92130
OPTIONEE:
TITLE:
ADDRESS:
Please deliver to me at my address as set forth
above stock certificates representing the
Purchased Shares registered in my name (and
as
(spouse) (type of ownership)
[SIGNATURE PAGE TO LASER POWER CORPORATION
STOCK PURCHASE AGREEMENT
(NOTICE OF EXERCISE OF OPTION)]
<PAGE> 1
EXHIBIT 10.6
LASER POWER CORPORATION
STOCK OPTION AGREEMENT
(Non-Qualified)
AGREEMENT made as of the ____________ day of ___________ , 19_____ , by and
between LASER POWER CORPORATION, a Delaware corporation (hereinafter called
"Company"), and _____________________________ (hereinafter called "Optionee).
WITNESSETH:
RECITALS
A. The Board of Directors of the Company has adopted the Company's 1993
Stock Option Plan (the "Plan") for the purpose of attracting and retaining the
services of selected key employees (including officers and directors), and
non-employee directors, consultants or advisors, who contribute to the financial
success of the Company or its parent or subsidiary corporations.
B. Optionee is a key employee of the Company or its parent or
subsidiary corporations, and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the Company's
grant of a stock option to Optionee.
C. The granted option is NOT intended to be an incentive stock option
within the meaning of Section 422A of the Internal Revenue Code ("Incentive
Option").
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. Subject to and upon the terms and conditions set
forth in this Agreement, there is hereby granted to Optionee, as of the date of
this Agreement (the "Grant Date"), a stock option to purchase up ______________
to shares of the Company's Common Stock (the "Optioned Shares") from time to
time during the option term at the option price of $_______________.(the "Option
Price").
2. Option Term. This option shall have a maximum term of __________
(____) years measured from the Grant Date and shall accordingly expire at the
close of business on ____________, _____________ (the "Expiration Date"), unless
sooner terminated in accordance with Paragraph 5, 7(a) or 18.
3. Option Nontransferable; Exception. This option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution and may be exercised, during Optionee's lifetime, only
by Optionee.
4. Dates of Exercise. This option may not be exercised in whole or in
part at any time prior to the time the Plan is approved by the Company's
stockholders in accordance with Paragraph 17. Provided such stockholder approval
is obtained, Optionee may, within the specified
-1-
<PAGE> 2
term of this option and pursuant to the provisions of this Agreement, purchase
the Optioned Shares according to the vesting schedule set forth in Exhibit "A"
hereto, which is incorporated herein by this reference. Exercisable installments
may be exercised in whole or in part and, to the extent not exercised, will
accumulate and be exercisable at any time on or before the Expiration Date
unless sooner terminated.
5. Accelerated Termination of Option Term. The option term specified in
Paragraph 2 shall terminate (and this option shall cease to be exercisable)
prior to the Expiration Date should one of the following provisions become
applicable:
(a) Except as otherwise provided in subparagraphs (b), (c) or
(d) below, should Optionee cease to be an employee of the Company at any time
during the option term, then the Optionee shall have up to a
______________________ (____) month period commencing with the date of such
cessation of employee status, in which to exercise this option for any or all of
the Optioned Shares for which this option is at the time of such cessation of
employee status exercisable, but in no event shall this option be exercisable at
any time after the Expiration Date. Upon the expiration of such ____________
(____) month period or (if earlier) upon the Expiration Date, this option shall
terminate and cease to be outstanding.
(b) Should Optionee die while this option is outstanding, then
the executors or administrators of Optionee's estate or Optionee's heirs or
legatees (as the case may be) shall have the right to exercise this option for
the number of Optioned Shares (if any) for which the option is exercisable on
the date of the Optionee's death. Such right shall lapse and this option shall
cease to be exercisable upon the earlier of (i) __________ month anniversary of
the date of the optionee's death or (ii) the Expiration Date.
(c) Should Optionee become permanently disabled and cease by
reason thereof to be an employee of the Company at any time during the option
term, then the Optionee shall have a period of _____________ (____) months
(commencing with the date of such cessation of employee status) in which to
exercise this option for any or all of the Optioned Shares for which this option
is exercisable at the time of such cessation of employee status; provided,
however, that in no event shall this option be exercisable at any time after the
Expiration Date. Optionee shall be deemed to be permanently disabled if Optionee
is, by reason of any medically determinable physical or mental impairment
expected to result in death or to be of continuous duration of not less than
_____________ (____) months, unable to perform his/her usual duties for the
Company or the parent or subsidiary corporation retaining his/her services. Upon
the expiration of such limited period of exercisability or (if earlier) upon the
Expiration Date, this option shall terminate and cease to be outstanding.
(d) Should the Optionee's status as an employee be terminated
for willful misconduct, theft, fraud, embezzlement or any unauthorized
disclosure or use of confidential information or trade secrets or should the
Optionee make or attempt to make any unauthorized use or disclosure of the
confidential information or trade secrets of the Company or any parent or
subsidiary corporation, then in any such event this option shall terminate and
cease to be exercisable immediately upon such termination of employee status.
-2-
<PAGE> 3
(e) For purposes of this Paragraph 5 and for all other
purposes under this Agreement, the Optionee shall be deemed to be an employee of
the Company and to continue in the Company's employ for so long as the Optionee
remains in the employ of the Company or one or more of its parent or subsidiary
corporations.
6. Adjustment in Option Shares. In the event any change is made to the
Common Stock issuable under the Plan by reason of any stock split, stock
dividend, combination of shares, or other change affecting the outstanding
Common Stock as a class without receipt of consideration, then appropriate
adjustments will be made to (i) the total number of Optioned Shares subject to
this option and (ii) the Option Price payable per share in order to reflect such
change and thereby preclude a dilution or enlargement of benefits hereunder.
7. Special Termination of Option.
(a) In the event of any of the following transactions (a
"Corporate Transaction"):
(i) a merger or consolidation in which the Company is
not the surviving entity, except for a transaction the
principal purpose of which is to change the State of the
Company's incorporation,
(ii) the sale, transfer or other disposition of all
or substantially all of the assets of the Company, or
(iii) any reverse merger in which the Company is the
surviving entity but in which fifty percent (50%) or more of
the Company's outstanding voting stock is then this
transferred to holders different from those who held the stock
immediately prior to such merger,
then this option, if not to be assumed by the successor corporation or parent
thereof (or replaced with a comparable option to purchase shares of the capital
stock of such successor corporation or parent thereof) , automatically shall be
accelerated so that this option shall, immediately prior to the specified
effective date for such Corporate Transaction, become fully exercisable with
respect to the total number of shares of Common Stock purchasable under this
option and may be exercised for all or any portion of such shares. No such
acceleration of this option, however, shall occur if and to the extent the
acceleration of this option would, when added to the present value of certain
other payments in the nature of compensation which become due and payable to
Optionee in connection of excess parachute payments under Section (28OG(b) of
the Internal Revenue Code. The existence of such excess parachute payment shall
be determined by the Plan Administrator in the exercise of its reasonable
business judgment and on the basis of tax counsel provided the Company. This
option, to the extent not previously exercised, shall terminate upon the
consummation of such Corporate Transaction and cease to be exercisable, unless
it is expressly assumed by the successor corporation or parent thereof (or
replaced with a comparable option to purchase shares of the capital stock of
such successor corporation or parent thereof).
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<PAGE> 4
(b) This Agreement shall not in any way affect the right of
the Company to adjust, reclassify, reorganize or otherwise make changes in its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
8. Privilege of Stock Ownership. The holder of this option shall not
have any of the rights of a stockholder with respect to the Optioned Shares
until such individual shall have exercised the option and paid the Option Price.
9. Manner of Exercising Option.
(a) In order to exercise this option with respect to all or
any part of the Optioned Shares for which this option is at the time
exercisable, Optionee (or in the case of exercise after Optionee's death, the
Optionee's executor, administrator, heir or legatee, as the case may be) must
take the following actions:
(i) Execute and deliver to the Secretary of the
Company a stock purchase agreement in substantially the form
of Exhibit "B" to this Agreement (the "Purchase Agreement");
(ii) Pay the aggregate option price for the purchased
shares in one or more of the following alternative forms:
(A) full payment, in cash or cash
equivalents; or
(B) full payment in shares of Common Stock
of the Company having a Fair Market Value on the
Exercise Date (as such terms are defined below) in an
amount equal to the option price; or
(C) full payment in a combination of shares
of Common Stock of the Company valued at Fair Market
Value on the Exercise Date and cash or cash
equivalents, equal in the aggregate to the option
price; or
(D) any other form which the Plan
Administrator (as that term is defined in the Plan)
may, in its discretion, approve at the time of
exercise, in accordance with the provisions of
paragraph 15 of this Agreement; and
(iii) Furnish to the Company appropriate
documentation that the person or persons exercising the
option, if other than Optionee, have the right to exercise
this option.
(b) For purposes of Paragraph 9 (a) above, the Fair Market
Value of a share of Common Stock shall be determined in accordance with
subparagraphs (i) through (iii) below, and the Exercise Date shall be the first
date on which there shall have been delivered to the Company both (I) the
executed Purchase Agreement and (II) the payment of the option price for the
purchased shares.
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<PAGE> 5
(i) If the Common Stock is not on the Exercise Date
listed or admitted to trading on any stock exchange, but is
traded in the over-the-counter market, the Fair Market Value
shall be the mean between the highest bid and lowest asked
prices (or if such information is available, the closing
selling price) of one share of Common Stock on the Exercise
Date in the over-the-counter market, as such prices are
reported by the National Association of Securities Dealers
through its NASDAQ system or any successor system. If there
are no reported bid and asked prices (or closing selling
price) for the Common Stock on the Exercise Date, then the
mean between the highest bid and lowest asked prices (or
closing selling price) on the last preceding date for which
such quotations exist shall be determinative of Fair Market
Value.
(ii) If the Common Stock is on the Exercise Date
listed or admitted to trading on any stock exchange, then the
Fair Market Value shall be the closing selling price of one
share of Common Stock on the Exercise Date on the stock
exchange determined by the Plan Administrator to be the
primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on
such exchange. If there is no reported sale of Common Stock on
such exchange on the Exercise Date, then the Fair Market Value
shall be the closing selling price on the exchange on the last
preceding date for which such quotation exists.
(iii) If the Common Stock is on the Exercise Date
neither listed or admitted to trading on any stock exchange
nor traded in the over-the-counter market, then the Fair
Market Value shall be determined by the Plan Administrator
after taking into account such factors as the Plan
Administrator shall deem appropriate, including one or more
independent professional appraisals.
(c) This option shall be deemed to have been exercised with
respect to the number of Optioned Shares specified in the Purchase Agreement at
such time as the executed Purchase Agreement for such shares shall have been
delivered to the Company. Payment of the option price shall immediately become
due and shall accompany the Purchase Agreement. As soon thereafter as practical,
the Company shall mail or deliver to Optionee or to the other person or persons
exercising this option a certificate or certificates representing the shares so
purchased and paid for, with the appropriate legends affixed thereto.
(d) In no event may this option be exercised for any
fractional shares.
10. Compliance with Laws and Regulations.
(a) The exercise of this option and the issuance of Optioned
Shares upon such exercise shall be subject to compliance by the Company and the
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange on
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<PAGE> 6
which shares of the Company's Common Stock may be listed at the time of such
exercise and issuance.
(b) In connection with the exercise of this option, Optionee
shall execute and deliver to the Company such representations in writing as may
be requested by the Company in order for it to comply with the applicable
requirements of federal and state securities laws.
11. Successors and Assigns. Except to the extent otherwise provided in
Paragraph 3 or 7 (a), the provisions of. this Agreement shall inure to the
benefit of, and be binding upon, the successors, administrators, heirs, legal
representatives and assigns of Optionee and the successors and assigns of the
Company.
12. Liability of Company.
(a) If the Optioned Shares covered by this Agreement exceed,
as of the Grant Date, the number of shares of Common Stock which may without
stockholder approval be issued under the Plan, then this option shall be void
with respect to such excess shares unless stockholder approval of an amendment
sufficiently increasing the number of shares of Common Stock issuable under the
Plan is obtained in accordance with the provisions of Section 10 of the Plan.
(b) The inability of the Company to obtain approval from any
regulatory body having authority deemed by the Company to be necessary to the
lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Company of any liability with respect to the non-issuance or sale of
the Common Stock as to which such approval shall not have been obtained. The
Company, however, shall use its best efforts to obtain all such approvals.
13. No Employment or Service Contract. Except to the extent the terms
of any employment contract between the Company and the Optionee may expressly
provide otherwise, the Company (or any parent or subsidiary corporation of the
Company employing Optionee) shall be under no obligation to continue the
employee status of Optionee for any period of specific duration and may
terminate such employee status at any time, with or without cause.
14. Notices. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed to
the Company in care of its Secretary at its corporate offices. Any notice
required to be given or delivered to Optionee shall be in writing and addressed
to Optionee at the address indicated below Optionee's signature line on this
Agreement. All notices shall be deemed to have been given or delivered upon
personal delivery or upon deposit in the U.S. mail, postage prepaid and properly
addressed to the party to be notified.
15. Construction. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the express terms and provisions of the Plan. All decisions of the
Plan Administrator with respect to any question or issue arising under the Plan
or this Agreement shall be conclusive and binding on all persons having an
interest in this option.
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<PAGE> 7
16. Governing Law. The interpretation, performance, and enforcement of
this Agreement shall be governed by the laws of the State of California as
applied to agreements between California residents entered into and to be fully
performed in California.
17. Stockholder Approval. The grant of this option is subject to
approval of the Plan by the Company's stockholders within twelve (12) months
after the adoption of the Plan by the Board of Directors, and this option may
not be exercised in whole or in part until such shareholder approval is
obtained. In the event that such stockholder approval is not obtained, then this
option shall thereupon terminate and the Optionee shall have no further rights
to acquire any Optioned Shares hereunder.
18. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
19. Withholding. Optionee hereby agrees to make appropriate
arrangements with the Company or parent or subsidiary corporation employing
Optionee (if any) for the satisfaction of any federal, state or local income tax
withholding requirements applicable to the exercise of this option.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in duplicate on its behalf by its duly authorized officer and Optionee
has also executed this Agreement in duplicate, all as of the day and year
indicated above.
COMPANY:
LASER POWER CORPORATION,
a Delaware corporation
By: ______________________________________
Title: ___________________________________
Address: 12777 High Bluff Drive
San Diego, California 92130
OPTIONEE:
Name: ___________________________________
Address: ________________________________
________________________________
________________________________
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<PAGE> 8
[SIGNATURE PAGE TO LASER POWER CORPORATION
STOCK OPTION AGREEMENT (NON-QUALIFIED)]
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<PAGE> 9
EXHIBIT "A"
VESTING SCHEDULE
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<PAGE> 10
EXHIBIT "B"
STOCK PURCHASE AGREEMENT
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<PAGE> 1
EXHIBIT 10.7
LASER POWER CORPORATION
1997 EQUITY INCENTIVE PLAN
ADOPTED _____________, 1997
APPROVED BY STOCKHOLDERS ___________, 1997
PURPOSES.
The purpose of the Plan is to provide a means by which
selected Employees and Directors and Consultants may be given an opportunity to
benefit from increases in value of the common stock of the Company ("Common
Stock") through the granting of (i) Incentive Stock Options, (ii) Nonstatutory
Stock Options, (iii) stock bonuses, and (iv) rights to purchase restricted
stock, and (v) stock appreciation rights, all as defined below.
The Company, by means of the Plan, seeks to retain the
services of persons who are now Employees or Directors of or Consultants to the
Company and its Affiliates, to secure and retain the services of new Employees,
Directors and Consultants, and to provide incentives for such persons to exert
maximum efforts for the success of the Company and its Affiliates.
The Company intends that the Stock Awards issued under the
Plan shall, in the discretion of the Board or any Committee to which
responsibility for administration of the Plan has been delegated pursuant to
subsection 3(c), be either (i) Options granted pursuant to Section 6 hereof,
including Incentive Stock Options and Nonstatutory Stock Options, or (ii) stock
bonuses or rights to purchase restricted stock granted pursuant to Section 7
hereof, or (iii) stock appreciation rights granted pursuant to Section 8
hereof. All Options shall be separately designated Incentive Stock Options or
Nonstatutory Stock Options at the time of grant, and in such form as issued
pursuant to Section 6, and a separate certificate or certificates will be
issued for shares purchased on exercise of each type of Option.
DEFINITIONS.
"AFFILIATE" means any parent corporation or subsidiary
corporation, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f) respectively, of the Code.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means a Committee appointed by the Board in
accordance with subsection 3(c) of the Plan.
"COMPANY" means Laser Power Corporation a Delaware
corporation.
<PAGE> 2
"CONCURRENT STOCK APPRECIATION RIGHT" OR "CONCURRENT RIGHT"
mean a right granted pursuant to subsection 8(b)(2) of the Plan.
"CONSULTANT" means any person, including an advisor, engaged
by the Company or an Affiliate to render consulting services and who is
compensated for such services, provided that the term "Consultant" shall not
include Directors who are paid only a director's fee by the Company or who are
not compensated by the Company for their services as Directors.
"CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT"
means the employment or relationship as a Director or Consultant is not
interrupted or terminated. The Board, in its sole discretion, may determine
whether Continuous Status as an Employee, Director or Consultant shall be
considered interrupted in the case of: (i) any leave of absence approved by
the Board, including sick leave, military leave, or any other personal leave;
or (ii) transfers between locations of the Company or between the Company,
Affiliates or their successors.
"DIRECTOR" means a member of the Board.
"EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FAIR MARKET VALUE" means, as of any date, the value of the
Common Stock of the Company determined as follows:
If the Common Stock is listed on any established
stock exchange, or traded on the Nasdaq National Market or the Nasdaq SmallCap
Market, the Fair Market Value of a share of Common Stock shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or the exchange or market with the greatest
volume of trading in Common Stock) on the last market trading day prior to the
day of determination, as reported in the Wall Street Journal or such other
source as the Board deems reliable;
In the absence of such markets for the Common Stock,
the Fair Market Value shall be determined in good faith by the Board.
"INCENTIVE STOCK OPTION" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
"INDEPENDENT STOCK APPRECIATION RIGHT" OR INDEPENDENT RIGHT"
means a right granted pursuant to subsection 8(b)(3) of the Plan.
"NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not
a current
<PAGE> 3
Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act of 1933 ("Regulation S-K"), does not possess an interest in any
other transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K, and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
"NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
"OFFICER" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
"OPTION" means a stock option granted pursuant to the Plan.
"OPTION AGREEMENT" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. Each Option Agreement shall be subject to the terms and
conditions of the Plan.
"OPTIONEE" means a person to whom an Option is granted
pursuant to the Plan.
"OUTSIDE DIRECTOR" means a Director who either (i) is not a
current employee of the Company or an "affiliated corporation" (within the
meaning of Treasury regulations promulgated under Section 162(m) of the Code),
is not a former employee of the Company or an "affiliated corporation"
receiving compensation for prior services (other than benefits under a tax
qualified pension plan), was not an officer of the Company or an "affiliated
corporation" at any time, and is not currently receiving direct or indirect
remuneration from the Company or an "affiliated corporation" for services in
any capacity other than as a Director, or (ii) is otherwise considered an
"outside director" for purposes of Section 162(m) of the Code.
"PLAN" means this Laser Power Corporation 1997 Equity
Incentive Plan.
"RULE 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect with respect to the Company when
discretion is being exercised regarding the Plan.
"STOCK APPRECIATION RIGHT" means any of the various types of
rights which may be granted under Section 8 of the Plan.
"STOCK AWARD" means any right granted under the Plan,
including any Option, any stock bonus and any right to purchase restricted
stock, and any Stock Appreciation Right.
"STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant.
<PAGE> 4
Each Stock Award Agreement shall be subject to the terms and conditions of the
Plan.
"TANDEM STOCK APPRECIATION RIGHT" OR "TANDEM RIGHT" means a
right granted pursuant to subsection 8(b)(1) of the Plan.
ADMINISTRATION.
The Plan shall be administered by the Board unless and until
the Board delegates administration to a Committee, as provided in subsection
3(c).
The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
To determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how each Stock
Award shall be granted; whether a Stock Award will be an Incentive Stock
Option, a Nonstatutory Stock Option, a stock bonus, a right to purchase
restricted stock, a Stock Appreciation Right, or a combination of the
foregoing; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive stock pursuant to a Stock Award; whether a person shall be permitted to
receive stock upon exercise of an Independent Stock Appreciation Right; and the
number of shares with respect to which a Stock Award shall be granted to each
such person.
To construe and interpret the Plan and Stock Awards
granted under it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
To amend the Plan or a Stock Award as provided in
Section 14.
Generally, to exercise such powers and to perform
such acts as the Board deems necessary or expedient to promote the best
interests of the Company which are not in conflict with the provisions of the
Plan.
The Board may delegate administration of the Plan to a
committee or committees ("Committee") of one or more members of the Board. In
the discretion of the Board, a Committee may consist solely of two or more
Outside Directors, in accordance with Code Section 162(m), or solely of two or
more Non-Employee Directors, in accordance with Rule 16(b)-3. If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore
possessed by the Board (and references in this Plan to the Board shall
thereafter be to the Committee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest
in the Board the administration of the Plan.
SHARES SUBJECT TO THE PLAN.
<PAGE> 5
Subject to the provisions of Section 13 relating to adjustments
upon changes in stock, the stock that may be issued pursuant to Stock Awards
shall not exceed in the aggregate one million (1,000,000) shares of the Common
Stock after adjustment for the reverse split of 1.5 to 1. If any Stock Award
shall for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full (or vested in the case of Restricted Stock), the
stock not acquired under such Stock Award shall revert to and again become
available for issuance under the Plan. Shares subject to Stock Appreciation
Rights exercised in accordance with Section 8 of the Plan shall not be available
for subsequent issuance under the Plan.
The stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.
ELIGIBILITY.
Incentive Stock Options and Stock Appreciation Rights
appurtenant thereto may be granted only to Employees. Stock Awards other than
Incentive Stock Options and Stock Appreciation Rights appurtenant thereto may
be granted only to Employees, Directors or Consultants.
No person shall be eligible for the grant of an Incentive
Stock Option or an award to purchase restricted stock if, at the time of grant,
such person owns (or is deemed to own pursuant to Section 424(d) of the Code)
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or of any of its Affiliates unless the
exercise price of such Option is at least one hundred ten percent (110%) of the
Fair Market Value of such stock at the date of grant and the Option is not
exercisable after the expiration of five (5) years from the date of grant, or
in the case of a restricted sock purchase award, the purchase price is at least
one hundred percent (100%) of the Fair Market Value of such stock at the date
of grant.
Subject to the provisions of Section 13 relating to
adjustments upon changes in stock, no person shall be eligible to be granted
Options and Stock Appreciation Rights covering more than [__________________
(__________)] shares of the Common Stock in any calendar year. This subsection
5(c) shall not apply until (i) the earliest of: (A) the first material
modification of the Plan (including any increase to the number of shares
reserved for issuance under the Plan in accordance with Section 4); (B) the
issuance of all of the shares of Common Stock reserved for issuance under the
Plan; (C) the expiration of the Plan; or (D) the first meeting of stockholders
at which directors are to be elected that occurs after the close of the third
calendar year following the calendar year in which occurred the first
registration of an equity security under Section 12 of the Exchange Act; or
(ii) such other date required by Section 162(m) of the Code and the rules and
regulations promulgated thereunder.
OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise)
<PAGE> 6
the substance of each of the following provisions:
TERM. No Option shall be exercisable after the expiration of
ten (10) years from the date it was granted.
PRICE. The exercise price of each Incentive Stock Option
shall be not less than one hundred percent (100%) of the Fair Market Value of
the stock subject to the Option on the date the Option is granted and the
exercise price of each Nonstatutory Stock Option shall be not less than
eighty-five percent (85%) of the Fair Market Value of the stock subject to the
Option on the date the Option is granted. Notwithstanding the foregoing, an
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of
Section 424(a) of the Code.
CONSIDERATION. The purchase price of stock acquired pursuant
to an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either in cash at the time the Option is exercised, or at the
discretion of the Board or the Committee, at the time of the grant of the
Option, by delivery to the Company of other Common Stock of the Company,
according to a deferred payment arrangement, except that payment of the common
stock's "par value" (as defined in the Delaware General Corporation Law) shall
not be made by deferred payment, or other arrangement (which may include,
without limiting the generality of the foregoing, the use of other Common Stock
of the Company) with the person to whom the Option is granted or to whom the
Option is transferred pursuant to subsection 6(d), or (C) in any other form of
legal consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate of interest
necessary to avoid the treatment as interest, under any applicable provisions
of the Code, of any amounts other than amounts stated to be interest under the
deferred payment arrangement.
TRANSFERABILITY. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Incentive
Stock Option is granted only by such person. A Nonstatutory Stock Option may
be transferred to the extent provided in the Option Agreement; provided that if
the Option Agreement does not expressly permit the transfer of a Nonstatutory
Stock Option, the Nonstatutory Stock Option shall not be transferable except by
will, by the laws of descent and distribution or pursuant to a domestic
relations order satisfying the requirements of Rule 16b-3 and shall be
exercisable during the lifetime of the person to whom the Option is granted
only by such person or any transferee pursuant to a domestic relations order.
Notwithstanding the foregoing, the person to whom the Option is granted may, by
delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionee, shall thereafter be entitled to exercise the Option.
VESTING. The total number of shares of stock subject to an
Option may, but need not, be allotted in periodic installments (which may, but
need not, be equal). The Option Agreement may provide that from time to time
during each of such installment periods, the Option
<PAGE> 7
may become exercisable ("vest") with respect to some or all of the shares
allotted to that period, and may be exercised with respect to some or all of
the shares allotted to such period and/or any prior period as to which the
Option became vested but was not fully exercised. The Option may be subject to
such other terms and conditions on the time or times when it may be exercised
(which may be based on performance or other criteria) as the Board may deem
appropriate. The provisions of this subsection 6(e) are subject to any Option
provisions governing the minimum number of shares as to which an Option may be
exercised.
TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that
the Optionee was entitled to exercise it at the date of termination) but only
within such period of time ending on the earlier of (i) the date thirty (30)
days after the termination of the Optionee's Continuous Status as an Employee,
Director or Consultant (or such longer or shorter period specified in the
Option Agreement), or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, after termination, the Optionee does not
exercise his or her Option within the time specified in the Option Agreement,
the Option shall terminate, and the shares covered by such Option shall revert
to and again become available for issuance under the Plan.
An Optionee's Option Agreement may also provide that if the exercise
of the Option following the termination of the Optionee's Continuous Status as
an Employee, Director, or Consultant (other than upon the Optionee's death or
disability) would result in liability under Section 16(b) of the Exchange Act,
then the Option shall terminate on the earlier of (i) the expiration of the
term of the Option set forth in the Option Agreement, or (ii) the tenth (10th)
day after the last date on which such exercise would result in such liability
under Section 16(b) of the Exchange Act. Finally, an Optionee's Option
Agreement may also provide that if the exercise of the Option following the
termination of the Optionee's Continuous Status as an Employee, Director or
Consultant (other than upon the Optionee's death or disability) would be
prohibited at any time solely because the issuance of shares would violate the
registration requirements under the Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option set forth in the first
paragraph of this subsection 6(f), or (ii) the expiration of a period of thirty
(30) days after the termination of the Optionee's Continuous Status as an
Employee, Director or Consultant during which the exercise of the Option would
not be in violation of such registration requirements.
DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result of the
Optionee's disability, the Optionee may exercise his or her Option (to the
extent that the Optionee was entitled to exercise it at the date of
termination), but only within such period of time ending on the earlier of (i)
the date six (6) months following such termination (or such longer or shorter
period specified in the Option Agreement), or (ii) the expiration of the term
of the Option as set forth in the Option Agreement. If, at the date of
termination, the Optionee is not entitled to exercise his or her entire Option,
the shares covered by the unexercisable portion of the Option shall revert to
and again become available for issuance under the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified
herein, the Option shall terminate, and the shares covered by
<PAGE> 8
such Option shall revert to and again become available for issuance under the
Plan.
DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a period specified in the Option after the termination of, the
Optionee's Continuous Status as an Employee, Director or Consultant, the Option
may be exercised (to the extent the Optionee was entitled to exercise the
Option at the date of death) by the Optionee's estate, by a person who acquired
the right to exercise the Option by bequest or inheritance or by a person
designated to exercise the option upon the Optionee's death pursuant to
subsection 6(d), but only within the period ending on the earlier of (i) the
date twelve (12) months following the date of death (or such longer or shorter
period specified in the Option Agreement), or (ii) the expiration of the term
of such Option as set forth in the Option Agreement. If, at the time of death,
the Optionee was not entitled to exercise his or her entire Option, the shares
covered by the unexercisable portion of the Option shall revert to and again
become available for issuance under the Plan. If, after death, the Option is
not exercised within the time specified herein, the Option shall terminate, and
the shares covered by such Option shall revert to and again become available
for issuance under the Plan.
EARLY EXERCISE. The Option may, but need not, include a
provision whereby the Optionee may elect at any time while an Employee,
Director or Consultant to exercise the Option as to any part or all of the
shares subject to the Option prior to the full vesting of the Option. Any
unvested shares so purchased may be subject to a repurchase right in favor of
the Company or to any other restriction the Board determines to be appropriate.
RE-LOAD OPTIONS. Without in any way limiting the authority of
the Board or Committee to make or not to make grants of Options hereunder, the
Board or Committee shall have the authority (but not an obligation) to include
as part of any Option Agreement a provision entitling the Optionee to a further
Option (a "Re-Load Option") in the event the Optionee exercises the Option
evidenced by the Option agreement, in whole or in part, by surrendering other
shares of Common Stock in accordance with this Plan and the terms and
conditions of the Option Agreement. Any such Re-Load Option (i) shall be for a
number of shares equal to the number of shares surrendered as part or all of
the exercise price of such Option; (ii) shall have an expiration date which is
the same as the expiration date of the Option the exercise of which gave rise
to such Re-Load Option; and (iii) shall have an exercise price which is equal
to one hundred percent (100%) of the Fair Market Value of the Common Stock
subject to the Re-Load Option on the date of exercise of the original Option.
Notwithstanding the foregoing, a Re-Load Option which is an Incentive Stock
Option and which is granted to a 10% stockholder (as described in subsection
5(c)), shall have an exercise price which is equal to one hundred ten percent
(110%) of the Fair Market Value of the stock subject to the Re-Load Option on
the date of exercise of the original Option and shall have a term which is no
longer than five (5) years.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board or Committee may designate at the time
of the grant of the original Option; provided, however, that the designation of
any Re-Load Option as an Incentive Stock Option shall be subject to the one
hundred thousand dollars ($100,000) annual limitation on exercisability of
Incentive Stock Options described in subsection 11(d) of the Plan and in
Section 422(d) of the Code. There shall be no Re-Load Options on a Re-Load
Option. Any such Re-Load Option shall be subject to the availability of
sufficient shares under subsection 4(a) and shall be subject to such
<PAGE> 9
other terms and conditions as the Board or Committee may determine which are
not inconsistent with the express provisions of the Plan regarding the terms of
Options.
TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in
such form and shall contain such terms and conditions as the Board or the
Committee shall deem appropriate. The terms and conditions of stock bonus or
restricted stock purchase agreements may change from time to time, and the
terms and conditions of separate agreements need not be identical, but each
stock bonus or restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions as appropriate:
(a) PURCHASE PRICE. The purchase price under each restricted
stock purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such agreement but in no event shall the purchase
price be less than eighty-five percent (85%) of the stock's Fair Market Value
on the date such award is made. Notwithstanding the foregoing, the Board or
the Committee may determine that eligible participants in the Plan may be
awarded stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company for its benefit.
(b) TRANSFERABILITY. No rights under a stock bonus or restricted
stock purchase agreement shall be transferable except by will or the laws of
descent and distribution or, if the agreement so provides, pursuant to a
domestic relations order satisfying the requirements of Rule 16b-3 so long as
stock awarded under such agreement remains subject to the terms of the
agreement.
(c) CONSIDERATION. The purchase price of stock acquired pursuant
to a stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment arrangement, except that payment of the common stock's "par
value" (as defined in the Delaware General Corporation Law) shall not be made
by deferred payment, or other arrangement with the person to whom the stock is
sold; or (iii) in any other form of legal consideration that may be acceptable
to the Board or the Committee in its discretion. Notwithstanding the
foregoing, the Board or the Committee to which administration of the Plan has
been delegated may award stock pursuant to a stock bonus agreement in
consideration for past services actually rendered to the Company or for its
benefit.
(d) VESTING. Shares of stock sold or awarded under the Plan may,
but need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee.
(e) TERMINATION OF CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR
CONSULTANT. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire any or all of the shares of stock held by that person which have not
vested as of the date of termination under the terms of the stock bonus or
restricted stock purchase agreement between the Company and such person.
<PAGE> 10
STOCK APPRECIATION RIGHTS.
The Board or Committee shall have full power and authority,
exercisable in its sole discretion, to grant Stock Appreciation Rights under
the Plan to Employees or Directors of or Consultants to, the Company or its
Affiliates. To exercise any outstanding Stock Appreciation Right, the holder
must provide written notice of exercise to the Company in compliance with the
provisions of the Stock Award Agreement evidencing such right. Except as
provided in subsection 5(c), no limitation shall exist on the aggregate amount
of cash payments the Company may make under the Plan in connection with the
exercise of a Stock Appreciation Right.
Three types of Stock Appreciation Rights shall be authorized
for issuance under the Plan:
TANDEM STOCK APPRECIATION RIGHTS. Tandem Stock
Appreciation Rights will be granted appurtenant to an Option, and shall, except
as specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to the particular Option grant to which it pertains.
Tandem Stock Appreciation Rights will require the holder to elect between the
exercise of the underlying Option for shares of stock and the surrender, in
whole or in part, of such Option for an appreciation distribution. The
appreciation distribution payable on the exercised Tandem Right shall be in
cash (or, if so provided, in an equivalent number of shares of stock based on
Fair Market Value on the date of the Option surrender) in an amount up to the
excess of (A) the Fair Market Value (on the date of the Option surrender) of
the number of shares of stock covered by that portion of the surrendered Option
in which the Optionee is vested over (B) the aggregate exercise price payable
for such vested shares.
CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent
Rights will be granted appurtenant to an Option and may apply to all or any
portion of the shares of stock subject to the underlying Option and shall,
except as specifically set forth in this Section 8, be subject to the same
terms and conditions applicable to the particular Option grant to which it
pertains. A Concurrent Right shall be exercised automatically at the same time
the underlying Option is exercised with respect to the particular shares of
stock to which the Concurrent Right pertains. The appreciation distribution
payable on an exercised Concurrent Right shall be in cash (or, if so provided,
in an equivalent number of shares of stock based on Fair Market Value on the
date of the exercise of the Concurrent Right) in an amount equal to such
portion as shall be determined by the Board or the Committee at the time of the
grant of the excess of (A) the aggregate Fair Market Value (on the date of the
exercise of the Concurrent Right) of the vested shares of stock purchased under
the underlying Option which have Concurrent Rights appurtenant to them over (B)
the aggregate exercise price paid for such shares.
INDEPENDENT STOCK APPRECIATION RIGHTS. Independent
Rights will be granted independently of any Option and shall, except as
specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to Nonstatutory Stock Options as set forth in Section 6.
They shall be denominated in share equivalents. The appreciation distribution
payable on the exercised Independent Right shall be not greater than an amount
equal to the excess of (A) the aggregate Fair Market Value (on the date of the
exercise of the Independent Right) of a number
<PAGE> 11
of shares of Company stock equal to the number of share equivalents in which
the holder is vested under such Independent Right, and with respect to which
the holder is exercising the Independent Right on such date, over (B) the
aggregate Fair Market Value (on the date of the grant of the Independent Right)
of such number of shares of Company stock. The appreciation distribution
payable on the exercised Independent Right shall be in cash or, if so provided,
in an equivalent number of shares of stock based on Fair Market Value on the
date of the exercise of the Independent Right.
CANCELLATION AND RE-GRANT OF OPTIONS.
The Board or the Committee shall have the authority to effect,
at any time and from time to time, (i) the repricing of any outstanding
Options and/or any Stock Appreciation Rights under the Plan and/or (ii) with
the consent of any adversely affected holders of Options and/or Stock
Appreciation Rights, the cancellation of any outstanding Options and/or Stock
Appreciation Rights under the Plan and the grant in substitution therefor of
new Options and/or Stock Appreciation Rights under the Plan covering the same
or different numbers of shares of stock, but having an exercise price per share
not less than eighty-five percent (85%) of the Fair Market Value for a
Nonstatutory Stock Option, one hundred percent (100%) of the Fair Market Value
for an Incentive Stock Option or, in the case of an Incentive Stock Option held
by a 10% stockholder (as described in subsection 5(c)), not less than one
hundred ten percent (110%) of the Fair Market Value per share of stock on the
new grant date. Notwithstanding the foregoing, the Board or the Committee may
grant an Option and/or Stock Appreciation Rights with an exercise price lower
than that set forth above if such Option and/or Stock Appreciation Rights is
granted as part of a transaction to which section 424(a) of the Code applies.
Shares subject to an Option or Stock Appreciation Right
canceled under this Section 8 shall continue to be counted against the maximum
award of Options or Stock Appreciation Rights permitted to be granted pursuant
to subsection 5(c) of the Plan. The repricing of an Option and/or Stock
Appreciation Right under this Section 8, resulting in a reduction of the
exercise price, shall be deemed to be a cancellation of the original Option
and/or Stock Appreciation Right and the grant of a substitute Option and/or
Stock Appreciation Rights; in the event of such repricing, both the original
and the substituted Options and Stock Appreciation Rights shall be counted
against the maximum awards of Options and Stock Appreciation Rights permitted
to be granted pursuant to subsection 5(c) of the Plan. The provisions of this
subsection 8(b) shall be applicable only to the extent required by Section
162(m) of the Code.
COVENANTS OF THE COMPANY.
During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of stock required to satisfy such
Stock Awards.
The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such authority as may be
required to issue and sell shares under Stock Awards; provided, however, that
this undertaking shall not require the Company to register under the Securities
Act of 1933, as amended (the "Securities Act") either the Plan, any Stock Award
or any stock issued or issuable pursuant to any such Stock Award. If, after
reasonable
<PAGE> 12
efforts, the Company is unable to obtain from any such regulatory commission or
agency the authority which counsel for the Company deems necessary for the
lawful issuance and sale of stock under the Plan, the Company shall be relieved
from any liability for failure to issue and sell stock upon exercise of such
Stock Awards unless and until such authority is obtained.
USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.
MISCELLANEOUS.
The Board shall have the power to accelerate the time at which
a Stock Award may first be exercised or the time during which a Stock Award or
any part thereof will vest pursuant to subsection 6(e) or 7(d), notwithstanding
the provisions in the Stock Award stating the time at which it may first be
exercised or the time during which it will vest.
Neither an Employee, Director nor a Consultant nor any person
to whom a Stock Award is transferred in accordance with the Plan shall be
deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares subject to such Stock Award unless and until such person
has satisfied all requirements for exercise of the Stock Award pursuant to its
terms.
Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any Employee, Consultant or other
holder of Stock Awards any right to continue in the employ of the Company or
any Affiliate or to continue serving as a Consultant and Director, or shall
affect the right of the Company or any Affiliate to terminate the employment of
any Employee with or without notice and with or without cause, or the right to
terminate the relationship of any Consultant pursuant to the terms of such
Consultant's agreement with the Company or Affiliate or service as a Director
pursuant to the Company's Bylaws and the laws of the state in which the Company
is incorporated.
To the extent that the aggregate Fair Market Value (determined
at the time of grant) of stock with respect to which Incentive Stock Options
are exercisable for the first time by any Optionee during any calendar year
under all plans of the Company and its Affiliates exceeds one hundred thousand
dollars ($100,000), the Options or portions thereof which exceed such limit
(according to the order in which they were granted) shall be treated as
Nonstatutory Stock Options.
The Company may require any person to whom a Stock Award is
granted, or any person to whom a Stock Award is transferred in accordance with
the Plan, as a condition of exercising or acquiring stock under any Stock
Award, to give written assurances satisfactory to the Company as to such
person's knowledge and experience in financial and business matters and/or to
employ a purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and to
give written assurances satisfactory to the Company stating that such person is
acquiring the
<PAGE> 13
stock subject to the Stock Award for such person's own account and not with any
present intention of selling or otherwise distributing the stock. The
foregoing requirements, and any assurances given pursuant to such requirements,
shall be inoperative if the issuance of the shares upon the exercise or
acquisition of stock under the Stock Award has been registered under a then
currently effective registration statement under the Securities Act, or as to
any particular requirement, a determination is made by counsel for the Company
that such requirement need not be met in the circumstances under the then
applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the
transfer of the stock.
To the extent provided by the terms of a Stock Award
Agreement, the person to whom a Stock Award is granted may satisfy any federal,
state or local tax withholding obligation relating to the exercise or
acquisition of stock under a Stock Award by any of the following means or by a
combination of such means: (1) tendering a cash payment; (2) authorizing the
Company to withhold shares from the shares of the Common Stock otherwise
issuable to the participant as a result of the exercise or acquisition of stock
under the Stock Award; or (3) delivering to the Company owned and unencumbered
shares of the Common Stock of the Company.
ADJUSTMENTS UPON CHANGES IN STOCK.
If any change is made in the stock subject to the Plan, or
subject to any Stock Award, without the receipt of consideration by the Company
(through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
class(es) and maximum number of shares subject to the Plan pursuant to
subsection 4(a) and the maximum number of shares subject to award to any person
during any calendar year pursuant to subsection 5(d), and the outstanding Stock
Awards will be appropriately adjusted in the class(es) and number of shares and
price per share of stock subject to such outstanding Stock Awards. Such
adjustments shall be made by the Board or the Committee, the determination of
which shall be final, binding and conclusive. (The conversion of any
convertible securities of the Company shall not be treated as a "transaction
not involving the receipt of consideration by the Company".)
In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or consolidation
in which the Company is not the surviving corporation; (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise; or (4) after the Listing Date the acquisition by any person,
entity or group within the meaning of Section 13(d) or 14(d) of the Exchange
Act, or any comparable successor provisions (excluding any employee benefit
plan, or related trust, sponsored or maintained by the Company or any Affiliate
of the Company) of the beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act, or comparable successor rule) of securities
of the Company representing at least fifty percent (50%) of the combined voting
power entitled to vote in the
<PAGE> 14
election of directors, then to the extent permitted by applicable law: (i) any
surviving corporation or an Affiliate of such surviving corporation shall
assume any Stock Awards outstanding under the Plan or shall substitute similar
Stock Awards for those outstanding under the Plan, or (ii) such Stock Awards
shall continue in full force and effect. In the event any surviving
corporation and its Affiliates refuse to assume or continue such Stock Awards,
or to substitute similar stock award for those outstanding under the Plan,
then, with respect to Stock Awards held by persons then performing services as
Employees, Directors or Consultants, the time during which such Stock Awards
may be exercised shall be accelerated and the Stock Awards terminated if not
exercised (if applicable) after such acceleration and at or prior to such
event, and (B) with respect to any other Stock Awards outstanding under the
Plan, such Stock Awards shall be terminated if not exercised (if applicable)
prior to such event.
AMENDMENT OF THE PLAN AND STOCK AWARDS.
The Board at any time, and from time to time, may amend the
Plan. However, except as provided in Section 13 relating to adjustments upon
changes in stock, no amendment shall be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary for
the Plan to satisfy the requirements of Section 422 of the Code, Rule 16b-3 or
any Nasdaq or securities exchange listing requirements.
The Board may in its sole discretion submit any other
amendment to the Plan for stockholder approval, including, but not limited to,
amendments to the Plan intended to satisfy the requirements of Section 162(m)
of the Code and the regulations thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
It is expressly contemplated that the Board may amend the Plan
in any respect the Board deems necessary or advisable to provide eligible
Employees, Directors or Consultants with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations promulgated
thereunder relating to Incentive Stock Options and/or to bring the Plan and/or
Incentive Stock Options granted under it into compliance therewith.
Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Stock Award was
granted and (ii) such person consents in writing.
The Board at any time, and from time to time, may amend the
terms of any one or more Stock Award; provided, however, that the rights and
obligations under any Stock Award shall not be impaired by any such amendment
unless (i) the Company requests the consent of the person to whom the Stock
Award was granted and (ii) such person consents in writing.
TERMINATION OR SUSPENSION OF THE PLAN.
The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate ten (10) years from the date
the Plan is adopted by the Board
<PAGE> 15
or approved by the stockholders of the Company, whichever is earlier. No Stock
Awards may be granted under the Plan while the Plan is suspended or after it is
terminated.
Rights and obligations under any Stock Award granted while the
Plan is in effect shall not be impaired by suspension or termination of the
Plan, except with the consent of the person to whom the Stock Award was
granted.
EFFECTIVE DATE OF PLAN.
The Plan shall become effective on the date of closing of the initial
public offering pursuant to an effective registration statement covering the
offer and sale of Common Stock to the public, but no Stock Awards granted under
the Plan shall be exercised unless and until the Plan has been approved by the
stockholders of the Company, which approval shall be within twelve (12) months
before or after the date the Plan is adopted by the Board.
<PAGE> 1
EXHIBIT 10.8
LASER POWER CORPORATION
1997 EQUITY INCENTIVE PLAN
INCENTIVE STOCK OPTION
__________________________________, Optionee:
Laser Power Corporation (the "Company"), pursuant to its 1997 Equity
Incentive Plan (the "Plan"), has granted to you, the optionee named above, an
option to purchase shares of the common stock of the Company ("Common Stock").
This option is intended to qualify as an "incentive stock option" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"). Defined terms not explicitly defined in this agreement but defined in
the Plan shall have the same definitions as in the Plan.
The details of your option are as follows:
TOTAL NUMBER OF SHARES SUBJECT TO THIS OPTION. The total
number of shares of Common Stock subject to this option is ____________________
(__________).
VESTING. Subject to the limitations contained herein,
twenty-five percent (25%) of the shares will vest (become exercisable) on the
first anniversary of the date of grant and one forty-eighth (1/48th) of the
shares will then vest each month thereafter until either (i) you cease to
provide services to the Company for any reason, or (ii) this option becomes
fully vested.
EXERCISE PRICE AND METHOD OF PAYMENT.
EXERCISE PRICE. The exercise price of this option is
___________________________ ($___________) per share, being not less than the
fair market value of the Common Stock on the date of grant of this option.
METHOD OF PAYMENT. Payment of the exercise price per
share is due in full upon exercise of all or any part of each installment which
has accrued to you. You may elect, to the extent permitted by applicable
statutes and regulations, to make payment of the exercise price under one of
the following alternatives:
Payment of the exercise price per share
in cash (including check) at the time of exercise;
Payment pursuant to a program developed
under Regulation T as promulgated by the Federal Reserve Board which, prior to
the issuance of Common Stock, results in either the receipt of cash (or check)
by the Company or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company from the sales proceeds;
Provided that at the time of exercise
the Company's Common Stock is publicly traded and quoted regularly in the Wall
Street Journal, payment by
<PAGE> 2
delivery of already-owned shares of Common Stock, held for the period required
to avoid a charge to the Company's reported earnings, and owned free and clear
of any liens, claims, encumbrances or security interests, which Common Stock
shall be valued at its fair market value on the date of exercise; or
Payment by a combination of the methods
of payment permitted by subparagraph 3(b)(i) through 3(b)(iii) above.
WHOLE SHARES. This option may not be exercised for any number
of shares which would require the issuance of anything other than whole shares.
SECURITIES LAW COMPLIANCE. Notwithstanding anything to the
contrary contained herein, this option may not be exercised unless the shares
issuable upon exercise of this option are then registered under the Act or, if
such shares are not then so registered, the Company has determined that such
exercise and issuance would be exempt from the registration requirements of the
Act.
TERM. The term of this option commences on __________, 19__,
the date of grant, and expires on the day before the tenth anniversary of the
date of grant (the "Expiration Date"), unless this option expires sooner as set
forth below or in the Plan. In no event may this option be exercised on or
after the Expiration Date. This option shall terminate prior to the Expiration
Date as follows: three (3) months after the termination of your Continuous
Status as an Employee, Director or Consultant with the Company or an Affiliate
unless one of the following circumstances exists:
Your termination of Continuous Status as an Employee,
Director or Consultant is due to your disability. This option will then expire
on the earlier of the Expiration Date set forth above or twelve (12) months
following such termination of Continuous Status as an Employee, Director or
Consultant. You should be aware that if your disability is not considered a
permanent and total disability within the meaning of Section 422(c)(6) of the
Code, and you exercise this option more than three (3) months following the
date of your termination of employment, your exercise will be treated for tax
purposes as the exercise of a "nonstatutory stock option" instead of an
"incentive stock option."
Your termination of Continuous Status as an Employee,
Director or Consultant is due to your death or your death occurs within three
(3) months following your termination of Continuous Status as an Employee,
Director or Consultant for any other reason. This option will then expire on
the earlier of the Expiration Date set forth above or twelve (12) months after
your death.
If during any part of such three (3) month period you
may not exercise your option solely because of the condition set forth in
paragraph 5 above, then your option will not expire until the earlier of the
Expiration Date set forth above or until this option shall have been
exercisable for an aggregate period of three (3) months after your termination
of Continuous Status as an Employee, Director or Consultant.
<PAGE> 3
If your exercise of the option within three (3)
months after termination of your Continuous Status as an Employee, Director or
Consultant with the Company or with an Affiliate would result in liability
under section 16(b) of the Securities Exchange Act of 1934, then your option
will expire on the earlier of the Expiration Date set forth above, the tenth
(10th) day after the last date upon which exercise would result in such
liability or six (6) months and ten (10) days after the termination of your
Continuous Status as an Employee, Director or Consultant with the Company or an
Affiliate.
However, this option may be exercised following termination of
Continuous Status as an Employee, Director or Consultant only as to that number
of shares as to which it was exercisable on the date of termination of
Continuous Status as an Employee, Director or Consultant under the provisions
of paragraph 2 of this option.
In order to obtain the federal income tax advantages associated with
an "incentive stock option," the Code requires that at all times beginning on
the date of grant of the option and ending on the day three (3) months before
the date of the option's exercise, you must be an employee of the Company or an
Affiliate, except in the event of your death or permanent and total disability.
The Company has provided for continued vesting or extended exercisability of
your option under certain circumstances for your benefit, but cannot guarantee
that your option will necessarily be treated as an "incentive stock option" if
you provide services to the Company or an Affiliate as a Consultant or exercise
your option more than three (3) months after the date your employment with the
Company and all Affiliates terminates.
EXERCISE.
This option may be exercised, to the extent
specified above, by delivering a notice of exercise (in a form designated by
the Company) together with the exercise price to the Secretary of the Company,
or to such other person as the Company may designate, during regular business
hours, together with such additional documents as the Company may then require
pursuant to subsection 12(f) of the Plan.
By exercising this option you agree that:
as a precondition to the completion of
any exercise of this option, the Company may require you to enter an
arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of (1) the exercise of
this option; (2) the lapse of any substantial risk of forfeiture to which the
shares are subject at the time of exercise; or (3) the disposition of shares
acquired upon such exercise;
you will notify the Company in writing
within fifteen (15) days after the date of any disposition of any of the shares
of the Common Stock issued upon exercise of this option that occurs within two
(2) years after the date of this option grant or within one (1) year after such
shares of Common Stock are transferred upon exercise of this option; and
the Company (or a representative of the
underwriters) may, in connection with the first underwritten registration of
the offering of any securities of the
<PAGE> 4
Company under the Act, require that you not sell, dispose of, transfer, make
any short sale of, grant any option for the purchase of, or enter into any
hedging or similar transaction with the same economic effect as a sale, any
shares of Common Stock or other securities of the Company held by you, for a
period of time specified by the underwriter(s) (not to exceed one hundred
eighty (180) days) following the effective date of a registration statement of
the Company filed under the Act. You further agree to execute and deliver such
other agreements as may be reasonably requested by the Company and/or the
underwriter(s) which are consistent with the foregoing or which are necessary
to give further effect thereto. In order to enforce the foregoing covenant,
the Company may impose stop-transfer instructions with respect to your Common
Stock until the end of such period.
TRANSFERABILITY. This option is not transferable, except by
will or by the laws of descent and distribution, and is exercisable during your
life only by you.
OPTION NOT A SERVICE CONTRACT. This option is not an
employment contract and nothing in this option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company, or of the Company to continue your employment with the Company. In
addition, nothing in this option shall obligate the Company or any Affiliate,
or their respective shareholders, Board of Directors, officers or employees to
continue any relationship which you might have as a Director or Consultant for
the Company or Affiliate.
NOTICES. Any notices provided for in this option or the Plan
shall be given in writing and shall be deemed effectively given upon receipt
or, in the case of notices delivered by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you at the
address specified below or at such other address as you hereafter designate by
written notice to the Company.
GOVERNING PLAN DOCUMENT. This option is subject to all the
provisions of the Plan, a copy of which is attached hereto and its provisions
are hereby made a part of this option, including without limitation the
provisions of Section 6 of the Plan relating to option provisions, and is
further subject to all interpretations, amendments, rules and regulations which
may from time to time be promulgated and adopted pursuant to the Plan. In the
event of any conflict between the provisions of this option and those of the
Plan, the provisions of the Plan shall control.
Dated the ____ day of __________________, 19__.
Very truly yours,
By_____________________________________
Duly authorized on behalf of the
Board of Directors
<PAGE> 5
LASER POWER CORPORATION
1997 EQUITY INCENTIVE PLAN
ACKNOWLEDGMENT OF OPTION TERMS
The undersigned:
Acknowledges receipt of the foregoing option and the
attachments referenced therein and understands that all rights and liabilities
with respect to this option are set forth in the option and the Plan; and
Acknowledges that as of the date of grant of this option, it
sets forth the entire understanding between the undersigned optionee and the
Company and its Affiliates regarding the acquisition of stock in the Company
and supersedes all prior oral and written agreements on that subject with the
exception of (i) the options previously granted and delivered to the
undersigned under stock option plans of the Company, and (ii) the following
agreements only:
NONE
(Initial)
OTHER
Date OPTIONEE
Address:
<PAGE> 1
EXHIBIT 10.9
LASER POWER CORPORATION
1997 EQUITY INCENTIVE PLAN
NONSTATUTORY STOCK OPTION
__________________________________, Optionee:
Laser Power Corporation (the "Company"), pursuant to its 1997 Equity
Incentive Plan (the "Plan"), has granted to you, the optionee named above, an
option to purchase shares of the common stock of the Company ("Common Stock").
This option is not intended to qualify and will not be treated as an "incentive
stock option" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"). Defined terms not explicitly defined in this
agreement but defined in the Plan shall have the same definitions as in the
Plan.
The details of your option are as follows:
TOTAL NUMBER OF SHARES SUBJECT TO THIS OPTION. The total
number of shares of Common Stock subject to this option is
_____________________ (____________).
VESTING. Subject to the limitations contained herein,
twenty-five percent (25%) of the shares will vest (become exercisable) on the
first anniversary of the date of grant and one forty-eighth (1/48th) of the
shares will then vest each month thereafter until either (i) you cease to
provide services to the Company for any reason, or (ii) this option becomes
fully vested.
EXERCISE PRICE AND METHOD OF PAYMENT.
EXERCISE PRICE. The exercise price of this option is
_______________ ($____________) per share, being not less than 85% of the fair
market value of the Common Stock on the date of grant of this option.
METHOD OF PAYMENT. Payment of the exercise price per
share is due in full upon exercise of all or any part of each installment which
has accrued to you. You may elect, to the extent permitted by applicable
statutes and regulations, to make payment of the exercise price under one of
the following alternatives:
Payment of the exercise price per share in
cash (including check) at the time of exercise;
Payment pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board which, prior to the
issuance of Common Stock, results in either the receipt of cash (or check) by
the Company or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company from the sales proceeds;
Provided that at the time of exercise the
Company's Common Stock is publicly traded and quoted regularly in the Wall
Street Journal, payment by delivery of already-owned shares of Common Stock,
held for the period required to avoid a charge to the
<PAGE> 2
Company's reported earnings, and owned free and clear of any liens, claims,
encumbrances or security interests, which Common Stock shall be valued at its
fair market value on the date of exercise; or
Payment by a combination of the methods of
payment permitted by subparagraph 3(b)(i) through 3(b)(iii) above.
WHOLE SHARES. This option may not be exercised for any number
of shares which would require the issuance of anything other than whole shares.
SECURITIES LAW COMPLIANCE. Notwithstanding anything to the
contrary contained herein, this option may not be exercised unless the shares
issuable upon exercise of this option are then registered under the Act or, if
such shares are not then so registered, the Company has determined that such
exercise and issuance would be exempt from the registration requirements of the
Act.
TERM. The term of this option commences on _________, 19__,
the date of grant and expires on the day before the tenth anniversary of the
date of grant (the "Expiration Date"), unless this option expires sooner as set
forth below or in the Plan. In no event may this option be exercised on or
after the Expiration Date. This option shall terminate prior to the Expiration
Date as follows: three (3) months after the termination of your Continuous
Status as an Employee, Director or Consultant with the Company or an Affiliate
for any reason or for no reason unless:
such termination of Continuous Status as an Employee,
Director or Consultant is due to your disability (within the meaning of Section
422(c)(6) of the Code), in which event the option shall expire on the earlier
of the Expiration Date set forth above or twelve (12) months following such
termination of Continuous Status as an Employee, Director or Consultant; or
such termination of Continuous Status as an Employee,
Director or Consultant is due to your death or your death occurs within three
(3) months following your termination for any other reason, in which event the
option shall expire on the earlier of the Expiration Date set forth above or
twelve (12) months after your death; or
during any part of such three (3) month period the
option is not exercisable solely because of the condition set forth in
paragraph 5 above, in which event the option shall not expire until the earlier
of the Expiration Date set forth above or until it shall have been exercisable
for an aggregate period of three (3) months after the termination of Continuous
Status as an Employee, Director or Consultant; or
exercise of the option within three (3) months after
termination of your Continuous Status as an Employee, Director or Consultant
with the Company or with an Affiliate would result in liability under section
16(b) of the Securities Exchange Act of 1934 (the "Exchange Act), in which case
the option will expire on the earlier of (i) the Expiration Date set forth
above, (ii) the tenth (10th) day after the last date upon which exercise would
result in such liability or (iii) six (6) months and ten (10) days after the
termination of your Continuous Status as an
<PAGE> 3
Employee, Director or Consultant with the Company or an Affiliate.
However, this option may be exercised following termination of
Continuous Status as an Employee, Director or Consultant only as to that number
of shares as to which it was exercisable on the date of termination of
Continuous Status as an Employee, Director or Consultant under the provisions
of paragraph 2 of this option.
EXERCISE.
This option may be exercised, to the extent specified
above, by delivering a notice of exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require
pursuant to subsection 12(f) of the Plan.
By exercising this option you agree that:
as a precondition to the completion of any
exercise of this option, the Company may require you to enter an arrangement
providing for the cash payment by you to the Company of any tax withholding
obligation of the Company arising by reason of: (1) the exercise of this
option; (2) the lapse of any substantial risk of forfeiture to which the shares
are subject at the time of exercise; or (3) the disposition of shares acquired
upon such exercise. You also agree that any exercise of this option has not
been completed and that the Company is under no obligation to issue any Common
Stock to you until such an arrangement is established or the Company's tax
withholding obligations are satisfied, as determined by the Company; and
the Company (or a representative of the
underwriters) may, in connection with the first underwritten registration of
the offering of any securities of the Company under the Act, require that you
not sell, dispose of, transfer, make any short sale of, grant any option for
the purchase of, or enter into any hedging or similar transaction with the same
economic effect as a sale, any shares of Common Stock or other securities of
the Company held by you, for a period of time specified by the underwriter(s)
(not to exceed one hundred eighty (180) days) following the effective date of a
registration statement of the Company filed under the Act. You further agree
to execute and deliver such other agreements as may be reasonably requested by
the Company and/or the underwriter(s) which are consistent with the foregoing
or which are necessary to give further effect thereto. In order to enforce the
foregoing covenant, the Company may impose stop-transfer instructions with
respect to your Common Stock until the end of such period.
TRANSFERABILITY. This option is not transferable, except by
will or by the laws of descent and distribution, and is exercisable during your
life only by you.
OPTION NOT A SERVICE CONTRACT. This option is not an
employment contract and nothing in this option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company, or of the Company to continue your employment with the Company. In
addition, nothing in this option shall obligate the Company or any Affiliate,
or their respective shareholders, Board of Directors, officers, or employees to
continue any
<PAGE> 4
relationship which you might have as a Director or Consultant for the Company
or Affiliate.
NOTICES. Any notices provided for in this option or the Plan
shall be given in writing and shall be deemed effectively given upon receipt
or, in the case of notices delivered by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you at the
address specified below or at such other address as you hereafter designate by
written notice to the Company.
GOVERNING PLAN DOCUMENT. This option is subject to all the
provisions of the Plan, a copy of which is attached hereto and its provisions
are hereby made a part of this option, including without limitation the
provisions of Section 6 of the Plan relating to option provisions, and is
further subject to all interpretations, amendments, rules and regulations which
may from time to time be promulgated and adopted pursuant to the Plan. In the
event of any conflict between the provisions of this option and those of the
Plan, the provisions of the Plan shall control.
Dated the ____ day of __________________, 19__.
Very truly yours,
By_____________________________________
Duly authorized on behalf
of the Board of Directors
ATTACHMENTS:
Laser Power Corporation 1997 Equity Incentive Plan
Acknowledgment of Option Terms
Notice of Exercise
<PAGE> 5
LASER POWER CORPORATION
1997 EQUITY INCENTIVE PLAN
ACKNOWLEDGMENT OF OPTION TERMS
The undersigned:
Acknowledges receipt of the foregoing option and the
attachments referenced therein and understands that all rights and liabilities
with respect to this option are set forth in the option and the Plan; and
Acknowledges that as of the date of grant of this option, it
sets forth the entire understanding between the undersigned optionee and the
Company and its Affiliates regarding the acquisition of stock in the Company
and supersedes all prior oral and written agreements on that subject with the
exception of (i) the options previously granted and delivered to the
undersigned under stock option plans of the Company, and (ii) the following
agreements only:
NONE
(Initial)
OTHER
OPTIONEE
Address:
<PAGE> 1
EXHIBIT 10.10
LASER POWER CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
ADOPTED ________, 1997
APPROVED BY THE STOCKHOLDERS ON ________, 1997
PURPOSE.
The purpose of the Employee Stock Purchase Plan (the "Plan")
is to provide a means by which employees of Laser Power Corporation,a Delaware
corporation (the "Company"), and its Affiliates, as defined in subparagraph
1(b), which are designated as provided in subparagraph 2(b), may be given an
opportunity to purchase stock of the Company.
The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company, as those terms are
defined in Sections 424(e) and (f), respectively, of the Internal Revenue Code
of 1986, as amended (the "Code").
The Company, by means of the Plan, seeks to retain the
services of its employees, to secure and retain the services of new employees,
and to provide incentives for such persons to exert maximum efforts for the
success of the Company.
The Company intends that the rights to purchase stock of the
Company granted under the Plan be considered options issued under an "employee
stock purchase plan" as that term is defined in Section 423(b) of the Code.
ADMINISTRATION.
The Plan shall be administered by the Board of Directors (the
"Board") of the Company unless and until the Board delegates administration to
a Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
To determine when and how rights to purchase stock of
the Company shall be granted and the provisions of each offering of such rights
(which need not be identical).
To designate from time to time which Affiliates of
the Company shall be eligible to participate in the Plan.
<PAGE> 2
To construe and interpret the Plan and rights
granted under it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.
To amend the Plan as provided in paragraph 13.
Generally, to exercise such powers and to perform
such acts as the Board deems necessary or expedient to promote the best
interests of the Company and its Affiliates and to carry out the intent that
the Plan be treated as an "employee stock purchase plan" within the meaning of
Section 423 of the Code.
The Board may delegate administration of the Plan to a
Committee composed of not fewer than two (2) members of the Board (the
"Committee"). If administration is delegated to a Committee, the Committee
shall have, in connection with the administration of the Plan, the powers
theretofore possessed by the Board, subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest
in the Board the administration of the Plan.
SHARES SUBJECT TO THE PLAN.
Subject to the provisions of paragraph 12 relating to
adjustments upon changes in stock, the stock that may be sold pursuant to
rights granted under the Plan shall not exceed in the aggregate two hundred
fifty thousand (250,000) shares of the Company's common stock after adjustment
for the reverse split of __________________ (the "Common Stock"). If any right
granted under the Plan shall for any reason terminate without having been
exercised, the Common Stock not purchased under such right shall again become
available for the Plan.
The stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.
GRANT OF RIGHTS; OFFERING.
(a) The Board or the Committee may from time to time grant or
provide for the grant of rights to purchase Common Stock of the Company under
the Plan to eligible employees (an "Offering") on a date or dates (the
"Offering Date(s)") selected by the Board or the Committee. Each Offering
shall be in such form and shall contain such terms and conditions as the Board
or the Committee shall deem appropriate, which shall comply with the
requirements of Section 423(b)(5) of the Code that all employees granted rights
to purchase stock under the Plan shall have the same rights and privileges.
The terms and conditions of an Offering shall be incorporated by reference into
the Plan and treated as part of the Plan. The provisions of separate Offerings
need not be identical, but each Offering shall include (through incorporation
of the provisions of this Plan by reference in the document comprising the
Offering or otherwise) the period during which the Offering shall be effective,
which period shall not exceed twenty-seven (27) months beginning with the
Offering Date, and the substance of the provisions contained in paragraphs 5
through 8, inclusive.
<PAGE> 3
(b) If an employee has more than one right outstanding under the
Plan, unless he or she otherwise indicates in agreements or notices delivered
hereunder: (1) each agreement or notice delivered by that employee will be
deemed to apply to all of his or her rights under the Plan, and (2) a right
with a lower exercise price (or an earlier-granted right, if two rights have
identical exercise prices), will be exercised to the fullest possible extent
before a right with a higher exercise price (or a later-granted right, if two
rights have identical exercise prices) will be exercised.
ELIGIBILITY.
Rights may be granted only to employees of the Company or, as
the Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan, unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment be equal to or greater than
two (2) years. In addition, unless otherwise determined by the Board or the
Committee and set forth in the terms of the applicable Offering, no employee of
the Company or any Affiliate shall be eligible to be granted rights under the
Plan, unless, on the Offering Date, such employee's customary employment with
the Company or such Affiliate is for at least twenty (20) hours per week and at
least five (5) months per calendar year.
The Board or the Committee may provide that each person who,
during the course of an Offering, first becomes an eligible employee of the
Company or designated Affiliate will, on a date or dates specified in the
Offering which coincides with the day on which such person becomes an eligible
employee or occurs thereafter, receive a right under that Offering, which right
shall thereafter be deemed to be a part of that Offering. Such right shall
have the same characteristics as any rights originally granted under that
Offering, as described herein, except that:
the date on which such right is granted shall be the
"Offering Date" of such right for all purposes, including determination of the
exercise price of such right;
the period of the Offering with respect to such right
shall begin on its Offering Date and end coincident with the end of such
Offering; and
the Board or the Committee may provide that if such
person first becomes an eligible employee within a specified period of time
before the end of the Offering, he or she will not receive any right under that
Offering.
No employee shall be eligible for the grant of any rights
under the Plan if, immediately after any such rights are granted, such employee
owns stock possessing five percent (5%) or more of the total combined voting
power or value of all classes of stock of the Company or of any Affiliate. For
purposes of this subparagraph 5(c), the rules of Section 424(d) of the Code
shall apply in determining the stock ownership of any employee, and stock which
such employee
<PAGE> 4
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.
An eligible employee may be granted rights under the Plan only
if such rights, together with any other rights granted under "employee stock
purchase plans" of the Company and any Affiliates, as specified by Section
423(b)(8) of the Code, do not permit such employee's rights to purchase stock
of the Company or any Affiliate to accrue at a rate which exceeds twenty-five
thousand dollars ($25,000) of fair market value of such stock (determined at
the time such rights are granted) for each calendar year in which such rights
are outstanding at any time.
Officers of the Company and any designated Affiliate shall be
eligible to participate in Offerings under the Plan, provided, however, that
the Board may provide in an Offering that certain employees who are highly
compensated employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.
RIGHTS; PURCHASE PRICE.
On each Offering Date, each eligible employee, pursuant to an
Offering made under the Plan, shall be granted the right to purchase up to the
number of shares of Common Stock of the Company purchasable with a percentage
designated by the Board or the Committee not exceeding fifteen percent (15%) of
such employee's Earnings (as defined in subparagraph 7(a)) during the period
which begins on the Offering Date (or such later date as the Board or the
Committee determines for a particular Offering) and ends on the date stated in
the Offering, which date shall be no later than the end of the Offering. The
Board or the Committee shall establish one or more dates during an Offering
(the "Purchase Date(s)") on which rights granted under the Plan shall be
exercised and purchases of Common Stock carried out in accordance with such
Offering.
In connection with each Offering made under the Plan, the
Board or the Committee may specify a maximum number of shares that may be
purchased by any employee as well as a maximum aggregate number of shares that
may be purchased by all eligible employees pursuant to such Offering. In
addition, in connection with each Offering that contains more than one Purchase
Date, the Board or the Committee may specify a maximum aggregate number of
shares which may be purchased by all eligible employees on any given Purchase
Date under the Offering. If the aggregate purchase of shares upon exercise of
rights granted under the Offering would exceed any such maximum aggregate
number, the Board or the Committee shall make a pro rata allocation of the
shares available in as nearly a uniform manner as shall be practicable and as
it shall deem to be equitable.
The purchase price of stock acquired pursuant to rights
granted under the Plan shall be not less than the lesser of:
an amount equal to eighty-five percent (85%) of the
fair market value of the stock on the Offering Date; or
an amount equal to eighty-five percent (85%) of the
fair market value of the stock on the Purchase Date.
<PAGE> 5
PARTICIPATION; WITHDRAWAL; TERMINATION.
An eligible employee may become a participant in the Plan
pursuant to an Offering by delivering a participation agreement to the Company
within the time specified in the Offering, in such form as the Company
provides. Each such agreement shall authorize payroll deductions of up to the
maximum percentage specified by the Board or the Committee of such employee's
Earnings during the Offering. "Earnings" is defined as an employee's regular
salary or wages (including amounts thereof elected to be deferred by the
employee, that would otherwise have been paid, under any arrangement
established by the Company intended to comply with Section 401(k), Section
402(e)(3), Section 125, Section 402(h), or Section 403(b) of the Code, and also
including any deferrals under a non-qualified deferred compensation plan or
arrangement established by the Company), which shall include or exclude (as
provided for each Offering) the following items of compensation: bonuses,
commissions, overtime pay, incentive pay, profit sharing, other remuneration
paid directly to the employee, the cost of employee benefits paid for by the
Company or an Affiliate, education or tuition reimbursements, imputed income
arising under any group insurance or benefit program, traveling expenses,
business and moving expense reimbursements, income received in connection with
stock options, contributions made by the Company or an Affiliate under any
employee benefit plan, and similar items of compensation, as determined by the
Board or Committee. The payroll deductions made for each participant shall
be credited to an account for such participant under the Plan and shall be
deposited with the general funds of the Company. A participant may reduce
(including to zero) or increase such payroll deductions, and an eligible
employee may begin such payroll deductions, after the beginning of any Offering
only as provided for in the Offering. A participant may make additional
payments into his or her account only if specifically provided for in the
Offering and only if the participant has not had the maximum amount withheld
during the Offering.
At any time during an Offering, a participant may terminate
his or her payroll deductions under the Plan and withdraw from the Offering by
delivering to the Company a notice of withdrawal in such form as the Company
provides. Such withdrawal may be elected at any time prior to the end of the
Offering except as provided by the Board or the Committee in the Offering.
Upon such withdrawal from the Offering by a participant, the Company shall
distribute to such participant all of his or her accumulated payroll deductions
(reduced to the extent, if any, such deductions have been used to acquire stock
for the participant) under the Offering, without interest, and such
participant's interest in that Offering shall be automatically terminated. A
participant's withdrawal from an Offering will have no effect upon such
participant's eligibility to participate in any other Offerings under the Plan
but such participant will be required to deliver a new participation agreement
in order to participate in subsequent Offerings under the Plan.
Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon cessation of any participating employee's employment
with the Company and any designated Affiliate, for any reason, and the Company
shall distribute to such terminated employee all of his or her accumulated
payroll deductions (reduced to the extent, if any, such deductions have been
used to acquire stock for the terminated employee), under the Offering, without
interest.
Rights granted under the Plan shall not be transferable by a
participant otherwise
<PAGE> 6
than by will or the laws of descent and distribution, or by a beneficiary
designation as provided in paragraph 14 and, otherwise during his or her
lifetime, shall be exercisable only by the person to whom such rights are
granted.
EXERCISE.
On each Purchase Date specified therefor in the relevant
Offering, each participant's accumulated payroll deductions and other
additional payments specifically provided for in the Offering (without any
increase for interest) will be applied to the purchase of whole shares of stock
of the Company, up to the maximum number of shares permitted pursuant to the
terms of the Plan and the applicable Offering, at the purchase price specified
in the Offering. No fractional shares shall be issued upon the exercise of
rights granted under the Plan. The amount, if any, of accumulated payroll
deductions remaining in each participant's account after the purchase of shares
which is less than the amount required to purchase one share of stock on the
final Purchase Date of an Offering shall be held in each such participant's
account for the purchase of shares under the next Offering under the Plan,
unless such participant withdraws from such next Offering, as provided in
subparagraph 7(b), or is no longer eligible to be granted rights under the
Plan, as provided in paragraph 5, in which case such amount shall be
distributed to the participant after such final Purchase Date, without
interest. The amount, if any, of accumulated payroll deductions remaining in
any participant's account after the purchase of shares which is equal to the
amount required to purchase whole shares of stock on the final Purchase Date of
an Offering shall be distributed in full to the participant after such Purchase
Date, without interest.
No rights granted under the Plan may be exercised to any
extent unless the shares to be issued upon such exercise under the Plan
(including rights granted thereunder) are covered by an effective registration
statement pursuant to the Securities Act of 1933, as amended (the "Securities
Act") and the Plan is in material compliance with all applicable state, foreign
and other securities and other laws applicable to the Plan. If on a Purchase
Date in any Offering hereunder the Plan is not so registered or in such
compliance, no rights granted under the Plan or any Offering shall be exercised
on such Purchase Date, and the Purchase Date shall be delayed until the Plan is
subject to such an effective registration statement and such compliance, except
that the Purchase Date shall not be delayed more than twelve (12) months and
the Purchase Date shall in no event be more than twenty-seven (27) months from
the Offering Date. If on the Purchase Date of any Offering hereunder, as
delayed to the maximum extent permissible, the Plan is not registered and in
such compliance, no rights granted under the Plan or any Offering shall be
exercised and all payroll deductions accumulated during the Offering (reduced
to the extent, if any, such deductions have been used to acquire stock) shall
be distributed to the participants, without interest.
COVENANTS OF THE COMPANY.
During the terms of the rights granted under the Plan, the
Company shall keep available at all times the number of shares of stock
required to satisfy such rights.
The Company shall seek to obtain from each federal, state,
foreign or other regulatory commission or agency having jurisdiction over the
Plan such authority as may be required to issue and sell shares of stock upon
exercise of the rights granted under the Plan. If,
<PAGE> 7
after reasonable efforts, the Company is unable to obtain from any such
regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell
stock upon exercise of such rights unless and until such authority is obtained.
USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under the
Plan shall constitute general funds of the Company.
RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have any
of the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shareholdings acquired upon
exercise of rights hereunder are recorded in the books of the Company.
ADJUSTMENTS UPON CHANGES IN STOCK.
If any change is made in the stock subject to the Plan, or
subject to any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange
of shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding rights will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding rights. Such adjustments shall be made by the Board or
the Committee, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a "transaction not involving the receipt of consideration by
the Company.")
In the event of: (1) a dissolution or liquidation of the
Company; (2) a merger or consolidation in which the Company is not the
surviving corporation; (3) a reverse merger in which the Company is the
surviving corporation but the shares of the Company's Common Stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise; or (4)
the acquisition by any person, entity or group within the meaning of Section
13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or any comparable successor provisions (excluding any employee
benefit plan, or related trust, sponsored or maintained by the Company or any
Affiliate of the Company) of the beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act, or comparable successor rule) of
securities of the Company representing at least fifty percent (50%) of the
combined voting power entitled to vote in the election of directors, then, as
determined by the Board in its sole discretion (i) any surviving or acquiring
corporation may assume outstanding rights or substitute similar rights for
those under the Plan, (ii) such rights may continue in full force and effect,
or (iii) participants' accumulated payroll deductions may be used to purchase
Common Stock immediately prior to the transaction described above and the
participants' rights under the ongoing Offering terminated.
<PAGE> 8
AMENDMENT OF THE PLAN.
The Board at any time, and from time to time, may amend the
Plan. However, except as provided in paragraph 12 relating to adjustments upon
changes in stock, no amendment shall be effective unless approved by the
stockholders of the Company within twelve (12) months before or after the
adoption of the amendment, where the amendment will:
Increase the number of shares reserved for rights
under the Plan;
Modify the provisions as to eligibility for
participation in the Plan (to the extent such modification requires
stockholder approval in order for the Plan to obtain employee stock
purchase plan treatment under Section 423 of the Code or to comply
with the requirements of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended ("Rule 16b-3")); or
Modify the Plan in any other way if such
modification requires stockholder approval in order for the Plan to
obtain employee stock purchase plan treatment under Section 423 of the
Code or to comply with the requirements of Rule 16b-3.
It is expressly contemplated that the Board may amend the Plan in any respect
the Board deems necessary or advisable to provide eligible employees with the
maximum benefits provided or to be provided under the provisions of the Code
and the regulations promulgated thereunder relating to employee stock purchase
plans and/or to bring the Plan and/or rights granted under it into compliance
therewith.
Rights and obligations under any rights granted before
amendment of the Plan shall not be altered or impaired by any amendment of the
Plan, except with the consent of the person to whom such rights were granted,
or except as necessary to comply with any laws or governmental regulations, or
except as necessary to ensure that the Plan and/or rights granted under the
Plan comply with the requirements of Section 423 of the Code.
DESIGNATION OF BENEFICIARY.
A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to the end
of an Offering but prior to delivery to the participant of such shares and
cash. In addition, a participant may file a written designation of a
beneficiary who is to receive any cash from the participant's account under the
Plan in the event of such participant's death during an Offering.
Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or
<PAGE> 9
if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its sole discretion, may deliver such shares
and/or cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
TERMINATION OR SUSPENSION OF THE PLAN.
The Board in its discretion, may suspend or terminate the Plan
at any time. No rights may be granted under the Plan while the Plan is
suspended or after it is terminated.
Rights and obligations under any rights granted while the Plan
is in effect shall not be altered or impaired by suspension or termination of
the Plan, except as expressly provided in the Plan or with the consent of the
person to whom such rights were granted, or except as necessary to comply with
any laws or governmental regulation, or except as necessary to ensure that the
Plan and/or rights granted under the Plan comply with the requirements of
Section 423 of the Code.
EFFECTIVE DATE OF PLAN.
The Plan shall become effective on the same day that the Company's
initial public offering of shares of common stock becomes effective (the
"Effective Date"), but no rights granted under the Plan shall be exercised
unless and until the Plan has been approved by the stockholders of the Company
within twelve (12) months before or after the date the Plan is adopted by the
Board or the Committee, which date may be prior to the Effective Date.
<PAGE> 1
EXHIBIT 10.12
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER SUCH ACT AND
QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO EXEMPTIONS
FROM REGISTRATION UNDER THE ACT AND SUCH STATE LAWS, THE AVAILABILITY OF WHICH
IS TO BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY.
Void after 5:00 p.m., Pacific Time, _______________
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF LASER POWER CORPORATION
This is to Certify that, FOR VALUE RECEIVED, _________________ or registered
assigns ("Holder") is entitled to purchase, subject to the provisions of this
Warrant, from LASER POWER CORPORATION, a Delaware corporation ("Company"), at
any time on or after the date hereof and not later than 5:00 p.m., Pacific
Time, on ______________, (the "Expiration Date") up to _________ shares of
Common Stock, $0.125 par value per share, of the Company (the "Stock") at a
purchase price of $3.00 per share. The number of shares of Stock to be
received upon the exercise of this Warrant and the price to be paid for a share
of Stock shall be adjusted from time to time as hereinafter set forth. The
shares of Stock deliverable upon such exercise, and as adjusted from time to
time, are hereinafter sometimes referred to as "Warrant Stock" and the exercise
price of a share of Stock in effect at any time and as adjusted from time to
time is hereinafter sometimes referred to as the "Exercise Price."
(a) Exercise of Warrant: As long as at least one representative
of Holder remains a member of the Board of Directors of Laser Power Corporation
and for the thirty day period following termination of the last of such
Directorships for any reason, this Warrant may be exercised in whole or in
part at any time or from time to time on or after the date hereof, or if such
date is a day on which banking institutions are authorized by law to close,
then on the next succeeding day which shall not be such a day, until the
Expiration Date by presentation and surrender hereof to the Company or at the
office of its stock transfer agent, if any, with the Purchase Form annexed
hereto duly executed and accompanied by payment in cash or cash-equivalent
funds of the Exercise Price for the number of shares specified in such form,
together with all federal and state taxes applicable upon such exercise. No
adjustment shall be made for any dividends on any shares of Stock upon exercise
of this Warrant. If this Warrant should be exercised in part only, the Company
shall, upon surrender of this Warrant for cancellation, execute and deliver a
new Warrant evidencing the right of the holder to purchase the balance of the
shares purchasable hereunder. Upon receipt by the Company of this Warrant at
the office or agency of the Company, in proper form for exercise, the Holder
shall be deemed to be the holder of record of the shares of Stock issuable upon
such exercise, notwithstanding that the stock
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<PAGE> 2
transfer books of the Company shall then be closed or that certificates
representing such shares of Stock shall not then be actually delivered to the
Holder.
(b) Reservation of Shares: The Company hereby agrees that at all
times there shall be reserved for issuance and/or delivery upon exercise of
this Warrant such number of shares of its Stock as shall be required for
issuance or delivery upon exercise of this Warrant. Further, the Company
hereby agrees to authorize and direct its transfer agent, if any, in accordance
herewith.
(c) Fractional Shares: No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant and no
payment shall be made in lieu of such fractional share.
(d) Assignment of Warrant: This Warrant may not be sold,
transferred, assigned or pledged except in a transaction permitted by Section
(m) hereof. Any permitted assignment shall be made by surrender of this
Warrant to the Company or at the office of its stock transfer agent, if any,
with the Assignment Form annexed hereto duly executed by the Holder or by
Holder's duly authorized attorney or representative, accompanied by proper
evidence of succession, assignment or authority to transfer, and with funds
sufficient to pay any transfer tax; whereupon, the Company, without charge,
shall execute and shall deliver a new Warrant in the name of the assignee named
in such instrument of assignment and this Warrant shall promptly be canceled.
This Warrant, as of the date of issue, shall be all purposes be separable from
the Stock, including for purposes of transfer. Registration of transfer of
this Warranty shall be effected only on the books of the Company, upon the
delivery of a duly executed Assignment Form. In all cases of transfer by an
attorney, the original power of attorney, duly approved, or an official copy
thereof, duly certified, shall be deposited and remain with the Company. In
the case of registration of transfer by executors, administrators, guardians or
other legal representatives, duly authenticated evidence of their authority
shall be produced, and may be required to be deposited and remain with the
Company in its discretion.
(e) Exchange or Loss of Warrant: This Warrant is exchangeable,
without expense, at the option of the Holder, upon presentation and surrender
hereof to the Company or at the office of its stock transfer agent, if any, for
other warrants of different denominations entitling the Holder thereof to
purchase in the aggregate the same number of shares of Stock purchasable
hereunder. This Warrant may be divided or may be combined with other warrants
which carry the same rights upon presentation hereof at the office of the
Company or at the office of its stock transfer agent, if any, together with a
written notice specifying the names and the denominations in which new Warrants
are to be issued and signed by the holder hereof. The term "Warrant" as used
herein includes any Warrants issued in substitution for or replacement of this
Warrant or into which this Warrant may be divided or exchanged. Upon receipt
by the Company of evidence satisfactory to it of the loss, theft, destruction,
or mutilation of this Warrant, and (in the case of loss, theft or destruction)
of reasonably satisfactory indemnification, and upon surrender and cancellation
of this Warrant, if mutilated, the Company will execute and will deliver a new
Warrant of like tenor and date. Any such new Warrant executed and delivered
shall constitute an additional contractual obligation on the part of the
Company, whether or not this Warrant so lost, stolen, destroyed or mutilated
shall be at any time enforceable by anyone.
2
<PAGE> 3
(f) Rights of the Holder: The Holder shall not, by virtue hereof,
be entitled to any rights of a shareholder in the Company, either at law or
equity, and the rights of the Holder are limited to those expressed in the
Warrant and are not enforceable against the Company except to the extent set
forth herein.
(g) Anti-Dilution Provisions:
(1) In case the Company shall at any time or from time to
time issue Stock or any other capital stock, warrants or rights by way of
dividend or other distribution on any Stock of the Company or subdivide or
combine the outstanding shares of Stock, the Exercise Price shall be
proportionately decreased in the case of such issuance (on the day following
the date fixed for determining shareholders entitled to receive such dividend
or other distribution) or decreased in the case of such subdivision or
increased in the case of such combination (on the date that such subdivision or
combination shall become effective).
(2) Upon any adjustment of the Exercise Price, the holder
of this Warrant shall thereafter (until another such adjustment) be entitled to
purchase, at the new Exercise Price, the number of shares, calculated to the
nearest full share, obtained by multiplying the number of shares of Stock
initially issuable upon exercise of this Warrant by the Exercise Price in
effect on the date hereof and dividing the product so obtained by the new
Exercise price.
(h) Officer's Certificate: Whenever the Exercise Price shall be
adjusted as required by the provisions of Section (g) hereof, the Company
shall forthwith file in the custody of its Secretary or an Assistant Secretary
at its principal office, and with its stock transfer agent, if any, an
officer's certificate showing the adjusted Exercise Price determined as herein
provided and setting forth in reasonable detail the facts requiring such
adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the Holder and the Company shall, forthwith
after each such adjustment, deliver a copy of such certificate to the Holder.
Such certificate shall be conclusive as to the correctness of such adjustment.
(i) Notices to Warrant Holders: So long as this Warrant shall be
outstanding and unexercised (i) if the Company shall pay any dividend or make
any distribution upon the Stock or (ii) if any capital reorganization of the
Company, reclassification of the capital stock of the Company consolidation or
merger of the Company with or into another corporation, sale, lease or transfer
of all or substantially all of the property and assets of the Company to
another corporation, or a spin-off of assets of the Company shall be effected,
then, in any such case, the Company shall cause to be delivered to the Holder,
at least ten (10) days prior to the date specified in (x) or (y) below, as the
case may be, a notice containing a brief description of the proposed action and
stating the date on which (x) a record is to be taken for the purpose of such
dividend or distribution, or (y) such reclassification, reorganization,
consolidation, merger, conveyance, lease, or spin-off is to take place and the
date, if any, is to be fixed, as of which the holders of Stock of record shall
be entitled to exchange their shares of Stock for securities or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, or spin-off.
3
<PAGE> 4
(j) Special Termination of Option: In the event of any of the
following transactions (a "Corporate Transaction"):
(i) a merger or consolidation in which the Company is not
the surviving entity, except for a transaction the principal purpose of which
is to change the State of the Company's incorporation.
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company, or
(iii) any reverse merger in which the Company is the
surviving entity but in which fifty percent (50%) or more of the Company's
outstanding voting stock is transferred to holders different from those who held
the stock immediately prior to such merger,
then this option, if not previously exercised, automatically shall terminate
upon the consummation of such Corporate Transaction and cease to be
exercisable, unless this option is assumed by the successor corporation or
parent thereof (or replaced with a comparable option to purchase shares of the
capital stock of such successor corporation or parent).
(k) Dissolution: If, at any time prior to the expiration of this
Warrant and prior to the exercise thereof, any dissolution, liquidation or
winding up of the Company shall be proposed, the Company shall cause at lease
thirty (30) days' notice to be mailed by certified mail to the registered
holder of this Warrant Certificate at his address as it appears on the books of
the Company. Such notice shall specify the date as of which holders of record
of Stock shall participate in any distribution or shall be entitled to exchange
their Stock for securities or other property, deliverable upon such
dissolution, liquidation or winding up, as the case may be, to the end that,
during such period of thirty (30) days, the holders of this Warrant may
exercise this Warrant and purchase Stock (or other stock substituted therefor
as herein before provided) and be entitled in respect of shares so purchased to
all of the rights of the other holders of Stock of the Company. In case of a
dissolution, liquidation or winding up of the Company, all purchase rights
under this Warrant shall terminate at the close of business on the date as of
which holders of record of the Stock shall be entitled to participate in a
distribution of the assets of the Company in connection with such dissolution,
liquidation or winding up (provided that in no event shall said date be less
than thirty (30) days after completion of service by certified mail of notice
as aforesaid). Any Warrant not exercised prior to such time shall be void and
no rights shall exist thereunder.
(l) Transfer to Comply with the Securities Act of 1933:
(1) This Warrant, the Warrant Stock or any other security
issued or issuable upon exercise of this Warrant may not be offered or sold
except in compliance with the registration requirements of the Securities Act
of 1933 and applicable state securities laws or an opinion of counsel
satisfactory to the Company that such registration is not required, and then
only against receipt of an agreement of such person to whom such offer or sale
is made to
4
<PAGE> 5
comply with the provisions of this Section (l) with respect to any resale of
other disposition of such securities.
(2) The Company may cause the following legend or one
similar thereto to be set forth on each certificate representing this Warrant,
the Warrant Stock or any other security issued or issuable upon assignment or
exercise of this Warrant, unless counsel for the Company is of the opinion as
to any such certificate that such legend is unnecessary:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 OR ANY APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACTS OR PURSUANT TO
AN EXEMPTION FROM REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS TO
BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY.
(m) Certain Representations by Holder: By acceptance of
this Warrant, the Holder hereby represents and warrants to the Company as
follows:
(1) Investment Intent; Capacity to Protect Interests:
The Holder is purchasing the Warrant solely for his own account for investment
and not with a view to or for sale in connection with any distribution of the
Warrant or the Warrant Stock, or any portion thereof, and not with any present
intention of selling, offering to sell or otherwise disposing of or
distributing the Warrant or the Warrant Stock or any portion thereof in any
transaction other than a transaction exempt from registration under the
Securities Act of 1933, as amended (the "Act"). The Holder also represents
that the entire legal and beneficial interest of the Warrant and the Warrant
Stock is being purchased, and will be held, for the Holder's account only, and
neither in whole or in part for any other person. The Holder further
represents to the Company that he is n "accredited investor" within the meaning
of paragraph (a) of Rule 501 of Regulation D promulgated by the Securities and
Exchange Commission. Holder either has a pre-existing business or personal
relationship with the Company or any of its officers, directors or controlling
persons or by reason of his business or financial experience of the business of
financial experience of Holder's professional advisors who are unaffiliated
with and who are not compensated by the Company or any affiliate or selling
agent of the Company, directly or indirectly, could be reasonably assumed to
have the capacity to evaluate the merits and risks of an investment in the
Company and to protect Holder's own interests in connection with this
transaction.
(2) Information Concerning Company: The Holder has
heretofore discussed the Company and its plans, operations and financial
condition with the Company's officers and has heretofore received all such
information as the Holder has deemed necessary and appropriate to enable him to
evaluate the financial risk inherent in making an investment in the Warrant and
the Warrant Stock, and the Holder has received satisfactory and complete
information concerning the business and financial condition of the Company in
response to all inquiries in respect thereof.
5
<PAGE> 6
(3) Economic Risk: The Holder realizes that the
purchase of the Warrant and the Warrant Stock will be a highly speculative
investment and involves a high degree of risk, and the Holder is able, without
impairing financial condition, to hold the Warrant and the Warrant Stock for an
indefinite period of time and to suffer a complete loss on the Holder's
investment.
(4) Restricted Securities: The Holder understands and
acknowledges that:
(A) the sale of the Warrant and the Warrant Stock
has not been registered under the Act or qualified under any state securities
laws, and the Warrant and the Warrant Stock must be held indefinitely unless
subsequently registered under the Act and such state laws or an exemption from
such registration or qualification is available and the Company is under no
obligation to register the Warrant or the Warrant Stock:
(B) the share certificate representing the
Warrant and the Warrant Stock will be stamped with the legends specified i
Section (m) hereof; and
(C) the Company will make a notation in its
records of the aforementioned restrictions on transfer and legends.
(n) Applicable Law: This Warrant shall be governed by, and
construed in accordance with, the laws of the State of California, without
regard to principles of conflicts of laws.
(o) Registration: This Warrant and all such Warrants shall be
numbered and registered in a Warrant Register, as issued, maintained by the
Company. The Company shall be entitled to treat the Holder as the
owner-in-fact of this Warrant for all purposes and shall not be bound to
recognize any equitable or other claim to or interest in a Warrant on the part
of any other person and, further, shall not be liable for any registration or
registration of transfer of Warrants which are registered or to be registered
in the name of a fiduciary or the nominee of a fiduciary, unless made with the
actual knowledge that a fiduciary or nominee is committing a breach of trust in
requesting such registration or transfer, or with actual knowledge of such
facts that its participation therein amounts to bad faith.
(p) Payment of Taxes: The Company will pay all documentary
stamp taxes, if any, attributable to the initial issuance of Warrant Stock upon
the exercise of this Warrant; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any
registration of transfer involved in the issue or delivery of this Warrant or
certificates for the Warrant Stock.
(q) Validity: Notwithstanding any other provision hereof, the
Company shall have no responsibility to determine the validity of the
execution, delivery, assignment, or execution of this Warrant, including the
genuiness of any signatures rendered with respect thereto and, further,
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<PAGE> 7
shall have the right to require and receive evidence of such validity as it
may, in its sole discretion, determine to be necessary or in furtherance of the
provisions hereof.
(r) Notice: Any notice pursuant to this Warrant given to the
Company shall be in writing, and shall be deemed to have been duly given if
delivered or mailed certified mail, return receipt requested, to Laser Power
Corporation, 12777 High Bluff Drive, San Diego, California 92130, Attention:
President. Any notice pursuant to this Warrant to the Holder shall be in
writing, and shall be deemed to have been duly given if mailed, postage
prepaid, to such Holder at such Holder's respective address on the books of the
Company. The parties hereto may from time to time change the address to which
notices to it are to be delivered or mailed hereunder by notice in writing to
the other party.
(s) Benefits of this Warrant: Nothing in this Warrant shall be
construed to give any person or entity other than the Company and the Holder
hereof, any legal or equitable right, remedy or claim under this Warrant;
rather, this Warrant shall be for the sole and exclusive benefit of the Company
and the Holder thereof.
Date:_______________, 1997 LASER POWER CORPORATION, a
Delaware corporation
By:___________________________
UNDERSTOOD AND ACCEPTED
this_____day of ____________, 199__
_____________________________
7
<PAGE> 8
LASER POWER CORPORATION
PURCHASE FORM
(to be executed only upon exercise of the Warrant)
(1) The undersigned registered owner of the attached Warrant
hereby elects to purchase_________________shares of the Common Stock of Laser
Power Corporation, pursuant to the terms of the attached Warrant, and tenders
herewith payment of the exercise price of $_______________ for such shares in
full.
(2) In exercising its rights to purchase the Common Stock of Laser
Power Corporation, the undersigned hereby confirms and acknowledges the
investment representations and warranties made in Section (m) of the Warrant.
(3) Please issue a certificate or certificates representing said
shares of Common Stock in the name of the undersigned or in such other name as
is specified below.
_____________________________
(Name)
______________________________
(Address)
Name of Warrantholder:____________________
Signature of Warrantholder:_______________
By:_______________________________________
Title:____________________________________
Date:_____________________________________
(The signature on this subscription must correspond with the name as
written on the attached Warrant, without any change whatsoever.)
Attachment: Warrant
8
<PAGE> 9
LASER POWER CORPORATION
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of the attached
Warrant hereby sells, assigns and transfers unto the Assignee named below all
of the rights of the undersigned under such Warrant, with respect to the number
of shares of Common Stock set forth below:
Name and Number of Shares
Address of Assignee of Common Stock
___________________ ___________________
___________________ ___________________
___________________ ___________________
___________________ ___________________
___________________ ___________________
and does hereby irrevocably constitute and appoint___________________
attorney-in-fact to register such transfer on the books of Laser Power
Corporation maintained for the purpose, with full power of substitution in the
premises.
DATED: ___________________
Name of Warrantholder:________________________
Signature of Warrantholder:___________________
By:___________________________________________
Title:________________________________________
Date:_________________________________________
(The signature on this subscription must correspond with the name as
written on the attached Warrant, without any change whatsoever.)
Attachment: Warrant
9
<PAGE> 10
Schedule 1
Directors who have been granted warrants:
Name Date Shares
1. Richard P. Scherer 9/1/92 200,000
2. William G. Fredrick, Jr. 4/24/93 16,666
12/7/96 6,666
3. Robert G. Klimasewski 4/24/93 16,666
12/7/96 6,666
4. Siegfried Meder 4/24/93 16,666
12/7/96 6,666
5. John C. Stiska 4/24/93 16,666
12/7/96 6,666
6. Union Miniere 4/24/93 50,000
12/7/96 20,000
7. Kenneth E. Olson 1/31/95 16,666
12/7/96 6,666
<PAGE> 1
Certain confidential portions of this Exhibit were omitted by means of blackout
of the text (the "Mark"). This Exhibit has been filed separately with the
Secretary of the Commission without the Mark pursuant to the Company's
Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
EXHIBIT 10.15
AMENDMENT NO. I
to the
Agreement
Effective March 1, 1986
Between
STANFORD UNIVERSITY
and
AMOCO
Effective as of September 27,1996, THE BOARD OF TRUSTEES OF THE
LELAND STANFORD JUNIOR UNIVERSITY, a body having corporate powers under the laws
of the State of California ("STANFORD"), and LASER POWER CORPORATION, a
California corporation having a principal place of business at 12777 High Bluff
Drive, San Diego, California 92130 ("LPC"), agree as follows:
1. BACKGROUND
1.1 -- STANFORD and AMOCO CORPORATION, an Indiana corporation
having a principal place of business at 200 East Randolph Drive, Chicago,
Illinois ("AMOCO") entered into an agreement with the effective date of March 1,
1986, ("Agreement") for the Laser Diode End Pumped Laser and Harmonic Generator
("Inventions"), as described in Stanford Docket S84-070, and any Licensed
Patents (including Continuation-In-Part ["CIP"] patents) that may issue to such
Inventions.
1.2 -- Under Article 12 of the Agreement, the Agreement was
assigned to ATX Telecom Systems, located in Naperville, Illinois, whose parent
is Scientific-Atlantic, Inc., located in Norcross, Georgia ("ATX/SAI") as the
successor to substantially the whole of AMOCO's assets in the field relating to
lasers.
1.3 -- ATX/SAI do not plan to develop Licensed Products under
the Agreement and have agreed, pending the approval of STANFORD, to assign the
Agreement to LPC. LPC does plan to develop and market Licensed Products under
the Agreement.
1.4 -- STANFORD and LPC agree that certain modifications to
the Agreement will be made effective as of the date of assignment of the
Agreement from ATX/SAI to LPC, as given below.
2. AMENDMENTS
2.1 -- STANFORD and LPC agree to substitute a new Paragraph
2.2 as given below for the existing Paragraph 2.2 of the Agreement:
Page 1 of 3
<PAGE> 2
"2.2 -- "Licensed Patent(s)" means United States patent
4,739,507 (issued April 19, 1988), and all of the related CIP patents of
4,739,507, namely serial numbers 4,701,928 (issued October 20, 1987), 4,731,787
(issued March 15, 1988), 4,764,933 (issued August 16, 1988), and 4,809,291
(issued February 28, 1989), and any reissues of such patents."
2.2 -- STANFORD and LPC agree to add to Paragraph 5.1 the following new
text:
"Should this Agreement be assigned under terms of Article 12
where Stanford's approval is required, and if STANFORD agrees to grant such
approval, the assignee of the Agreement agrees to pay to STANFORD a one-time
noncreditable and nonrefundable assignment grant royalty of [ *** ] payable
within 30 days following the effective date of the assignment. "
2.3 -- STANFORD and LPC agree to substitute a new Paragraph 5.2 as
given below for the existing Paragraph 5.2 of the Agreement:
"5.2 -- Effective upon the date of assignment of this
Agreement to Laser Power Corporation, Laser Power Corporation agrees that
Paragraph 5.2 of this Agreement will be changed, that the former provisions of
Paragraph 5.2 will be void, and the new provision of Paragraph 5.2 will be the
agreement of Laser Power Corporation to pay to STANFORD an earned royalty of
[ *** ] on the Net Sales of all Licensed Product(s) made during the remaining
term of this Agreement whenever sold or otherwise disposed of. "
2.4 -- STANFORD and LPC agree to change Article 14 to update the
address for notices: (1) STANFORD changed to Office of Technology Licensing, 900
Welch Road, Suite 350, Palo Alto, CA 94304-1850; (2) to LPC Laser Power
Corporation, 12777 High Bluff Drive, San Diego, CA 92130.
2.5 -- STANFORD and LPC agree to add a new Paragraph 3.3 to read as
follows:
"3.3 -- Upon assignment of this Agreement to LPC,
STANFORD hereby releases LPC and its Affiliates from any and all claims for
damages, royalties, or profits from any infringement such as by the use, sale,
development or manufacture of Licensed Product(s) prior to the date of
assignment.
2.6 -- STANFORD and LPC agree to delete Paragraph 2.3 from the
Agreement.
2.7 -- STANFORD and LPC agree to substitute the word "product" for the
words "Laser Apparatus" in line 1 of Paragraph 2.4.
Page 2 of 3
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 3
2.8 -- All other terms and conditions of the Agreement remain in full
force and effective.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No.1 in
duplicate originals by their duly authorized officer or representative.
THE BOARD OF TRUSTEES OF THE
LELAND STANFORD JUNIOR UNIVERSITY
Signature:
----------------------------------
Printed Name: Katharine Ku
-------------------------------
Title: Director, Technology Licensing
------------------------------------
Date: September 27, 1996
------------------------------------
LASER POWER CORPORATION
Signature:
----------------------------------
Printed Name: Glenn H. Sherman
-------------------------------
Title: Chief Executive Officer
--------------------------------------
Date: September 27, 1996
--------------------------------------
Page 3 of 3
<PAGE> 4
STATE OF CALIFORNIA
UNIFORM COMMERCIAL CODE - FINANCING STATEMENT - FORM UCC-1
This STATEMENT is presented to a filing officer for filing pursuant to the
Uniform Commercial Code.
<TABLE>
<CAPTION>
Debtor (Last Name First)/address Secured Party/address For Filing officer
<S> <C> <C>
Laser Power Corporation ATx Telecom Systems, Inc.
12777 High Bluff Drive 1251 Frontenac Road
San Diego, California 92130 Naperville, Illinois 60563
</TABLE>
Add'l Debtor(s) (Last Name First)/address(es)
Assignee of Secured Party/address
This Financing Statement covers the following types or items of property:
Debtor hereby grants and assigns to Secured Party a continuing security
interest in all of Laser Power Corporation's present rights and additional
rights as may be agreed between the parties, as assigned under the
Agreement dated March 1, 1986 between The Board of Trustees of the Leland
Stanford Junior University and Amoco Corporation, revenue from assignment
therefrom, and proceeds of the foregoing assignment.
X Products of collateral are also covered.
- ----
This Financing Statement is a fixture filing to be recorded in the official
- ----
records of the County of ______.
Debtor is a "transmitting Utility " in accordance with UCC Section
- ----
9105(l)(N).
This Financing Statement is signed by the Secured Party instead of the Debtor to
perfect a security interest in collateral
already subject to a security interest in another jurisdiction when it was
- ----
brought into this state, or when the debtors location was changed to this
state, or
already subject to a FINANCING statement filed in another county, or
- ----
which is proceeds of the original collateral described above in which a
security interest was perfected, or
which is proceeds of the original collateral described above in which a
- ----
security interest was perfected, or
as to which the filing has lapsed, or
- ----
acquired after a change of name, identify or corporate structure of the
- ----
debtor.
DEBTOR: SECURED PARTY:
Laser Power- Corporation ATx Telecom Systems, Inc.
By: By:
-------------------------------- -------------------------------
Its: Its:
-------------------------------- -------------------------------
Return copy to: Roxanne E. Christ, Esq.
Paul, Hastings, Janofsky & Walker LLP
Twenty-Third Floor
555 South Flower Street
Los Angeles, California 90071
<PAGE> 5
ASSIGNMENT AGREEMENT
This AGREEMENT was made this 30th day of September, 1996 between ATx Telecom
Systems, Inc. ("ATx"), a Delaware Corporation with offices at 1251 Frontenac
Rd., Naperville, III 60563, and Laser Power Corporation ("LPC") with offices at
12777 High Bluff Drive, San Diego, CA 92130.
RECITALS:
ATx holds a worldwide non-exclusive license (the "Amoco License") to make,
have made, use and sell products that incorporate inventions owned or
disclosed in U.S. patent application Serial No. 674,948, including any
patent which may issue from any divisions, continuations, or
continuations-in-part based on said application Serial No. 674,948.
A copy of the Amoco License, dated March 1, 1986, is attached hereto as
Exhibit A. The licensor is THE BOARD OF TRUSTEES OF THE LELAND STANFORD
JUNIOR UNIVERSITY ("STANFORD") and the original licensee is AMOCO
CORPORATION ("AMOCO"). AMOCO transferred the Amoco License to ATx, who at
the time of transfer was a wholly owned subsidiary of AMOCO. Scientific
Atlanta, Inc. ("S-A") has since acquired ATx and all its assets and at the
present time ATx is a wholly owned subsidiary of S-A.
LPC desires to receive an assignment of all rights and obligations under
the Amoco License according to the terms of said license, and ATx are
willing to assign the rights and obligations under the Amoco License to
LPC.
STANFORD has agreed to assignment of the Amoco License by written consent,
a copy of which is attached hereto as Exhibit "B", in accordance with
Section 12 of the Amoco License.
LPC desires to commercialize said technology in order that products
resulting therefrom might be available for public use and benefit at the
earliest possible time.
AGREEMENT:
Therefore, in consideration of the mutual promises and obligations set forth
herein, the parties agree as follows:
1. DEFINITIONS
1.1 "Affiliate" shall be defined as in Paragraph 2.5 of the Amoco
License, which definition is incorporated by reference herein.
- 1 -
<PAGE> 6
1.2 "Agreement" shall mean the agreement set forth herein.
1.3 "AMOCO" refers to AMOCO CORPORATION.
1.4 "Amoco License" is defined as the agreement between STANFORD and
AMOCO, dated March 1, 1986, a copy of which is attached hereto as
Exhibit A.
1.5 "Laser Apparatus" shall be defined as in Paragraph 2.3 of the Amoco
License, which definition is incorporated by reference herein.
1.6 "Licensed Patent(s)" shall be defined as in Paragraph 2.2 of the
Amoco License, which definition is incorporated by reference herein.
1.7 "Licensed Product(s)" shall be defined as in Paragraph 2.4 of the
Amoco License, which definition is incorporated by reference herein.
1.8 "Net Sales Price" shall be defined as in Paragraph 2.6(a) and (b)
of the Amoco License, which definition is incorporated by reference
herein, substituting LPC as assignee for AMOCO.
1.9 "STANFORD" refers to The Board of Trustees of the Leland Stanford
Junior University.
2. ASSIGNMENT OF LICENSE
2.1 Subject to the terms and conditions set forth in this Agreement, Atx
assigns, transfers, and conveys to LPC, and LPC accepts from Atx, all rights and
obligations of AMOCO (now assigned to ATx) under the Amoco License, upon receipt
of the written consent of STANFORD.
3. COMPENSATION TERMS AND CONDITIONS
3.1. In full consideration of the assignment of the Amoco License to
LPC hereunder, LPC agrees to pay, and ATx agrees to accept the
following:
(a)Assignment Fee. LPC will pay the sum of [ *** ]
to ATx, payable upon execution and delivery of this Assignment
of the Amoco License from ATx to LPC.
(b)Royalties. No royalties shall be due until the cumulative Net
Sales Price of all Licensed Product(s) made during the term of
this Agreement whenever sold or otherwise disposed of by LPC is
in excess of [ *** ] and thereafter royalties shall be due only
on such excess. LPC shall pay ATx a royalty at a rate of [ *** ]
of the Net Sales Price of all
- 2 -
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 7
Licensed Product(s) made during the term of this Agreement
whenever sold or otherwise disposed of by LPC, payable as set
forth in Section 4. All such royalty payments shall be made
payable to ATx Telecom Systems, Inc. in U.S. dollars at the
following address:
Vice President of Finance
ATx Telecom Systems, Inc.
1251 Frontenac Rd.
Naperville, Ill 60563
The above address may be changed in the manner specified for
notices in this Agreement.
(c) Minimum royalty. Beginning the first of January in the fifth
full year after the effective date of this agreement (i.e. for
the year beginning January 1, 2001), LPC shall pay to ATx a
[ *** ] pursuant to Paragraph 4.1 of at least [ *** ] per year,
at the address specified in Paragraph 3.1(b). In the event that
LPC does not pay at least the [ *** ] payment for any such year
by the due date set forth in Paragraph 4.1, then ATx may
terminate this Agreement in accordance with Paragraph 5.2 after
fifteen days from receipt of written notice by LPC, if LPC has
failed to pay the required minimum royalty within such
fifteen-day period.
(d)Royalties for Transactions in Non-U.S. Currencies. The royalty
on sales in currencies other than U.S. Dollars shall be
calculated using the appropriate foreign exchange rate for such
currency quoted by the Bank of America (San Francisco) foreign
exchange desk, on the close of business on the last banking day
of the calendar quarter immediately preceding the subject sale.
Any and all taxes levied on royalties accruing under this
Agreement in a country in which there is a provision by law or
regulation for withholding such taxes will be deducted from such
royalty and paid by LPC to the proper taxing authority.
3.2 Effect of invalidity. In the event that one or more of the claims
of a Licensed Patent are held invalid by a final judgment of a court of
competent jurisdiction from which no appeal can be or is taken, then no
royalties based on such invalid claim(s) shall be due subsequent to
said final judgment.
4. ROYALTY REPORTS, PAYMENTS, AND ACCOUNTING
4.1 Annual Royalty Payment and Report. Within sixty (60) days after the
end of each calendar year, LPC shall make an appropriate written report
and pay the earned royalty payments (if any) to ATx .
- 3 -
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 8
Time is of the essence in this Assignment Agreement. This report shall
state the aggregate Net Sales Price of Licensed Product(s) during such
completed report year, and resulting royalty payment due ATx.
Concurrent with the making of each such report, LPC shall include the
royalty payment due ATx for the report year covered by such report.
4.2 Accounting. LPC agrees to keep and maintain records and books of
account for a period of three (3) years in sufficient detail to enable
the royalties payable hereunder to be determined, and further agrees to
permit such records to be examined on behalf of ATx by an auditor or
accountant, to whom LPC shall have no reasonable objection, from time
to time during normal business hours, but not more than once a year, to
verify reports provided for above. The auditor or accountant shall
report to ATx in such manner that names of customers and any other
information deemed confidential by LPC will not be disclosed to ATx.
Such examination is to be made by ATx, at the expense of ATx, except in
the event that the results of the audit prove an under reporting of
royalties due ATx of 7.5% (seven and one-half percent) or more, then
the audit costs shall be paid by LPC. All under-reported royalties
shall be paid to ATx within 30 days, and shall bear interest at the
statutory interest rate of California, accruing from the date when the
under-reported royalties should have been due.
5. EFFECTIVE DATE, DURATION, TERMINATION
5.1 Effective Date. This Agreement shall be effective upon the date set
forth in the first paragraph of this Agreement.
5.2 Termination. This Agreement may not be terminated except as
expressly provided in paragraph 3:1(c). Upon such termination of the
Agreement, LPC agrees that all its rights under the Amoco License shall
be deemed to be assigned to ATx, subject to approval of STANFORD if
required pursuant to the Amoco License.
5.3 Survival. Surviving any termination pursuant to paragraph 5.2 are
LPC's obligation to pay royalties accrued or accruable as of the
termination date, and any cause of action or claim of either party
accrued because of any breach by the other party.
5.4 Term continuance until expiration. Unless previously terminated in
strict accordance with paragraph 5.2, this Agreement shall continue in
full force until the expiration of the last to expire of any Licensed
Patents. However, no royalties shall be due for any Licensed Product(s)
made, used, and sold subsequent to the expiration date of the Licensed
Patent(s) associated therewith, and as set forth in paragraph 3.2, no
royalties based on an adjudicated invalid claim(s)
- 4 -
<PAGE> 9
shall be due subsequent to a final judgment of a court of competent
jurisdiction from which no appeal can be or is taken.
6. VALIDITY AND INFRINGEMENT
6.1 ATx hereby releases LPC from any and all claims of ATx under the
Licensed Patent(s) for damages, royalties, or profits, for any
infringement such as by the use, sale, or manufacture of Licensed
Product(s) prior to the date of this Agreement. ATx also releases the
direct and indirect vendees of LPC from any and all claims of ATx,
under the Licensed Patent(s) for such damages, royalties, or profits
for infringement such as by the use or resale of any such items prior
to the date of this Agreement.
7. WAIVER
7.1 None of the terms, covenants and conditions of this Agreement may
be waived except by the written consent of the party waiving
compliance.
7.2 The waiver of a breach of this Agreement by either party hereto
shall in no event constitute a waiver as to any future breach, whether
similar or dissimilar in nature.
8. SECURITY INTEREST
8.1 LPC agrees to execute a security agreement concurrent herewith that
grants ATx a security interest in the Amoco License assigned to LPC
pursuant to this Agreement.
9. NOTICES AND DESIGNATED CONTACTS
Any notice required or permitted to be made under this Agreement shall be in
writing and shall be deemed to have been duly given to the other party on the
earlier of (i) actual receipt by such party, irrespective of whether sent by
post, telex, facsimile transmission, overnight (or expedited) courier service or
any other method, or (ii) the sixth (6th) day after mailing by registered or
certified mail from the country in which the notice originated, return receipt
requested and postage prepaid, provided such notice is directed or addressed to
the appropriate address or facsimile number set forth below:
-5-
<PAGE> 10
For Atx: For LPC:
- -------- --------
Steven C. Stewart James D. McFarland
Assistant General Patent Counsel General Counsel
One Technology Parkway, South 12777 High Bluff Drive
Norcross, GA 30092-2967 San Diego, CA 92130
Phone: (770) 903-4833 Phone: (619) 755-0700
FAX: (770) 903-4837 FAX: (619) 259-0956
Either party may change the address, the facsimile number of the person
designated above by notice to the other party, which notice complies
with this section.
10. APPLICABLE LAW
10.1 This Agreement shall be construed in accordance with the laws of
New York, without regard to principles of conflicts of law.
11. ENTIRE AGREEMENT
11.1 This Agreement contains the entire understanding of the parties
and supersedes all other agreements or understandings with respect to
the subject matter hereof. Any amendment to this Agreement must be in
writing, signed by authorized representatives of each party, and must
expressly refer to this Agreement.
12. OTHER
12.1 Fax signatures. Each party intends the facsimile of its signature
printed by a receiving FAX machine to be an original signature.
12.2 Headings. The foregoing paragraph headings are included solely for
convenience and shall not be deemed part of this Agreement and shall
not be used for the interpretation hereof.
12.3 Force Majeure. No party shall be liable for failure to perform or
delay in performing any obligation (other than the payment of money)
under this Agreement if such failure or delay is due to fire, flood,
earthquake, strike, labor trouble or other industrial disturbance, war
(declared or undeclared), embargo, blockage, shortage of labor,
material or equipment, legal prohibition, governmental action, riot,
insurrection, damage, destruction or any other cause beyond the control
of such defaulting party preventing or delaying the performance. The
obligations and rights of the excused party shall be extended on a day
to day basis for the time period of the excusable delay plus thirty
(30) days; however, in no event shall this extended period exceed one
hundred twenty (120) days.
-6-
<PAGE> 11
12.4 Assignment. Neither party may transfer its rights or delegate the
duties provided under the terms of this Agreement without the prior
consent of the other party. However, consent shall not be required in
the event of a sale or transfer to an Affiliate or to a successor to
substantially the whole of LPC's assets in the field relating to the
manufacture and sale of Laser Apparatus.
12.5 Neither party to be construed as drafter. As both parties have
participated in the negotiation and drafting of this Agreement, neither
party shall be deemed to be the drafter of this Agreement for purposes
of construing any ambiguities against one party.
12.6 Severability. In the event that any provision of this Agreement,
or any part hereof, is found invalid or unenforceable, the remainder of
this Agreement will be binding on the parties hereto, and will be
construed as if the invalid or unenforceable provision or part thereof
had been deleted from this Agreement.
13. WARRANTIES
13.1 ATx Warranties. ATx represents, warrants, and covenants to and
with LPC as follows:
(a) ATx is unaware of any issued and unexpired patent that
would prevent practice of the claims of the Licensed Patents;
(b) ATx is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and has
all requisite power and authority to execute and deliver this Agreement
and to perform all its duties and obligations set forth herein. This
Agreement is a valid and binding obligation of ATx, enforceable against
it in accordance with its terms; and
(c) Neither the execution and delivery of this Agreement, nor
the performance by ATx of any of the provisions hereof shall constitute
a breach of or a default under ATx's charter documents or any
agreement, instrument or other document to which ATx is a party or by
which any of its assets or properties may be bound or affected, or any
judgment, order, regulation, stature, ordinance or rule having any
applicability to ATx or any of its assets or properties.
(d) ATx has sole, unencumbered possession of and/or title to
the Amoco License and is the owner of the Amoco License free from any
adverse liens, security interests, or encumbrances.
13.2 LPC Warranties. LPC represents, warrants, and covenants to and
with LPC as follows:
-7-
<PAGE> 12
(a) LPC is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and has
all requisite power and authority to execute and deliver this Agreement
and to perform all its duties and obligations set forth herein. This
Agreement is a valid and binding obligation of LPC, enforceable against
it in accordance with its terms; and
(b) Neither the execution and delivery of this Agreement, nor the performance by
LPC of any of the provisions hereof shall constitute a breach of or a default
under LPC's charter documents or any agreement, instrument or other document to
which LPC is a party or by which any of its assets or properties may be bound or
affected, or any judgment, order, regulation, stature, ordinance or rule having
any applicability to LPC or any of its assets or properties.
14. NEGATION OF WARRANTIES
14.1 Nothing in this Agreement shall be construed as:
(a) a warranty or representation by ATx as to the validity or
scope of any Licensed Patent(s);
(b) a warranty or representation that anything made, used,
sold or otherwise disposed of under any license granted in this
Agreement is or will be free from infringement of patents, copyrights,
and trademarks of third parties;
(c) an obligation to bring or prosecute actions or suits
against third parties for infringement; and
(d) conferring rights to use in advertising, publicity, or
otherwise any trademark or the name "ATx Telecom Systems".
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by their
duly authorized officers or representatives.
ATX TELECOM SYSTEMS, INC LASER POWER CORPORATION
By: /s/ George Steiner By: /s/ Glenn H. Sherman
----------------------------- ----------------------------
Name: George Steiner Name: Glenn H. Sherman
----------------------------- ----------------------------
Title: Vice President-Finance Title: Chairman and CEO
----------------------------- ----------------------------
Date: 10/7/96 Date: 10/4/96
----------------------------- ----------------------------
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<PAGE> 13
Exhibit A
AGREEMENT
Effective as of March 1, 1986, THE BOARD OF TRUSTEES OF HE LELAND STANFORD
JUNIOR UNIVERSITY, a body having corporate powers under the laws of the State of
California ("STANFORD"), and AMOCO CORPORATION, an Indiana corporation, having a
principal place of business at 200 Easts Randolph Drive, Chicago, Illinois 60601
("AMOCO"), agree as follows:
1. BACKGROUND
1.1-- STANFORD represents that it has certain rights by assignment to
the Laser Diode End Pumped Laser and Harmonic Generator (Invention[s]), as
described in Stanford Docket S84-070, and any patents which may issue to such
Invention(s).
1.2-- STANFORD has filed United States Patent Application Serial No.
674,948 which is directed to Invention(s). A copy of said patent application is
attached hereto as Exhibit I and is incorporated herein by reference.
1.3-- STANFORD wishes to have the Invention(s) perfected and marketed at
the earliest possible time in order that products resulting therefrom might be
available for public use and benefit.
<PAGE> 14
1.4-- Amoco wishes to acquire a license under Licensed Patent(s) which
is defined herein below.
1.5-- The Invention(s) was made in the course of research supported by
the National Aeronautics a Space Administration (NASA) and the Navy and is
subject to patent regulations of said agencies.
2. DEFINITIONS
2.1--"Invention(s)" shall have the meaning set forth above.
2.2--"Licensed Patent(s)" means all patents of all countries based in
whole or in part upon United States Patent Application Serial No. 674,948 or any
invention owned or controlled by STANFORD which is disclosed in said application
Serial No. 674,948 and shall includes without limitation, any patent which may
issue from any divisions, continuations or continuations-in-part based on said
application Serial No. 674,948.
2.3-- "Laser Apparatus" means an optically pumped laser which includes
an optical pump and output coupler together with any intermediate active or
passive optical
- 2 -
<PAGE> 15
elements, said elements including a gain medium and any focusing
and nonlinear optical components, but excluding any other devices and equipment
either upstream of the optical pump or downstream of the output coupler.
2.4-- "Licensed Product(s)" means any Laser Apparatus or part thereof,
the manufacture use or sale of which is covered by any valid claim of an issued,
unexpired Licensed Patent(s). A claim of an issued unexpired patent shall be
presumed to be valid unless and until it has been held to be invalid by a final
judgment of a court of competent jurisdiction from which no appeal can be or is
taken.
2.5--"Affiliate" shall mean any company of which AMOCO at the time in
question owns or controls directly or indirectly, fifty percent (50%) or more of
the stock having the right to vote for directors thereof.
2.6-- "Net Sales Price" shall have the following meaning:
(a) In respect of Licensed Product(s) sold as such to
any party other than an Affiliate, Net Sales Price shall mean
the [ *** ]
- 3 -
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 16
[ *** ]
(b) In respect of Licensed Product(s) sold either to
an Affiliate or as a component of another product, Net Sales
Price shall mean the [ *** ]
- 4-
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 17
[ *** ]
3. GRANT
3.1--Subject to the terms and conditions set forth in this Agreement,
STANFORD hereby grants and AMOCO hereby accepts a worldwide nonexclusive license
under Licensed Patent(s) to make, have made use and sell Licensed Product(s).
3.2 -- It is understood that STANFORD has granted a nonexclusive
license under Licensed Patent(s) to Spectra-Physics Inc. It is further
understood that, except for AMOCO's license hereunder and any other nonexclusive
rights which STANFORD may have granted, may grant or is obligated
-5-
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 18
to grant under Licensed Patent(a), Spectra-Physics Inc. has an option to convert
its license to an exclusive license. In the event that Spectra-Physics Inc. does
not exercise its option, AMOCO shall have the option to convert its license
hereunder to an exclusive license, except for any nonexclusive licenses STANFORD
has granted or is obligated to grant under Licensed Patent(s) as of the date
AMOCO exercises its option. AMOCO may exercise this option by delivering written
notice of its election to STANFORD anytime after one year from the effective
date of this Agreement. The exclusive license shall be on fair and reasonable
terms to be negotiated in good faith. STANFORD shall have sixty (60) days from
receipt of such notification, or until the exclusive license is executed by
AMOCO, whichever is later, to conclude any pending negotiations with third
parties. STANFORD shall provide AMOCO with a list of companies with which
negotiations are pending as of the date of notification.
4. GOVERNMENT RIGHTS
This Agreement is subject to all of the items and conditions of Public
Law 96-517 as amended.
-6-
<PAGE> 19
5. ROYALTIES
5.1-- In consideration of the license granted herein AMOCO shall pay to
STANFORD a noncreditable, nonrefundable license issue royalty of [ *** ] upon
signing of this Agreement.
5.2-- In addition, earned royalties shall be payable to STANFORD an the
Net Sales Price of all Licensed Product(s) made during the term of this
Agreement whenever sold or otherwise disposed of by AMOCO as follows:
(a) [ *** ] of Net Sales Price until cumulative royalties
paid to STANFORD total [ *** ]; then
(b) [ *** ] of Net Sales Price for the next [ *** ]; in
earned royalties until cumulative royalties paid to STANFORD total [ *** ];
then
(c) [ *** ] of Net Sales Price thereafter.
5.3 -- All royalties payable to AMOCO hereunder shall be paid to
STANFORD at its address specified in Article 14
-7-
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 20
hereof in lawful money of the United States of America.
6. REPORTS PAYMENTS AND ACCOUNTING
6.1-- STANFORD shall notify AMOCO of the issue of any Licensed
Patent(s) within thirty (30) days of such issue.
6.2-- Within sixty (60) days after the end of each calendar half-year
during the existence of any unexpired Licensed Patent(s), AMOCO shall render to
STANFORD a written statement showing all Licensed Product(s) sold by AMOCO
during the preceding calendar half-year and shall accompany each such statement
by payment of royalty due STANFORD. If for any such period no royalty shall be
due, AMOCO shall submit a written statement to that effect.
6.3-- In the event that the selling price of Licensed Product(s) on
which royalty is based hereunder is in a currency other than lawful money of the
United States, the rate of exchange used in calculating such royalty for each
calendar half-year shall be the arithmetic average of the selling prices for the
currency in question as quoted by leading New York, New York banks at the end of
business on the last business day of each calendar month in such calendar
half-year during which any sale of Licensed Product(s) occurred.
-8-
<PAGE> 21
6.4-- AMOCO agrees to keep records and books of account for a period of
three (3) years in sufficient detail to enable the royalties payable hereunder
to be determined, and further agrees to permit such records to be examined for
STANFORD by an auditor or accountant, to whom Amoco shall have no reasonable
objection from time to time during normal business hours to the extent
necessary, but not more than once a year, to verify reports provided for in
Paragraph 6.2 of this Article 6. Such examination is to be made by STANFORD, at
the expense of STANFORD, and such auditor or accountant shall report to STANFORD
in such manner that names of customers and any other information deemed
confidential by AMOCO will not be disclosed to STANFORD.
7. NEGATION OF WARRANTIES
Nothing in this Agreement shall be construed
as:
(a) A warranty or representation by STANFORD as to the
validity or scope of any Licensed Patent(a);
(b) A warranty or representation that anything made, used,
sold or otherwise disposed of under any license granted in this Agreement is or
will be free from infringement of patents, copyrights and trademarks of third
parties;
-9-
<PAGE> 22
(c) An obligation to bring or prosecute actions or suits
against third parties for infringement;
(d) Conferring rights to use in advertising, publicity or
otherwise any trademark or the name of "Stanford; or
(e) Granting by implication, estoppel or otherwise any
licenses under patents of STANFORD other than Licensed Patent(a), regardless of
whether such patents are dominant or subordinate to any Licensed Patent(s).
8. INDEMNITY
AMOCO agrees to indemnify, hold harmless and defend STANFORD,
its trustees, directors, officers, employees and agents against any and all
claims arising out of the exercise by AMOCO of any rights under this Agreement,
without limiting the generality of the foregoing against any damages, losses or
liabilities whatsoever in respect to death or injury to person or damage to
property from or out of the possession, use or operation of Licensed Product(s)
by AMOCO or its customers in any manner whatsoever.
-10-
<PAGE> 23
9. MARKING
With respect to any Licensed Product(s) which is either manufactured or
sold within the United States, AMOCO agrees that it will mark such Licensed
Product(s) with proper patent notice as specified under the patent laws of the
United States.
10. INFRINGEMENT BY OTHERS: PROTECTION OF PATENTS
AMOCO-shall promptly inform STANFORD of any suspected
infringement of any Licensed Patent(s) by a third party.
11. TERMINATION
11.1-- Unless previously terminated in accordance with the provisions of
Paragraphs 11.2 or 11.3 of this Article 11, this Agreement shall continue in
full force until the expiration of the last to expire of any Licensed Patent(s)
or, in the event that no Licensed Patent(s) issue, the expiration of the last to
expire of all STANFORD patent applications based in whole or in part upon United
States Patent Application Serial No. 674,948 or any of the inventions contained
therein.
-11-
<PAGE> 24
11.2-- AMOCO may terminate this Agreement by giving STANFORD notice in
writing at least ninety (90) days in advance of the effective date of
termination selected by AMOCO. After such termination, AMOCO shall have no
further rights under Licensed Patent(s). Termination pursuant to this Paragraph
11.2 shall not relieve AMOCO of its royalty obligations in respect of Licensed
Product(s) produced but not sold prior to the effective date of termination or
otherwise relieve AMOCO of any other obligation or liability arising from any
acts or omissions under this Agreement committed prior to the effective date of
such termination.
11.3-- Should AMOCO be in default as to any obligation hereunder and
fail to remedy such default within thirty (30) days after receipt of written
notice thereof from STANFORD specifying the nature of such default, STANFORD may
terminate this Agreement by delivering written notice to AMOCO of termination.
Such termination shall relieve each of the parties hereto of all further rights,
duties and obligations, except the obligation of AMOCO to render a final
accounting in accordance with Paragraph 6.2 hereof, and pay all royalty due in
accordance with the provisions of this Agreement.
-12-
<PAGE> 25
12. ASSIGNMENT
Amoco shall not, without the prior written consent of STANFORD, assign
or extend this Agreement or any rights hereunder to another person or company,
except to an Affiliate or to a successor to substantially the whole of AMOCO's
assets in the field relating to lasers.
13. APPLICABLE LAW
This Agreement shall be construed, interpreted and applied in
accordance with the laws of the State of California.
14. NOTICES
All notices, demands or other writings in this Agreement provided to be given or
made or sent, or which may be given or made or sent, by either party hereto to
the other, shall be deemed to have been fully given or made or sent when done in
writing and deposited in the United States mail first class, postage prepaid and
addressed as follows:
-13-
<PAGE> 26
TO STANFORD: STANFORD UNIVERSITY
350 CAMBRIDGE AVENUE SUITE 250
PALO ALTO, CA 94306
ATTENTION: DIRECTOR,
TECHNOLOGY LICENSING
TO AMOCO AMOCO CORPORATION
200 EAST RANDOLPH DRIVE
POST OFFICE BOX 87703
CHICAGO, ILLINOIS 60680-703
ATTENTION: GENERAL MANAGER
PATENTS AND LICENSING DEPARTMENT
MAIL CODE 1905A
THE ADDRESS TO WHICH ANY NOTICE, DEMAND OR OTHER WRITING MAY BE GIVEN OR MADE OR
SENT TO AN PARTY MAY BE CHANGED UPON WRITTEN NOTICE GIVEN BY SUCH PARTY AS ABOVE
PROVIDED.
-14-
<PAGE> 27
15. WAIVER
The waiver of a breach of this Agreement by either party hereto shall
in no event constitute a waiver as to any future breach, whether similar or
dissimilar in nature. None of the terms, covenants and conditions of this
Agreement can be waived except by the written consent of the party waiving
compliance.
16. SCOPE OF AGREEMENT
This Agreement constitutes the entire Agreement between the parties
pertaining to the subject matter hereof and may be amended or modified only by
an Instrument of equal formality signed by the duly authorized representatives
of the respective parties.
17. WARRANTIES
17.1-- Subject to the provisions hereof, STANFORD represents and
warrants that it has corporate power to extend the rights granted or to be
granted to AMOCO under this Agreement.
-15-
<PAGE> 28
17.2 -- Except as expressly set forth in this Agreement, STANFORD
MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS
OR IMPLIED. THERE ARE NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, OR THAT THE USE OF THE LICENSED PRODUCT(S)
WILL NOT INFRINGE ANY PATENT, COPYRIGHT TRADEMARK OR OTHER RIGHTS.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
duplicate originals by their duly authorized officers or representatives.
THE BOARD OF TRUSTEES OF THE
LELAND STANFORD UNIVERSITY
By: /s/ Katherine Ku
---------------------------
Title: Acting Director
Technology Licensing
---------------------------
Date: 5/30/86
---------------------------
AMOCO CORPORATION
By: /s/ Illegible
---------------------------
Title: Director, Physical Technology
---------------------------
Date: 6/20/86
---------------------------
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<PAGE> 29
EXHIBIT I
<PAGE> 30
Stanford Patent License Agreement
File No.: RESCH2900F1C4
As you know, Amoco Corporation holds a non-exclusive license under certain
patents assigned to Stanford University. According to the license agreement,
dated March 1, 1986, the licensed patents include all patents of all countries
based upon U.S. Patent Application Serial Number 674,948 (filed November 26,
1984), and includes divisionals, continuations, and continuations-in-part (CIPs)
of this application.
As you may not know, the '948 application was abandoned, and four CPI
applications were filed based an the application. These four CPI applications
have issued as the following four patents (copies attached):
1. U.S. Patent No. 4,731,787 (Fan et al.), "Monolithic Phasematched Laser
Harmonic Generator", issued March 15, 1988;
2. U.S. Patent No. 4,739,507 (Byer et al.), "Diode End Pumped Laser and
Harmonic Generator Using Same", issued April 19, 1988;
3. U.S. Patent No. 4,764,933 (Kozlovsky et al.), "Diode Pumped Low Doped
ND3+ Glass Laser", issued August 16, 1988; and
4. U.S. Patent No. 4,809,291 (Byer et al.), "'Diode Pumped Laser and
Doubling to Obtain Blue Light", issued February 28, 1989.
<PAGE> 31
STANFORD UNIVERSITY
OFFICE OF TECHNOLOGY LICENSING - 900 WELCH ROAD, SUITE 350
PALO ALTO, CA 94304-1850
(415) 723-0651 FAX (41S) 725-7295
September 27, 1996
Mr. Glenn Sherman
Chairman and Chief Executive Officer
Laser Power Corporation
12777 High Bluff Drive
San Diego, CA 92130
Re: Agreement Between STANFORD and AMOCO with Effective Date of March
1, 1986 ("Agreement"); Assignment thereof
Dear Glenn:
Under the terms of the Agreement, specifically Article 12 the
assignment of the Agreement to another party requires the prior written consent
of STANFORD except to a successor to substantially the whole of AMOCO's assets
in the field relating to lasers. It is our understanding that AMOCO's assets in
the field relating to lasers was acquired by ATX Telecom Systems, a company
located in Naperville, Illinois, whose parent is Scientific-Atlanta, Inc., a
company located in Norcross, Georgia (ATX/SAI).
It is our further understanding that ATX/SAI do not intend to
develop and market Licensed Product(s) under the Agreement, and are willing to
assign the Agreement to Laser Power Corporation. Laser Power Corporation plans
to develop and market Licensed Product(s).
As documented in Paragraph 1.3 of the Agreement, STANFORD
wishes to have the Invention(s) developed and marketed at the earliest possible
time in order that products resulting therefrom will be available for public use
and benefit. Therefore, this letter serves as STANFORD'S written consent for the
assignment of the Agreement from ATX/SAI to Laser Power Corporation as
negotiated between ATX/SAI and Laser Power Corporation.
Sincerely,
Katharine Ku
Director
cc: John Clark (ATX/SAI)
EXHIBIT "B"
<PAGE> 32
SECURITY AGREEMENT
THIS AGREEMENT is made this 30th day of 1996, between ATX Telecom Systems, Inc.,
a Delaware corporation, having a principal place of business at 1251 Frontenac
Road, Naperville, Illinois 60563 (hereafter "ATX"), and Laser Power Corporation,
an Delaware corporation, having a principal place of business at 12777 High
Bluff Drive, San Diego, California 92130 (hereafter "LPC"), in which the parties
agree as follows:
1 SECURITY INTEREST
In consideration of the grant of assignment of license ("License") to LPC by ATX
as set forth in the Assignment Agreement of even date herewith ("Assignment
Agreement") and for value received therein, LPC hereby grants to ATX a security
interest in the property described below ("Collateral") pursuant to Section 9101
(1996), California Uniform Commercial Code ("UCC"), to secure payment of minimum
royalties by LPC pursuant to the Assignment Agreement. The parties further
acknowledge the assignment of said License set forth in said Assignment
Agreement.
2. COLLATERAL
2.1 The Collateral consists of the following:
(a) All of LPC's present rights and additional rights as may be
agreed between the parties, as assigned under the Agreement
dated March 1, 1986 between THE BOARD OF TRUSTEES OF THE
LELAND STANFORD JUNIOR UNIVERSITY ("STANFORD") and AMOCO
CORPORATION, revenue from assignment therefrom, and proceeds
of the foregoing assignment.
The foregoing is referred to herein as "Collateral."
- 1 -
<PAGE> 33
2.2 LPC hereby acknowledges that the License is a unique valuable
asset and further acknowledges that the License is a bona fide
business opportunity, and that LPC has been assigned the
License based upon ATX's determination that LPC has the unique
attributes necessary to maintain the value of the Licensed
Patents. LPC further acknowledges that the value of such
License is at least [ *** ]
3. FINANCING STATEMENTS
LPC represents, warrants and covenants that LPC has granted no other security
interest in the Collateral and that it has not filed or recorded any other
financing statement covering any of the Collateral or any proceeds thereof in
any public office. At the request of ATX, LPC shall execute and return within
thirty (30) days after submission, one or more financing statements pursuant to
the UCC in a form satisfactory to ATX, for filing and recordation in any and all
jurisdictions which are deemed necessary or desirable by ATX.
4. LOCATION OF DEBTOR AND COLLATERAL
4.1 The principal place of business of LPC is 12777 High Bluff
Drive, San Diego, California 92130. If more than one principal
place of business for LPC exists, the executive offices of LPC
are located 12777 High Bluff Drive, San Diego, California
92130 ("place of business"). LPC shall immediately notify ATX
in writing of any change in or discontinuance of the place or
places of business or executive offices of LPC as noted
herein.
4.2 LPC shall immediately notify ATX in writing of any change in
the location of books and records kept in accordance with the
terms of Paragraph 4.2 of the Assignment Agreement.
- 2 -
* CONFIDENTIAL TREATMENT REQUESTED
<PAGE> 34
5. POSSESSION AND USE OF COLLATERAL
Until default, LPC shall have the right to possess and use the Collateral
pursuant to terms of the Assignment Agreement or as otherwise agreed to between
LPC and STANFORD.
6. SALE OF COLLATERAL
Subject to the terms and conditions of the Assignment Agreement, LPC shall have
the power to utilize, sell, assign, encumber, transfer or otherwise dispose of
all Collateral only with the prior written consent of ATX.
7. ACCOUNTS
LPC shall provide accountings of its sales in accordance with Paragraphs 4.1 and
4.2 of the Assignment Agreement.
8. RIGHTS OF LPC in COLLATERAL
In reliance on the representations and warranties of ATX and Scientific-Atlanta
under the Assignment Agreement, LPC warrants and covenants that LPC has, and
will have at all times pertinent to this Agreement and the Assignment Agreement,
sole, unencumbered possession of and/or title to the Collateral and is the owner
of the Collateral free from any adverse liens, security interests, or
encumbrances, except for the security interest granted herein.
9. PROTECTION OF COLLATERAL
9.1 LPC shall notify ATX within a reasonable time if the validity
of any claim(s) contained within a Licensed Patent(s), as
defined in the Assignment Agreement, has been challenged in a
judicial proceeding and/or adjudicated invalid.
10. TAXES OR ENCUMBRANCES: REIMBURSEMENT
LPC shall pay promptly when due all taxes, assessments, liens or encumbrances
levied on or against the Collateral or for its use or operation whether
- 3 -
<PAGE> 35
by government action or pursuant under this Security Agreement or the Assignment
Agreement.
11. EXPIRATION DATE: OBLIGATIONS
The security interest in the Collateral shall be in force until the expiration
of the last to expire of the Licensed Patents as defined in the Assignment
Agreement, and upon said expiration date ATX shall provide a release of said
security interest and this Agreement.
12. DEFAULT
12.1 LPC shall be in default under this Security Agreement on the
happening of any of the following events or conditions.
(a) Delivery of Notice by ATX to LPC of any failure by
LPC to pay the minimum royalty due pursuant to
Paragraph 3.1 (c) of the Assignment Agreement by the
due date set forth in Paragraph 4.1 of the Assignment
Agreement, if the failure has not been cured within
fifteen (1 5) days after written notice from ATX.
(b) IF LPC (i) voluntarily files, or has filed against
it, any petition for bankruptcy, arrangement,
reorganization, liquidation or other protection under
any state or federal bankruptcy law or statute, and
such petition has not been discharged or dismissed by
the court within sixty (60) days after the filing
thereof; or (ii) makes an assignment for the benefit
of creditors, or agrees to the appointment of a
receiver, liquidator, or trustee with respect to all
or substantially all of its assets and/or properties;
or (iii) dissolves and/or winds-up its business or
otherwise ceases business operations.
- 4 -
<PAGE> 36
13. REMEDIES
13.1 On any default under Section 12.1 and at any time thereafter,
ATX may declare all obligations secured hereby immediately due
and payable and shall have the remedies of a secured party
under the UCC, and agrees to execute and/or foreclose on the
collateral only in accordance with the provisions of the UCC.
13.2 All expenses of retaking, holding, preparing for sale or
license, selling or licensing, or the like of the Collateral
incurred by ATX in accordance with the provisions of this
Agreement shall include reasonable attorney's fees and legal
expenses incurred by ATX, all of which shall become part of
the obligation after default and may be recovered by
disposition of the Collateral.
13.3 LPC shall have rights to retain the Collateral until execution
in accordance with the UCC as herein provided.
13.4 LPC acknowledges and agrees that in the event that ATX
properly executes on the Collateral in accordance with the
UCC, and the Collateral is not purchased by LPC, then the
Assignment Agreement shall be automatically terminated without
any further action or notice required to be taken or made and
all rights, obligations and other interests in the Amoco
License shall revert to ATX.
13.5 LPC acknowledges that upon LPC default pursuant to Section
12.1, and proper execution on the collateral by ATX in
accordance with the UCC, title in the collateral shall pass to
ATX and that ATX may, upon such default, prepare additional
documents, including but not limited to, assignment forms and
title paper as are necessary to perfect or prove ATX's title
to or ownership of the Collateral. LPC further grants ATX an
irrevocable Power of Attorney to execute the appropriate
documents herein in the event of LPC's failure or refusal to
execute and deliver such documents in accordance with this
Section.
- 5 -
<PAGE> 37
14. WAIVER
No waiver by ATX of any default shall operate as a waiver of any other default
or of a similar default on a future occasion.
15. CHOICE OF LAW
LPC and ATX hereby agree and designate the UCC and all other applicable
substantial laws of the State of California as the law to be applied in the
construction of this Agreement.
16. BINDING EFFECT
All rights of ATX hereunder shall inure to the benefit of its successors and
assigns and all obligations of LPC shall be binding on the legal
representatives, executors, administrators and successors of LPC.
17. EFFECTIVE DATE
This Agreement shall become effective on the date set forth in the first
paragraph of this Agreement.
18. MISCELLANEOUS
18.1 LPC shall, at the request of ATX, execute such documents which
ATX deems desired or required by the UCC and the laws of the
State of California to record or perfect the Security Interest
granted hereunder in accordance with the purposes of this
Agreement.
18.2 All rights and remedies provided herein and in the Assignment
Agreement are cumulative and are not exclusive of any rights
or remedies otherwise provided by law or in equity. Any simple
or partial exercise of any right or remedy shall not preclude
the further exercise thereof or the exercise of any other
right or remedy.
18.3 In the event that any provision or portion of any provision
contained in this Security Agreement shall for any reason be
held to be invalid, illegal
- 6 -
<PAGE> 38
or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not
affect any other term or provision and this Security Agreement
shall be interpreted and construed as if such term or
provision, to the extent the same shall have been held to be
invalid, illegal or unenforceable, had never been contained
herein.
18.4 This Agreement and the Assignment Agreement represents the
entire undertaking between the parties hereto with respect to
the subject matter hereof and supersedes all previous
representations, understandings, or agreements, oral or
written, between the parties with respect hereto (except the
companion Assignment Agreement). It may not be modified except
by a written instrument signed by the parties hereto.
EXECUTED AT ON THE DATE FIRST ABOVE WRITTEN.
DATE: 10/7/96 ATX Telecom Systems, INC.
NAME: /s/ George A. Steiner
----------------------------
TITLE: Vice President-Finance
----------------------------
DATE: 10/3/96 LASER POWER CORPORATION
NAME: /s/ Glenn H. Sherman
----------------------------
TITLE: Chairman and CEO
----------------------------
- 7 -
<PAGE> 1
Exhibit 10.16
CREDIT AGREEMENT
THIS AGREEMENT is entered into as of January 31, 1997, by and between
LASER POWER CORPORATION, a Delaware corporation ("Borrower"), and WELLS FARGO
BANK, NATIONAL ASSOCIATION ("Bank").
RECITAL
Borrower has requested from Bank the credit accommodations described
below (each, a "Credit" and collectively, the "Credits"), and Bank has agreed to
provide the Credits to Borrower on the terms and conditions contained herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Bank and Borrower hereby agree as follows:
ARTICLE I
THE CREDITS
SECTION 1.1. LINE OF CREDIT.
(a) Line of Credit. Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make advances to Borrower from time to time up
to and including March 1, 1998, not to exceed at any time the aggregate
principal amount of Two Million Dollars ($2,000,000.00) ("Line of Credit"), the
proceeds of which shall be used for working capital requirements. Borrower's
obligation to repay advances under the Line of Credit shall be evidenced by a
promissory note substantially in the form of Exhibit A hereto ("Line of Credit
Note"), all terms of which are incorporated herein by this reference.
(b) Borrowing and Repayment. Borrower may from time to time during the
term of the Line of Credit borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions contained herein or in the Line of Credit Note; provided however,
that the total outstanding borrowings under the Line of Credit shall not at any
time exceed the maximum principal amount available thereunder, as set forth
above.
SECTION 1.2. TERM LOAN.
(a) Term Loan. Bank has made a loan to Borrower in the original
principal amount of One Million Dollars ($1,000,000.00) ("Term Loan"), on which
the outstanding principal balance as of the date hereof is $203,704.50.
Borrower's obligation to repay the Term Loan is evidenced by a promissory note
substantially in the form of Exhibit B attached hereto ("Term Note"), all terms
-1-
<PAGE> 2
of which are incorporated herein by this reference. Subject to the terms and
conditions of this Agreement, Bank hereby confirms that Term Loan remains in
full force and effect. Any reference in the Term Note to any prior loan
agreement between Bank and Borrower shall be deemed a reference to this
Agreement.
(b) Repayment. The principal amount of the Term Loan shall be repaid in
accordance with the provisions of the Term Note.
(c) Prepayment. Borrower may prepay principal on the Term Loan at any
time, in any amount and without penalty. All prepayments of principal shall be
applied on the most remote principal installment or installments then unpaid.
SECTION 1.3. TERM COMMITMENT.
(a) Term Commitment. Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make advances to Borrower from time to time up
to and including August 1, 1997, not to exceed the aggregate principal amount of
One Million Five Hundred Thousand Dollars ($1,500,000.00) ("Term Commitment"),
the proceeds of which shall be used for working capital requirements and to
purchase new equipment, and which shall be converted on August 1, 1997, to a
term loan, as described more fully below. Borrower's obligation to repay
advances under the Term Commitment shall be evidenced by a promissory note
substantially in the form of Exhibit C attached hereto ("Term Commitment Note")
all terms of which are incorporated herein by this reference.
(b) Limitation on Borrowings. Notwithstanding any other provision of
this Agreement, the aggregate amount of all outstanding borrowings under the
Term Commitment shall not at any time exceed a maximum of (100%) of the cost of
each item of equipment purchased with the proceeds thereof, including tax and
freight costs as evidenced by seller's invoice.
(c) Borrowing and Repayment. Borrower may from time to time during the
period in which Bank will make advances under the Term Commitment borrow and
partially or wholly repay its outstanding borrowings, provided that amounts
repaid may not be reborrowed, subject to all the limitations, terms and
conditions contained herein; provided however, that the total outstanding
borrowings under the Term Commitment shall not exceed the maximum principal
amount available thereunder, as set forth above. The outstanding principal
balance of the Term Commitment shall be due and payable in full on August 1,
1997; provided however, that so long as Borrower is in compliance on said date
with all terms and conditions contained herein and in any other documents
evidencing the Credits, Bank agrees to restructure repayment of said outstanding
principal balance so that principal shall be amortized over five (5) years and
shall be repaid in sixty (60) installments, as set forth in the promissory note
executed by Borrower on said date to evidence the new repayment schedule.
(d) Prepayment. Borrower may prepay principal on the Term Commitment at
any time, in any amount and without penalty.
-2-
<PAGE> 3
SECTION 1.4. INTEREST/FEES.
(a) Interest. The outstanding principal balance of the Line of Credit,
Term Loan and Term Commitment shall bear interest at the rate of interest set
forth in the Line of Credit Note, Term Note and Term Commitment Note.
(b) Computation and Payment. Interest shall be computed on the basis of
a 360-day year, actual days elapsed. Interest shall be payable at the times and
place set forth in the Line of Credit Note, Term Note and Term Commitment Note
(collectively, the "Notes").
(c) Commitment Fee. Borrower shall pay to Bank a nonrefundable
commitment fee for the Line of Credit equal to Seven Thousand Five Hundred
Dollars ($7,500.00), which fee shall be due and payable in full upon execution
of this Agreement.
(d) Commitment Fee. Borrower shall pay to Bank a nonrefundable
commitment fee for the Term Commitment equal to One Thousand Dollars
($1,000.00), which fee shall be due and payable in full upon execution of this
Agreement.
SECTION 1.5. COLLECTION OF PAYMENTS.
Borrower authorizes Bank to collect all principal, interest and fees
due under each Credit by charging Borrower's demand deposit account number
4650-022304 with Bank, or any other demand deposit account maintained by
Borrower with Bank, for the full amount thereof. Should there be insufficient
funds in any such demand deposit account to pay all such sums when due, the full
amount of such deficiency shall be immediately due and payable by Borrower.
SECTION 1.6. COLLATERAL.
As security for all indebtedness of Borrower to Bank subject hereto,
Borrower hereby grants to Bank security interests of first priority in all
Borrower's accounts receivable and other rights to payment, inventory, general
intangibles, equipment and fixtures.
All of the foregoing shall be evidenced by and subject to the terms of
such security agreements, financing statements, deeds of trust and other
documents as Bank shall reasonably require, all in form and substance
satisfactory to Bank. Borrower shall reimburse Bank immediately upon demand for
all costs and expenses incurred by Bank in connection with any of the foregoing
security, including without limitation, filing and recording fees and costs of
appraisals, audits and title insurance.
-3-
<PAGE> 4
SECTION 1.7 SUBORDINATION OF DEBT.
All obligations of Borrower to Union Miniere Inc. shall be subordinated
in right of repayment to all obligations of Borrower to Bank, as evidenced by
and subject to the terms of subordination agreements in form and substance
satisfactory to Bank.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Bank,
which representations and warranties shall survive the execution of this
Agreement and shall continue in full force and effect until the full and final
payment, and satisfaction and discharge, of all obligations of Borrower to Bank
subject to this Agreement.
SECTION 2.1. LEGAL STATUS.
Borrower is a corporation, duly organized and existing and in good
standing under the laws of the state of Delaware and is qualified or licensed to
do business (and is in good standing as a foreign corporation, if applicable) in
all jurisdictions in which such qualification or licensing is required or in
which the failure to so qualify or to be so licensed could have a material
adverse effect on Borrower.
SECTION 2.2. AUTHORIZATION AND VALIDITY.
This Agreement, the Notes, and each other document, contract and
instrument required hereby or at any time hereafter delivered to Bank in
connection herewith (collectively, the "Loan Documents") have been duly
authorized, and upon their execution and delivery in accordance with the
provisions hereof will constitute legal, valid and binding agreements and
obligations of Borrower or the party which executes the same, enforceable in
accordance with their respective terms.
SECTION 2.3. NO VIOLATION.
The execution, delivery and performance by Borrower of each of the Loan
Documents do not violate any provision of any law or regulation, or contravene
any provision of the Articles of Incorporation or By-Laws of Borrower, or result
in any breach of or default under any contract, obligation, indenture or other
instrument to which Borrower is a party or by which Borrower may be bound.
-4-
<PAGE> 5
SECTION 2.4. LITIGATION.
There are no pending, or to the best of Borrower's knowledge
threatened, actions, claims, investigations, suits or proceedings by or before
any governmental authority, arbitrator, court or administrative agency which
could have a material adverse effect on the financial condition or operation of
Borrower other than those disclosed by Borrower to Bank in writing prior to the
date hereof.
SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT.
The financial statement of Borrower dated November 30, 1996, a true
copy of which has been delivered by Borrower to Bank prior to the date hereof,
(a) is complete and correct and presents fairly the financial condition of
Borrower, (b) discloses all liabilities of Borrower that are required to be
reflected or reserved against under generally accepted accounting principles,
whether liquidated or unliquidated, fixed or contingent, and (c) has been
prepared in accordance with generally accepted accounting principles
consistently applied. Since the date of such financial statement there has been
no material adverse change in the financial condition of Borrower, nor has
Borrower mortgaged, pledged, granted a security interest in or otherwise
encumbered any of its assets or properties except in favor of Bank or as
otherwise permitted by Bank in writing.
SECTION 2.6. INCOME TAX RETURNS.
Borrower has no knowledge of any pending assessments or adjustments of
its income tax payable with respect to any year.
SECTION 2.7. NO SUBORDINATION.
There is no agreement, indenture, contract or instrument to which
Borrower is a party or by which Borrower may be bound that requires the
subordination in right of payment of any of Borrower's obligations subject to
this Agreement to any other obligation of Borrower.
SECTION 2.8. PERMITS, FRANCHISES.
Borrower possesses, and will hereafter possess, all permits, consents,
approvals, franchises and licenses required and rights to all trademarks, trade
names, patents, and fictitious names, if any, necessary to enable it to conduct
the business which it is now engaged in compliance with applicable law.
-5-
<PAGE> 6
SECTION 2.9. ERISA.
Borrower is in compliance in all material respects with all applicable
provisions of the Employee Retirement Income Security Act of 1974, as amended or
recodified from time to time ("ERISA"); Borrower has not violated any provision
of any defined employee pension benefit plan (as defined in ERISA) maintained or
contributed to by Borrower (each, a "Plan"); no Reportable Event as defined in
ERISA has occurred and is continuing with respect to any Plan initiated by
Borrower; Borrower has met its minimum funding requirements under ERISA with
respect to each Plan; and each Plan will be able to fulfill its benefit
obligations as they come due in accordance with the Plan documents and under
generally accepted accounting principles.
SECTION 2.10. OTHER OBLIGATIONS.
Borrower is not in default on any obligation for borrowed money, any
purchase money obligation or any other material lease, commitment, contract,
instrument or obligation.
SECTION 2.11. ENVIRONMENTAL MATTERS.
Except as disclosed by Borrower to Bank in writing prior to the date
hereof, Borrower is in compliance in all material respects with all applicable
federal or state environmental, hazardous waste, health and safety statutes, and
any rules or regulations adopted pursuant thereto, which govern or affect any of
Borrower's operations and/or properties, including without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Superfund Amendments and Reauthorization Act of 1986, the Federal Resource
Conservation and Recovery Act of 1976, and the Federal Toxic Substances Control
Act, as any of the same may be amended, modified or supplemented from time to
time. None of the operations of Borrower is the subject of any federal or state
investigation evaluating whether any remedial action involving a material
expenditure is needed to respond to a release of any toxic or hazardous waste or
substance into the environment. Borrower has no material contingent liability in
connection with any release of any toxic or hazardous waste or substance into
the environment.
ARTICLE III
CONDITIONS
SECTION 3.1. CONDITIONS OF INITIAL
EXTENSION OF CREDIT. The obligation of Bank to grant any of the Credits
is subject to the fulfillment to Bank's satisfaction of all of the following
conditions:
(a) Approval of Bank Counsel. All legal matters incidental to the
granting of each of the Credits shall be satisfactory to Bank's counsel.
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(b) Documentation. Bank shall have received, in form and substance
satisfactory to Bank, each of the following, duly executed:
(i) This Agreement and the Notes.
(ii) Corporate Borrowing Resolution.
(iii) Certificate of Incumbency.
(iv) Continuing Security Agreement Rights to Payment and Inventory.
(v) Security Agreement Equipment and Fixtures.
(vi) UCC Financing Statements.
(vii) Subordination Agreement Payments Permitted.
(viii) Corporate Resolution: Subordination
(ix) Such other documents as Bank may require under any other
Section of this Agreement.
(c) Financial Condition. There shall have been no material adverse
change, as determined by Bank, in the financial condition or business of
Borrower (or any guarantor hereunder), nor any material decline, as determined
by Bank, in the market value of any collateral required hereunder or a
substantial or material portion of the assets of Borrower.
(d) Insurance. Borrower shall have delivered to Bank evidence of
insurance coverage on all Borrower's property, in form, substance, amounts,
covering risks and issued by companies satisfactory to Bank, and where required
by Bank, with loss payable endorsements in favor of Bank.
SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT.
The obligation of Bank to make each extension of credit requested by
Borrower hereunder shall be subject to the fulfillment to Bank's satisfaction of
each of the following conditions:
(a) Compliance. The representations and warranties contained herein and
in each of the other Loan Documents shall be true on and as of the date of the
signing of this Agreement and on the date of each extension of credit by Bank
pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist.
(b) Documentation. Bank shall have received all additional documents
which may be required in connection with such extension of credit.
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ARTICLE IV
AFFIRMATIVE COVENANTS
Borrower covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower shall, unless Bank otherwise consents in
writing:
SECTION 4.1. PUNCTUAL PAYMENTS.
Punctually pay all principal, interest, fees or other liabilities due
under any of the Loan Documents at the times and place and in the manner
specified therein, and immediately upon demand by Bank, the amount by which the
outstanding principal balance of any of the Credits at any time exceeds any
limitation on borrowings applicable thereto.
SECTION 4.2. ACCOUNTING RECORDS.
Maintain adequate books and records in accordance with generally
accepted accounting principles consistently applied, and permit any
representative of Bank, at any reasonable time, to inspect, audit and examine
such books and records, to make copies of the same, and to inspect the
properties of Borrower.
SECTION 4.3. FINANCIAL STATEMENTS.
Provide to Bank all of the following, in form and detail satisfactory
to Bank:
(a) not later than 120 days after and as of the end of each fiscal
year, an audited financial statement of Borrower, prepared by a certified public
accountant acceptable to Bank, to include balance sheet, income statement and
statement of cash flow;
(b) not later than 30 days after and as of the end of each fiscal
quarter, a financial statement of Borrower, prepared by Borrower, to include
balance sheet, income statement and statement of cash flow;
(c) not later than 30 days after and as of the end of each fiscal
quarter, an aged listing of accounts receivable and accounts payable, and a
reconciliation of accounts;
(d) from time to time such other information as Bank may reasonably
request.
SECTION 4.4 COMPLIANCE.
Preserve and maintain all licenses, permits, governmental approvals,
rights, privileges and franchises necessary for the conduct of its business; and
comply with the provisions of all
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documents pursuant to which Borrower is organized and/or which govern Borrower's
continued existence and with the requirements of all laws, rules, regulations
and orders of any governmental authority applicable to Borrower and/or its
business.
SECTION 4.5. INSURANCE.
Maintain and keep in force insurance of the types and in amounts
customarily carried in lines of business similar to that of Borrower, including
but not limited to fire, extended coverage, public liability, flood, property
damage and workers' compensation, with all such insurance carried with companies
and in amounts satisfactory to Bank, and deliver to Bank from time to time at
Bank's request schedules setting forth all insurance then in effect.
SECTION 4.6. FACILITIES.
Keep all properties useful or necessary to Borrower's business in good
repair and condition, and from time to time make necessary repairs, renewals and
replacements thereto so that such properties shall be fully and efficiently
preserved and maintained.
SECTION 4.7. TAXES AND OTHER LIABILITIES.
Pay and discharge when due any and all indebtedness, obligations,
assessments and taxes, both real or personal, including without limitation
federal and state income taxes and state and local property taxes and
assessments, except such (a) as Borrower may in good faith contest or as to
which a bona fide dispute may arise, and (b) for which Borrower has made
provision, to Bank's satisfaction, for eventual payment thereof in the event
Borrower is obligated to make such payment.
SECTION 4.8. LITIGATION.
Promptly give notice in writing to Bank of any litigation pending or
threatened against Borrower with a claim in excess of $50,000.00.
SECTION 4.9. FINANCIAL CONDITION.
Maintain Borrower's financial condition as follows using generally
accepted accounting principles consistently applied and used consistently with
prior practices (except to the extent modified by the definitions herein):
(a) Current Ratio not at any time less than 1.25 to 1.0, with "Current
Ratio" defined as total current assets divided by total current liabilities.
(b) Tangible Net Worth not at any time less than $5,500,000.00, with
"Tangible Net Worth" defined as the aggregate of total stockholders' equity plus
subordinated debt less any intangible assets.
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(c) Total Liabilities divided by Tangible Net Worth not at any time
greater than 1.25 to 1.0, with "Total Liabilities" defined as the aggregate of
current liabilities and non-current liabilities less subordinated debt, and with
"Tangible Net Worth" as defined above.
(d) EBITDA Coverage Ratio not less than 1.50 to 1.0 as of each fiscal
year end, with "EBITDA" defined as net profit before tax plus interest expense
(net of capitalized interest expense), depreciation expense and amortization
expense,) and with "EBITDA Coverage Ratio" defined as EBITDA divided by the
aggregate of total interest expense plus the prior period current maturity of
long-term debt and the prior period current maturity of subordinated debt,
determined semi-annually at end of second and fourth fiscal quarter.
(e) Net income after taxes not less than $1.00 on an annual basis,
determined as of each fiscal year end, and pre-tax profit not less than $1.00 on
a quarterly basis, determined as of each fiscal quarter end.
SECTION 4.10. NOTICE TO BANK.
Promptly (but in no event more than five (5) days after the occurrence
of each such event or matter) give written notice to Bank in reasonable detail
of: (a) the occurrence of any Event of Default, or any condition, event or act
which with the giving of notice or the passage of time or both would constitute
an Event of Default; (b) any change in the name or the organizational structure
of Borrower; (c) the occurrence and nature of any Reportable Event or Prohibited
Transaction, each as defined in ERISA, or any funding deficiency with respect to
any Plan; or (d) any termination or cancellation of any insurance policy which
Borrower is required to maintain, or any uninsured or partially uninsured loss
through liability or property damage, or through fire, theft or any other cause
affecting Borrower's property.
ARTICLE V
NEGATIVE COVENANTS
Borrower further covenants that so long as Bank remains committed to
extend credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank's prior written
consent:
SECTION 5.1. USE OF FUNDS.
Use any of the proceeds of any of the Credits except for the purposes
stated in Article I hereof.
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SECTION 5.2. OTHER INDEBTEDNESS.
Create, incur, assume or permit to exist any indebtedness or
liabilities resulting from borrowings, loans or advances, whether secured or
unsecured, matured or unmatured, liquidated or unliquidated, joint or several,
except (a) the liabilities of Borrower to Bank, and (b) any other liabilities of
Borrower existing as of, and disclosed to Bank prior to, the date hereof.
SECTION 5.3. MERGER, CONSOLIDATION, TRANSFER OF ASSETS.
Merge into or consolidate with any other entity; make any substantial
change in the nature of Borrower's business as conducted as of the date hereof;
acquire all or substantially all of the assets of any other entity; nor sell,
lease, transfer or otherwise dispose of all or a substantial or material portion
of Borrower's assets except in the ordinary course of its business.
SECTION 5.4. GUARANTIES.
Guarantee or become liable in any way as surety, endorser (other than
as endorser of negotiable instruments for deposit or collection in the ordinary
course of business), accommodation endorser or otherwise for, nor pledge or
hypothecate any assets of Borrower as security for, any liabilities or
obligations of any other person or entity, except any of the foregoing in favor
of Bank.
SECTION 5.5. LOANS, ADVANCES, INVESTMENTS.
Make any loans or advances to or investments in any person or entity,
except any of the foregoing existing as of, and disclosed to Bank prior to, the
date hereof, and additional loans or advances to Radius Engineering, a Belgian
corporation in amounts not to exceed an aggregate of $2,250,000.00 outstanding
at any one time.
SECTION 5.6. DIVIDENDS, DISTRIBUTIONS.
Declare or pay any dividend or distribution either in cash, stock or
any other property on Borrower's stock now or hereafter outstanding, nor redeem,
retire, repurchase or otherwise acquire any shares of any class of Borrower's
stock now or hereafter outstanding.
SECTION 5.7. PLEDGE OF ASSETS.
Mortgage, pledge, grant or permit to exist a security interest in, or
lien upon, all or any portion of Borrower's assets now owned or hereafter
acquired, except any of the foregoing in favor of Bank or which is existing as
of, and disclosed to Bank in writing prior to, the date hereof.
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ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.1. EVENT OF DEFAULT
The occurrence of any of the following shall constitute an "Event of
Default" under this Agreement:
(a) Borrower shall fail to pay when due any principal, interest, fees
or other amounts payable under any of the Loan Documents.
(b) Any financial statement or certificate furnished to Bank in
connection with, or any representation or warranty made by Borrower or any other
party under this Agreement or any other Loan Document shall prove to be
incorrect, false or misleading in any material respect when furnished or made.
(c) Any default in the performance of or compliance with any
obligation, agreement or other provision contained herein or in any other Loan
Document (other than those referred to in subsections (a) and (b) above), and
with respect to any such default which by its nature can be cured, such default
shall continue for a period of twenty (20) days from its occurrence.
(d) Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any contract or instrument (other
than any of the Loan Documents) pursuant to which Borrower has incurred any debt
or other liability to any person or entity, including Bank.
(e) The filing of a notice of judgment lien against Borrower; or the
recording of any abstract of judgment against Borrower in any county in which
Borrower has an interest in real property; or the service of a notice of levy
and/or of a writ of attachment or execution, or other like process, against the
assets of Borrower or; or the entry of a judgment against Borrower.
(f) Borrower shall become insolvent, or shall suffer or consent to or
apply for the appointment of a receiver, trustee, custodian or liquidator of
itself or any of its property, or shall generally fail to pay its debts as they
become due, or shall make a general assignment for the benefit of creditors;
Borrower shall file a voluntary petition in bankruptcy, or seeking
reorganization, in order to effect a plan or other arrangement with creditors or
any other relief under the Bankruptcy Reform Act, Title 11 of the United States
Code, as amended or recodified from time to time ("Bankruptcy Code"), or under
any state or federal law granting relief to debtors, whether now or hereafter in
effect; or any involuntary petition or proceeding pursuant to the Bankruptcy
Code or any other applicable state or federal law relating to bankruptcy,
reorganization or other relief for debtors is filed or commenced against
Borrower, or Borrower shall file an answer admitting the jurisdiction of the
court and the material allegations of any involuntary petition; or Borrower
shall be adjudicated a bankrupt, or an order for relief shall be entered against
Borrower by any court of competent jurisdiction under the Bankruptcy Code or
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any other applicable state or federal law relating to bankruptcy, reorganization
or other relief for debtors.
(g) There shall exist or occur any event or condition which Bank in
good faith believes impairs, or is substantially likely to impair, the prospect
of payment or performance by Borrower of its obligations under any of the Loan
Documents.
(h) The dissolution or liquidation of Borrower; or Borrower, or any of
its directors, stockholders or members, shall take action seeking to effect the
dissolution or liquidation of Borrower.
(i) Any change in ownership during the term of this Agreement of an
aggregate of twenty-five percent (25%) or more of the common stock of Borrower.
SECTION 6.2. REMEDIES.
Upon the occurrence of any Event of Default: (a) all indebtedness of Borrower
under each of the Loan Documents, any term thereof to the contrary
notwithstanding, shall at Bank's option and without notice become immediately
due and payable without presentment, demand, protest or notice of dishonor, all
of which are hereby expressly waived by each Borrower; (b) the obligation, if
any, of Bank to extend any further credit under any of the Loan Documents shall
immediately cease and terminate; and (c) Bank shall have all rights, powers and
remedies available under each of the Loan Documents, or accorded by law,
including without limitation the right to resort to any or all security for any
of the Credits and to exercise any or all of the rights of a beneficiary or
secured party pursuant to applicable law. All rights, powers and remedies of
Bank may be exercised at any time by Bank and from time to time after the
occurrence of an Event of Default, are cumulative and not exclusive, and shall
be in addition to any other rights, powers or remedies provided by law or
equity.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. NO WAIVER.
No delay, failure or discontinuance of Bank in exercising any right,
power or remedy under any of the Loan Documents shall affect or operate as a
waiver of such right, power or remedy; nor shall any single or partial exercise
of any such right, power or remedy preclude, waive or otherwise affect any other
or further exercise thereof or the exercise of any other right, power or remedy.
Any waiver, permit, consent or approval of any kind by Bank of any breach of or
default under any of the Loan Documents must be in writing and shall be
effective only to the extent set forth in such writing.
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SECTION 7.2. NOTICES.
All notices, requests and demands which any party is required or may
desire to give to any other party under any provision of this Agreement must be
in writing delivered to each party at the following address:
BORROWER: LASER POWER CORPORATION
12777 High Bluff Drive
San Diego, CA 92130
BANK: WELLS FARGO BANK, NATIONAL ASSOCIATION
101 West Broadway, Suite 300
San Diego, CA 92101
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.
SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES.
Borrower shall pay to Bank immediately upon demand the full amount of
all payments, advances, charges, costs and expenses, including reasonable
attorneys' fees (to include outside counsel fees and all allocated costs of
Bank's in-house counsel), expended or incurred by Bank in connection with (a)
the negotiation and preparation of this Agreement and the other Loan Documents,
Bank's continued administration hereof and thereof, and the preparation of any
amendments and waivers hereto and thereto, (b) the enforcement of Bank's rights
and/or the collection of any amounts which become due to Bank under any of the
Loan Documents, and (c) the prosecution or defense of any action in any way
related to any of the Loan Documents, including without limitation, any action
for declaratory relief, whether incurred at the trial or appellate level, in an
arbitration proceeding or otherwise, and including any of the foregoing incurred
in connection with any bankruptcy proceeding (including without limitation, any
adversary proceeding, contested matter or motion brought by Bank or any other
person) relating to any Borrower or any other person or entity.
SECTION 7.4. SUCCESSORS, ASSIGNMENT.
This Agreement shall be binding upon and inure to the benefit of the
heirs, executors, administrators, legal representatives, successors and assigns
of the parties; provided however, that Borrower may not assign or transfer its
interest hereunder without Bank's prior written consent. Bank reserves the right
to sell, assign, transfer, negotiate or grant participations in all or any part
of, or any interest in, Bank's rights and benefits under each of the Loan
Documents. In connection
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therewith, Bank. may disclose all documents and information which Bank now has
or may hereafter acquire relating to any of the Credits, Borrower or its
business, or any collateral required hereunder.
SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT.
This Agreement and the other Loan Documents constitute the entire
agreement between Borrower and Bank with respect to the Credits and supersede
all prior negotiations, communications, discussions and correspondence
concerning the subject matter hereof. This Agreement may be amended or modified
only in writing signed by each party hereto.
SECTION 7.6. NO THIRD PARTY BENEFICIARIES.
This Agreement is made and entered into for the sole protection and
benefit of the parties hereto and their respective permitted successors and
assigns, and no other person or entity shall be a third party beneficiary of, or
have any direct or indirect cause of action or claim in connection with, this
Agreement or any other of the Loan Documents to which it is not a party.
SECTION 7.7. TIME.
Time is of the essence of each and every provision of this Agreement
and each other of the Loan Documents.
SECTION 7.8. SEVERABILITY OF PROVISIONS.
If any provision of this Agreement shall be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity without invalidating the remainder of such
provision or any remaining provisions of this Agreement.
SECTION 7.9. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which when executed and delivered shall be deemed to be an original, and all of
which when taken together shall constitute one and the same Agreement.
SECTION 7.10. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of California.
SECTION 7.11. ARBITRATION.
(a) Arbitration. Upon the demand of any party, any Dispute shall be
resolved by binding arbitration (except as set forth in (e) below) in accordance
with the terms of this
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Agreement. A "Dispute" shall mean any action, dispute, claim or controversy of
any kind, whether in contract or tort, statutory or common law, legal or
equitable, now existing or hereafter arising under or in connection with, or in
any way pertaining to, any of the Loan Documents, or any past, present or future
extensions of credit and other activities, transactions or obligations of any
kind related directly or indirectly to any of the Loan Documents, including
without limitation, any of the foregoing arising in connection with the exercise
of any self-help, ancillary or other remedies pursuant to any of the Loan
Documents. Any party may by summary proceedings bring an action in court to
compel arbitration of a Dispute. Any party who fails or refuses to submit to
arbitration following a lawful demand by any other party shall bear all costs
and expenses incurred by such other party in compelling arbitration of any
Dispute.
(b) Governing Rules. Arbitration proceedings shall be administered by
the American Arbitration Association ("AAA") or such other administrator as the
parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the Loan
Documents. The arbitration shall be conducted at a location in California
selected by the AAA or other administrator. If there is any inconsistency
between the terms hereof and any such rules, the terms and procedures set forth
herein shall control. All statutes of limitation applicable to any Dispute shall
apply to any arbitration proceeding. All discovery activities shall be expressly
limited to matters directly relevant to the Dispute being arbitrated. Judgment
upon any award rendered in an arbitration may be entered IN any court having
jurisdiction; provided however, that nothing contained herein shall be deemed to
be a waiver by any party that is a bank of the protections afforded to it under
12 U.S.C. Section 91 or any similar applicable state law.
(c) No Waiver; Provisional Remedies, Self-Help and Foreclosure. No
provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary remedies,
including without limitation injunctive relief, sequestration, attachment,
garnishment or the appointment of a receiver, from a court of competent
jurisdiction before, after or during the pendency of any arbitration or other
proceeding. The exercise of any such remedy shall not waive the right of any
party to compel arbitration or reference hereunder.
(d) Arbitrator qualifications and Powers; Awards. Arbitrators must be
active members' of the California State Bar or retired judges of the state or
federal judiciary of California, with expertise in the substantive laws
applicable to the subject matter of the Dispute. Arbitrators are empowered to
resolve Disputes by summary rulings in response to motions filed prior to the
final arbitration hearing. Arbitrators (i) shall resolve all Disputes in
accordance with the substantive law of the state of California, (ii) may grant
any remedy or relief that a court of the state of California could order or
grant within the scope hereof and such ancillary relief as is necessary to make
effective any award, and (iii) shall have the power to award recovery of all
costs and fees, to impose sanctions and to take such other actions as they deem
necessary to the same extent a judge could pursuant to the Federal Rules of
Civil Procedure, the California Rules of Civil Procedure or other applicable
law. Any Dispute in which the amount in controversy is $5,000,000 or less shall
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be decided by a single arbitrator who shall not render an award of greater than
$5,000,000 (including damages, costs, fees and expenses). By submission to a
single arbitrator, each party expressly waives any right or claim to recover
more than $5,000,000. Any Dispute in which the amount in controversy exceeds
$5,000,000 shall be decided by majority vote of a panel of three arbitrators;
provided however, that all three arbitrators must actively participate in all
hearings and deliberations.
(e) Judicial Review. Notwithstanding anything herein to the contrary,
in any arbitration in which the amount in controversy exceeds $25,000,000, the
arbitrators shall be required to make specific, written findings of fact and
conclusions of law. In such arbitrations (i) the arbitrators shall not have the
power to make any award which is not supported by substantial evidence or which
is based on legal error, (ii) an award shall not be binding upon the parties
unless the findings of fact are supported by substantial evidence and the
conclusions of law are not erroneous under the substantive law of the state of
California, and (iii) the parties shall have in addition to the grounds referred
to in the Federal Arbitration Act for vacating, modifying or correcting an award
the right to judicial review of (A) whether the findings of fact rendered by the
arbitrators are supported by substantial evidence, and (B) whether the
conclusions of law are erroneous under the substantive law of the state of
California. Judgment confirming an award in such a proceeding may be entered
only if a court determines the award is supported by substantial evidence and
not based on legal error under the substantive law of the state of California.
(f) Real Property Collateral; Judicial Reference. Notwithstanding
anything herein to the contrary, no Dispute shall be submitted to arbitration if
the Dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the mortgage, lien or
security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits
that might accrue to them by virtue of the single action rule statute of
California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any
such Dispute is not submitted to arbitration, the Dispute shall be referred to a
referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance with said Section 638. A referee with the
qualifications required herein for arbitrators shall be selected pursuant to the
AAA's selection procedures. Judgment upon the decision rendered by a referee
shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and 645.
(g) Miscellaneous. To the maximum extent practicable, the AAA, the
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business, by applicable law or
regulation, or to the extent necessary to exercise any judicial review rights
set forth herein. If more than one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration provision most
directly related to the Loan Documents or the subject matter of the Dispute
shall control.
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This arbitration provision shall survive termination, amendment or expiration of
any of the Loan Documents or any relationship between the parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
WELLS FARGO BANK,
LASER POWER CORPORATION NATIONAL ASSOCIATION
By: By:
--------------------------- ----------------------------
Title: Bernie Palmer
Vice President
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EXHIBIT 10.17
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of
_______, 199__ (the "Effective Date"),by and among; Laser Power Corporation, a
Delaware corporation, with its principal address at 12777 High Bluff Drive (the
"Company"), and __________, an individual (the "Employee").
WHEREAS, the Company wishes to continue to employ Employee and Employee
wishes to continue in the employ of the Company for the period and on the terms
and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants, conditions, representations and warranties contained herein, the
parties hereto agree as follows:
1. EMPLOYMENT. Employee shall continue to perform services for the
Company in the position of __________, and Employee shall perform such duties
and responsibilities as may be assigned from time to time by the Company's Board
of Directors (the "Board") consistent with Employee's position. (It is
anticipated that such duties will include responsibilities beyond, or different
from, those normally assigned to a ___________.) From time to time, the Company
may change Employee's title as it may determine appropriate in light of the
Company's current structure and staffing, provided that the title shall properly
reflect Employee's status as an executive. During the term of Employee's
employment with the Company, Employee will devote Employee's best efforts and
substantially all of Employee's business time and attention (except for vacation
periods as set forth below and reasonable periods of illness or other
incapacities permitted by the Company's general employment policies) to the
business of the Company.
2. TERM OF AGREEMENT. The term of this Agreement shall commence on the
Effective Date and shall continue for a period of three (3) years (the "Term"),
unless Employee's services are terminated pursuant to the provisions of Section
7 hereof. At the end of the Term, if Employee is still employed by the Company
pursuant to this Agreement, the term of this Agreement may be extended by mutual
written consent of the parties hereto, and all of the terms and conditions of
this Agreement shall thereafter apply during such extended term.
3. LOCATION OF SERVICES. Employee's services under this Agreement shall
be performed primarily at the facilities of the Company located in San Diego,
California, or at such other facilities as the Company and Employee may
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<PAGE> 2
agree upon from time to time. Employee acknowledges and agrees that Employee's
job responsibilities may require extensive travel, and Employee agrees to travel
as necessary to discharge those duties.
4. STANDARD TERMS; PROPRIETARY INFORMATION. The employment relationship
between the parties shall also be governed by the general employment policies
and practices of the Company, including those relating to protection of
confidential information and assignment of inventions, except that when the
terms of this Agreement differ from or are in conflict with the Company's
general employment policies or practices, this Agreement shall control. Employee
hereby acknowledges that certain agreement with respect to Confidential
Information, Inventions, and Works of Authorship, dated as of ___________,
199___., between Employee and the Company (the "Confidentiality Agreement"),
substantially in the form of EXHIBIT A attached to this Agreement, and the terms
of such Confidentiality Agreement are incorporated herein by reference.
5. COMPENSATION.
5.1 BASE COMPENSATION. Effective as of the Effective Date, the
Company shall pay to Employee base compensation at the monthly rate in effect
immediately prior to the Effective Date, which base compensation shall continue
in effect until adjusted by the Compensation Committee (the "Committee") of the
Company's Board of Directors. Such compensation shall be payable less taxes and
other usual deductions. From time to time, Employee's base compensation shall be
reviewed by the Committee and the Committee may, but is not required to, change
such base compensation. Employee's base compensation shall be payable in
installments consistent with the Company's normal payroll practices for its
executive employees.
5.2 BONUS. During the Term, Employee shall be entitled to
receive such annual bonuses, if any, as the Board may determine based on
performance objectives that may be adopted by the Board, payable to Employee in
a lump sum within thirty (30) days following completion of the financial audit
for each fiscal year or in any other fashion and at any other time as may be
determined by the Board.
6. BENEFITS.
6.1 GENERAL. Except as otherwise expressly provided in this
Section 6, for so long as Employee is employed by the Company, Employee shall be
entitled to all fringe benefits that the Company may make available from time to
time for all executive employees. Without limitation, such fringe benefits shall
include those available, if any, under any health and benefits package, life
insurance and disability programs, and participation in any plan or program
designed for all executive employees by the Company. Employee shall be entitled
to paid vacation in accordance with the Company's
2
<PAGE> 3
standard employment policies and practices for executive employees, as the same
may be in effect from time to time. In addition, Employee shall be entitled to
take all Company holidays as the same may be designated by the Company from time
to time for all employees. Employee shall receive such additional fringe
benefits, if any, as the Board shall determine in its sole discretion from time
to time.
6.2 BUSINESS EXPENSES. The Company shall reimburse Employee
for all ordinary and necessary expenses incurred by Employee, including
disbursements, in the performance of Employee's duties for the Company upon
presentation within the time period specified by the Company of an itemized
statement of all expenses incurred showing the date, nature, recipient, purpose
and amount of each item, subject to prior approval of the Company as required of
executive employees.
6.3 TERMINATION OF BENEFITS. All unvested benefits provided
under this Section 6 shall terminate concurrently with termination of Employee's
employment hereunder for any reason whatsoever. Nothing herein shall vest any
rights in any profit sharing or bonus plans, general expense or automotive
reimbursements, and similar fringe benefits which the Company may provide, if
any, beyond the date on which Employee's employment is terminated for any
reason.
7. TERMINATION OF EMPLOYMENT.
7.1 TERMINATION FOR CAUSE. Notwithstanding any other provision
of this Agreement, Employee's employment with the Company may be terminated for
cause at any time by the Company, upon reasonable notice to Employee. For the
purposes of this Agreement, "cause" shall mean (a) gross or habitual failure to
perform pursuant to the terms of this Agreement; or (b) misconduct, including,
but not limited to: (i) conviction of a crime or entry of a plea of nolo
contendere with regard to a crime involving moral turpitude or dishonesty, (ii)
any breach of the Confidentiality Agreement, (iii) Employee's repeated
insubordination or refusal to comply with any reasonable request of the Board
relating to the scope or performance of Employee's duties, or (iv) conduct that
in the good faith and reasonable determination of the Board demonstrates
Employee's gross unfitness to serve.
7.2 TERMINATION WITHOUT CAUSE. The Company may terminate
Employee's employment under this Agreement without cause at any time upon
written notice to Employee.
7.3 TERMINATION FOR DEATH OR DISABILITY. Employment hereunder
shall automatically terminate upon Employee's death or disability. Disability,
for purposes of this Agreement, shall mean a physical or mental. disability that
interferes with
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<PAGE> 4
Employee's ability to perform duties pursuant to this Agreement for a continuous
period of six (6) months or more.
7.4 VOLUNTARY TERMINATION. Employee may terminate this
Agreement upon thirty (30) days' written notice to the Company; provided,
however, that if prior notice is given, the Company may, at its sole discretion
upon receipt of such notice, require Employee to terminate at any time in
advance of the proposed termination date so long as the Company pays Employee
salary for at least one (1) month after such termination notice by Employee is
received by the Company.
8. POST-TERMINATION CONSULTING AND COMPENSATION.
8.1 TERMINATION BY THE COMPANY FOR CAUSE. Notwithstanding any
other provision of this Agreement to the contrary, if Employee's employment is
terminated for cause pursuant to Section 7.1, the Company shall make no further
salary payments except those earned prior to the date of termination and shall
make no further bonus payments.
8.2 TERMINATION BY THE COMPANY WITHOUT CAUSE. If the Company
terminates this Agreement without cause as defined in Section 7.2 hereof, then
the Company shall pay Employee, upon execution by the Employee of a release
agreement in a form satisfactory to the Company, consulting fees equal to
Employee's base compensation as determined pursuant to Section 5.1, for the
number of months equal to the Employee's number of years of employment at
Employee's next anniversary date of employment, but in any case for no less than
three (3) months if termination is during first six (6) months of employment,
and thereafter for no less than six (6) months. The Company shall make no
further bonus payments. The Employee agrees to indemnify and defend the Company
against any and all liability for any of the payments described in this
paragraph, including penalties and interest associated therewith.
8.3 CONSULTING SERVICES. Employee's consulting services will
be, as and when reasonably requested, to assist the Company in the transition
period following termination and to answer questions, give testimony, and
generally cooperate in any Company matters, including litigation, and the
general promotion of the goodwill of the Company.
8.4 TERMINATION BY EMPLOYEE'S DEATH OR DISABILITY. If
employment shall terminate by reason of Employee's death or disability, the
Company shall pay Employee or Employee's estate severance equal to six (6)
months base compensation, payable in a lump sum. The Company shall make no
further bonus payments.
4
<PAGE> 5
8.5 VOLUNTARY TERMINATION. If Employee terminates this
Agreement, the Company shall make no further salary payments except those earned
prior to the date of termination and shall make no further bonus payments.
9. NONCOMPETITION.
9.1 During Employee's employment by the Company, and for as
long as Employee receives payments from the Company under Section 8.2 of this
Agreement, Employee shall not (a) either directly or indirectly, carry on,
engage in or have any interest in any business that competes with the Company,
excepting ownership by Employee of no more than one percent (1%) of the publicly
traded common stock of any corporation, (b) without the express written consent
of the Company, accept employment with, or in any other manner agree to provide,
for compensation, services for any other person or entity which competes
directly or indirectly with the Company, or (c) materially disrupt, damage,
impair or interfere with the business of the Company, whether by way of
interfering with or soliciting its employees, disrupting its relationship with
customers, agents, representatives or vendors, or otherwise.
9.2 If any portion of this Section 9 is held to be illegal,
unenforceable, void or voidable, the remainder shall remain in full force and
effect, and this Section 9 shall be deemed altered and amended to the minimum
extent necessary to bring it within the legal requirements of enforceability.
10. ARBITRATION. Any and all disputes or controversies, whether of law
or fact of any nature whatsoever, arising from or respecting this Agreement
shall be decided by arbitration by the Judicial Arbitration Mediation Services,
Inc. ("JAMS") in accordance with the rules and regulations of JAMS, or by any
other body mutually agreed upon by the parties. Pre-arbitration discovery shall
be permitted at the request of any party under appropriate protection for
proprietary and confidential business information.
Before filing a demand for arbitration, a party must send the other
parties written notice identifying the matter in dispute and invoking the
procedures in this paragraph. Such written notice shall be sent promptly after
the party knew or reasonably should have known of an alleged violation of this
Agreement. Within fifteen (15) days after such written notice is given, one (1)
or more principals of each party shall meet at a mutually agreeable location in
San Diego, California, for the purpose of determining whether they can resolve
the dispute themselves by written agreement. If the parties fail to resolve the
dispute by written agreement within the fifteen-day (15-day) period, the
complaining party may then initiate the arbitration process by filing a demand
with JAMS or such other body as the parties may agree upon. Nothing in this
paragraph shall prevent a party from seeking temporary equitable relief from
JAMS or such other body as the parties may
5
<PAGE> 6
mutually agree upon during the fifteen-day (15-day) period if necessary to
prevent irreparable harm.
The arbitrators shall be selected as follows: the Company and Employee
shall each select one (1) independent, qualified arbitrator, and the two (2)
arbitrators so selected shall select the third arbitrator. Any party may
disqualify any individual arbitrator who is a present or past employee, owner,
officer, director, relative or consultant to any party hereto or a competing
organization.
Arbitration shall take place at San Diego, California, or any other
location mutually agreeable to the parties. At the request of any party,
arbitration proceedings will be conducted in the utmost secrecy and, in such
case, all documents, testimony and records shall be received, heard and
maintained by the arbitrators in secrecy under seal, available for inspection
only by the Company or Employee, their respective attorneys, and their
respective experts, consultants or witnesses who shall agree, in advance and in
writing, to receive all such information confidentially and to maintain such
information in secrecy, and make no use of such information except for the
purposes of the arbitration, until such information shall become generally
known.
The arbitrators, who shall act by majority vote, shall be able to
decree any and all relief of an equitable nature, including but not limited to
such relief as a temporary restraining order, a temporary injunction, or a
permanent injunction, and shall also be able to award damages, with or without
an accounting and costs. The decree or judgment of an award rendered by the
arbitrators may be entered in any court having jurisdiction over the parties.
Reasonable notice of the time and place of arbitration shall be given
to persons other than the parties, if such notice is required by law, in which
case such persons or their authorized representatives shall have the fight to
attend or participate in the arbitration hearing in such manner as the law shall
require.
If any action is necessary to enforce or interpret the terms of this
Agreement, the prevailing party shall be entitled to reasonable attorneys' fees,
costs, and necessary disbursements in addition to any other relief to which that
party may be entitled.
11. POWER AND AUTHORITY. Each party executing this Agreement hereby
covenants, represents and warrants that such party has full power and authority
to execute this Agreement, that no other consents or approvals of any other
third parties are required or necessary for this Agreement to be so binding
(except as otherwise herein expressly stated) and that this Agreement shall be
fully enforceable in accordance with its terms.
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<PAGE> 7
12. HEIRS, ADMINISTRATORS AND SUCCESSORS. Except as otherwise provided
herein, this Agreement shall inure to the benefit of and be binding upon, the
heirs, administrators and successors of each of the parties hereto.
13. NONASSIGNABILITY. The Company may assign the benefit of this
Agreement to any successor in interest that results from a merger,
reorganization or acquisition. Otherwise, no party to this Agreement may assign
any fight hereunder or delegate any duty hereunder without the written consent
of the other party affected by such assignment or delegation.
14. NO ORAL MODIFICATION. This Agreement may only be changed or
modified and any provisions hereof may only be waived in or by a writing signed
by a party against whom enforcement of any waiver, change or modification is
sought.
15. GOVERNING LAW. This Agreement shall be deemed to be a contract made
under, and shall be construed in accordance with, the laws of the State of
California.
16. SEVERABILITY. If any portion of this Agreement shall be held
illegal, unenforceable, void or voidable by any court, each of the remaining
terms hereof shall nevertheless remain in full force and effect as a separate
contract.
17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one (1) and the same instrument.
18. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
and understanding of the parties pertaining to the matters set forth herein, and
all prior agreements, understandings or representations are hereby terminated
and canceled in their entirety and are of no further force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above indicated.
LASER POWER CORPORATION, EMPLOYEE
A Delaware Corporation
By:
------------------------- ------------------------------
Name: Address:
------------------------ ------------------------------
Title:
---------------------- ------------------------------
7
<PAGE> 8
AGREEMENT WITH RESPECT TO CONFIDENTIAL INFORMATION
INVENTIONS, AND WORKS OF AUTHORSHIP
Employee is employed by Laser Power Corporation (hereinafter "the
Company") in a position by virtue of which Employee will have access to certain
inventions, processes, designs, methods, systems, improvements, bidding and
proposal data related to job costing, computer software or programs or other
works of authorship, trade secrets or other proprietary and confidential matters
of the Company, or of any third party which the Company is under an obligation
to keep confidential, (hereinafter "Confidential Information"); and
Such Confidential Information constitutes extremely valuable
information to the Company; and
Employee may make, reduce to practice, or conceive inventions (whether
patentable or not), including discoveries, improvements or ideas, either alone
or jointly with others (hereinafter "Employee Inventions"), and/or originate or
develop works of authorship, either alone or jointly with others (hereinafter
"Employee Works of Authorship"), while employed by the Company;
Therefore in consideration of my employment and of the salary or wages
paid to me, I agree to the following terms:
1. CONFIDENTIALITY OBLIGATIONS. I agree that all knowledge and
information not already available to the public which I may acquire or have
acquired respecting Confidential Information of any kind, nature, or description
concerning any matters affecting or relating to the business of the Company,
shall for all time and for all purposes be regarded by me as strictly
confidential and shall not be used by me, directly or indirectly disclosed at
any time during or following my employment with the Company, to any unauthorized
person without the Company's prior written permission.
<PAGE> 9
2. PRIOR INVENTIONS/WORKS OF AUTHORSHIP.
I have disclosed on Schedule A to this Agreement a complete list of all
inventions and works of authorship proprietary to me as of this date which I
want to exclude from the application of this Agreement. I acknowledge that I
have not made or reduced to practice (alone or jointly with others) any
inventions, computer software or programs, or other works of authorship other
than those identified on the attached schedule.
3. DISCLOSURE AND OWNERSHIP OF EMPLOYEE INVENTIONS AND EMPLOYEE WORKS
OF AUTHORSHIP. I agree to disclose immediately to the Company, in writing, all
Employee Inventions and Employee Works of Authorship made, conceived, reduced to
practice, or learned by me during the period of my employment with the Company.
I understand that per Labor Code Section 2871, such disclosures will be received
in confidence. I agree that the Company shall exclusively own all Employee
Inventions and Employee Works of Authorship except those for which, as
determined by the Company, no equipment, supplies, facilities or trade secret
information of the Company was used and which was developed entirely on my own
time, and (a) which does not relate at the time of conception or reduction to
practice of the Employee Invention or Employee Work of Authorship to the
business of the Company or to the Company's actual or demonstrably anticipated
research of development, or (b) which does not result from any work performed by
me for the Company.
Furthermore, the Company may, at its option, expressly decline to take
title in an Employee Invention or Employee Works of Authorship disclosed to it
by me under this paragraph. In this event, the Company will notify me in writing
and, after receipt of such written notification, I may, at my expense, pursue
such Employee Invention or Employee Works of Authorship provided I do not use
Company time or materials.
Finally, nothing contained in this Agreement shall obligate the Company
to pursue or develop any Employee Invention or Employee Works of Authorship
acquired pursuant to the terms hereof.
<PAGE> 10
4. OBLIGATION TO COOPERATE IN PERFECTING THE COMPANY'S RIGHTS. I agree
to grant the right to the Company to obtain, for its own benefit and when
applicable in its own name (entirely at its expense) patents, patent
applications and copyrights of any and all types, in any country, and all
renewals and extensions thereof, for those inventions and works of authorship
owned by the Company as a result of the terms of this agreement ("Company's
Rights"). I further agree, in order to perfect the Company's Rights, to (1) sign
and execute all instruments of assignment and other papers necessary to transfer
the Company's Rights to the Company, and (2) perform such further acts as may be
deemed necessary by the Company. I shall perform the foregoing obligations
without further compensation during the term of my employment, and after
termination of my employment, at a reasonable compensation to be negotiated.
In the event the Company is unable to secure my signature on any document
necessary to apply for, prosecute, obtain, or enforce any patent, copyright, or
other protection relating to any Employee Invention or Employee Work of
Authorship, whether due to mental or physical incapacity or any other cause, I
hereby irrevocably designate and appoint the Company and each of its duly
authorized officers and agents as my agent and attorney-in-fact, to act for and
in my behalf and stead to execute and file any such document and to do all other
lawfully permitted acts to further the prosecution, issuance, and enforcement of
patents, copyrights, or other rights or protections with the same force and
effect as if executed and delivered by me.
5. ADDITIONAL EMPLOYEE OBLIGATIONS.
a. I agree not to disclose to the Company or induce the Company to use
any secret or proprietary and confidential information or material belonging to
others, including my former employers, if any. I also agree not to in any way
enable or induce other current or future employers or companies to use any
Confidential Information or materials belonging to the Company.
<PAGE> 11
b. So long as I am employed by the Company and for two years
thereafter, I will not directly or indirectly, individually or by action in
concert with others, solicit, induce or influence, or seek to solicit, induce or
influence, any person who is engaged as an employee, agent, independent
contractor or otherwise by the Company, to terminate his or her employment or
engagement, or otherwise interfere with such employment or engagement.
c. Except with the express prior written consent of the Chief Executive
Officer of the Company, I agree that during my employment, I will not (1) engage
in any employment or activity other than for the Company in any business in
which the Company is engaged or contemplates engaging; (2) induce any other
employee of or consultant to the Company to engage in any such employment or
activity; or (3) solicit any clients or potential clients of the Company for
goods or services similar to those performed by the Company even though not
directly competitive with such goods or services.
d. Upon termination of my employment, I will promptly deliver to the
Company all drawings, manuals, guides, records, notebooks, computer software or
programs in any form and other documents and materials, (including all copies
thereof) which are in my possession or under my control (whether or not such
items were prepared by me), and which relate in any way to Employee Inventions
or Employee Works of Authorship, or to matters which I am obligated to keep
confidential.
e. Upon termination of my employment, I agree to participate in an exit
interview with a representative of the Company to discuss my continuing
obligations regarding the Company's Confidential Information. I understand that
my obligations under this Agreement shall be the same regardless of the reasons
for the termination of my employment, and regardless of whether it is at my own
or the Company's initiative.
f. For two years following termination as an employee of the Company, I
agree not to undertake any employment or activity competitive with the Company's
business in which the loyal and complete fulfillment of the duties of the
competitive employment or activity would call on me to reveal, to make judgments
on, or otherwise to use any of the Company's Confidential Information.
<PAGE> 12
g. For two years following termination as an employee of the Company, I
agree that I will not, directly or indirectly, either for myself or for any
other person or entity, divert or take away or attempt to divert or take away,
call on or solicit or attempt to call on or solicit any of the Company's
customers.
6. INJUNCTIVE RELIEF. I acknowledge that the Company shall not have an
adequate remedy in the event I break this Agreement and that the Company will
suffer irreparable damage and injury in such event. Should that occur, I agree
that the Company, in addition to any other available rights and remedies, shall
be entitled (without posting any bond or other security) to enjoin or restrict
me from committing or continuing any violation of this Agreement.
7. GOVERNING LAW. This Agreement and the rights and obligations of the
parties hereunder shall be construed, interpreted and enforced in accordance
with, and governed by the laws of the State of California.
8. CONSTRUCTION OF AGREEMENT. If any provision of this Agreement shall,
to any extent, be found to be invalid or unenforceable, the remainder of this
Agreement shall not be affected. Any such invalid or unenforceable provision
shall be reformed to be valid and enforceable to the full extent permitted by
law.
9. COMPLETE AGREEMENT. This Agreement expresses the entire
understanding of the parties about the described subject matter, and supersedes
all prior and contemporaneous offers, promises, representations, discussions,
agreements, and communications that may have been made in connection with the
subject matter of this Agreement.
10. SEVERABILITY. The provisions of this Agreement are severable, and
if one or more provisions should be determined to be judicially unenforceable,
in whole or in part, the remaining provisions shall nevertheless be binding and
enforceable.
<PAGE> 13
11. EMPLOYMENT AT-WILL. I acknowledge that my employment and
compensation can be terminated, with or without cause and with or without
notice, at any time, at my option or the option of the Company. I understand and
agree that nothing contained in this Agreement limits or otherwise alters that
at-will employment status.
12. PREEXISTING RIGHTS. Employee represents that he or she owns the
inventions, computer software or programs, or other works of authorship
identified by title and number or date in a schedule attached hereto, which are
expressly reserved and excepted from the provisions of this Agreement.
13. MISCELLANEOUS PROVISIONS. The rights accruing to the Company under
this Agreement shall pass to its assignees or successors. This Agreement may not
be changed in whole or in part except by an instrument in writing signed by the
Chief Executive Officer of the Company.
This Agreement shall be binding upon my heirs, executors, administrators, or
other legal representatives. In any litigation arising under this Agreement, the
prevailing party will be entitled to recover its attorneys fees and costs.
- ---------------------------- -------------------------
Witness Signature Employee Signature
Date:
---------------------- -------------------------
Employee Name
(Type or Print)
LASER POWER CORPORATION
By:
-------------------------
<PAGE> 14
ADDENDUM TO "AGREEMENT WITH RESPECT TO CONFIDENTIAL INFORMATION INVENTION AND
WORKS OF AUTHORSHIP"
Per Paragraph 3 of the above-referenced Agreement, the employee discloses, and
the Company declines to take title in the following Inventions or Works of
Authorship developed by __________________________________________________ and
further allows that these items are not subject to the Confidentiality
Obligations of Paragraphs 1 and 4. This exception to the Agreement is made with
the understanding that no financial claims will be made against the Company for
past, present, or future use of the Inventions or Works of Authorship.
- --------------------------------------------------------------
- --------------------------------------------------------------
- --------------------------------------------------------------
- --------------------------------------------------------------
- --------------------------------------------------------------
- --------------------------------------------------------------
- --------------------------- -------------------------
Witness Signature Employee Signature
Date:
--------------------- -------------------------
Employee Name
(Type or Print)
LASER POWER CORPORATION
By:
------------------------
Date:
----------------------
<PAGE> 15
SCHEDULE A "AGREEMENT WITH RESPECT TO
CONFIDENTIAL INFORMATION, INVENTIONS, AND WORKS OF AUTHORSHIP"
Prior Inventions/Works of Authorship
I acknowledge that at this time I have not made or reduced to practice (alone or
jointly with others) any inventions or works of authorship except the following:
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
the list above is a complete list of all inventions and works of authorship
which I consider proprietary to me as of this date, and which the Company and I
agree are excluded from the application of the Agreement with Respect to
Confidential Information, Inventions, and Works of Authorship.
- --------------------------- -------------------------
Witness Signature Employee Signature
Date:
--------------------- -------------------------
Employee Name
(Type or Print)
LASER POWER CORPORATION
By:
------------------------
<PAGE> 16
Schedule 1
Officers who have executed employment agreements:
1. Glenn H. Sherman
2. Douglas H. Tanimoto
3. Richard P. Scherer
4. Dean T. Hodges
5. Paul P. Wickman
<PAGE> 1
EXHIBIT 10.18
CONSULTANT AGREEMENT
This Agreement, having an effective date of December 1, 1996 is made
and entered into between LASER POWER CORPORATION, a Delaware corporation
(hereinafter called "LPC") having a place of business at 12777 High Bluff Drive,
San Diego, CA 92130, and ARTHUR P. MINICH (hereinafter called "CONSULTANT").
WHEREAS, CONSULTANT represents that he is experienced in the field of
projection display technologies; and
WHEREAS, LPC desires to engage the services of CONSULTANT for the
purpose of developing and improving microlaser projectors, display systems, and
microlasers, including hardware and software; and
WHEREAS, LPC is engaged in the business of research, development and
manufacture of products and processes of a highly confidential nature, some of
which will be revealed to CONSULTANT during the course of his retention by LPC;
and
WHEREAS, LPC desires to protect itself from the unauthorized disclosure
of such confidential matter by CONSULTANT and to ensure that it will have the
sole and exclusive use and ownership of any inventions, discoveries,
improvements, trade secrets, secret processes, and copyrightable material made
or conceived by CONSULTANT during his retention by LPC;
NOW THEREFORE, it is hereby agreed as follows:
1. LPC agrees to utilize the services of CONSULTANT for the purposes set forth
above, and CONSULTANT agrees to perform such services as may be requested by LPC
which are generally related to the purpose for which CONSULTANT has been
retained.
2. As consideration to enter into this Agreement, and as full payment for the
services to be performed by CONSULTANT, LPC agrees to pay CONSULTANT, beginning
January 6, 1997 at the rate of Two Thousand Eight Hundred Eighty Five U.S.
dollars ($2885) per week.
3. During the term of this Agreement, CONSULTANT agrees as follows:
a) CONSULTANT shall devote best and full-time efforts to his or
her duties in the performance of the services as CONSULTANT of
LPC.
b) CONSULTANT shall not (i) solely or jointly with others
undertake or join any planning for or organization of any
business activity competitive with the business activities of
LPC, and (ii) directly or indirectly, engage or participate in
any other activities in conflict with the best interests of
-1-
<PAGE> 2
Arthur P. Minich Consultant Agreement
LPC, or (iii) directly or indirectly, anywhere in the United
States develop, or assist others to develop, product(s) with
functionality similar to the functionality of any product(s)
developed or under development by LPC.
4. This Agreement may be terminated by either party at any time, at the sole
discretion of the terminating party with seven (7) days written notice. It is
expressly understood that the obligations imposed on CONSULTANT by Section 5
hereof shall survive termination of this Agreement.
5. CONSULTANT agrees as follows:
a) That he will hold in strictest confidence and not disclose to any
person, firm or corporation not under a confidentiality agreement with
LPC, without the express written authorization of an officer of LPC any
information, manufacturing technique, process, formula, development or
experimental work, work in process, business trade secret or any other
secret or confidential matter relating to the products, sales, business
or activity of LPC, except that CONSULTANT may disclose such
information to employees of CONSULTANT if necessary to accomplish the
purposes of this Agreement, provided that all such employees are bound
by the obligations set forth in all subparagraphs of this paragraph 5
including (without limitation) the duties set forth in this
subparagraph and the duty to assign set forth in subparagraph (c).
However, this Agreement imposes no obligation upon CONSULTANT with
respect to any portion of such information that CONSULTANT demonstrates
to LPC's satisfaction by written evidence (i) is or becomes a matter of
public knowledge through no act or omission of CONSULTANT, or (ii) is
in CONSULTANT's possession before receipt from LPC, (iii) is rightfully
received by CONSULTANT from a third party without a duty of
confidentiality, and (iv) is disclosed by LPC to a third party without
a duty of confidentiality.
b) That he will recognize as binding on him and comply with
government-prescribed regulations and mandatory contract provisions
related to the safeguarding of military information and transferring or
making available to the Government of such patent rights as may be the
subject of contracts between LPC and the Government of the United
States of America or any of its agencies.
c) That he will disclose promptly to LPC all inventions, discoveries,
improvements, trade secrets and secret processes, whether patentable or
not, made or conceived by CONSULTANT, either solely or in collaboration
with others, during the term of this Agreement whether or not during
regular working hours, and relating to any methods, apparatus, products
or components thereof that are manufactured, sold, leased, used or
under development by LPC or pertain to any business or activity of LPC,
or to the work for which CONSULTANT was retained by LPC.
d) That he will, and does hereby assign and grant to LPC all of his
right, title and interest in and to the inventions, discoveries,
improvements, trade
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<PAGE> 3
Arthur P. Minich Consultant Agreement
secrets and secret processes described in subparagraph (c) above, and
any patents granted thereon, and at the request and expense of LPC he
will make, execute and deliver all application papers, assignments or
instruments and perform or cause to be performed such other acts as LPC
may deem desirable or necessary in making or prosecuting applications,
domestic or foreign, for patents, re-issues, and extensions thereof,
and assist and cooperate (without expense to him) with LPC or any of
its designated representatives, in any controversy or legal proceedings
relating to said inventions, discoveries, improvements, trade secrets
and secret processes or to any patents which may be procured thereon.
Should CONSULTANT be requested after termination of this Agreement to
perform services for LPC in connection hereunder, he shall be paid a
prorated amount for such services at the same rate prevailing at the
time of termination.
e) That all said inventions, discoveries, improvements, trade secrets
and secret processes described in subparagraphs (c) and (d) above,
whether or not patented, shall become and remain the property of LPC,
its successors and assigns, unless expressly released by LPC as
hereinafter provided.
f) That all copyrightable works created during the term of this
Agreement by CONSULTANT or under LPC's direction in connection with the
services rendered hereunder are "works made for hire" and shall be the
sole and complete property of LPC and that any and all copyrights to
such works shall belong to LPC. To the extent such works are not deemed
to be "works made for hire," CONSULTANT hereby assigns all proprietary
rights, including copyright, in these works to LPC without further
compensation. CONSULTANT further agrees to execute and sign any and all
applications, assignments, or other instruments which LPC may deem
necessary in order to enable it, at its expense, to apply for,
prosecute, and obtain such copyrights or other proprietary rights in
the United States and foreign countries or in order to transfer to LPC
all right, title, and interest in such copyrights or other proprietary
rights.
g) That upon request or at the time of leaving the service of LPC,
CONSULTANT will deliver to LPC and not keep or deliver to anyone else,
any and all drawings, blueprints, notes, memoranda, specifications,
devices, documents and in general any and all material relating to
LPC's business or activity or to any inventions, discoveries,
improvements, trade secrets, secret processes, or copyrightable
material covered by this Agreement.
h) Any attempt on the part of CONSULTANT to induce others to leave
LPC's employ, or any effort by CONSULTANT to interfere with LPC's
relationship with its other employees would be harmful and damaging to
LPC. CONSULTANT agrees that during the term of this Agreement and for a
period of six (6) months thereafter, CONSULTANT will not in any way,
directly or indirectly (i) induce or attempt to induce any employee of
LPC to quit employment with LPC; (ii) otherwise interfere with or
disrupt LPC's relationship with its employees; (iii) solicit, entice,
or hire away any employee
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<PAGE> 4
Arthur P. Minich Consultant Agreement
of LPC; or (iv) hire or engage any employee of LPC or any former
employee of LPC whose employment with LPC ceased less than one (1) year
before the Effective Date of this Agreement.
6. LPC will investigate each patent disclosure submitted by CONSULTANT and if it
elects to file a patent application thereon agrees to pay all expenses in
connection with the preparation and prosecution of such patent application or
applications which it may decide to file in the United States of America or in
foreign countries.
7. If CONSULTANT petitions LPC in writing to release any of its rights to any
inventions, discoveries, improvements, trade secrets or secret processes or any
patents granted thereon, which by this Agreement are assigned to LPC, the latter
will promptly consider and act on such petition but is not obligated to release
any of its rights to CONSULTANT.
8. LPC acknowledges that CONSULTANT will use certain computer equipment owned by
CONSULTANT in the performance of his duties and that it would be impractical to
remove such equipment from LPC premises after each use. Therefore, LPC agrees
that such computer equipment may remain in LPC's facility until termination of
this Agreement and LPC shall safeguard such equipment from theft or negligent
use in the same manner as it safeguards its own computer equipment. In the event
that such CONSULTANT-owned computer equipment is lost or damaged, as
CONSULTANT's sole remedy, LPC shall replace any such lost or damaged equipment
and commercial software products, provided that LPC shall not be liable for lost
or damaged data or custom software.
9. CONSULTANT and LPC are contractors independent of one another and neither
party's employees will be considered employees of the other party for any
purpose. This Agreement does not create a joint venture or partnership, and
neither party has the authority to bind the other to any third party.
10. Neither this Agreement nor any benefits hereunder shall be assignable by
CONSULTANT, and all of CONSULTANT's obligations hereunder shall be binding upon
his heirs and legal representatives. The terms and provisions hereof shall inure
to the benefit of LPC's successors and assigns.
11. This Agreement constitutes the entire agreement between LPC and CONSULTANT
with respect to the subject matter hereof. This agreement shall be governed by
the laws of the State of California. The masculine gender shall be deemed to
include the feminine gender where appropriate.
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<PAGE> 5
Arthur P. Minich Consultant Agreement
12. The term "LPC" as used in this Agreement shall be deemed to include not only
LASER POWER CORPORATION, but also all of its divisions, subsidiaries, and/or
affiliates.
LASER POWER CORPORATION ARTHUR P. MINICH
By:
-------------------------------- ----------------------------------
Title:
-----------------------------
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<PAGE> 1
EXHIBIT 10.19
TABLE OF CONTENTS
BUSINESS PARK LEASE--TOTAL NET
1. Parties 1
2. Premises 1
3. Term 1
3.1 Term 1
3.2 Delay in Possession 1
3.3 Early Possession 1
3.4 Option to Extend Lease 1
4. Rent 2
4.1 Minimum Rent 2
4.2 Consumer Price Index Adjustment to 2
Minimum Rent 2
4.3 Additional Rent - "Total Net Lease" 3
5. Security Deposit 3
6. Use 4
6.1 Use 4
6.2 Compliance With Law 4
6.3 Condition of Premises 4
7. Maintenance, Repairs and Alterations 5
7.1 Tenant's Obligations 5
7.2 Surrender 5
7.3 Landlord's Rights 5
7.4 Landlord's Obligations 6
7.5 Alterations and Additions 6
8. Insurance Indemnity 7
8.1 Insuring Party; Tenant's Pro Rata Share 8
8.2 Liability Insurance 8
8.3 Property Insurance 9
8.4 Insurance Policies 9
8.5 Waiver of Subrogation 9
8.6 Indemnity 10
8.7 Exemption of Landlord From Liability 10
9. Damage or Destruction 11
9.1 Definitions 11
9.2 Partial Damage -- Insured Loss 11
9.3 Partial Damage -- Uninsured Loss 11
9.4 Total Destruction 12
9.5 Damage Near End of Term 12
9.6 Abatement of Rent; Tenant's Remedies 13
9.7 Termination -- Advance Payments 13
9.8 Waiver 13
10 Real Property Taxes 13
<PAGE> 2
10.1 Payment of Taxes 13
10.2 Definition of "Real Property Tax." 13
10.3 Joint Agreement 14
10.4 Personal Property Taxes 14
11. Utilities 14
12. Common Areas and Automobile Parking 14
12.1 Use of Common Area 15
12.2 Parking 15
12.3 Maintenance and Security 15
12.4 Allocation of Common Area Expenses 16
12.5 Decisions Affecting The Common Area 16
12.6 Liability Disclaimer 17
13. Assignment and Subletting 17
13.1 Landlord's Consent Requirement 17
13.2 Tenant Affiliate 17
13.3 No Release of Tenant 17
13.4 Attorneys' Fees 18
14. Defaults; Remedies 18
14.1 Defaults 18
14.2 Remedies 19
14.3 Default by Landlord 19
14.4 Late Charges 19
15. Condemnation 20
16. Estoppel Certificate 22
17. Landlord's Liability 22
18. Severability 22
19. Interest on Past-Due Obligations 23
20. Time of Essence 23
21. Incorporation of Prior Agreements Amendments 23
22. Notices 23
23. No Waiver 23
24. Holding Over 24
25. Cumulative Remedies 24
26. Covenants and Conditions 24
27. Binding Effect; Choice of Law 24
28. Subordination 24
29. Attorneys' Fees 25
30. Landlord's Access 25
31. Auctions 25
32. Signs 25
33. Merger 25
34. Guarantor 25
35. Quiet Possession 25
36. Easements 26
37. Performance Under Protest 26
<PAGE> 3
38. Authority 26
39. Conflict 26
40. Addendum 26
41. Tenant Improvements 26
42. Rules and Regulations 26
ADDENDUM
43. Lease Commencement, Termination Dates 28
44. Landlord's Liability for Delay in Possession 28
45. Construction by Tenant Prior to Possession 28
46. Rent 29
47. Consumer Price Index Adjustments to Minimum Rent 30
48. Expenses Allocable to Tenant 32
49. Structural Repairs 32
50. Total Destruction 32
51. Damage Near End of Term (continued) 33
52. Abatement of Rent: Tenant's Remedies 34
53. Real Property Taxes 34
54. Parking 34
55. Allocation of Common Area Expenses 35
56. Measurement of Rentable Area 35
57. Assignment and Subletting 35
58. Condemnation: Tenant's Remedies 36
59. Subordination 36
60. Options 36
61 Signs 36
62. Partial Damage - Uninsured Loss 36
<PAGE> 4
BUSINESS PARK LEASE -- TOTAL NET
<PAGE> 5
BUSINESS PARK LEASE -- TOTAL NET
1. Parties. This Lease, dated, for reference purposes only,
____________________ , 1984, is made by and between HIGHLANDS PARK PARTNERSHIP,
a California general partnership (herein called "Landlord") and LASER POWER
CORPORATION, a Delaware corporation (herein called "Landlord")
2. Premises. Landlord hereby leases to Tenant and Tenant leases from
Landlord for the term, at the rental, and upon all of the conditions set forth
herein, that certain real property consisting of approximately 41,000 square
feet, more particularly described as a portion of High Bluff Drive; herein
referred to as the "Premises") in that certain business park commonly known as
Highland Park (herein referred to as the "Park") located in the County of San
Diego, State of California. [A diagram of the Premises is attached hereto as
Exhibit "A"] The Premises are a part of a larger approximately 44,000 square
foot building-(the "Building"). See Addendum Paragraph 46.
3. Term.
3.1 Term. The initial term of this Lease shall be for
approximately five (5) years and four (4) months* commencing on
___________________ (herein referred to as the "Commencement Date") and ending
on December 31, 1990 unless sooner terminated pursuant to any provision hereof.
(See Addendum Paragraph 43.)
3.2 Delay in Possession. Notwithstanding said Commencement
Date, if for any reason Landlord cannot deliver possession of the Premises to
Tenant on said date, Landlord shall not be subject to any liability therefor,
nor shall such failure affect the validity of this Lease or the obligations of
Tenant hereunder or extend the term hereof, but in such case, Tenant shall not
be obligated to pay rent until possession of the Premises is tendered to Tenant;
provided, however, that if Landlord shall not have delivered possession of the
Premises within sixty (60) days from said Commencement Date, Tenant may, at
Tenant's option, by notice in writing to Landlord within thirty (30) days
thereafter, cancel this Lease, in which event the parties shall be discharged
from all obligations hereunder; provided further, however, that if such written
notice of Tenant is not received by Landlord within said thirty (30) day period,
Tenant's right to cancel this Lease hereunder shall terminate and be of no
further force or effect. (See Addendum Paragraph 44.)
3.3 Early Possession. If Tenant occupies the Premises prior to
said commencement date, such occupancy shall be subject to all provisions
hereof, such occupancy shall not .advance the termination date, and Tenant shall
pay rent for such period at the initial monthly rates set forth below. (See
Addendum Paragraph 45).
3.4 Option to Extend Lease. Subject to the limitations in
Addendum Paragraph 60, Tenant is hereby granted an option to extend the initial
term of this Lease, including all of the provisions herein, for two (2) period
(s) of five (5) year (s) each following the expiration of the initial term, or
the immediately preceding extended term, as the case may be, by giving
<PAGE> 6
written notice of exercise of the option ("Option Notice") to Landlord at least
six months, but not more than one year, before the expiration of the initial
term or the immediately preceding extended term, as the case may be. The monthly
rent for the extended term shall be subject to the Consumer Price Index annual
adjustments as set forth in Addendum Paragraph 47.
4. Rent. See Addendum Paragraph 46
4.1 Minimum Rent. Deleted.
4.2 Consumer Price Index Adjustments to Minimum Rent. See
Addendum Paragraph 47.
4.3 Additional Rent - "Total Net Lease." This Lease is what is
commonly called a "total net lease to it being understood that Landlord shall
receive the minimum rent set forth in this Paragraph 4 free and clear of any and
all other impositions, taxes, liens, charges or expenses of any nature
whatsoever in connection with the ownership and operation of the Premises
(hereinafter collectively referred to as "Expenses"). Tenant shall pay Tenant's
share (as set forth in this Lease) of all such Expenses as additional rent
hereunder, and shall pay the same to the Property Management Company, if any, or
to the Landlord, or as directed by Landlord. (See Addendum Paragraph 48.) As
examples, and not by way of limitation, such Expenses shall include all
impositions, insurance premiums, operating charges (including without limitation
common area maintenance, utility charges, maintenance (including non-capital
construction items which can be expensed) and any other charges, cost and
expenses which arise or may be contemplated under any provisions of this Lease
during the term hereof all as is more specifically set forth herein. Upon
failure of Tenant to pay any Expenses as additional rent on time and in full,
Landlord shall have the same rights and remedies as otherwise provided in this
Lease for the failure of Tenant to pay rent. Except as otherwise expressly
provided in this Lease, it is the intention of the parties hereto that this
Lease shall not be terminable for any reason by the Tenant, and that Tenant
shall in no event be entitled to any abatement of or reduction in rent payable
hereunder. Any present or future law to the contrary shall not alter this
agreement of the parties.
5. Security Deposit. Tenant has deposited with Ticor Title Insurance
Company $30,000 as security for Tenant's faithful performance of Tenant's
obligations hereunder. (Said deposit shall be released to Landlord pursuant to
separate escrow instructions executed by the parties.) If Tenant fails to pay
rent or other charges due hereunder, or otherwise defaults with respect to any
provision of this Lease, Landlord may use, apply or retain all or any portion of
said deposit for the payment of any rent or other charge in default or for the
payment of any other sum to which Landlord may become obligated by reason of
Tenant's default or to compensate Landlord for any loss or damage which Landlord
may suffer thereby. If Landlord so uses or applies all or any portion of said
deposit, Tenant shall within ten (10) days after written demand therefor deposit
cash with Landlord in an amount sufficient to restore said deposit to the full
amount hereinabove stated and Tenant's failure to do so shall be a material
breach of this Lease. Landlord shall not be required to keep said deposit
separate from its general accounts. If Tenant performs all of Tenant's
obligations hereunder, said deposit, or so much thereof as has not theretofore
been applied by Landlord, shall be returned, without payment of Interest or
other increment for its use, to Tenant
<PAGE> 7
(or, at Landlord's option, to the last assignee, if any, of Tenant's Interest
hereunder) at the expiration of the initial term hereof. No trust relationship
is created herein between Landlord and Tenant with respect to said Security
Deposit.
6. Use.
6.1 Use. The Premises shall be used and occupied only office
and light manufacturing and for no other purpose, without the written consent of
Landlord which shall not be unreasonably withheld.
6.2 Compliance With Law.
(a) Landlord warrants to Tenant that the Premises, in
their state existing on the date that the initial term commences, but without
regard to the use for which Tenant will use the Premises nor to improvements
made or to be made by Tenant, do not violate any covenants or restrictions of
record, or any applicable building code, regulation or ordinance in effect on
the Commencement Date. In the event it is determined that this warranty has been
violated, then it shall be the obligation of the Landlord, after written notice
from Tenant, at Landlord's sole cost and expense, rectify any such violation. in
the event Tenant does not give to Landlord written notice of the violation of
this warranty within three (3) months from the Commencement Date with reasonable
promptness, the correction of same shall be the obligation of the Tenant at
Tenant's sole cost (except for latent defects).
(b) Except as provided in Paragraph 6.2(a), Tenant
shall, at Tenant's expense, comply promptly with all applicable statutes,
Building Codes, ordinances, rules, regulations, orders, covenants and
restriction of record and requirements in effect during the initial or extended
term or any part of the term hereof. Tenant shall not use or permit the use of
the Premises in any manner that will tend to create waste or a nuisance or, if
there shall be more than one tenant in the Park, shall tend to disturb such
other tenants.
6.3 Condition of Premises.
(a) Landlord and Tenant shall improve the Premises
with such Tenant improvements described on Exhibit "B" and to be constructed in
accordance with the procedures set forth in Exhibit "B".
(b) Subject to the express provisions of Exhibit "B",
Tenant shall accept the Premises in their condition existing as of the
Commencement Date or the date that Tenant takes possession of the Premises,
whichever is earlier, subject to all applicable zoning, municipal, county and
state laws, ordinances and regulations governing and regulating the use of the
Premises, and any covenants or restrictions of record, and accepts this Lease
subject thereto and to all matters disclosed thereby and by any exhibits
attached hereto. Tenant acknowledges that neither Landlord nor Landlord's agent
has made any representation or warranty as to the present or future suitability
of the Premises for the conduct of Tenant's business. Landlord represents that
as of the date of this Lease the zoning is MIP, as modified by EC designation.
<PAGE> 8
7. Maintenance, Repairs and Alterations.
7 1 Tenant's Obligations, Tenant shall keep in good order,
condition and repair the Premises and every part thereof, structural and
nonstructural (whether or not such portion of the Premises requiring repairs, or
the means of repairing the same, are reasonably or readily accessible to Tenant,
and whether or not the need for such repairs occurs as a result of Tenant's use
any prior use, the elements or the age of such portion of the Premises),
including, without limiting the generality of the foregoing, all plumbing,
heating, air conditioning (Tenant shall procure and maintain, at Tenant's
expense, an air conditioning system maintenance contract), ventilating,
electrical, lighting facilities and equipment within the Premises, fixtures,
walls (interior and exterior), foundations,, ceilings, roofs (interior and
exterior), floors, windows, doors, plate glass and skylights located within the
Premises, and all signs located on the .Premise (See Addendum Paragraph 49.)
7.1.1 In the event that the Premises comprise less
than all the rentable square feet of a building, then any structural maintenance
or repairs to the exterior wall, roof and foundation of the building shall be
performed by the Landlord. In such event, Tenant shall on a monthly basis, and
as additional rent concurrently with its payment of all other Rent, pay to
Landlord the Tenant's pro rata share of the cost of such structural maintenance
and repairs. Tenant's pro rata share shall be an amount equal to Landlord's cost
for such structural maintenance and repairs multiplied by a fraction, the
numerator of which is the total rentable square feet in the Premises, and the
denominator of which is the total rentable square feet in the building in which
the premises are situated.
7.2 Surrender. On the last day of the term hereof, or upon any
sooner termination, Tenant shall surrender the Premises to Landlord in the same
condition as when received , ordinary wear and tear excepted, clean and free of
debris, and, at the option of Landlord, Tenant shall remove any or all
improvements and trade fixtures made by or for the benefit of Tenant. Other than
Tenant improvements installed during the initial buildout of the subject
premises pursuant to Exhibit "B" hereto, Tenant shall repair any damage to the
Premises occasioned by the installation or removal of Tenant's trade fixtures,
furnishings and equipment. Notwithstanding anything to the contrary otherwise
stated in this Lease, Tenant shall leave the air lines, power panels, electrical
distribution systems, lighting fixtures, space heaters, air conditioning,
plumbing and fencing on the premises in good operating condition.
7.3 Landlord's Rights. If Tenant fails to perform obligations
under this Paragraph 7, or under any other paragraph of this Lease, Landlord may
at its option (but shall not be required to) enter upon the Premises after ten
(10) days' prior written notice to Tenant (except in the case of an emergency,
in which case no notice shall be required), perform such obligations on Tenant's
behalf and put the same in good order, condition and repair, and the cost
thereof together with interest thereon at the maximum rate then allowable by law
shall become due and payable as additional rental to Landlord together with
Tenant's next rental installment.
<PAGE> 9
7.4 Landlord's Obligations. Except for the obligations of
Landlord under Paragraph 6.2(a) (relating to Landlord's warranty), Paragraph 7.1
(relating to Landlord's performance of certain structural repairs at Lessee's
expense), Paragraph 9 (relating to destruction of the Premises) and under
Paragraph 14 (relating to condemnation of the Premises), or as expressly
provided otherwise in Article 7, it is intended by the parties hereto that
Landlord have no obligation, in any manner whatsoever, to repair and maintain
the Premises nor the building located thereon nor the equipment therein, whether
structural or nonstructural, all of which obligations are intended to be that of
the Tenant under Paragraph 7.1 hereof. Tenant expressly waives the benefit of
any statute now or hereinafter in effect which would otherwise afford Tenant the
right to make repairs at Landlord's expense or to terminate this Lease because
of Landlord's failure to keep the Premises in good order, condition and repair.
7.5 Alterations and Additions.
(a) Tenant shall not, without Landlord's prior
written consent, make any alterations, improvements, additions, or Utility
Installations in, on or about the Premises, the cost of which would exceed
$10,000 in any one instance. Tenant shall make no change or alteration to the
exterior of the Premises or the exterior of the building(s).in the Park without
Landlord's prior written consent. As used in this Paragraph 7.5 the term
"Utility Installation" shall mean carpeting, window coverings, air lines, power
panels, electrical distribution systems, lighting fixtures, space heaters, air
conditioning, plumbing, and fencing. Landlord may require that Tenant remove any
or all of said alterations, improvements, additions or Utility Installations at
the expiration of the term, and restore the Premises to their prior condition.
Landlord may require Tenant to provide Landlord, at Tenant's sole cost and
expense, a lien and completion bond in an amount equal to one and one-half times
the estimated cost of such improvements, to insure Landlord against any
liability for mechanics' and materialmen's liens and to insure completion of the
work. Should Tenant make any alterations, improvements, additions or Utility
Installations without the prior approval of Landlord, Landlord may require that
Tenant remove any or all of the same. Landlord shall not unreasonably withhold
or delay giving its consent where required, provided, however, that any refusal
by Landlord to give its consent shall be deemed reasonable if such refusal is
based on a refusal by Landlord's lender or a refusal by any architectural review
board having jurisdiction over the Park. In addition, tenant may alter its
private telephone system installed at its own cost and expense without
Landlord's consent provided no alterations are made to the Premises except as
provided herein.
(b) Any alterations, improvements, additions or
Utility Installations in or about the Premises that Tenant shall desire to make
and which requires the consent of the Landlord shall be presented to Landlord in
written form, with proposed detailed plans. If Landlord shall give its consent,
the consent shall be deemed conditioned upon Tenant acquiring a permit to do so
from appropriate governmental agencies, the furnishing of a copy thereof to
Landlord prior to the commencement of the work and the compliance by Tenant of
all conditions of said permit in a prompt and expeditious manner.
<PAGE> 10
(c) Tenant shall pay, when due, all claims for labor
or materials furnished or alleged to have been furnished to or for Tenant at or
for use in the Premises, which claims are or may be secured by any mechanics' or
materialmen's lien against the Premises or any interest therein. Tenant shall
give Landlord not less than ten (10) days' notice prior to the commencement of
any work in the Premises, and Landlord shall have the right to post notices of
non-responsibility in or on the Premises as provided by law. If Tenant shall, in
good faith, contest the validity of any such lien, claim or demand, then Tenant
shall, at its sole expense, defend itself and Landlord against the same and
shall pay and satisfy any such adverse judgment that may be rendered thereon
before the enforcement thereof against the Landlord or the Premises, upon the
condition that if Landlord shall require, Tenant shall furnish to Landlord a
surety bond satisfactory to Landlord in an amount equal to such contested lien
claim or demand indemnifying Landlord against liability for the same and holding
the Premises and the Park, or any part thereof, free from the effect of such
lien or claim. In addition, Landlord may require Tenant to pay Landlord's
attorneys' fees and costs in participating in such action if Landlord shall
decide it is to its best interest to do so.
(d) Unless removed pursuant to Paragraph 7.5(a), all
alterations, improvements, additions and Utility Installations (whether or not
such Utility Installations constitute trade fixtures of Tenant), which may be
made on the Premises, shall become the property of Landlord and remain upon and
be surrendered with the Premises at the expiration of the term. Notwithstanding
the provisions of this Paragraph 7.5(d), Tenant's machinery and equipment, and
private telephone system installed at its sole cost and expense, shall remain
the property of Tenant and may be removed by Tenant. Prior to the expiration of
the term of this Lease, Tenant shall repair any damage to the Premises
occasioned by the installation or removal of such machinery and equipment.
8. Insurance indemnity.
8.1 Insuring Party; Tenant's Pro Rata Share. As used in this
Paragraph 8, and its subparagraphs, the term "insuring party" shall mean the
party who is designated by this Lease to have the obligation to obtain the
respective type of Insurance required hereunder. If Landlord is the insuring
party, Tenant shall pay as additional rent hereunder, its pro rata share of such
insurance obtained by Landlord including all such insurance required hereunder
and any additional insurance as is normally carried at similar locations or as
may be required by any mortgagee, each such payment to be made within 10 days
after the receipt of written statement from Landlord setting forth the cost of
such insurance and the computation thereof. Tenant's pro rata share shall be an
amount equal to Landlord's cost of such insurance for the entire Park multiplied
by a fraction, the numerator of which is the total rentable square feet in the
Premises and the denominator of which is the total rentable square feet in the
Park covered by such insurance policy. If Tenant is the insuring party, Tenant
shall procure and maintain the insurance required of Landlord at Tenant's sole
expense.
8.2 Liability Insurance.
<PAGE> 11
(a) Tenant shall obtain and keep in force during the
term of this tease a policy of Comprehensive Public Liability insurance,
including Contractual Liability insurance, insuring Landlord, its employees and
mortgagee having lien on the Premises designated by Landlord, and Tenant
against any liability arising out of the ownership, use, occupancy or
maintenance of the Premises and all areas appurtenant thereto, including injury
to or death of one or more persons or property damage. Such insurance shall be a
combined single limit policy in an amount not less than one million dollars
($1,000,000) per occurrence. The limits of said insurance shall not, however,
limit the liability of Tenant hereunder and shall be increased upon demand from
Landlord based upon the advice or instruction it receives from its insurers or
from any mortgagee having a lien on the Premises. Said insurance shall have a
Landlord's Protective Liability endorsement attached thereto. If the Tenant:
shall fail to procure and maintain said insurance, Landlord may, but shall not
be required to, procure and maintain the same, but at the expense of Tenant.
(b) In addition to the foregoing, Landlord shall
obtain and keep in force a policy of comprehensive public liability insurance
against liability arising out of the ownership, use, occupancy or maintenance of
the Park, in an amount determined by Landlord to be appropriate. Tenant shall be
responsible for its pro rata share of the cost thereof, as required under this
Lease, provided, however, that Tenant shall not be responsible for that portion
of the cost attributable to Landlord's liability insurance coverage in excess of
$5,500,000 per occurrence.
8.3 Property Insurance.
(a) The Landlord shall obtain and keep in force
during the term of this Lease a policy or policies of insurance covering loss or
damage to the Premises, in the amount of at least 90% of the full replacement
value thereof, as the same may exist from time to time, but in no event less
than the total amount required for the Premises by lenders having liens on the
Park or any part thereof, against all perils included within the classification
of fire, extended coverage, vandalism, malicious mischief, flood (in the event
same is required by a lender having a lien on the Park or any part thereof), and
special extended perils ("risk" as such term is used in the insurance industry).
Said insurance shall provide for payment of loss thereunder to Landlord or to
the holder of mortgages or deeds of trust on Lessor's interest in the Park or
any part thereof. A stipulated value or agreed amount endorsement deleting the
co-insurance provision of the policy which covers loss or damage to the Premises
shall be procured with said insurance. If the insuring party shall fail to
procure and maintain said insurance the other party may, but shall not be
required to, procure and maintain the same, but the expense thereof shall be
allocated in the same manner as for the insurance required hereunder. If such
insurance coverage has a deductible clause, the deductible amount shall be in
the discretion of the insuring party, and Tenant shall be liable for its pro
rata share of such deductible amount.
(b) Tenant shall pay for any increase in the property
insurance of such other building or buildings in the Park if said increase is
caused by Tenant's acts, omissions, use or occupancy of the Premises.
<PAGE> 12
(c) Landlord's policy will not insure Tenant's
inventory, trade fixtures and equipment. Tenant shall at all times during the
term obtain and keep in force, at Tenant's expense, policies of insurance: (i)
covering its removable inventory, trade fixtures and equipment for an amount
equal to not less than 80% of their actual cash value from time to time,
providing coverage against fire, extended coverage, sprinkler damage, vandalism
and malicious mischief, with a stipulated amount clause and a replacement cost
clause; and (ii) covering all damage to and replacement of all plate glass on
the Premises. All such insurance shall name Landlord as a named insured with
Landlord's mortgagees also included under a 438BF4 Form or other like form
approved by Landlord. Proceeds of such insurance shall be paid to Tenant
provided Tenant is not in default, under this lease.
(d) The Landlord shall, in addition, obtain and keep
in force during the term of this Lease a policy of rental value insurance
covering a period of one year, with loss payable to Landlord, which insurance
shall also cover all real estate taxes and insurance costs for said period.
8.4 Insurance Policies. Insurance required hereunder shall be
in companies holding a "General Policyholders Rating" of at least B plus, or
such other rating as may be required by a lender having a lien on the Park or
any part thereof, as set forth in the most current issue of "Best's Insurance
Guide XIII." The Tenant shall deliver to the other party copies of policies of
such insurance or certificates evidencing the existence and amounts of such
insurance with loss payable clauses as required by this Paragraph 8. No such
policy shall be cancelable or subject to reduction of coverage or other
modification except after thirty (30) days' prior written notice to Landlord. If
Tenant is the insuring party Tenant shall, at least thirty (30) days prior to
the expiration of such policies, furnish Landlord with renewals or "binders"
thereof, or Landlord may order such insurance and charge the cost thereof to
Tenant, which amount shall be payable by Tenant upon demand. Tenant shall not do
or permit to be done anything which shall invalidate the insurance policies
referred to in Paragraph 8.3. If Tenant does or permits to be done anything
which shall increase the cost of the insurance policies referred to in Paragraph
8.3, then Tenant shall forthwith upon Landlord's demand reimburse Landlord for
any additional premiums attributable to any act or omission or operation of
Tenant causing such increase in the cost of insurance.
8.5 Waiver of Subrogation. Tenant and Landlord each hereby
release and relieve the other and waive their entire right of recovery against
the other for loss or damage arising out of or incident to the perils insured
against under Paragraph 8.3, which perils occur in, on or about the Premises,
the building and the Park, or any part thereof, whether due to negligence of
Landlord or Tenant or other tenants of the Park or their agents, employees,
contractors and/or invitees. Tenant and Landlord shall, upon obtaining the
policies of insurance required hereunder, give notice to the insurance carrier
or carriers that the foregoing mutual waiver of subrogation is contained in this
Lease. The foregoing waivers of subrogation shall be operative only so long as
available in the State of California, and do not invalidate any such insurance
policy.
8.6 Indemnity. Notwithstanding any insurance protection under
this Lease, Tenant shall indemnify and hold harmless Landlord, its employees and
agents from and against any and all claims arising from Tenant's use of the
Premises, or from the conduct of Tenant's business or
<PAGE> 13
from any activity, work or things done, permitted or suffered by Tenant in or
about the Premises or elsewhere, and shall further indemnify and hold harmless
Landlord from and against any and all claims arising from any breach or default
in the performance of any obligation on Tenant's part to be performed under the
terms of this Lease, or arising from any negligence of the Tenant, or any of
Tenant's agents, contractors, or employees, and from and against all costs,
attorney's fees, expenses and liabilities incurred in the defense of any such
claim or any action or proceeding brought thereon; and in case any action or
proceeding be brought against Landlord by reason of any such claim, Tenant upon
notice from Landlord shall defend the same at Tenant's expense by counsel
satisfactory to Landlord. Tenant, as a material part of the consideration to
Landlord, hereby assumes all risk of damage to property or injury to person, in,
upon or about the Premises ,the Building and the Park, or any part thereof,
arising from any cause and Tenant hereby waives all claims in respect thereof
against Landlord.
8.7 Exemption of Landlord From Liability. Tenant hereby agrees
that Landlord shall not be liable for injury to Tenant's business or any loss of
income therefrom or for damage to the goods, wares, merchandise or other
property of Tenant, Tenant's employees, invitees, customers, or any other person
in or about the Premises/ the Building and the Park, or any part thereof, nor
shall Landlord be liable for injury to the person of Tenant, Tenant's employees,
agents or contractors, whether such damage or injury is caused by or results
from fires, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, sprinklers, wires, appliances,
plumbing, air conditioning or lighting fixtures, or from any other cause,
whether the said damage or injury results from conditions arising upon the
Premises or upon other portions of the building of which the Premises are a
part, and the Park, or any part thereof, or from other sources or places and
regardless of whether the cause of such damage or injury or the means of
repairing the same is inaccessible to Tenant. Landlord shall not be liable for
any damages arising from any act or neglect of any other tenant, if any, of the
Park. Notwithstanding anything in this Lease, to the contrary, Landlord shall at
all times be liable for its gross negligence and willful misconduct and that of
its employees and agents.
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall herein mean
damage or destruction to the Premises to the extent that the cost of repair is
less than 20% (twenty percent) of the then replacement cost of the Premises.
"Premises Building Partial Damage" shall herein mean damage or destruction to
the building of which the Premises' are a part (without regard to damage to
other buildings in the Park of which the Premises are not a part) to the extent
that the cost of repair is less than 20% (twenty percent) of the then
replacement cost of such building as a whole.
(b) "Premises Total Destruction" shall herein mean
damage or destruction to the Premises to the extent that the cost of repair is
20% (twenty percent) or more of the then replacement cost of the Premises.
"Premises Building Total Destruction" shall herein mean damage or destruction to
the building of which the Premises are a part (without regard to damage
<PAGE> 14
to other buildings in the Park of which the Premises are not a part) to the
extent that the cost of repair is "20%" (twenty percent) or more of the then
replacement cost of such building as a whole.
(c) "Insured Loss" shall herein mean damage or
destruction which was caused by an event required to be covered by the insurance
described in Paragraph 8. Uninsured Loss" shall mean damage or destruction
caused by any other event.
(d) "Pro rata share" for purposes of this Paragraph 9
shall mean a fraction the numerator of which is the number of rentable square
feet in the Premises and the denominator of which is the number of rentable
square feet in all premises in the building or buildings damaged within the
Park.
9.2 Partial Damage -- Insured Loss. Subject to the provisions
of Paragraphs 9.4, 9.5 and 9.6, if at any time. during the term of this Lease
there is damage which is an Insured Loss and which falls into the classification
of Premises Partial Damage or Premises Building Partial Damage, then Landlord
shall, at Landlord's expenses, repair such damage, but not Tenant's fixtures,
equipment or tenant improvements, as soon as reasonably possible and this Lease
shall continue in full force and effect. Notwithstanding the above, if the
insurance proceeds received by Landlord are not sufficient to effect such
repair, Landlord shall give notice to Tenant of the amount required in addition
to the insurance proceeds to effect such repair. Tenant shall contribute
Tenant's pro rata share of the required amount to Landlord within ten (10) days
after Tenant has received notice from Landlord of the shortage in the insurance.
When Tenant shall contribute such amount to Landlord, Landlord shall make such
repairs as soon as reasonably possible and this Lease shall continue in full
force and effect. Tenant shall in no event have any right to reimbursement for
any such amounts so contributed.
9.3 Partial Damage -- Uninsured Loss See Addendum Paragraph
62.
9.4 Total Destruction See Addendum Paragraph 50.
9.5 Damage Near End of Term.
(a) If at any time during the last year of the term
of this Lease there is damage, whether or not an Insured Loss, which falls
within the classification of Premises Partial Damage, or Premises Building
Partial Damage, Landlord may at Landlord's option cancel and terminate this
Lease by giving written notice to Tenant of Landlord's election to do so within
thirty 30 days after the date of occurrence of such damage, said lease to be
canceled and terminated as of the date of delivery of Landlord's written notice
to Tenant, subject to Subparagraphs (b) and (c) below.
(b) Notwithstanding Paragraph 9.5(a), in the event
that Tenant has an option to extend this Lease, and the time within which said
option may be exercised has not yet expired, Tenant shall exercise such option,.
if it is to be exercised at all, no later than thirty (30) days after the
occurrence of an Insured Loss falling within the classification of Premises
Partial Damage or Premises Building Partial Damage during the last of the term
of this Lease. If Tenant duly
<PAGE> 15
exercises such option during said thirty (30) day period, Landlord shall repair
such damage as soon as reasonably possible and this Lease shall continue in full
force and effect. If the insurance proceeds received by Landlord are not
sufficient to effect such repair, Tenant shall pay its prorata share of the
amount required to complete such repairs in the manner provided in Paragraph
9.2. If tenant fails to exercise such option during said thirty (30) day period,
then Landlord may at Landlord's option terminate and cancel this Lease by giving
written notice to Tenant of Landlord's election to do so within ten (10) days
after the expiration of said thirty (30) day period, then Landlord may at
Landlord's option terminate and cancel this Lease by giving ten (10) days after
the expiration of said thirty (30) day period, notwithstanding any term or
provision in the grant of option to the contrary, said lease to be canceled and
terminated as of the date of delivery of Landlord's written notice to Tenant.
See Addendum Paragraph 51.
9.6 Abatement of Rent; Tenant's Remedies.
(a) See Addendum Paragraph 52.
(b) If Landlord shall be obligated to repair or
restore the Premises under the provisions of this Paragraph 9 and shall not
commence such repair or-restoration within ninety (90) days after such
obligations shall accrue, Tenant may at Tenant's option cancel and terminate
this Lease by giving Landlord written notice of Tenant's election to do so at
any time prior to the commencement of such repair or restoration. In such event
this Lease shall terminate as of the date of such notice.
9.7 Termination -- Advance Payments. Upon termination of this
Lease pursuant to-this Paragraph 9. an equitable adjustment in Landlord's
exercise of reasonable discretion shall be made concerning advance rent and any
advance payments made by Tenant to Landlord. Landlord shall, in addition, return
to Tenant so much of Tenant's security deposit as has not theretofore been
applied by Landlord.
9.8 Waiver. Landlord and Tenant waive the provisions of any
statutes which relate to termination of lease when leased property is destroyed
and agree that such event shall be governed by the terms of this Lease.
10. Real Property Taxes.
10.1 Payment of Taxes. Tenant Shall pay as additional rent
hereunder its pro rata share of the real property tax, as defined in Paragraph
10.2, applicable to the Premises during the term of this Lease. If any such
taxes paid by Tenant shall cover any period of time prior to or after the
expiration of the term hereof, Tenant's share of such taxes shall be equitably
prorated to cover only the period of time within the tax fiscal year during
which this Lease shall be in effect. Payment shall be made by Tenant within ten
(10) days after receipt of written notice by Landlord of the amount of such tax
and computation of same, if appropriate, or twenty (20) days prior to
delinquency, whichever is the later to occur.
<PAGE> 16
10.2 Definition of "Real Property Tax". As used herein, the
term real property tax" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and license fee, commercial rental
tax, improvement bond or bonds, levy or tax (other than inheritance taxes,
federal, state, county or city income taxes, franchise taxes or estate taxes)
imposed on the Premises by any authority having the direct or indirect power to
tax, including any city, state or federal government, or any school,
agricultural, sanitary, fire, street, drainage or other improvement district
thereof, as against any legal or equitable interest of Landlord in the Premises
or in the real property of which the Premises are a part, as against Landlord's
right to rent or other income therefrom, and as against Landlord's business of
leasing the Premises. The term "real property tax" shall also include any tax,
fee, levy, assessment or charge (i) in substitution of, partially or totally,
any ,levy, assessment or charge hereinabove included within the definition of
"real property tax," or (ii) the nature of which was hereinbefore included
within the definition of "real property tax, " or (iii) which is imposed for a
service or right not charged prior to June 1, 1978, or, if previously charged,
has been increased since June 1, 1978, or (iv) which is imposed as a result of a
transfer (See Addendum Paragraph 53) either partial or total, occurring more
than three years after the date of this Lease of Landlord's interest in the
Premises or which is added to a tax or charged hereinbefore included within the
definition of real property tax by reason of such transfer, or (v) which is
imposed by reason of this transaction, any modifications or changes hereto, or
any transfers hereof.
10.3 Joint Agreement. If the Premises are not separately
assessed, Tenant's pro rata share shall be an amount equal to the real property
tax for the land and improvements within the tax parcels assessed multiplied by
a fraction, the numerator of which is the total rentable square feet in the
Premises and the denominator of which is the total rentable square feet within
the tax parcels assessed. If separately assessed, Tenant's pro rata share shall
be the entire assessment for the respective parcel.
10.4 Personal Property Taxes.
(a) Tenant shall pay prior to delinquency all taxes
assessed against and levied upon trade fixtures, furnishings, equipment and all
other personal property of Tenant contained in the Premises or elsewhere. When
possible, Tenant shall cause said trade fixtures, furnishings, equipment and all
other personal property to be assessed and billed separately from the real
property of Landlord.
(b) If any of Tenant's said personal property shall
be assessed with Landlord's real property, Tenant shall pay Landlord the taxes
attributable to Tenant within ten (10) days after receipt of a written statement
setting forth the taxes applicable to Tenant's property.
11. Utilities. Tenant shall pay for all water, gas, heat, light, power,
telephone and other utilities and services supplied to the Premises, together
with any taxes thereon. If any such services are not separately metered to
Tenant, Tenant shall pay a reasonable proportion to be determined by Landlord of
all charges jointly metered with other premises. Electricity shall be separately
metered to the Premises.
<PAGE> 17
12. Common Areas and Automobile Parking. The term "common areas" refers
to all areas within the exterior boundaries of the Park which are now or
hereafter made available for general use, convenience and benefit of Landlord
and other persons entitled to occupy rentable area in the Park, including,
without limiting the generality of the foregoing, automobile parking areas,
driveways, sidewalks, open and enclosed courts and malls, landscaped and planted
areas.
12.1 Use of Common Areas. Tenant and its employees and
invitees are, except as otherwise specifically provided in this Lease,
authorized, empowered and privileged to use the common areas in common with
other persons during the term of this Lease. The common areas are as shown on
the site plan attached hereto and marked Exhibit "A." Landlord agrees to
maintain and operates or cause to be maintained and operated (except as
hereinafter provided with reference to cost of maintenance), said common areas
at all times for the benefit and use of the customers and patrons of the Tenant,
and of other tenants, owners and occupants of the land constituting the Park of
which the Premises are a part. The outside areas immediately adjoining the
Premises shall be kept clean and free from dirt and rubbish. Tenant shall not
place or permit any obstruction or materials in such areas. No exterior storage
shall be allowed.
12.2 Parking. Parking spaces shall be unassigned for use in
common by all tenants and their invitees of the Park. Landlord makes no warranty
as to the availability of parking for Tenant, its agents, employees or invitees.
Tenant agrees not to overburden the parking facilities and agrees to cooperate
with Landlord and other tenants in the use of parking facilities. Landlord
reserves the right in its absolute discretion to determine whether to allocate
parking spaces among lessees or to designate specific areas within which Tenant,
its employees and invitees must park. (See Addendum Paragraph 54.)
12.3 Maintenance and Security.
(a) The Landlord-shall keep or cause to be kept said
common areas in a neat, clean and orderly condition, and shall repair any damage
to the facilities thereof, but all expenses in connection with said common areas
shall be charged and prorated in the manner hereinafter set forth. It is
understood and agreed that the phrase "expenses in connection with said common
areas" as used herein shall be construed to include, but not be limited to, all
sums expended in connection with said common areas for all general maintenance
and repairs, resurfacing, or painting, restriping, cleaning, sweeping and
janitorial services; maintenance and repair of sidewalks, curbs, and park signs;
sprinkler systems, planting and landscaping; lighting and other utilities;
directional signs and other markers and bumpers; maintenance and repair of any
fire protection systems, lighting systems, storm drainage systems and any other
utility systems; personnel to implement such services including, if Landlord
deems necessary, the cost of security guards (provided, that the decision of
whether to employ such security guards shall be made in the sole discretion of
Landlord, and Landlord shall have no liability to Tenant, any tenant or invitees
of same for failure to provide such services and provided further that Tenant
may, at Tenant's expense, and with the prior written consent of Landlord, which
consent shall not be unreasonably withheld, engage such security guard service
as Tenant deems necessary and appropriate for the protection of Tenant and
Tenant's employees and invitees); real and personal property taxes and
assessments on the improvements and land comprising said common areas; any
governmental
<PAGE> 18
imposition or surcharge imposed against Landlord or assessed against the
automobile parking area or any other portion of the common area; all costs and
expense pertaining to a security alarm system, if any, for the tenants in the
Park; depreciation on maintenance and operating machinery and equipment (if
owned) and rental paid for such machinery and equipment (if rented); adequate
public liability and property damage insurance on the common areas. Landlord may
cause any or all of said services to be provided by an independent contractor or
contractors, or may engage an affiliated property management firm, or may
provide such services directly. Provided, however, that Tenant's share of the
fees payable to a property management firm, affiliated with Landlord providing
such service shall not exceed five percent (5%) of the minimum rent as adjusted
payable by Tenant.
(b) Should Landlord acquire or make available
additional land not shown as part of the Park on Exhibit "A" and make the same
available for parking on other common area purposes, then said expenses in
connection with said common areas shall also include all of the aforementioned
expenses incurred and paid in connection with said additional land.
12.4 Allocation of Common Area Expenses. Tenant shall pay to
Landlord Tenant's pro rata share of such common area expenses in the following
manner:
(i) From and after the date the minimum rent provided
for in Paragraph 4 hereof has commenced, but subject to adjustment as
hereinafter in this subparagraph (i) provided, Tenant shall pay Landlord
concurrently with the rental payment during the term of this Lease, an amount
estimated by Landlord to be Tenant's pro rata share of such common area
expenses. Landlord may adjust the estimated monthly charge at the end of any
calendar quarter on the basis of Landlord's experience and reasonably
anticipated costs.
(ii) Within thirty (30) days following the end of
each calendar quarter or, at Landlord's option, each calendar year, Landlord
shall furnish Tenant a statement covering the calendar quarter or year just
expired, certified as correct by a certified public accountant or an authorized
representative of Landlord, showing the total common area expenses, the amount
of Tenant's pro rata share of such common area expenses for such calendar
quarter or year and the payments made by Tenant with respect to such period as
set forth in subparagraph (i).(See Addendum Paragraph 55). If Tenant's pro rata
share of such common area expenses exceeds Tenant's payment so made, Tenant
shall pay Landlord the deficiency within ten (10) days after receipt of such
statement. If said payments exceed Tenant's pro rata 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 (i).
Tenant's pro rata share of the total common area expenses for the previous
calendar quarter or year shall be that portion of all of such expenses which is
equal to the proportion thereof which the number of rentable square feet in the
Premises bears to the total number of rentable square feet in the entire Park.
(See Addendum Paragraph 56). There shall be appropriate adjustment of Tenant's
share of the common area expenses as of the expiration of the term of this
Lease.
12.5 Decisions Affecting The Common Area. The Landlord shall
at all times have the right and privilege of determining the nature and extent
of the common areas, whether the
<PAGE> 19
same shall be surface, underground or multiple-deck, and of making such changes
therein and thereto from time to time which in its opinion are deemed to be
desirable and for the best interests of all persons using said common areas,
including the location and relocation of driveways, entrances, exits, automobile
parking spaces, the direction and flow of traffic, installation of prohibited
areas, landscaped areas, and all other facilities thereof. Nothing contained in
this Subparagraph 12.5 shall in any way be interpreted to mean that Tenant is
responsible for the cost of building a parking structure at the Park.
12.6 Liability Disclaimer. Nothing contained herein shall be
deemed to create any liability upon Landlord for any damage to motor vehicles of
invitees or employees or for loss of property from within such motor vehicles,
unless caused by the gross negligence of the Landlord, its agents, employee, or
invitees.
13. Assignment and Subletting.
13.1 Landlord's Consent Required. Tenant shall not voluntarily
or by operation of law assign, transfer mortgage, sublet or otherwise transfer
or encumber all or any part of Tenant's interest in this Lease or in the
Premises, without Landlord's prior written consent, which Landlord shall not
unreasonably withhold. Any attempted assignment, transfer, mortgage, encumbrance
or subletting without such consent shall be void,, and shall constitute a breach
of this Lease. Landlord may, in Landlord's discretion, cancel all or a part of
this Lease covering such portion of the Premises as Tenant requests to assign or
sublet, and to enter into a lease with such proposed assignee or sublessee
directly; provided, that in such event Tenant shall be relieved from further
liability for such portion of the Premises so assigned or sublet directly by
Landlord.
Without limitation, it shall not, be unreasonable for Landlord to
withhold its consent to any assignment or subletting unless and until Tenant
assigns and pays to Landlord all consideration received or to be received by
Tenant in connection with any such assignment or subletting in excess of the
rents and other sums due Landlord from Tenant pursuant to this Lease. See
Addendum Paragraph 57.
13.2 Tenant Affiliate. Notwithstanding the provisions of
Paragraph 13.1 hereof, Tenant may assign or sublet the Premises, or any portion
thereof, without Landlord's consent, to any corporation which controls, is
controlled by or is under common control with Tenant,, or to any corporation
resulting from the merger or consolidation with Tenant, or to any person or
entity which acquires all the assets of Tenant as a going concern of the
business that is being conducted on the Premises, provided that said assignee
assumes, in full, the obligations of Tenant under this Lease. Any such
assignment shall not, in any way, affect or limit the liability of Tenant under
the terms of this Lease even if after such assignment or subletting the terms of
this Lease are materially changed or altered without the consent of Tenant, the
consent of whom shall not be necessary.
13.3 No Release of Tenant. Regardless of Landlord's consent,
no subletting or assignment shall release Tenant of Tenant's obligation or alter
the primary liability of Tenant to pay the rent and to perform all other
obligations to be performed by Tenant hereunder. Provided,,
<PAGE> 20
however, that if in the opinion of Landlord, an assignee of the entire interest
of Tenant under the Lease, otherwise agreed to by Landlord, is of sufficient
financial strength, then Landlord may, at Landlord's option, release Tenant from
further liability hereunder. The acceptance of rent by Landlord from any other
person shall not be deemed to be a waiver by Landlord of any provision hereof.
Consent to one assignment or subletting shall not be deemed consent to any
subsequent assignment or subletting. In the event of default by any assignee of
Tenant or any successor of Tenant, in the performance of any of the terms
hereof, Landlord may proceed directly against Tenant without the necessity of
exhausting remedies against said assignee. Landlord may consent to subsequent
assignments or subletting of this Lease or amendments or modifications to this
Lease with assignees of Tenant? without notifying Tenant, or any successor of
Tenant, and without obtaining Its or their consent thereto and such action shall
not relieve Tenant of liability under this Lease.
13.4 Attorneys' Fees. In the event Tenant shall assign or
sublet the Premises or request the consent of Landlord to any assignment or
subletting or if Tenant shall request the consent of Landlord for any act Tenant
proposes to do then Tenant shall pay Landlord's reasonable attorneys' fees
incurred in connection therewith, said fees not to exceed $500.00,.
14. Defaults; Remedies.
14.1 Defaults. -The occurrence of any one or more of the
following events shall constitute a material default and breach of this Lease by
Tenant:
(a) The vacating or abandonment of the Premises by
Tenant.
(b) The failure by Tenant to make any payment of rent
or any other payment required to be made by Tenant hereunder, as and when due,
where such failure shall continue for a period five (5) days after written
notice thereof from Landlord to Tenant. In the event that Landlord serves Tenant
with a Notice to Pay Rent or Quit pursuant to applicable unlawful detainer
statutes, such Notice to Pay Rent or Quit shall also constitute the notice
required by this subparagraph.
(c) The failure by Tenant to observe or perform any
of the covenants, conditions or provisions of this Lease to be observed or
performed by Tenant, other than described in Paragraph (b) above, where such
failure shall continue for a period of thirty (30) days after written notice
hereof from Landlord to Tenant; provided, however, that if the nature of
Tenant's default is such that more than thirty (30) days are reasonably required
for its cure, then Tenant shall not be deemed to be in default if Tenant
commenced such cure within said thirty (30) day period and thereafter diligently
prosecutes such cure to completion.
(d) (i) The making by Tenant of any general
arrangement or assignment for the benefit of creditors; (ii) Tenant becomes a
"debtor" as defined in 11 U.S.C. S 101 or any successor statute thereto (unless,
in the case of a petition filed against Tenant, the same is dismissed within 60
days); (iii) the appointment of a trustee or receiver to take possession of
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease,
<PAGE> 21
where possession is not restored to Tenant within 30 days; or (iv) the
attachment, execution or other judicial seizure of substantially all of Tenant's
assets located at the Premises or of Tenant's interest in this Lease, where such
seizure is not discharged within 30 days. Provided, however, in the event that
any provision of this Paragraph 14.1(d) is contrary to any applicable law, such
provision shall be of no force or effect.
(e) The discovery by Landlord that any financial
statement given to Landlord by Tenant, any assignee of Tenant, any subtenant of
Tenants any successor in interest of Tenant or any guarantor of Tenant's
obligation hereunder, and any of them, was materially false.
14.2 Remedies. In the event of any such material default or
breach by Tenant, Landlord may at any time thereafter, with or without notice or
demand and without limiting Landlord in the exercise of any right or remedy
which Landlord may have by reason of such default or breach, do any of the
following:
(a) Terminate Tenant's right to possession of the
Premises by any lawful means, in which case this Lease shall terminate and
Tenant shall immediately surrender possession of the Premises to Landlord. In
such event, Landlord shall be entitled to recover from Tenant all damages
incurred by Landlord by reason of Tenant's default including, but not limited
to, the cost of recovering possession of the Premises; expenses of reletting,
including necessary renovation and alteration of the Premises, reasonable
attorneys' fees, and any real estate commission actually paid; the worth at the
time of award by the court having jurisdiction thereof of the amount by which
the unpaid rent for the balance of the term after the time of such award exceeds
the amount of such rental loss for the same period that Tenant proves could be
reasonably avoided; that portion of the leasing commission paid by Landlord, if
any, applicable to the unexpired term of this Lease.
(b) Maintain Tenant's right to possession in which
case this Lease shall continue in effect whether or not Tenant shall have
abandoned the Premises. In such event Landlord shall be entitled to enforce all
of Landlord's rights and remedies under this Lease, including the right to
recover the rent as it becomes due hereunder.
(c) Pursue any other remedy now or hereafter
available to Landlord under the laws or judicial decisions of the state wherein
the Premises are located. Unpaid installments of rent and other unpaid monetary
obligations of Tenant under the terms of this Lease shall bear interest from the
date due at the maximum rate then allowable by law.
14.3 Default by Landlord. Landlord shall not be in default
unless Landlord fails to perform obligations required of Landlord within a
reasonable time, but in no event later than thirty (30) days after written
notice by Tenant to Landlord and to the holder of any first mortgage or deed of
trust covering the Park or any part of it whose name and address shall have
theretofore been furnished to Tenant in writing, specifying wherein Landlord has
failed to perform such obligation; provided, however, that if the nature of
Landlord's obligation is such that more than thirty (30) days are required for
performance then Landlord shall not be in default if Landlord
<PAGE> 22
commences performance within such 30-day period and thereafter diligently
prosecutes the same to completion.
14.4 Late Charges. Tenant hereby acknowledges that late
payment by Tenant to Landlord of rent and other sums due hereunder will cause
Landlord to incur costs not contemplated by this Lease, the exact amount of
which will be extremely difficult to ascertain. Such costs include, but are not
limited to, processing and accounting charges, and late charges which may be
imposed on Landlord by the terms of any mortgage or trust deed covering the Park
or any part of it. Accordingly, if any installment of rent or any other sum due
from Tenant shall not be received by Landlord or Landlord's designee, within
five (5) days after such amount shall be due, then, without any requirement for
notice to Tenant, Tenant shall pay to Landlord a late charge equal to five
percent (5%) of such overdue amount. The parties hereby agree that such late
charge represents a fair and reasonable estimate of the costs Landlord will
incur by reason of late payment by Tenant. Acceptance of such late charge by
Landlord shall in no event constitute a waiver of Tenant's default with respect
to such overdue amount, nor prevent Landlord from exercising any of the other
rights and remedies granted hereunder.
15. Condemnation. In the event the entire Park shall be appropriated or
taken under the power of eminent domain by any public or quasi-public authority
(herein collectively referred to as "condemnation", this Lease shall terminate
and expire as of the date title or the right of possession, whichever is
earlier, vests in the public or quasi-public authority, and the Tenant shall
thereupon be released from any liability thereafter accruing hereunder.
In the event more than twenty-five percent (25%) of the square footage
of rentable area of the Premises is taken under the power of eminent domain by
any public or quasi-public authority, or if by reason of any appropriation or
taking, regardless of the amount of Premises or common area so taken, the
Premises is not reasonably suitable for Tenant's use, either Landlord or Tenant
shall have the right to terminate this Lease as of the date title or the right
of possession, whichever is earliest vests in the public or quasi-public
authority, upon giving notice in writing of such election within thirty (30)
days after receipt by the Tenant from the Landlord of written notice that said
Premises or the common area have been so condemned. In the event of such
termination, both Landlord and Tenant shall thereupon be released from any
liability thereafter accruing hereunder. The Landlord agrees promptly after
learning of any appropriation or taking to give to the Tenant notice in writing
thereof.
If this Lease is terminated in either manner hereinabove provided, the
Landlord shall be entitled to the entire award or compensation in such
proceedings, but the rent and other charges for the last month of the Tenant's
occupancy shall be prorated and the Landlord agrees to refund to the Tenant any
rent or other charges paid in advance. (See Addendum Paragraph 58.)
If both Landlord and Tenant elect not to so terminate this Lease,
Tenant shall remain in that portion of the Premises which shall not have been
appropriated or taken as herein provided, or in the event less than twenty-five
percent (25%) of the square footage of floor area of the Premises shall be
appropriated under the power of eminent domain by any public or quasi-public
authority, and the remainder thereof is reasonably suitable for Tenant's user
then in either such event the
<PAGE> 23
Landlord agrees, at the Landlord's cost and expense, as soon as reasonably
possible, to restore the Premises to a complete unit of like quality and
character as existed prior to such condemnation; provided, that Landlord shall
not be required to expend funds in connection with such restoration in excess of
the award received by Landlord for such purposes, in which event, Landlord shall
have the option to terminate this Lease upon not less than thirty (30) days'
prior written notice in lieu of making such restoration. In the event of
continuation of this Lease after such partial condemnation, there shall be an
equitable adjustment (taking into account, among other things, the relative
value of the Premises or common areas, as the case may be, prior to the
condemnation and the value of the Premises after the condemnation; and taking
into account any damages received by Tenant and Landlord from the public or
quasi-public authority) in the minimum rent payable by Tenant for the remaining
portion of the Premises; and the Landlord shall be entitled to receive the total
award or compensation in such proceedings. (See Addendum Paragraph 58.)
For the purposes of this Paragraph 15, a voluntary sale or conveyance
in lieu of condemnation, but under the threat of condemnation, shall be deemed
an appropriation or taking under the power of eminent domain.
16. Estoppel Certificate.
(a) Tenant shall at any time upon not less than ten (10) days'
prior written notice from Landlord execute, acknowledge and deliver to Landlord
a statement in writing (i) certifying that this Lease is unmodified and in full
force and effect (or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect) and the
date to which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not to Tenant's knowledge, any uncured defaults on
the part of Landlord hereunder, or specifying such defaults if any are claimed.
Any such statement may be conclusively relied upon by any prospective purchaser
or encumbrancer of the Park or any part thereof.
(b) At Landlord's option, Tenant's failure to deliver such
statement within such time shall be a material breach of this Lease or shall be
conclusive upon Tenant (i) that this Lease is in full force and effect, without
modification except as may be represented by Landlord, (ii) that there are no
uncured defaults in Landlord's performances, and (iii) that not more than one
month's rent has been paid in advance.
(c) If Landlord desires to finance, refinance, or sell the
Park, or any part thereof, Tenant hereby agrees to deliver to any lender or
purchaser designated by Landlord such financial statements of Tenant as may be
reasonably required by such lender or purchaser. Such statements shall include
the past three years' financial statements of Tenant. All such financial
statements shall be received by Landlord and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
17. Landlord's Liability. The term "Landlord" as used herein shall mean
only the owner or owners at the time in question of the fee title or a lessee's
interest in a ground lease of the Park or any part thereof, and in the event of
any transfer of such title or interest, Landlord herein named (and in case of
any subsequent transfers then the grantor) shall be relieved from and after
<PAGE> 24
the date of such transfer of all liability as respects Landlord's obligations
thereafter to be performed, provided that any funds in the hands of Landlord or
the then grantor at the time of such transfer, in which Tenant has an interest.,
shall be delivered to the grantee. The obligations contained in this Lease to be
performed by Landlord shall, subject as aforesaid, be binding on Landlord's
successors and assigns, only during their respective periods of ownership.
18. Severability. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
19. Interest on Past-Due Obligations. Except as expressly herein
provided, any rent, additional rent or any other amount date due to Landlord not
paid when due shall bear interest at the rate of ten percent (10%) per annum
from the date due until paid. Payment of such interest shall not excuse or cure
any default by Tenant under this Lease. such interest shall be in addition to
any late charge incurred by Tenant under this Lease, provided, however, that
interest shall be not payable on late charges incurred by Tenant.
20. Time of Essence, Time is of the essence.
21. Incorporation of Prior Agreements Amendments. This Lease contains
all agreements of the parties with respect to any matter mentioned herein. No
prior agreement or understanding pertaining to any such matter shall be
effective . This Lease may be modified in writing only, signed by the parties in
interest at the time of the modification. Except as otherwise stated in this
Lease I Tenant hereby acknowledges that no broker, if any, engaged on this
transaction nor the Landlord or any employees or agents of any of said persons
has, made any oral or written warranties or. representations to Tenant relative
to the condition or use by Tenant of said Premises and Tenant acknowledges that
Tenant assumes all responsibility regarding the Occupational Safety Health Act,
the legal use and adaptability of the Premises and the compliance thereof with
all applicable laws and regulations in effect during the term of this Lease
except as otherwise specifically stated in this Lease.
22. Notices. Any notice required or permitted to be given hereunder
shall be in writing and may be given by personal delivery or by certified mail,
if given personally or by mail, shall be deemed sufficiently given if addressed
to . Tenant or to Landlord at the address noted below the signature of the
respective parties, as the case may be, and if given by mail, shall be deemed
delivered and received (3) days after posting thereof. Either party may by
notice to the other specify a different address for notice purposes except that
upon Tenant's taking possession of the Premises, the Premises shall constitute
Tenant's address for notice purposes. A copy of all notices required or
permitted to be given to Landlord hereunder shall be concurrently transmitted to
such party or parties at such addresses as Landlord may from time to time
hereafter designate by notice to Tenant.
"and received
23. No Waiver. No agreement to accept a surrender of this Lease shall
be valid unless in writing signed by Landlord. No agent or employee of Landlord
or of Landlord's agents shall have any power to accept the possession of all or
any part of the Leased Premises prior to the
<PAGE> 25
termination or expiration of this Lease. The delivery of possession to any such
agent or employee shall not operate as a termination of this Lease or a
surrender of the Leased Premises. The failure of Landlord or Tenant to seek
redress for violation of or to insist upon the strict performance of, any
covenant or condition of this Lease, shall not be deemed a waiver thereof or
prevent a subsequent act, which would have originally constituted a violation,
from having all the force and effect of an original violation. The receipt by
Landlord of rent with knowledge of the breach of any covenant of this Lease
shall not be deemed a waiver of such breach. No provision of this Lease shall be
deemed to have been waived by Landlord or Tenant unless such waiver be in
writing signed by the party making such waiver.
24. Holding Over. If Tenant, with Landlord's consent, remains in
possession of the Premises or any part thereof after the expiration of the term
hereof, such occupancy shall be a tenancy from month to month upon all the
provisions of this Lease pertaining to the obligations of Tenant, but all
options and rights of first refusal, if any, granted under the terms of this
Lease or hereafter shall be deemed terminated and be of no further effect during
said month to month tenancy.
25. Cumulative Remedies. No remedy or election hereunder shall be
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
26. Covenants and Conditions. Each provision of this Lease performable
by Tenant shall be deemed both a covenant and a condition.
27. Binding Effect; Choice of Law. Subject to any provisions hereof
restricting assignment or subletting by Tenant and subject to the provisions of
Paragraph 17, this Lease shall bind the parties, their personal representatives,
successors and assigns. This Lease shall be governed by the laws of the state
wherein the Premises are located.
28. Subordination.
(a) This Lease, at Landlord's option, shall be subordinate to
any ground lease, mortgage, deed of trust, or any other hypothecation or
security now or hereafter placed upon the real property of which the Park is a
part, and to any and all advances made on the security thereof and to all
renewals, modifications, consolidations, replacements and extensions thereof.
Notwithstanding such subordination, Tenant's right to quiet possession of the
Premises shall not be disturbed if Tenant is not in default and so long as
Tenant shall pay the rent and observe and perform all of the provisions of this
Lease,, unless this Lease is otherwise terminated pursuant to its terms. If any
mortgagee, trustee or ground lessor shall elect to have this Lease prior to the
lien of its mortgage, deed of trust, or ground lease, and shall give written
notice thereof to Tenant, this Lease shall be deemed prior to such mortgage,
deed of trust, or ground lease, whether this Lease is dated prior or subsequent
to the date of said mortgage, deed of-trust or ground lease or the date of
recording thereof.
(b) Tenant agrees to execute any documents required to
effectuate an attornment, a subordination or to make this Lease prior to the
lien of any mortgages deed of trust or ground
<PAGE> 26
lease, as the case may be. (See Addendum Paragraph 59.) Tenant's failure to
execute such documents within 10 days after written demand shall constitute a
material default by Tenant hereunder, or, at
Landlord's option, Landlord shall execute such documents on behalf of Tenant as
Tenant's attorney-in-fact. Tenant does hereby maker constitute and irrevocably
appoint Landlord as Tenant's attorney-in-fact and in Tenant's name, place and
stead, to execute such documents in accordance with this Paragraph 28(b).
29. Attorneys' Fees. if either party brings an action to enforce the
terms hereof or declare rights hereunder, the prevailing party in any such
action, on trial or appeal, shall be entitled to his reasonable attorneys' fees,
to be paid by the losing party as fixed by the court.
30. Landlord's Access. Landlord and Landlord's agents shall have the
right to enter the Premises at reasonable times for the purpose of inspecting
the same, showing the same to prospective purchasers, lenders, or tenants, And
making such alterations, repairs, improvements or additions to the Premises or
to the Park as Landlord may deem necessary of desirable. Landlord may at any
time place on or about the Premises any ordinary "For Sale" signs and Landlord
may at any time during the last 120 days of the term hereof place on or about
the Premises any ordinary "For Lease" signs, all without rebate of rent or
liability to Tenant.
31. Auctions. Tenant shall not conduct, nor permit to be conducted,
either voluntarily or involuntarily, any auction upon the Premises without first
having obtained Landlord's prior written consent. Notwithstanding anything to
the contrary in this Lease, Landlord shall not be obligated to exercise any
standard of reasonableness in determining whether to grant such consent.
32. Signs. Any sign installed without approval of the Landlord will be
brought into conformity at the expense of the Tenant. Tenant shall submit a
sketch of the proposed sign to the Landlord for approval, which sign must be of
a size, shape, composition, design and color approved by Landlord. Tenant shall
be responsible for obtaining and paying the cost of the sign and the cost of
installation thereof. At the expiration or sooner termination of this Lease, the
sign may be removed by the Tenant in Tenant's discretion, and must be removed at
the expense of Tenant, in Landlord's discretion. Except as provided herein, no
advertising placards, banners, pennants, names, insignia, trademarks, or other
descriptive material shall be affixed or maintained upon the glass panes of the
exterior walls of any building in the Park, landscaped areas, streets, or
parking areas. (See Addendum Paragraph 61.)
33. Merger. The voluntary or other surrender of this Lease by Tenant,
or a mutual cancellation thereof, or a termination by Landlord, shall not work a
merger, and shall, at the option of Landlord, terminate all or any existing
subtenancies or may, at the option of Landlord, operate as an assignment to
Landlord of any or all of such subtenancies.
34. Guarantor. In the event that there is a guarantor of this Lease,
said guarantor shall have the same obligations as Tenant under this Lease.
<PAGE> 27
35. Quiet Possession. Upon Tenant paying the rent for the Premises and
observing and performing all of the covenants, conditions and provisions on
Tenant's part to be observed and performed hereunder, Tenant shall have quiet
possession of the Premises for the entire term hereof, subject to all of the
provisions of this Lease. The individuals executing this Lease on behalf of
Landlord represent and warrant to Tenant that they are fully authorized and
legally capable of executing this Lease on behalf of Landlord and that such
execution is binding upon all parties holding an ownership interest in the
Premises.
36. Easements. Landlord reserves to itself the right, from time to
time, to grant such easements, rights and dedications that Landlord deems
necessary or desirable, and to cause the recordation of Parcel Maps and
restrictions; so long as such easements, rights, dedications, Maps and
restrictions do not unreasonably interfere with the use of the Premises by
Tenant, Tenant shall sign any of the aforementioned documents upon request of
Landlord and failure to do so shall constitute a material breach of this Lease
by Tenant.
37. Performance Under Protest. If at any time a dispute shall arise as
to any amount or sum of money to be paid by one party to the other under the
provisions hereof, the party against whom the obligation to pay the money is
asserted shall have the right to make payment 'under protest' and such payment
shall not be regarded as a voluntary payment, and there shall survive the right
on the part of said party to institute suit for recovery of such sum. If it
shall be adjudged that there was no legal obligation on the part of said party
to pay such sum or any part thereof, said party shall be entitled to recover
such sum or so much thereof as it was not legally required to pay under the
provisions of this Lease.
38. Authority. If Tenant is a corporation, trust, or general or limited
partnership, each individual executing this Lease on behalf of such entity
represents and warrants that he or she is duly authorized to execute and deliver
this Lease on behalf of said entity. If Tenant is a corporation, trust or
partnership, Tenant shall, within thirty (30) days after execution of this
Lease, deliver to Landlord evidence of such authority satisfactory to Landlord.
39. Conflict. Any conflict between the printed provisions of this Lease
and the typewritten or handwritten provisions shall be controlled by the
typewritten or handwritten provisions.
40. Addendum. Attached hereto is an addendum or addenda containing
Paragraphs 43 through 62,, which constitutes a part of this Lease.
41. Tenant Improvements. (Per agreement between Landlord and Tenant -
draft as needed for Exhibit "B.")
42. Rules and Regulations. Tenant agrees to abide by such reasonable
rules and regulations as may be adopted in Landlord's discretion from time to
time to protect and to promote the orderly operation and enjoyment of the Park.
<PAGE> 28
The Exhibits "A" and "B" attached hereto are a part of this Lease and
incorporated herein by this reference.
LANDLORD AND TENANT HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM
AND PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LANDLORD AND TENANT WITH REPEAT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION TO YOUR
ATTORNEY FOR HIS APPROVAL. ON REPRESENTATION OR RECOMMENDATION IS MADE BY
LANDLORD OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT,
OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION RELATING THERETO; THE
PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN LEGAL COUNSEL AS TO THE
LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
The parties hereto have executed this Lease at the places and on the dates
specified immediately adjacent to their respective signatures.
HIGHLANDS PARK PARTNERSHIP
Executed at San Diego, California a California General Partnership
on August 31, 1984
Landlord's Address: 11030 Roselle Street By: ____________________________
San Diego, California 92121 Thomas W. James
By: ____________________________
Malin Burnham
(LANDLORD)
Executed at San Diego, California a Delaware Corporation
on August 31, 1984 By: ____________________________
Tenant's Address: 11211 Sorrento Valley Rd
San Diego, CA 92121 By: ____________________________
(TENANT)
<PAGE> 29
ADDENDUM TO THAT CERTAIN LEASE DATED AS OF
AUGUST 30, 1984, BETWEEN
HIGHLANDS PARK PARTNERSHIP, AS LANDLORD,
AND
LASER POWER CORPORATION, AS TENANT
This Addendum is made and entered into by and between HIGHLANDS PARK
PARTNERSHIP, as Landlord, and LASER POWER CORPORATION, as Tenant, as of the date
set forth on the cover page of the Lease between Landlord and Tenant to which
this Addendum is attached (the "Lease"). The promises, covenants, agreements and
declarations made and set forth herein are intended to and shall have the same
force and effect as if set forth at length in the body of the Lease. To the
extent that the provisions of this Addendum are inconsistent with the terms and
conditions of the Lease, the provisions of this Addendum shall control.
43. Lease Commencement, Termination Dates. Subject to Exhibit "B," the
Lease commencement date ("Commencement Date") shall be the first to occur of (a)
delivery of possession of the Premises to Tenant following substantial
completion of construction of those tenant improvements to be constructed by
Landlord in the Premises pursuant to Exhibit "B" attached hereto, and
satisfactory completion of inspection of the Building and such tenant
improvements constructed by Landlord by the building inspection department of
the City of San Diego as evidenced by the final inspector's "sign-off" on the
posted building permit, or (b) the date upon which Landlord would have delivered
possession of the Premises as provided in (a) above, but for delays caused by
Tenant. The parties anticipate that the Commencement Date will occur
approximately November 1, 1985, but no assurances are given with respect to such
date. The Lease termination date shall be December 31, 1990, regardless of the
actual Commencement Date.
44. Landlord's Liability for Delay in Possession. Notwithstanding
anything to the contrary contained in Subparagraph 3.2 of the Lease, (a) if
delivery is not made by October 1, 1985 and (b) Tenant has not validly canceled
this Lease pursuant to the procedures contained in Subparagraph 3.2 of the Lease
and (c) such failure to deliver the Premises is not the result of delays caused
by Tenant, then Landlord shall be liable to Tenant for that portion of the rent
actually paid by Tenant from and after October 1, 1995, by reason of Tenant
having to hold over in its current premises, which is in excess of the monthly
rent in effect of such Premises when Tenant's current lease expires.
45. Construction by Tenant Prior to Possession. Notwithstanding the
provisions of Subparagraph 3.3 of the Lease, Tenant may, prior to the
Commencement Date, enter the Premises for purposes of constructing those tenant
improvements to the Premises to be constructed by Tenant pursuant to Exhibit
"B;" however, such right shall be on condition that, and shall last only so long
as, any such activities do not in any way impair or interfere with any of
Landlord's activities at the Park, including, but not limited to Landlord's
timely completion of the Building and improvements required of Landlord under
Exhibit "B." Such construction work, and such entry, by Tenant shall not trigger
Tenant's obligation to commence payment of rent; provided,
<PAGE> 30
however, that upon and from and after such entry Tenant shall be subject to all
the terms and conditions of this Lease except for the payment of rent and other
monetary amounts to Landlord. Without limiting the foregoing, Tenant's right of
such entry on the Premises shall be on condition) that Tenant shall first comply
with all the requirements of Paragraph 8 of the Lease relating to insurance.
46. Rent. The term "rent," as used in this Lease shall include "minimum
rent," as defined in Subparagraph 4.1, and any "additional rent" as defined in
Subparagraph 4.3. All rent shall be paid to Landlord in lawful money of the
United States at the address to which notices to Landlord are given or at such
other places as Landlord may designate in writing.
Minimum Rent. Subparagraph 4.1 of the Lease is deleted in its entirety
and is replaced by the following:
"4.1 Payment of Minimum Rent. Tenant shall pay to
Landlord without deduction, setoff, prior notice or demand,
the "minimum rent" (as stated below) on the first day of each
month throughout the term of this Lease. On or before the
Commencement Date, Tenant shall pay to Landlord the minimum
rent for the first full calendar month of the Lease term and
any partial month at the commencement. Minimum rent for any
partial month during the term of this Lease shall be prorated
at the rate of 1/30th of the minimum rent per day.
4.1.1 Minimum Rent. The minimum rent payable
by Tenant to Landlord during the first 12 full calendar months
following the Commencement Date (and any partial month at the
commencement) of this Lease shall be 90@ per square foot per
month. The minimum rent during the balance of the initial term
of this Lease shall be $1.025 per square foot per month
(subject to possible adjustment for (i) excess Tenant
improvement expenses as set forth below in Subparagraph
4.1.3(b), and for (ii) cost of living adjustments as set forth
in Subparagraph 4.2). Minimum rent during the option terms
shall be as set forth in Subparagraph 4.2.2(b) below. Minimum
rent, when adjusted pursuant to Subparagraphs 4.1.3(b) and
4.2, shall be calculated on a square footage basis to the
nearest one-tenth (1/10) of one cent.
4.1.2 Determination of Rentable Square
Footage. The first payment of minimum rent shall be based upon
the assumption that the Premises contain 41,000 rentable
square feet, unless the parties otherwise agree. Not later
than thirty (30) days after the Commencement Date, Landlord
shall determine the rentable square footage for the Park, the
building and for the Premises (as set forth in Paragraph 56 of
the Addendum), and give
<PAGE> 31
notice to Tenant of the results. If Tenant gives notice within
ten (10) days that Tenant disagrees with the rentable square
footage, then the parties shall mutually select an
independent, qualified expert to measure and determine the
rentable square footage (as set forth in Paragraph 56), and
the expense of such expert shall be split evenly between
Landlord and Tenant. Failure of the Tenant to timely object,
as herein provided, shall be deemed approval of the rental
square footage of the Park, the building and the Premises. The
decision of the independent expert shall be binding on
Landlord and Tenant.
4.1.3 Computation of Minimum Rent.
(a) Credit for Savings. Landlord
contemplates that the market rate of minimum rent for the
Premises at completion will be $1.25 per square foot per
month. Tenant has negotiated this Lease directly with Landlord
and has obligated. itself to this Lease prior to the
construction of the Premises. By so doing, Tenant has allowed
Landlord to effect certain savings in brokerage commission
costs and carrying costs normally associated with the start-up
and rental of commercial space. In recognition of these
savings, and as a result of negotiations with Tenant, Landlord
has agreed to Lease the Premises to Tenant for the initial
term of the Lease at a minimum rent which, when averaged over
the initial five (5) years of the initial term, is
approximately $1.00 per square foot per month. Consistent with
this principle, Landlord and Tenant have agreed with the
minimum rent structure as set forth above in Subparagraph
4.1.1.
(b) Adjustment for Excess Tenant
Improvement Expenses. The minimum rent for the initial term of
the Lease has been agreed to by the parties assuming a tenant
improvement allowance of $12.00 per square foot. Any actual
cost of tenant improvements in excess of this amount but no
greater than $15-00 per square foot (the "Excess Cost") shall
be amortized over the initial term of the Lease by increasing
the monthly minimum rent by two and one-half percent (2-1/2%)
of the amount of the Excess Cost per square foot of the
Premises and such amount shall become a part of the minimum
rent, which shall be subject to the cost of living increases
in Subparagraphs 4.2.2(a) and 4.2.2(b). Notwithstanding the
foregoing, Tenant may elect to pay Landlord the Excess Cost in
cash provided, before work on the tenant improvements has
commenced, (i) Tenant gives Landlord written notice of such
election and (ii) Tenant pays Landlord cash equal to the
Excess Cost. Any actual cost of tenant
<PAGE> 32
improvements in excess of t15.00 per square foot shall be paid
by Tenant pursuant to Exhibit "B."
47. Consumer Price Index Adjustments to Minimum Rent. Subparagraph 4.2
of the Lease is deleted in its entirety and is replaced by the following:
4.2 Consumer Price Index Adjustments to minimum Rent.
4.2.1 Annual Adjustments. The "Minimum Rent
Reference Date" as used herein shall be W the Commencement
Date if said date falls upon the first day of a calendar month
or (ii) the date which is the first day of the calendar month
immediately following the Commencement Date, if the
Commencement Date falls upon any date other than the first day
of a calendar month. The minimum rent to be paid by Tenant
pursuant to Subparagraph 4.1 of the Lease shall be adjusted
effective upon the expiration of one year from the Minimum
Rent Reference Date, and annually thereafter on each
anniversary of the Minimum Rent Reference Date during the term
of the Lease, including any extended term as provided for in
Subparagraph 3.4 of the Lease (each such date herein referred
to as an "Adjustment Date," utilizing the Consumer Price Index
(all items) for all Urban Consumers in the San Diego
Metropolitan area (1967 equals 100), published by the United
States Department of Labor, Bureau of Labor Statistics) herein
referred to as the "Index").
4.2.2 Adjustments to Minimum Rent.
(a) Subject to the limitation of
Subparagraph 4.2.3, on each Adjustment Date during the initial
term the minimum rent set forth in Subparagraph 4.1.1 shall be
adjusted as follows:
(I) AMR Year 1 = .90
(ii) AMR Year 2 =
1.025 + (1.00 + AEC) * Index Year 2 -1.00
------------
Index Year 1
(iii) AMR Year 3 =
1.025 + (AMR Year 2 -.025) * Index Year 3) (AMR Year 2 - .025)
------------
Index Year 1
(iv) AMR Year 4 =
1.025 + (AMR Year 3 025) * Index Year 4 (AMR Year 3 - .025)
------------
Index Year 3
<PAGE> 33
(v) AMR Year 5
1.025 + (AMR Year 4 .025) * Index Year (AMR Year 4 - .025)
----------
Index Year 4
All numbers above are stated as dollars per square foot.
"AMR Year (X)" means the adjusted minimum rent for Year X.
"AEC" means the monthly increase in the minimum rent pursuant
to Subparagraph 4.1.3(b).
"Index for year (X)" means the Index published for the month
which is three or four months as the case may be immediately
preceding the applicable Adjustment Date or the Minimum Rent
Reference Date as the case may be.
"Adjustment Factor for Year (X)" refers to the amount
contained within the brackets ("E [ ] ") for Year (X).
"Year W" means the 12-month period between the Minimum Rent
Reference Date and the first Adjustment Date or between each
subsequent Adjustment Date, as the case may be.
(b) In the event that the first option is exercised, the
minimum rent payable during the option terms shall be
determined according to the following formulae:
AMR Year 6 = Beta * Index Year 6
------------
Index Year 5
AMR Year 7 = AMR Year 6 * Index Year 7
------------
Index Year 6
AMR Year 8 = AMR Year 7 * Index Year 8
I ------------
Index Year 7
and so on for each year during each option term.
Beta = $1.00 + AEC increased at the same frequency and at the
same annual percentage rates on a compounded basis as AMR
during the initial term was actually increased.
<PAGE> 34
4.2.3 Cap on CPI Adjustments. In no event
shall the dollar amount or any annual adjustment to the
minimum rent exceed the following limits (the "Cap"):
(a) For the first Adjustment Date,
the Cap shall be equal to 8.0% of ($1.00 per sq. ft. plus the
amortized cost of the excess tenant improvements payable by
Tenant pursuant to Subparagraph 4.1.3(b)).
(b) For the second and each
succeeding Adjustment Date, the Cap shall be equal to 8.0% of
the Adjustment Factor for the immediately preceding 12-month
period.
4.2.4 Alternative Index. Should the Bureau
of Labor Statistics discontinue publication of the Index, or
publish the same less frequently, or alter the same in some
other manner, then Landlord shall adopt a substitute index or
procedure which reasonably reflects and monitors the increase
in consumer prices, and shall provide Tenant with written
notice of such substitute index or procedure.
48. Expenses Allocable to Tenant. Notwithstanding anything to the
contrary contained in Subparagraph 4.3 of the Lease, "Expenses," as defined
therein, shall not include the cost and expense of the initial installation or
construction of any common area improvements, nor shall Expenses include any
administrative fee or similar expense for work done in the common area.
"Expenses" of Tenant shall include an amount equal to five percent (5%) of the
minimum rent due from Tenant as a property management fee but shall not include
any other property management fee or portion thereof.
Landlord's determination of Expenses, and Tenant's pro rata share
thereof, shall be made in accordance with generally accepted accounting
principles (GAAP). Tenant shall have the right, at Tenant's own expense,
independently to audit Landlord's determination of Expenses, and have such an
independent audit conducted by an independent certified public accountant. In
the event such audit ultimately discloses that Tenant has been overcharged by
three percent (3%) or more, then Landlord shall pay the cost of Tenant's audit.
In the event that the audit discloses that Tenant has been overcharged by less
than three percent (3%), then in addition to paying for such audit, Tenant shall
pay all of Landlord's reasonable costs associated with such audit. In the event
of a dispute as to the amount of such overcharge, the parties shall submit the
matter to a neutral certified public accountant, agreeable to the parties, whose
determination shall be binding. The cost of such accountant shall be paid by the
party determined to be responsible (as set forth above), for the costs of the
initial audit.
<PAGE> 35
49. Structural Repairs. Notwithstanding the provisions of Subparagraph
7.1 of the Lease, Landlord shall be responsible for repairing all structural
defects in the Premises occurring within one (1) year after completion of all
Tenant Improvements to the Premises required under Exhibit "B." Thereafter,
Tenant shall assume responsibility for all structural defects as set forth in
Section 7.1 and Landlord shall assign all construction warranties, to the extent
they are assignable, to Tenant.
50. Total Destruction. Subparagraph 9.4 of the Lease is deleted in its
entirety and is replaced by the following:
"If at any time during the term of this Lease there is damage,
whether or not an Insured Loss (including destruction required
by any authorized public authority), which falls into the
classification of Premises Total Destruction or Premises
Building Total Destruction, Tenant shall have the right, but
not the obligation, to restore and rebuild the Premises with
Landlord's insurance proceeds, if any, and otherwise at
Tenant's own cost, as herein provided. Tenant may exercise its
election to restore and rebuild the Premises, by sending to
Landlord written notice to such effect within thirty (30) days
after the date of such destruction. In such event, Landlord
shall pay to Tenant all property insurance proceeds, if any,
resulting from the destruction of the Premises; provided such
proceeds re used by Tenant solely for restoration and repair
of the Premises, and provided that Landlord may pay such
proceeds to Tenant on a reasonable progress-payments basis.
Unless Tenant timely elects to restore and rebuild the
Premises, as herein provided, the Lease shall terminate
effective as of the date which is the end of such thirty (30)
day period."
51. Damage Near End of Term (continued). The following is added to the
end of Subparagraph 9.5(b) of the Lease:
Notwithstanding the provisions of Subparagraph 3.4, upon
failure of Tenant to exercise an option to extend the Lease as
provided in this Subparagraph 9.5(b), all such options to
extend shall automatically expire.
(c) Notwithstanding Subparagraph 9.5(a), in the
event that Tenant has an option to extend this Lease, and the
time within which said option may be exercised shall not have
yet expired, then Tenant shall have the right, but not the
obligation, to elect to repair any Uninsured Loss which falls
within the classification of Premises Partial Damage or
Premises Building Partial Damage occurring during the last
year of the initial term or the first option term of this
Lease, provided (I) Tenant pays for the entire cost of such
repair and (ii) Tenant validly exercises the option to extend.
Tenant may
<PAGE> 36
exercise its election to repair such an Uninsured Loss, and to
extend the term of this Lease, if it is to be exercised at
all, by giving written notice to Landlord to such effect
within thirty (30) days after the occurrence of such Uninsured
Loss. In such event, this Lease shall continue in full force
and effect on condition that Tenant shall promptly commence
such repairs and shall diligently complete them. In the event
that Tenant does not timely elect to so repair and extend,
then Landlord may at Landlord's option terminate and cancel
this Lease by giving written notice to Tenant of Landlord's
election to do so within ten (10) day after the expiration of
said thirty (30) day period, notwithstanding any term or
provision in the grant of option to the contrary, said Lease
to be canceled and terminated as of the date of delivery of
Landlord's notice to Tenant. Notwithstanding the provisions of
Subparagraph 3.4, upon failure of Tenant to exercise an option
to extend the Lease as provided in this Subparagraph 9.5(c) of
the Lease, all such options to extend shall automatically
expire."
52. Abatement of Rent: Tenant's Remedies. Subparagraph 9.6 (a) of the
Lease is deleted in its entirety and replaced by the following provision:
"(a) In the event of damage described in Subparagraphs 9.2 or
9.3 of the Lease, and Landlord or Tenant repairs or restores
the Premises pursuant to the provisions of this Paragraph 9 of
the Lease, then Tenant's obligation to pay the minimum rent
hereunder for the period during which such damage, repair or
restoration continues shall be abated in direct proportion to
the square footage of the Premises which Tenant is prevented
from using due to such damage, repair or restoration. The
amount of the abatement will be an amount equal to the minimum
rent payable hereunder multiplied by a fraction, the numerator
of which is the total rentable square feet in the Premises
which Tenant is, in Landlord's exercise of reasonable
discretion, prevented from using because of any damage,
destruction, repair or restoration of or to the Premises and
the denominator of which is the total rentable square feet in
the Premises. Except for abatement of minimum rent, as
described hereinabove, Tenant shall have no claim against
Landlord for any damage suffered by reason of any such damage,
destruction, repair or restoration. Nothing contained
hereinabove shall be deemed a waiver of Landlord's right to
any proceeds from any rental value insurance or Tenant's
business interruption insurance in effect at the time of such
damage, destruction, repair or restoration."
<PAGE> 37
53. Real Property Taxes. Notwithstanding anything contained in
Subparagraph 10.2, Tenant shall not be responsible for any "real property tax"
increases resulting from a transfer, as described in Subparagraph 10.2(iv) of
the Lease occurring within three (3) years from the date of this Lease.
54. Parking. Notwithstanding anything to the contrary contained in
Subparagraph 12.2, Landlord shall provide for not less than four (4) parking
spaces per 1,000 square feet of usable space at the Park. Landlord shall not
impose fee for parking. However, Tenant shall not be absolved from contributing
its pro rata share of all common area maintenance costs including costs related
to maintenance of the parking areas as set forth in Paragraph 12 of the Lease.
55. Allocation of Common Area Expenses.
(a) Notwithstanding anything to the contrary contained in
Subparagraph 12.4(ii) of the Lease, Landlord's determination of common area
expenses shall be made in accordance with generally accepted accounting
principles (GAAP) and Tenant shall have the right, at Tenant's own expense, to
audit independently Landlord's determination of the total common area expenses.
In the event such audit ultimately discloses that Tenant has been overcharged by
three percent (3%) or more, then Landlord shall pay the cost of Tenant's audit;
otherwise, in addition to paying for the expense of the audit, Tenant shall pay
all of Landlord's reasonable costs associated with such audit. In the event of a
dispute as to the amount of such overcharge, the parties shall submit the matter
to a neutral certified public accountant, agreeable to the parties, whose
determination shall be binding. The cost of such accountant shall be paid by the
party responsible for paying the cost of the initial audit.
b) Notwithstanding anything in this Lease to the contrary, it
is agreed that the Expenses payable by Tenant pursuant to Paragraphs 4.3, 12.3
and 48 shall be separated into two categories of Expenses--"Building Operating
Expenses" and 'Park Operating Expenses." Building Operating Expenses shall
include those Expenses solely attributable to the operation and maintenance of
the Building, exclusive of (1) those Expenses allocable to the portions of the
Building which are for the use and benefit of all tenants and occupants of the
Park, and (2) those Expenses which are separately metered for or paid directly
by the various tenants and occupants of the Building. Park Operating Expenses
shall include all Expenses attributable to the operation and maintenance of all
Common Areas (as hereafter defined) in the Park, including property taxes not
specifically allocable to the Building. The Common Areas in the Park shall
include all parking areas, landscaping, parking structures, recreational
facilities (including a proposed gym in the Building), the Park's HVAC plant and
other areas or facilities in the Park which are not for the exclusive use or
enjoyment of specific tenants or occupants of the Park or the exclusive use or
enjoyment of all tenants or occupants of a single building in the Park. Park
Operating Expenses shall include a monthly amount equal to M One Dollar (t1.00)
per square foot of the Building gym, plus (ii) the per square foot cost of
Tenant Improvements for said gym amortized at two and one-half percent (2-1/2%)
per month; provided, however, that (1) if any other tenant of the Park does not
pay its pro rata share of such costs for the Building gym as part of the Park
operating Expenses, Tenant shall not be obligated to pay same. Said amount shall
be increased annually in proportion to the increase in cost of living as
evidenced by the change in the Index (as defined in
<PAGE> 38
Subparagraph 4.2.1) between the month which is three or four months preceding
the lease commencement date and the annual adjustment date, respectively. In no
event shall such increase exceed eight percent (8%) per annum.
(c) As to Park Operating Expenses, Tenant shall pay a pro rata
share thereof equal to the ratio of the rentable area of the Premises to the
total rentable area of all buildings in the Park. As to Building Operating
Expenses, Tenant shall pay a pro rata share thereof equal to the ratio of the
rentable area of the Premises to the total rentable area of the Building.
56. Measurement of Rentable Area. For all purposes of this Lease,
including but not limited to calculation of rent and apportionment of common
area expenses, rentable square footage will be calculated by measuring on each
floor from the exterior of exterior walls to the exterior of exterior walls, or
to the center of demising walls separating the Premises from other premises on
the same floor, as the case may be. The area of all exterior "deck(s)" for the
exclusive use of a tenant in the Park shall be included in the calculation of
the total rentable square footage of the Park, and the area of any such deck
which is for the exclusive use of Tenant shall be included, in the calculation
of the rentable square footage of the Premises. The calculation of the rentable
square footage of any such deck(s) shall be made by measuring from the exterior
of the exterior building wall(s) abutting such deck(s) to the edge of such
deck(s).
Tenant's Premises, and the rentable square footage thereof, shall not
include a portion of the square footage area of the Park's atrium and courtyard
(the "Atrium"). For purposes of measurement, a wall adjoining an atrium or
courtyard shall be deemed to be an exterior wall. The area of such Atrium shall
be calculated by measuring from the inside edge of the walls surrounding the
Atrium at floor level.
57. Assignment and Subletting. Notwithstanding the provisions of
Subparagraph 13.1 of the Lease, to the extent that Tenant would remain in
possession of more than fifty percent (50%) of the rentable square footage of
the Premises after any proposed subletting, then Landlord's consent shall not be
required for any such subletting, provided Tenant gives to Landlord prior
written notice of such subletting, informing Landlord of the percentage of the
Premises to remain in possession of Tenant. The terms of Subparagraph 13.1 shall
remain unchanged with respect to any other assignment or subletting.
58. Condemnation: Tenant's Remedies. Notwithstanding anything to the
contrary contained in Paragraph 15 of the Lease, in the event that the Premises,
or any portion thereof, is taken under the power of eminent domain by any public
or quasi-public authority, Tenant shall be entitled to pursue any remedies
Tenant may have against such public or quasi-public party W for any of Tenant's
personal property so taken or acquired, (ii) for compensation to Tenant as a
displaced person pursuant to California Government Code Section 7262, and (iii)
for compensation to Tenant for loss of goodwill as the owner of the business
pursuant to California Code of Civil Procedure Section 1263.51C.
59. Subordination. Any document which Tenant is required to execute
pursuant to Paragraph 28 of the Lease to effectuate an attornment, or to make
this Lease subordinate to the lien
<PAGE> 39
of any mortgage or deed of trust, or subordinate to any ground lease, as the
case may be, shall provide for recognition of this Lease and provide that this
Lease and the rights of Tenant hereunder shall continue in full force and
effect, provided that (i) Tenant attorns to the ground lessor or lender or its
successor, as the case may be, (ii) Tenant is not in default, and (iii) Tenant
pays the rent and observes and performs all of its obligations under this Lease.
60. Options.
60.1 Definition. As used in this paragraph the word "Options"
has the following meaning: (1) any right or option of Tenant to extend the term
of this Lease as granted in the Lease or this Addendum; (2) the option of Tenant
to lease additional space in the Park as set forth in Paragraph 60 of this
Addendum.
60.2 Options Personal. Each Option granted to Tenant in this
Lease is personal to Tenant and may not be exercised or be assigned, voluntarily
or involuntarily, by or to any person or entity other than Tenant except by an
assignment in accordance with Paragraph 13 of the Lease. The Options herein
granted to Tenant are not assignable separate and apart from this Lease.
60.3 Multiple Options. In the event that Tenant has any
multiple Options to extend this Lease, a later Option cannot be exercised
unless, among other conditions, the prior Option to extend this Lease has been
validly exercised.
60.4 Effect of Default on Options.
(a) Tenant shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary, (i) at any
time after the date Landlord gives to Tenant a notice of default pursuant to
Subparagraph 14.1(b) or 14.1(c) unless Tenant has first cured the failure
alleged in said notice of material default within the time limits provided, or
(ii) at any time after an event of default described in Subparagraphs 14.1(a),
14.1(d), or 14.1(e) (without any necessity of Landlord to give notice of such
default to Tenant).
(b) The period of time within which an Option may be
exercised shall not be extended or enlarged by reason of Tenant's inability to
exercise an Option because of the provisions of Subparagraph 61.4(a).
(c) All rights of Tenant under the provisions of an
Option shall terminate and be of no further force or effect, notwithstanding
Tenant's due and timely exercise of the Option, if, after such exercise and
during the term of this Lease, (i) the Lease is terminated under the provisions
of Paragraph 14, or (ii) if upon the expiration date of the initial term of the
Lease (A) a notice of material default pursuant to Subparagraph 14.1(b) or
14.1(c) has been issued and the failure alleged in such notice has not been
cured, or (B) there has occurred an event of default under Subparagraphs
14.1(a), 14.1(d) or 14.1(e) of the Lease.
61. Signs. Notwithstanding the provisions of Paragraph 32, Landlord
shall include, at no cost to Tenant, the name of Tenant on the monument sign for
the Park to be erected by
<PAGE> 40
Landlord. The size, style and location of said monument sign and Tenant's name
thereon shall be in the sole discretion of Landlord. If a sign to be placed on
the Building is approved by the subdivision review board, architectural
committee or other review board set up by any applicable covenants, conditions
and restrictions, Landlord shall pay the cost of installation only for one sign
of a size, style, shape, design, color and composition approved by Landlord .
All other costs of such one sign, and all costs of all other signs shall be paid
by Tenant. Landlord may refuse to consent to any sign if the same does not
comply with zoning laws or covenants, conditions and restrictions applicable to
the Park.
62. Partial Damage - Uninsured Loss. Paragraph 9.3 of the Lease is
deleted in its entirety and replaced by the following provision:
"9.3 Partial Damage - Uninsured Loss. Subject to the
provisions of Paragraphs 974, 9.5 and 9.6, if at any time
during the term of this Lease there is damage which is not an
Insured Loss and which falls within the classification of
Premises Partial Damage or Premises Building Partial Damage,
unless caused by a negligent or willful act of Tenant (in
which event Tenant shall make the repairs at Tenant's
expense), Landlord may at Landlord's option either (i) repair
such damage as soon as reasonably possible at Landlord's
expense, in which event this Lease shall continue in full
force and effect, or (ii) give written notice to Tenant within
thirty (30) days after the date of the occurrence of such
damage of Landlord's intention to cancel and terminate this
Lease, such termination to be effective thirty (30) days after
Landlord delivers such notice to terminate. In the event
Landlord elects to give such notice of Landlord's intention to
cancel and terminate this Lease, Tenant shall have the right
within thirty (30) days after the receipt of such notice to
give written notice to Landlord of Tenant's intention to
repair any damage to the entire Building of which the Premises
are a part at Tenant's expense, without reimbursement from
Landlord, in which event this Lease shall continue in full
force and effect, and Tenant shall proceed to make such
repairs as soon as reasonably possible. If Tenant does not
give such 30-day notice within such period this Lease shall be
canceled and terminated as of thirty (30) days after delivery
of Landlord's written notice to terminate."
<PAGE> 41
EXHIBIT "A"
TO THAT CERTAIN LEASE DATED AS OF
AUGUST 30, 1984, BETWEEN HIGHLANDS PARK
PARTNERSHIP, AS LANDLORD, AND LASER POWER
CORPORATION, AS TENANT
Landlord may designate the exact boundaries of the Premises, provided the total
area remains approximately 41,000 square feet.
<PAGE> 42
"EXHIBIT B"
TO THAT CERTAIN LEASE DATED AS OF
AUGUST 30, 1984, BETWEEN HIGHLANDS PARK
PARTNERSHIP, AS LANDLORD, AND LASER POWER
CORPORATION, AS TENANT
CONSTRUCTION RESPONSIBILITIES
I
CONSTRUCTION
1.1 General. Landlord shall, at its sole cost and expense
construct or cause to be constructed the Building Shell (as hereafter defined).
Landlord shall also construct or cause to be constructed the Tenant Improvements
(as hereafter defined); provided, however, that Tenant shall have the right to
have a portion of the Tenant Improvements constructed by a general contractor
selected by Tenant from a list of three contractors provided by Landlord,
provided such right is exercised no later than the date specified in Article V,
below. Tenant shall install or cause to be installed Tenant's Trade Fixtures (as
hereafter defined). The Building Shell and the Tenant Improvements shall be
constructed in accordance with detailed plans, drawings and specifications
prepared by Landlord's architect or space planner and approved by Tenant as
provided below. The construction of the Building Shell and the Interior
Improvements and the installation of the Tenant's Trade Fixtures shall be done
in compliance with all building, fire, health and sanitary codes and regulations
and any other codes or regulations relative to the construction thereof.
1.2 Preparation of Plans. Plans for the construction of the
Building Shell and the Tenant Improvements shall be accomplished in accordance
with detailed plans, drawings and specifications (collectively, "plans")
prepared by Landlord's architect or space planner and submitted to Tenant for
its review and approval. The plans shall be prepared and approved in accordance
with the schedule set forth in Article V, below.
1.3 Selection of Contractor.
a. For Landlord's Work. After the parties have
determined who will be responsible for constructing all or a portion of the
Tenant Improvements, Landlord shall obtain bids for the work to be performed by
Landlord from at least three general contractors selected by Landlord. Landlord
and Tenant shall then jointly determine which bid to accept, taking into account
the amount of the bids, the capabilities of the contractors and the estimated
time of construction for lack of the contractors. If the parties are unable to
agree on a contractor by the date specified in Article V, Landlord shall have
the right, exercisable in its sole discretion, to select the contractor to
perform Landlord's work.
<PAGE> 43
b. For Tenant's Work. If Tenant elects to construct a
portion of the Tenant Improvements, Tenant shall select the contractor to do
Tenant's work from a list of at least three contractors approved by Landlord. At
least one of these three contractors shall be non-union. In the event that
Tenant selects a non-union contractor and Landlord is using a union contractor,
Tenant and Landlord shall adopt a "two-gate" system for the job site and
Tenant's contractor shall perform its work in a manner that will avoid
disrupting the work being performed by Landlord's contractor.
II
PAYMENT OF CONSTRUCTION COSTS
2.1 Allocation of Construction Costs. Landlord shall pay all
construction costs associated with the construction of the Building Shell.
Tenant shall pay all construction costs associated with the construction or
installation of Tenant's Trade Fixtures. The cost of constructing the Tenant
Improvements (the "Tenant Improvements Costs") shall be paid by Landlord and
Tenant as provided below. The Tenant Improvement Costs include, without
limitation, the cost of architectural plans and specifications, space planner
fees, architectural and engineering fees, the cost of any governmental permits,
the amount specified in any construction contract therefor and the cost of any
change orders. The Tenant Improvement Costs shall not include any construction
period interest or loan fees or points.
2.2 Parties' Respective Contributions. Landlord's share of the
Tenant Improvement Costs shall be equal to $12.00 per square foot multiplied by
the rentable area of the Premises (i.e., 41,000 square feet) ("Landlord's
Maximum Contribution"). Tenant shall pay all Tenant Improvement Costs in excess
of Landlord's Maximum Contribution, including, without limitation, any cost
overruns resulting from change orders initiated or approved by Tenant.
Notwithstanding anything in this Section 2.2 to the contrary, it is agreed that
in no event shall Landlord be obligated to pay its space planners (Ron Lentz &
Associates, Inc.) more than 0,000.00 for the space plans to be provided for the
Tenant Improvements. Said sum of $20,000.000 is to be included as part of
Landlord's Maximum Contribution. Tenant shall have the right to review and
approve Landlord's contract with its space planners before Landlord executes
same.
2.3 Payment of Tenant's Share of Tenant Improvement Costs.
a. Construction by Landlord. If Tenant elects to have
Landlord construct all the Tenant Improvements, Tenant shall have the option to
pay for its share of the Tenant Improvement Costs by either (1) delivering prior
to commencement of construction of the Tenant Improvements, Landlord a check in
an amount equal to the difference between the total amounts of the Tenant
Improvement Costs and Landlord's Maximum Contribution or (2) permitting Landlord
to pay for any such excess as contemplated in Addendum Paragraph 46 of the
Lease. Tenant's failure to timely deliver to Landlord a check in the amount
required to pay Tenant's share of the Tenant Improvement Costs shall be deemed
an election by Tenant to have Landlord pay for
<PAGE> 44
same. Landlord agrees to retain from the payments due the general contractor
constructing the Tenant Improvements an amount equal to 10% of the Tenant
Improvement Costs. Such retainage shall not be paid to Landlord's contractor
unless and until (1) Tenant has first inspected the Tenant Improvements and
delivered to Landlord and Landlord's contractor a punch list or list of
discrepancies therein, and (2) Landlord reasonably determines that construction
of the Tenant Improvements has been substantially completed. Landlord agrees
that any discrepancies listed on such punch list shall be corrected within
thirty (30) days after receipt of such punch list by Landlord. In the event that
Tenant initiates or approves any change orders to the plans for the Tenant
Improvements (other than those required to correct construction or design errors
or to comply with governmental rules and regulations), Tenant shall promptly pay
to Contractor the cost thereof.
b. Construction by Tenant. If Tenant elects to
construct a portion of the Tenant improvements, Landlord shall disburse, during
the course of construction, to Tenant's general contractor any unpaid portion of
Landlord's Maximum Contribution to Tenant's contractor according to reasonable
procedures selected by Landlord to ensure lien-free completion of construction
of the Tenant Improvements. Landlord's Maximum Contribution shall be paid in
full before Tenant shall be obligated to pay any Tenant Improvement Costs in
excess of Landlord's Maximum Contribution. Tenant shall be solely responsible
for paying all Tenant Improvement Costs in excess of Landlord's Maximum
Contribution, except for change orders initiated or required by Landlord. To
ensure lien-free completion of construction by Tenant, Tenant shall, prior to
commencement of any construction work by Tenant, furnish Landlord with evidence
reasonably satisfactory to Landlord of Tenant's ability to pay for the Tenant
Improvement Costs in excess of Landlord's Maximum Contribution.
c. Cost Verification. Landlord and Tenant shall
direct their respective general contractors and all other persons and firms
whose labor, material or services are part of the Tenant Improvements and who
bill Landlord or Tenant directly to send to Landlord or Tenant, as the case may
be, duplicate copies of each invoice sent to Landlord or Tenant, as the case may
be. In addition, Landlord and Tenant shall deliver or cause to be delivered to
each other copies of any changes, additions or deletions to said invoices.
III
PERFORMANCE OF CONSTRUCTION WORK
3.1 Permits and Approvals. Landlord shall cause to be obtained
all necessary approvals and permits from all state and local governmental
agencies having authority over construction of the Building Shell and the
portion of the Tenant Improvements to be constructed by Landlord. Tenant shall
be solely responsible for obtaining all necessary approvals and permits from all
state and local governmental agencies having authority over construction of the
portion of the Tenant Improvements to be constructed by Tenant.
3.2 Workmanship. All work performed by Landlord and Tenant
shall be done in a good and workmanlike manner with first-class materials in
accordance with the approved plans.
<PAGE> 45
3.3 Supervising Architect. Landlord's architect shall be the
supervising architect in charge of construction of the Building Shell.
Landlord's space planner shall supervise construction of the Tenant
Improvements.
3.4 Fixturization By Tenant. Subject to all the provisions of
Landlord's construction contract, if Landlord is constructing the Tenant
Improvements, Tenant shall be entitled to enter the Premises during the
construction of the Tenant Improvements for the purpose of installing Tenant's
Trade Fixtures; provided, however, that Tenant shall do so only in a manner as
will cause a minimum of interference with the work of Landlord's general
contractor and its subcontractors and shall be at Tenant's own risk.
3.5 Inspections By Tenant. Landlord shall give Tenant at least
ten (10) days prior written notice of the date on which Landlord reasonably
expects construction of the portion of the Tenant Improvements to be constructed
by Landlord to be substantially completed. Promptly after receipt of such
notice, Tenant, Landlord and Landlord's and, if applicable, Tenant's general
contractor shall inspect the Building Shell and the Tenant Improvements to
develop a punch list or a list of discrepancies in Landlord's work to be
corrected (a) if in the case of Landlord's work, by Landlord's general
contractor, or (b) in the case of Tenant's work, by Tenant's general contractor.
Correction of items on such punch list which are Landlord's responsibility shall
be accomplished within thirty (30) days after receipt of the punch list by
Landlord. The correction of any items on such punch list shall not delay or
postpone the Commencement Date.
3.6 Time of Construction.
a. All Work Done by Landlord. If Landlord is solely
responsible for constructing the Tenant Improvements, notwithstanding anything
in this Lease to the contrary, Tenant shall not be obligated to accept
possession of the Premises unless and until (1) construction of the Tenant
Improvements has been substantially completed within the meaning of Addendum
Paragraph 43 of the Lease, (2) electrical, telephone, gas and water services are
available to the Premises, (3) the HVAC system in the Building is operational,
(4) the parking areas in the Park are paved to the extent that Tenant's
employees and customers have reasonably adequate off-street parking, and (5)
Tenant and its employees and customers have reasonably unobstructed access to
and from the portion of the Park in which the Building is located.
b. Landlord Does Work in Part. If Landlord is
responsible for constructing less than all the Tenant Improvements,
notwithstanding anything in this Lease to the contrary, Tenant shall not be
obligated to accept possession of the Premises unless and until (1) Landlord has
substantially completed construction of the portion of the Tenant Improvements
to be constructed by Landlord, (2) electrical, telephone, gas and water services
are available to the Premises, (3) Landlord has substantially completed
construction of the Building Shell, (4) the central HVAC plant for the Park is
operational, (5) the parking areas in the Park are paved to the extent that
Tenant's employees and customers have reasonably adequate off-street parking,
and (6) Tenant and its employees and customers have reasonably unobstructed
access to and from the portion of the Park in which the Building is located.
<PAGE> 46
c. For Tenant's Work. If Tenant is responsible for
constructing the Tenant Improvements, in whole or in part, Tenant shall have a
mutually acceptable period of time following substantial completion of the work
to be done by Landlord in which to perform Tenant's work. Such period of time
for performance of Tenant's work shall be extended by the occurrence of events
of force majeure and/or Landlord's Del (as hereafter defined). The Commencement
Date shall, subject to subsection (b), be determined with respect to the
expiration of such period of time for performance of Tenant's work, as the same
may be extended pursuant to the preceding sentence. Tenant's Delay (as hereafter
defined) shall not delay or postpone the Commencement Date.
3.7 Delays by Change Orders. In the event Tenant initiates or
approves any change orders to the plans for Tenant Improvements (other than
those required to correct construction or design errors or to comply with
governmental rules and regulations), Landlord's contractor and/or space planner
shall certify to Landlord as to any delay caused by such change order and the
term of the Lease shall commence on the date it would have otherwise commenced
but for such delay arising from said change order.
IV
DEFINITIONS
4.1 Building Shell. The "Building Shell" shall consist of: (a)
a completed shell for the Building, including roofing, fascia, exterior walls,
windows and doors for the Building, (b) the Building's footings and a concrete
subfloor, (c) the Building's sprinkler system, if any, (d) the Building's
heating, ventilation and air conditioning ("HVAC") system (exclusive of
distribution), (e) water, sewer and gas lines brought to the inside of the
perimeter or exterior wall of the Building at places designated by appropriate
utility companies, and (f) electrical power, including house power panel and
meters has been brought to a single point located within the interior of the
Building designated by utility companies. The Building Shell shall include any
and all work required to effect a compliance with the so-called "Title 24"
requirements imposed by the State of California.
4.2 Tenant Improvements. The "Tenant Improvements" shall
consist of the interior improvements constructed in the Building which are not
part of the Building Shell (e.g., interior walls, partitions, doors, electrical
and plumbing distribution, HVAC distribution, etc.). The Tenant Improvements do
not include Tenant's Trade Fixtures.
4.3 Tenant's Trade Fixtures. "Tenant's Trade Fixtures" shall
consist of all trade fixtures, equipment and personal property installed in the
Building for use in Tenant's business to be conducted on the Premises.
4.4 Landlord's Delay. The term "Landlord's Delay" shall mean
any (a) delay in the construction of the Building Shell and/or the Tenant
Improvements to be constructed by Landlord
<PAGE> 47
on the part of Landlord or Landlord's general contractor which is not Tenant's
Delay and (b) the failure of Landlord and/or Landlord's general contractor to
comply with the schedule set forth in Article V below.
4.5 Tenant's Delay. The term "Tenant's Delay" shall mean (a)
any delay in the performance of any construction work on the Tenant Improvements
to be performed by Tenant or Tenant's general contractor which is not the result
of the occurrence of an event of force majeure or the failure of Landlord or
Landlord's general contractor to comply with the construction schedule set forth
in Article V below and (b) the failure of Tenant or Tenant's general contractor
to comply with the schedule set forth in Article V below.
CONSTRUCTION SCHEDULE
5.1 Landlord and Tenant shall accomplish tasks listed below in
the event column below by the corresponding times specified in the time column
as follows:
<TABLE>
<CAPTION>
EVENT TIME
----- ----
<S> <C>
(1) Preparation of initial space plans by Landlord's (1) Date to be mutually agreed upon by both parties
space planner
(2) Approval of space plans by tenant (2) Ten (10) days after receipt of completed space
plans for Landlord's space planner
(3) Preparation of detailed working drawings and (3) Date to be mutually agreed upon by both parties
specifications by Landlord's architect and/or
space planner
(4) Approval of detailed working drawings and (4) Ten (10) days after receipt thereof from
specifications by Tenant Landlord's space planner, but no later than
April 1, 1985
(5) Determination of portions of Tenant Improvements (5) Ten (10) days after approval of detailed
to be constructed by Landlord and/or Tenant working drawings and specifications by Tenant
(6) Submission by Landlord of three bids for portion (6) Fifteen (15) days after completion of task
of Tenant Improvements to be constructed by described in Item (5), above
Landlord for approval by Tenant
(7) Submission by Landlord to Tenant of at least three (7) Five (5) business days after completion of
Landlord-approved general contractors to do Tenant task described in Item (5), above
Improvements work, if any, to be done by Tenant
</TABLE>
<PAGE> 48
<TABLE>
<S> <C>
(8) Selection of bid for portion of Tenant (8) Five (5) business days after completion of
Improvements to be constructed by Landlord task to be completed in Item (6), above
(9) Commencement of construction of portion of Tenant (9) Five (5) business days after selection of bid
Improvements to be constructed by Landlord pursuant to Item (6), above
(10) Completion of construction portion of Tenant (10) Mutually agreed upon date following
Improvements to be constructed by Tenant substantial completion of portion of Tenant
Improvements to be constructed by Landlord
(11) Substantial Completion of construction portion of (11) November 1, 1985
Tenant Improvements to be constructed by Landlord
</TABLE>
<PAGE> 49
[BURNHAM PACIFIC PROPERTIES INC. LETTERHEAD]
June 20, 1990
Mr. Glenn Sherman
Chairman and Chief Executive Officer
Laser Power Corporation
12777 High Bluff Drive
San Diego, CA 92130
Dear Glenn:
Pursuant to our recent discussions, this letter shall hereby modify and amend
the existing lease for your premises at 12777 High Bluff Drive, which terms and
conditions contained herein shall be more fully defined in a lease amendment to
be executed by Landlord and Tenant as soon as practicably possible hereafter, as
follows:
1. Tenant hereby exercises both of its five (5) year options to extend the term
of the Lease, subject to the modifications of the terms contained in this letter
agreement as defined below.
2. The term of the Lease is hereby extended and shall now terminate on December
31, 2001.
3. Tenant's minimum rent shall be abated commencing October 1, 1990 and
terminating December 31, 1991; however, Tenant's so-called "triple-net expenses"
(or operating costs) shall not be abated during such period, and shall continue
in accordance with the Lease, except as otherwise modified below.
4. Commencing January 1, 1992, Tenant's minimum rent shall be Fifty Two Thousand
Eight Hundred Thirty Six and no/100 Dollars ($52,836.00) per month ($1.20 per
square foot per month).
5. The annual adjustment to Tenant's minimum rent described in the Lease and in
the prior lease amendments shall be amended so that Tenant's minimum rent shall
be adjusted on January 1, 1993, and each January 1 thereafter, by the cost of
living index (as described in the Lease, as amended) with a maximum increase of
five percent (5%) per year.
6. Tenant shall have one (1) new five (5) year option to extend the Lease under
all the same terms and conditions contained in the Lease, as amended, except
that the minimum rent for the first year of the option term shall be five
percent (5%) greater than the rent during the last year of the now extended term
of the lease. Tenant shall be required to exercise the option in the same manner
as described in the Lease.
<PAGE> 50
BURNHAM PACIFIC PROPERTIES INC. LETTERHEAD]
Mr. Glenn Sherman
June 20, 1990
Page 2
7. a. Tenant shall have a first right of refusal to purchase the property
known as Highlands Plaza (both Buildings) on the same terms and conditions as
per a bona fide third party offer to Landlord.
b. Tenant shall have the right to purchase the property known as Highlands
Plaza (both buildings) at the expiration of the term of the Lease at the then
prevailing market value for the property.
c. In the event Tenant commits to a purchase as per either 6a or 6b above,
but in the event Tenant only wishes to exercise such right for its own building,
Landlord shall use its best efforts to obtain a parcel split in order to effect
such partial purchase. In the event Landlord is legally or economically
prohibited from making such parcel split, Tenant's right hereunder shall be
void. In the event such parcel split is effected, Tenant shall agree to mutual
easements for ingress, egress and parking with the other building and such other
conditions as required by public agencies.
8. Landlord shall install at Landlord's cost permanent furniture in Tenant's
courtyard area of a style and type to be mutually agreed to by Landlord and
Tenant.
9. Tenant shall have the right, at Tenant's sole expense, and subject to zoning
regulations and other laws, and further subject to Landlord's approval of the
location to be utilized (which location shall be hidden from the street), to add
an additional walled equipment yard similar to Tenant's existing yard currently
located on the east side of the building.
10. The common area costs section of the Lease shall be modified so that (i)
Tenant shall be responsible for all of the maintenance of the courtyard area
within Tenant's building and (ii) Tenant shall not be responsible for any
portion of repair and maintenance costs pertaining specifically to the other
(multi-tenant) building at Highlands Plaza, including the courtyard of such
other building. However, notwithstanding the foregoing, Tenant shall continue to
be responsible for its prorata share of maintenance of the balance of the common
area of Highlands Plaza.
<PAGE> 51
[BURNHAM PACIFIC PROPERTIES INC. LETTERHEAD]
Mr. Glenn Sherman
June 20, 1990
Page 3
11. In the event Highlands Plaza is sold on or before June 30, 1995, Landlord
(Seller) shall make a payment to Tenant at the time of the close of escrow to
compensate Tenant for Tenant's increased cost of real estate taxes during the
balance of such five (5) year period as follows:
a. The real estate taxes for the Property shall be calculated by using the
sale price of the property as the valuation and the tax rate as of the close of
escrow.
b. The increase in real estate taxes due to sale shall be calculated by
subtracting One Hundred Two Percent (102%) of the real estate taxes immediately
prior to the close of escrow from the amount calculated in 11a above.
c. Tenant's prorata share of the increase in real estate taxes due to sale
shall be calculated.
d. Landlord shall pay to Tenant Tenant's prorata share of the increase in
real estate taxes calculated above times the number of years remaining between
the close of escrow and June 30, 1995. Any partial years shall be prorated for
time.
Sincerely,
BURNHAM PACIFIC PROPERTIES, INC.
Michael L. Rubin
Vice President
MLR/kmv
The above terms and conditions are hereby agreed to.
LASER POWER CORPORATION
BY:
Glenn H. Sherman
Chairman and Chief Executive Officer
<PAGE> 52
February 21, 1986
ADI PROPERTIES
REAL ESTATE MANAGEMENT Laser Power Optics
AND DEVELOPMENT 12777 High Bluff Drive
San Diego, CA 92130
Re: Lease Amendment for lease dated 8/3/84 between
Highlands Park Partnership as Lessor and Laser
Power Corporation as Lessee.
Paragraph 56: Measurement of Rentable Area
Lessor and Lessee agree that the rentable area
leased by Laser Power Optics is 44,030 sq. ft.
LASER POWER OPTICS
By:____________________________ Date:____________
Dr. Glenn Sherman
HIGHLANDS PARK PARTNERSHIP
By:____________________________ Date:____________
Tom W. James
12707 High Bluff Drive, Suite 100
San Diego, California 92130
619/481-7777
<PAGE> 53
February 21, 1986
ADI PROPERTIES
REAL ESTATE MANAGEMENT Laser Power Optics
AND DEVELOPMENT 12777 High Bluff Drive
San Diego, CA 92130
Re: Lease Amendment for lease dated 8/3/84 between
Highlands Park Partnership as Lessor and Laser
Power Corporation as Lessee.
Paragraph 43: Lease Commencement, Termination Dates
Lessor and Lessee agree that the commencement
date, for the lease dated 8/3/84, by and between
Highlands Park Partnership as Lessor and Laser Power
Corporation as Lessee will be 1/1/86. The
termination date will remain 12/31/90.
LASER POWER OPTICS
By:____________________________ Date:____________
Dr. Glenn Sherman
HIGHLANDS PARK PARTNERSHIP
By:____________________________ Date:____________
Tom W. James
12707 High Bluff Drive, Suite 100
San Diego, California 92130
619/481-7777
<PAGE> 54
FOURTH AMENDMENT TO LEASE
This Amendment to Lease dated March 28, 1989, by and between BURNHAM
PACIFIC PROPERTIES, INC., a California corporation (herein called "Landlord")
and LASER POWER CORPORATION, a Delaware corporation (herein called "Tenant").
WHEREAS, there is a Lease and Addendum (herein called "Lease") dated August
30, 1984, by and between HIGHLANDS PARK PARTNERSHIP (Landlord) and LASER POWER
CORPORATION (Tenant) for that certain premises located at 12777 High Bluff
Drive, San Diego, California; and,
WHEREAS, there is an Amendment to the Lease contained in a letter agreement
dated March 20, 1985 between Landlord and Tenant; and,
WHEREAS, there is an Amendment to the Lease contained in a letter agreement
dated February 21, 1986 between Landlord and Tenant (regarding paragraph 56);
and,
WHEREAS, there is an Amendment to the Lease contained in an additional
letter agreement dated February 21, 1986 between Landlord and Tenant (regarding
Paragraph 43); and,
WHEREAS, BURNHAM PACIFIC PROPERTIES, INC. is the successor in interest to
HIGHLANDS PARK PARTNERSHIP as Landlord; and,
WHEREAS, Landlord and Tenant desire to further amend said Lease;
NOW, THEREFORE, it is agreed between the parties as follows:
1. Subparagraphs 4.2.2 (a) (iii), (iv) and (v) (as indicated in paragraph
47 of the Addendum to Lease) are hereby deleted in their entirety, and the
following are substituted in their place:
(iii) AMR year 3 = $1.072
(iv) AMR Year 4 =
AMR Year 3 + (AMR Year 3 - .025) * Index Year 4 (AMR YEAR 3 - .025)
------------
Index Year 3
(v) AMR Year 5
AMR Year 4 + (AMR Year 4 - .025) * Index Year 5 AMR YEAR 4 - .025)
-----------
Index Year 4
-55-
<PAGE> 55
2. Subparagraph 4.2.2 (b) (as indicated in paragraph 47 of the Addendum to
Lease) is hereby deleted in its entirety, and the following is substituted in
its place:
(b) In the event that the first option is exercised, the
minimum rent payable during the option terms shall be determined according to
the following formulae:
AMR Year 6 = AMR Year 5 * Index Year 6
------------------
Index Year 5
AMR Year 7 = AMR Year 6 * Index Year 7
------------------
Index Year 6
AMR Year 8 = AMR Year 7 * Index Year 8
------------------
Index Year 7
and so on for each year during each option term.
3. With reference to Subparagraph 4.2.4 (as indicated in paragraph 47 of
the Addendum to Lease), and confirming information contained in a letter dated
January 4, 1988 from Landlord to Tenant, it is hereby acknowledged and agreed
that, since the Consumer Price Index for the San Diego area is now published
less frequently than at the date of execution of the Lease, the Los Angeles area
Index is hereby substituted in its place.
4. All other terms and conditions contained in the Lease (including the
Addendum and previous Amendments) shall remain unchanged and in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have executed this Fourth Amendment
to Lease on the dates specified below their respective signatures.
LANDLORD: TENANT:
BURNHAM PACIFIC PROPERTIES, INC. LASER POWER CORPORATION,
a California corporation a Delaware corporation
By ______________________________ By ____________________________
Michael L. Rubin Dr. Glenn H. Sherman
Vice President Chairman and Chief
Executive Officer
Date: ___________________________ Date: _________________________
-56-
<PAGE> 1
EXHIBIT 11.1
LASER POWER CORPORATION
STATEMENT RE: COMPUTATION OF PER SHARE DATA
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED AUGUST SIX MONTHS ENDED
31, FEBRUARY 29/28
--------------------------- ----------------
1994 1995 1996 1996 1997
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
HISTORICAL INFORMATION:
Net income (loss)............................... $(1,013) $(2,269) $(1,231) $(1,004) $ 313
======= ======= ======= ======= ======
Weighted average common shares outstanding...... 2,987 2,994 3,000 3,000 3,002
Net effect of dilutive common share equivalents
based on the treasury stock method........... -- -- -- -- 484
Adjustments to reflect requirements of the
Securities and Exchange Commission (Effect of
SAB 83)...................................... 331 331 331 331 331
------- ------- ------- ------- ------
Shares used in historical per share
computations................................. 3,318 3,325 3,331 3,331 3,817
======= ======= ======= ======= ======
Historical net income (loss) per share
reflecting requirements of the SEC........... $ (0.31) $ (0.68) $ (0.37) $ (0.30) $ 0.08
======= ======= ======= ======= ======
PRO FORMA INFORMATION:
Shares used in historical per share
computations................................. 3,331 3,817
Effect of assumed conversion of preferred stock
from date of issuance........................ 980 1,070
------- ------
Shares used in pro forma per share
computations................................. 4,311 4,887
======= ======
Pro forma net income (loss) per share........... $ (0.29) $ .06
======= ======
SUPPLEMENTAL INFORMATION:
Shares used in historical per share
computations................................. 3,331 3,817
Additional shares issued to effect the assumed
paydown of debt.............................. 74 157
------- ------
Shares used in supplemental per share
computations................................. 3,405 3,974
======= ======
Net income (loss)............................... $(1,231) $ 313
Income adjustment for elimination of interest
related to paydown of debt................... 51 54
------- ------
Supplemental net income (loss).................. $(1,180) $ 367
======= ======
Supplemental net income (loss) per share........ $ (0.35) $ .09
======= ======
</TABLE>
<PAGE> 1
Exhibit 21.1
Subsidiaries of Laser Power
The subsidiaries of Laser Power as of the date of this prospectus are:
1. Laser Power Optics de Mexico S.A. de C.V., located in Tijuana,
Mexico.
2. Radius Engineering N.V., located in Ghent, Belgium.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and
"Selected Consolidated Financial Information" and to the use of our report dated
October 9, 1996, except for Note 5 ("Changes in Capitalization"), as to which
the date is March 25, 1997, in the Registration Statement (Form SB-2) and the
related Prospectus of Laser Power Corporation for the registration of shares of
its common stock.
ERNST & YOUNG LLP
San Diego, California
April 2, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED
AUGUST 31, 1996 AND AS OF AND FOR THE SIX MONTHS ENDED FEBRUARY 28, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> AUG-31-1996 FEB-28-1997
<PERIOD-START> SEP-01-1995 SEP-01-1996
<PERIOD-END> AUG-31-1996 FEB-28-1997
<CASH> 298 128
<SECURITIES> 0 0
<RECEIVABLES> 3,101 3,363
<ALLOWANCES> (108) (152)
<INVENTORY> 2,730 2,919
<CURRENT-ASSETS> 6,187 6,546
<PP&E> 10,250 11,644
<DEPRECIATION> (6,063) (6,449)
<TOTAL-ASSETS> 11,194 12,728
<CURRENT-LIABILITIES> 3,349 4,555
<BONDS> 1,660 1,660
0 0
201 201
<COMMON> 3 3
<OTHER-SE> 123 6
<TOTAL-LIABILITY-AND-EQUITY> 11,194 12,728
<SALES> 15,194 7,995
<TOTAL-REVENUES> 18,907 11,124
<CGS> 9,888 5,475
<TOTAL-COSTS> 12,030 7,977
<OTHER-EXPENSES> 6,996 2,667
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 300 145
<INCOME-PRETAX> (1,218) 335
<INCOME-TAX> 13 22
<INCOME-CONTINUING> (1,231) 313
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,231) 313
<EPS-PRIMARY> (0.29)<F1> 0.06<F1>
<EPS-DILUTED> (0.29)<F1> 0.06<F1>
<FN>
<F1>EARNINGS PER SHARE IS CALCULATED BASED UPON PRO FORMA SHARES OUTSTANDING. SEE
NOTE 1 OF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
</TABLE>
