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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------
FORM 10-QSB
---------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-28566
LASERMEDICS, INC.
(Exact name of registrant as specified in its
charter)
TEXAS 76-0335587
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
120 Industrial Boulevard, Sugar Land, Texas 77478
(Address of principal executive offices, including zip code)
713-276-7000
(Registrant's telephone number, including area code)
Check whether the Registrant (i) filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (ii) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
As of October 25, 1996 Lasermedics, Inc. had 2,416,001 shares of Common
Stock outstanding.
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<PAGE>
LASERMEDICS, INC.
FORM 10-QSB FOR THE QUARTER ENDED SEPTEMBER 30, 1996.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS................................... 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.............................................. 13
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.................................... 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS. ....................................... 15
ITEM 5. OTHER INFORMATION........................................ 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................... 16
SIGNATURES............................................... 17
2
<PAGE>
PART I. FINANCIAL INFORMATION
Included in this report are "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Although the Company
believes that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations reflected in such
forward-looking statements will prove to have been correct.
ITEM 1. FINANCIAL STATEMENTS
The information required hereunder is included in this report as set
forth in the "Index to Financial Statements."
INDEX TO FINANCIAL STATEMENTS
PAGE
Balance Sheet 4
Statement of Operations 5-6
Statement of Cash Flows 7
Notes to Financial Statements 8-11
3
<PAGE>
LASERMEDICS, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
=================================================================================================================
(Unaudited)
September 30, December 31,
1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ....................................................... $ 598,421 $ 203,364
Accounts receivable, net of allowance for doubtful
accounts of $265,784 at September 30, 1996 .................................. 4,657,024 32,669
Inventory ....................................................................... 4,736,797 114,732
Prepaid expenses ................................................................ 152,790 --
Other current assets ............................................................ 150,000 100,000
- -----------------------------------------------------------------------------------------------------------------
Total current assets ..................................................... 10,295,032 450,765
Property, plant and equipment, net of
accumulated depreciation of $142,567 and
$16,002, respectively ........................................................... 3,442,325 51,074
Goodwill and other intangibles, net of accumulated
amortization of $55,881 and $12,730, respectively ............................... 1,213,329 482
License agreement ................................................................. 101,850 101,850
- -----------------------------------------------------------------------------------------------------------------
TOTAL ASSETS ............................................................. $ 15,052,536 $ 604,171
=================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current Liabilities:
Line of credit - bank ........................................................... $ 2,796,493 --
Accounts payable:
Trade ......................................................................... 425,185$382,894
Related party ................................................................. 837 56,747
Accrued liabilities ............................................................. 826,192 95,564
Customer deposits ............................................................... 28,500 89,100
Current maturities of long-term debt ............................................ 286,333 --
- -----------------------------------------------------------------------------------------------------------------
Total current liabilities ................................................ 4,363,540 624,305
Notes payable, net of unamortized
discount of $151,667 .......................................................... -- 335,833
Other accrued liabilities ......................................................... 157,500 --
Long-term debt, net of current maturities ......................................... 9,127,219 --
- -----------------------------------------------------------------------------------------------------------------
Total liabilities ....................................................... 13,648,259 960,138
Stockholders' Equity (Deficiency):
Preferred stock - $.10 par value; authorized 2,500,000
shares at September 30, 1996 and 1,000,000 shares at
December 31, 1995;
none issued and outstanding
Common stock - $.01 par value; authorized 20,000,000 shares at September 30, 1996
and 10,000,000 shares at December 31, 1995; issued 2,695,001 shares at
September 30, 1996
and 1,761,225 shares at December 31, 1995 ..................................... 26,950 17,612
Additional paid-in-capital ...................................................... 9,645,378 7,232,691
Accumulated deficit ............................................................. (8,040,251) (7,378,470)
- -----------------------------------------------------------------------------------------------------------------
1,632,077 (128,167)
Treasury stock, at cost, 279,000 common shares
at September 30, 1996 and 281,000 common
shares at December 31, 1995 ................................................... (227,800) (227,800)
- -----------------------------------------------------------------------------------------------------------------
Stockholders' equity (deficiency) ......................................... 1,404,277 (355,967)
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY) ...................................................... $ 15,052,536 $ 604,171
=================================================================================================================
</TABLE>
See notes to financial statements.
4
<PAGE>
LASERMEDICS, INC.
STATEMENT OF OPERATIONS
(Unaudited)
=======================================================================
Three months ended September 30, 1996 1995
- -----------------------------------------------------------------------
Net sales ................................ $ 5,228,426 $ 257,126
Cost of sales ............................ 2,341,731 157,590
- -----------------------------------------------------------------------
Gross profit ............................. 2,886,695 99,536
Operating expenses ....................... 2,334,088 334,170
- -----------------------------------------------------------------------
Income (loss) from operations ............ 552,607 (234,634)
Interest expense ......................... (234,899) (30,875)
Other income (expense), net .............. (16,624) 2,206
- -----------------------------------------------------------------------
Net income (loss) ........................ $ 301,084 $ (263,303)
=======================================================================
Net income (loss) per common share ....... $ 0.12 $ (0.18)
=======================================================================
Weighted average common shares outstanding 2,412,827 1,457,990
=======================================================================
See notes to financial statements.
5
<PAGE>
LASERMEDICS, INC.
STATEMENT OF OPERATIONS
(Unaudited)
=======================================================================
Nine months ended September 30, .......... 1996 1995
- -----------------------------------------------------------------------
Net sales ................................ $ 8,093,719 $ 384,664
Cost of sales ............................ 3,755,479 222,051
- -----------------------------------------------------------------------
Gross profit ............................. 4,338,240 162,613
Operating expenses ....................... 4,413,794 1,292,515
- -----------------------------------------------------------------------
Loss from operations ..................... (75,554) (1,129,902)
Interest expense ......................... (559,612) (51,333)
Other income (expense), net .............. (26,615) 8,322
- -----------------------------------------------------------------------
Net loss ................................. $ (661,781) $(1,172,913)
=======================================================================
Net loss per common share ................ $ (0.36) $ (0.82)
=======================================================================
Weighted average common shares outstanding 1,823,288 1,435,033
=======================================================================
See notes to financial statements.
6
<PAGE>
LASERMEDICS, INC.
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
==========================================================================================================
Nine months ended September 30, 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss .................................................................. $ (661,781) $(1,172,913)
- ----------------------------------------------------------------------------------------------------------
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense .................................. 169,675 6,482
Amortization of discount on notes payable .............................. 151,667 27,083
Bad debt expense ....................................................... 916,054 12,377
Compensation related to stock options and
warrants issued ....................................................... -- 137,330
Shares issued for public relations agreement ........................... 8,000
Shares issued for clinical research studies ............................ 110,000
Shares issued for furniture ............................................ 5,995
Changes in operating assets and liabilities:
Accounts receivable .................................................. (2,268,589) 51,100
Inventory ............................................................ 1,302,013 (36,346)
Prepaid expenses and other current assets ............................ (180,769) (25,000)
Accounts payable ..................................................... (42,283) 275,062
Accrued liabilities .................................................. 222,738 19,920
Customer deposits .................................................... 73,600 78,855
Other accrued liabilities ............................................ 157,500 --
- ----------------------------------------------------------------------------------------------------------
Total adjustments ............................................. 509,606 662,858
- ----------------------------------------------------------------------------------------------------------
Net cash used in operating activities ......................... (152,175) (510,055)
- ----------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Acquisition of Henley, net of cash
acquired of $1,909 ..................................................... (6,496,613) --
Capital expenditures ...................................................... (92,725) (1,858)
- ----------------------------------------------------------------------------------------------------------
Net cash used in investing activities .......................... (6,589,338) (1,858)
- ----------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net proceeds from issuance of common stock ................................ 1,926,525 5,000
Subscriptions refunded on common stock .................................... (46,000)
Net proceeds from line of credit .......................................... 2,796,493
Proceeds from long-term debt .............................................. 2,508,998 487,500
Principal payments of long-term debt ...................................... (95,446)
- ----------------------------------------------------------------------------------------------------------
Net cash provided by financing activities ....................... 7,136,570 446,500
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents ........................ 395,057 (65,413)
Cash and cash equivalents at beginning of period ............................ 203,364 310,742
- ----------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period .................................. $ 598,421 $ 245,329
==========================================================================================================
</TABLE>
See notes to financial statements.
7
<PAGE>
LASERMEDICS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION:
The accompanying unaudited interim financial statements of Lasermedics,
Inc., a Texas corporation (the "Company"), have been prepared in
accordance with generally accepted accounting principles and the rules of
the Securities and Exchange Commission (the "SEC"), and should be read in
conjunction with the audited financial statements and notes thereto
contained in the Company's latest Annual Report filed with the SEC on Form
10-KSB. In the opinion of management, all adjustments, consisting of
normal recurring adjustments, necessary for a fair presentation of
financial position and the results of operations for the interim periods
presented have been reflected herein. The results of operations for
interim periods are not necessarily indicative of the results to be
expected for the full year. Notes to the financial statements which would
substantially duplicate the disclosure contained in the audited financial
statements for the most recent fiscal year, 1995, as reported in the Form
10-KSB, have been omitted.
2. NET INCOME (LOSS) PER SHARE:
Net income per common share is calculated on the basis of the weighted
average number of common shares outstanding during the period. The
dilutive effect of common stock equivalents is not material. The
calculation of primary loss per common share is based on the weighted
average number of common shares outstanding during the period, after
consideration of the dilutive effect of stock options and warrants
reflected under the treasury stock method. Fully diluted net income (loss)
per share is not presented because such amounts would be the same as
amounts computed for primary net income (loss) per common share.
3. ACQUISITION OF ASSETS:
On April 30, 1996 the Company entered into an agreement with Maxxim
Medical, Inc., a Delaware corporation ("Maxxim"), whereby the Company
purchased certain assets of (and assumed certain liabilities associated
with) the Henley Healthcare Division ("Henley") of Maxxim for an estimated
purchase price of approximately $13.5 million. The assets acquired consist
of real property; tangible personal property including machinery,
equipment, furniture and fixtures; general intangibles; contracts;
business licenses; accounts receivable; inventory; and prepaid expenses.
The purchase price was paid by the issuance of the Company's convertible
subordinated promissory note in the principal amount of $7,000,000 (the
"Note") with the balance of the purchase price being paid in cash. The
Company obtained the cash portion of the purchase price pursuant to a loan
agreement entered into with Comerica Bank - Texas, a Texas banking
corporation ("Comerica"), which loan is secured by substantially all of
the assets of the Company including the Henley assets acquired from
Maxxim.
The Note is due and payable on March 1, 2003 with interest payable
semi-annually on November 1 and May 1 of each calendar year and calculated
at a rate equal to 2% per annum and increasing annually 2% per annum. The
Company may redeem all or any portion of the outstanding principal amount
of the Note at redemption prices ranging from 104% to 110% of the
principal amount being redeemed, depending on when the redemption occurs
as set forth in the Note. In addition, the Note is subject to mandatory
redemption in annual installments of $1.4 million commencing on March 1,
1999 at premiums starting at 7% and decreasing 1% each
continued
8
<PAGE>
LASERMEDICS, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
(UNAUDITED)
3. ACQUISITION OF ASSETS, CONTINUED:
year. The Company is also required to redeem 40% of the Note upon the
completion of a public offering. The Note is convertible into common stock
at an initial conversion price of $3 per share, provided that upon the
occurrence of any default under the Note, the conversion price will be
automatically adjusted to an amount equal to the lesser of the conversion
price then in effect or 80% of the average market price for the Company's
common stock for the 30 trading days immediately preceding the event of
default. The conversion price is also subject to adjustment upon the
occurrence of certain events (including certain issuances of common stock
for less than the conversion price) to provide anti-dilution protection.
Such conversion could, depending on the fair market value of the Company's
common stock at the time of conversion, result in substantial dilution to
holders of the Company's common stock. The Company's common stock issuable
upon conversion of the Note is subject to the terms of a registration
rights agreement entered into by the Company and Maxxim whereby Maxxim
(and certain subsequent holders) shall retain certain demand and piggyback
registration rights with respect to those shares of common stock.
The loan agreement with Comerica (the "Loan Agreement") provides for (i) a
revolving loan ("Line of Credit" or "Revolver"), which permits borrowings
up to $4,000,000 pursuant to a borrowing base calculation derived from the
Company's accounts receivable and inventory and (ii) two term loans in the
amount of $893,000 and $1,616,000, respectively. The Revolver also
includes a $250,000 letter of credit facility. Interest on the Revolver
and the two term loans is payable monthly and is calculated at a rate
equal to the Prime Rate plus one-half of one percent per annum. The
Revolver's maturity date is two years from the date of the Loan Agreement
while the maturity dates of the $893,000 and $1,616,000 term loans are
five years and fifteen years, respectively, from the date of the Loan
Agreement, except that Comerica may call the $1,616,000 term loan
beginning on the fifth anniversary of the Loan Agreement. All of the
borrowings from Comerica are secured by substantially all of the assets of
the Company including the Henley assets acquired from Maxxim. The loan
agreement also contains a number of affirmative covenants, negative
covenants and financial covenants with which the Company must comply
including a minimum tangible net worth, leverage ratio, working capital
ratio, fixed charge ratio and interest coverage ratio. The Company is also
limited in the amount of its capital expenditures and research and
development expenditures, and all future acquisitions and major corporate
transactions require approval of Comerica, as do offerings of securities
by the Company.
At September 30, 1996, the Company was not in compliance with certain of
its covenants under the Loan Agreement. However, On October 25, 1996, the
Company and Comerica entered into an amended agreement (the "Amendment")
effective as of April 30, 1996 (the date of the Loan Agreement), pursuant
to which the Loan Agreement has been modified to waive defaults under the
loan covenants and to make certain other modifications to the financial
covenants and related provisions. Pursuant to the Amendment, from the date
of the Loan Agreement through September 30, 1996, the Company has been and
remains in compliance with its covenants under the Loan Agreement.
The acquisition has been accounted for as a purchase, and the results of
operations of Henley have been included in operations from the date of
acquisition. The estimated purchase price in
continued
9
<PAGE>
LASERMEDICS, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
(UNAUDITED)
3. ACQUISITION OF ASSETS, CONTINUED:
excess of the estimated fair value of the net assets acquired which is
being amortized over 15 years on the straight line method aggregated
approximately $1,239,000. The estimated fair value of the Note amounted to
$7,000,000 pursuant to a valuation by an investment banking firm.
4. OTHER CURRENT ASSETS:
At September 30, 1996, the Company had two stand-by Letters of Credit (the
"LOCs") one of which is for the benefit of the Company's Danish supplier,
in the amount of $100,000, expiring October 31, 1996, and the other is for
the benefit of one of the Company's wholesale suppliers, in the amount of
$50,000, expiring December 31, 1996. The LOCs are collateralized by
certificates of deposit for a total of $150,000 included in other current
assets.
5. RELATED PARTY TRANSACTIONS:
Included in accounts payable at September 30, 1996, were reimbursable
expenses of $837 related to a consulting agreement with one of the
directors of the Company.
6. STOCKHOLDERS' EQUITY:
In connection with an agreement it entered into (in December 1995) with a
public relations firm, the Company issued to the firm, in February 1996,
2,000 shares of its treasury common stock as compensation for services.
The Company has recognized $8,000 in related compensation expense based on
the market price of the common stock of $4.00 per share on the date of the
agreement.
During March 1996, the Company amended the terms of a "best-efforts"
private offering of its securities commenced in December 1995 (the
"Offering") by extending the Offering from January 31, 1996 to June 21,
1996, increasing the size of the Offering up to 1,000,000 units and
modifying the provisions of certain common stock registration rights
granted in the Offering.
On April 30, 1996 the Company consummated the Offering with respect to
those subscriptions received to that date. Pursuant to such consummation
the Company received an aggregate of approximately $1,300,000 from
investors and issued to such investors in exchange therefor, 433,333 units
of its securities ("Units"), each Unit consisting of one share of the
Company's common stock and one four-year warrant to purchase one share of
the Company's common stock at an exercise price of $6.00 per share.
Subsequent to April 30, 1996 the Company consummated the Offering with
respect to those subscription agreements received after that date and, in
connection therewith, received approximately $746,000 and issued an
additional 248,670 Units.
Additionally, on April 30, 1996 the holders of all of the Company's
previously issued convertible, unsecured, non-negotiable promissory notes
("Bridge Notes") converted the amounts due thereunder into an aggregate of
176,773 shares of the Company's common stock and four-year warrants to
purchase an aggregate of 176,773 shares of the Company's common stock at
an exercise price of $6.00 per share. Such conversion was effected under
the same terms as those offered to investors in the Offering.
continued
10
<PAGE>
LASERMEDICS, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
(UNAUDITED)
6. STOCKHOLDERS' EQUITY, CONTINUED:
At the Company's annual shareholders' meeting held in July 1996, the
Company's shareholders, among other things, approved (i) a proposal
amending the Company's Articles of Incorporation which (a) increased the
authorized number of shares of the Company's Common Stock, par value $.01
per share from 10,000,000 shares to 20,000,000 shares and (b) increased
the authorized number of shares of the Company's Preferred Stock, par
value $.10 per share from 1,000,000 shares to 2,500,000 shares and (ii)
the 1996 Incentive Stock Option Plan (the "Incentive Stock Plan") and the
1996 Amended and Restated Non-Employee Director Stock Option Plan (the
"Non-Employee Director Stock Plan") as adopted by the Company's Board of
Directors (the "BOD") the in January 1996. (See Item 5 of Part II.)
7. STOCK OPTIONS & WARRANTS:
Effective January 15, 1996, the BOD adopted, subject to approval by the
Company's stockholders, the Incentive Stock Plan covering 1,200,000 shares
of the Company's common stock and the Non-Employee Director Stock Plan
covering 250,000 shares of the Company's common stock.
In connection with their election to the BOD in January 1996, two
non-employee directors were each granted a stock option under the
Non-Employee Director Stock Plan to purchase 25,000 shares of the
Company's common stock at a price of $5.50 per share. Also, in connection
with his election to the BOD concurrent with the closing of the Henley
transaction in April 1996, one non-employee director was granted an option
under the Non-Employee Director Stock Plan to purchase 10,000 shares of
the Company's common stock at a price of $7.75 per share. The grants of
these options were subject to stockholder approval of the Non-Employee
Director Stock Plan which approval was obtained in July 1996.
In February 1996, the Company extended the expiration date from February
16, 1997 to February 1, 1999 of an immediately exercisable option to
purchase 75,000 shares of the Company's common stock at a price of $4.25
per share granted in connection with an agreement entered into with a
consultant of the Company in February 1994.
In March 1996, the Company extended the expiration date from July 15, 1996
to March 12, 1998 of an immediately exercisable option to purchase 20,000
shares of the Company's common stock at a price of $4.00 per share granted
in connection with an agreement entered into with a financial public
relations firm in December 1995.
Effective June 14, 1996 the Company entered into a settlement agreement
with J.W. Cabott Holding Corp. ("JWC") and certain of JWC's principals
with respect to an agreement the Company entered into with JWC in July
1994 pursuant to which JWC was granted a warrant to purchase 125,000
shares of the Company's common stock at $.10 per share. The settlement
agreement provides for, among other things, a reduction in the number of
shares issuable pursuant to the warrant granted to JWC from 125,000 to
75,000 and the transfer of such warrant to three principals of JWC. The
Company subsequently issued 75,000 shares of its common stock to the three
principals of JWC pursuant to their exercise of the warrant at the
specified price of $.10 per share.
continued
11
<PAGE>
LASERMEDICS, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
(UNAUDITED)
7. STOCK OPTIONS & WARRANTS, CONTINUED:
In connection with their re-election to the BOD in July 1996, four
non-employee directors were each granted a stock option under the
Non-Employee Director Plan to purchase 10,000 shares (for an aggregate of
40,000 shares) of the Company's common stock at a price of $6.125 per
share.
8. DEVELOPMENT STAGE:
For financial reporting purposes the Company was considered to be in the
development stage at March 31, 1996. Subsequent to April 30, 1996 (date of
acquisition of Henley) the Company is no longer in the development stage.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
For the quarter ended September 30, 1996 the Company had net income of
$301,084 compared to net loss of $263,303 for the same period in 1995. The
Company's profitability has resulted primarily from increased sales of the
recently acquired Henley products and the effects of certain cost reduction
measures taken during the quarter relative to the Henley operations. Operating
deficit for the nine months ended September 30, 1996 decreased approximately 44%
to $661,781 compared to operating deficit of $1,172,913 for the same period in
1995. This decrease results primarily from the effects of income earned in the
quarter ended September 30, 1996 attributable to the Henley operations and less
expense recognized aggregating approximately $245,000 relating to stock or stock
options/warrants issued for compensation or under certain agreements which the
Company entered into.
Net sales for the three months ended September 30, 1996 increased to
$5,228,426 compared to $257,126 reported for the same period in 1995. For the
nine months ended September 30, 1996 net sales increased to $8,093,719 compared
to $384,664 reported for the same period in 1995. Gross margin for the three
months ended September 30, 1996 increased to $2,886,695 compared to $99,536
reported for the same period in 1995, and for the nine months ended September
30, 1996 gross margin increased to $4,338,240 compared to $162,613 reported for
the same period in 1995. These increases in net sales and gross margins have
resulted primarily from the effects of the Henley acquisition completed in the
quarter ended June 30, 1996.
Operating expenses for the quarter ended September 30, 1996 were
$2,334,088 compared to $334,170 reported for the same period in 1995. For the
nine months ended September 30, 1996 operating expenses were $4,413,794 compared
to $1,292,515 reported for the same period in 1995. The increases in operating
expenses are directly attributable to the acquisition of the Henley operations.
For the three months and nine months ended September 30, 1996 the Company
had interest expense of $234,899 and $559,612, respectively, compared to $30,875
and $51,333 reported for the same periods in 1995. The increase in interest
expense is directly related to the long-term debt incurred and the credit
facility established to finance the Henley acquisition as well as the effects of
the conversion of the Bridge Notes into shares of the Company's common stock.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996 the Company had cash and cash equivalents of
$598,421 compared to cash and cash equivalents of $203,364 at December 31, 1995.
The increase in cash and cash equivalents resulted from proceeds of the Offering
consummated during the quarter ended June 30, 1996. Also, at September 30, 1996,
the Company had two stand-by letters of credit expiring October 31, 1996 and
December 31, 1996, respectively, aggregating $150,000 under which the Company's
Danish supplier and another supplier are the beneficiaries. The letters of
credit are collateralized by certificates of deposit for a total of $150,000
classified as other current assets in the financial statements.
The Company's current sources of liquidity consist primarily of (i) funds
held at the end of fiscal year 1995, (ii) proceeds received from the Offering
and (iii) the amounts, if any, available under the revolving loan from Comerica
(the "Revolver".) As of June 30, 1996 the Company had consummated the Offering
and in connection therewith had received an aggregate of approximately
$2,000,000, portions of which have been used in operations and to pay down the
Revolver. As of September 30, 1996 the Company had approximately $1,600,000
available for borrowing pursuant to the Revolver. The total amount available for
borrowing under the Revolver is the lesser of (i) $4,000,000 and (ii) a variable
borrowing base calculated based on the amount and type of outstanding accounts
receivable and the value of certain items of inventory.
13
<PAGE>
The Company's still expends some of its capital resources in connection
with its continuing efforts to obtain from the U.S. Food and Drug Administration
("FDA") marketing clearance for the commercial distribution of the Microlight
830(TM), the Company's portable, hand-held, battery-operateD, low-energy laser
device. Although no assurances can be given, the Company anticipates that
operating cash flows from the Henley operations will be sufficient to meet its
current needs. If the Company's operating cash flows from the recently acquired
Henley assets is not adequate, the Company may require new sources of liquidity
to (i) fund future activities that may be required to obtain FDA marketing
clearance for the Microlight 830(TM), (ii) maKe the required payments under the
Note and term loans with Comerica, (iii) make the payments required to obtain
the exclusive manufacturing and marketing rights to the Microlight 830(TM), (iv)
expand the Henley operations, (v) begIn full-scale manufacturing of the
Microlight 830(TM) and (vi) pursue additionAl acquisitions. The Company believes
that its success in obtaining the necessary financing will depend on, among
other factors, (i) successfully operating the recently-acquired Henley business
and (ii) successfully marketing the Microlight 830(TM) when it is cleared for
commercial distributiOn by the FDA. The failure to accomplish any of the
foregoing could have a significant adverse impact on the Company's business and
financial condition. Sources of additional financing may include additional bank
debt or public or private sale of equity or debt securities. There can be no
assurance that the Company will be successful in arranging such financing on
terms commercially acceptable to the Company.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
At the Company's annual meeting of shareholders held in July 1996, the
Company's shareholders approved an amendment to the Company's Articles of
Incorporation that, among other things, eliminated the cumulative voting of
shares of the Company's common stock in the election of directors.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's annual meeting of shareholders was held on July 18, 1996 and
continued on July 24, 1996. The holders of 1,286,500 shares of the Company's
common stock were present at the meeting, in person and by proxy, and took the
following actions:
(A) Election of Directors
The shareholders voted as follows and elected the following persons to
serve as directors of the Company until the next annual meeting of
stockholders and until their successors are duly elected and qualified:
NUMBER OF NUMBER OF
VOTES FOR VOTES WITHHELD
Michael M. Barbour 1,281,790 2,278
Chadwick F. Smith, MD 1,275,790 2,078
Dan D. Sudduth 1,275,645 2,378
Pedro A. Rubio, MD, Ph.D. 1,269,765 2,515
Kenneth W. Davidson 1,270,665 2,078
Ernest J. Henley, Ph.D. 1,270,465 2,478
(B) Approval of Amendment to the Company's Articles of Incorporation
The shareholders voted as follows and approved an amendment to the
Company's Articles of Incorporation which (i) increased the authorized
number of shares of the Company's common stock, par value $.01 per share
from 10,000,000 shares to 20,000,000 shares; (ii) increased the authorized
number of shares of the Company's preferred stock, par value $.10 per
share from 1,000,000 shares to 2,500,000 shares; (iii) granted specific
authority to the Company's Board of Directors to designate the rights,
preferences, terms and conditions of one or more series of preferred stock
without further shareholder approval; and (iv) eliminated cumulative
voting in the election of directors:
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
VOTES FOR VOTES AGAINST VOTES ABSTAINED VOTES NOT CAST
1,006,982 12,267 1,660 461,316
15
<PAGE>
(C) Approval of the Incentive Stock Plan and the Non-Employee Director
Stock Plan
The shareholders voted as follows and approved the Incentive Stock Plan
and the Non-Employee Director Stock Plan:
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
VOTES FOR VOTES AGAINST VOTES ABSTAINED VOTES NOT CAST
The Incentive
Stock Plan 985,614 22,617 10,495 463,499
The Non-
Employee
Director
Stock Plan 982,094 19,772 9,660 470,669
ITEM 5. OTHER INFORMATION
In April 1996 the Company submitted to the FDA a supplement to its
Pre-Market Approval ("PMA") application in response to the FDA's request for
additional information and some clarification of certain data submitted in the
Company's original PMA application. In June 1996 the FDA informed the Company
that the PMA submission was formally accepted for filing and substantive review.
In October 1996 the Company received from the FDA a letter notification in which
the FDA requested yet additional information in connection with the Company's
PMA application. The Company is in the process of preparing its response to the
request. However, there can be no assurance that the Company's PMA application
submissions will ultimately satisfy the FDA's requirements or that the FDA will
grant PMA approval on a timely basis, if at all. The Company will be unable to
sell the Microlight 830(TM) In commercial quantities for human application in
the U.S. market until it obtains the FDA's clearance to market the device.
In July 1996 the Company was informed that the FDA had reviewed the
Company's response to the FDA's October 1995 warning letter and had no further
concerns with respect to the matters covered in the warning letter. The FDA's
warning letter was issued pursuant to a June 1995 inspection of the Company's
clinical studies program involving the Microlight 830(TM).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
See "Index of Exhibits" on pages 18 and 19 listing the documents required
to be filed as exhibits to this Form 10-QSB by Item 601 of Regulation S-B.
(b) REPORTS ON FORM 8-K
None.
16
<PAGE>
SIGNATURES
IN ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF
1934, THE REGISTRANT CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, HEREUNTO DULY AUTHORIZED.
LASERMEDICS, INC.
(Registrant)
Date: OCTOBER 25, 1996 By:/s/ MICHAEL M. BARBOUR
Michael M. Barbour
(President and Chief Executive
Officer)
Date: OCTOBER 25, 1996 By:/s/ CHIKE J. OGBOENYIYA
Chike J. Ogboenyiya
(Vice President and
Chief Financial Officer)
17
<PAGE>
LASERMEDICS, INC.
EXHIBITS TO FORM 10-QSB
for the quarter ended September 30, 1996
INDEX OF EXHIBITS
Exhibits incorporated by reference to a prior filing are designated by
an asterisk (*); all exhibits not so designated are documents required to be
filed as exhibits to this Form 10-QSB.
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ------- ----------- --------- ------ ---------
2.1* Agreement of Form 8-K/A dated
Purchase and Sale April 30, 1996 33-49972 1(A)
of Assets dated
April 30, 1996
with Maxxim.
3.1* Amendment to Form 10-QSB for
By-Laws the quarter ended
June 30, 1996 0-28566
3.2* Articles of Form 10-QSB for
Amendment to the quarter ended
Articles June 30, 1996 0-28566
Incorporation
3.3* Articles of Proxy Statement
Amendment to dated June 24, 1996 0-28566
Articles
Incorporation
10.1* Convertible Form 8-K dated
Subordinated April 30, 1996 33-49972 1(B)
Promissory Note
dated April 30,
1996 payable to
Maxxim.
10.2* Registration Form 8-K dated
Rights Agreement April 30, 1996 33-49972 1(C)
dated April 30, 1996
with Maxxim.
10.3* Voting and Form 8-K dated
Shareholders April 30, 1996 33-49972 1(D)
Agreement dated
April 30, 1996 by
and between M.M.
Barbour, Dr. C. F.
Smith and Maxxim.
18
<PAGE>
LASERMEDICS, INC
INDEX OF EXHIBITS, continued
REPORT OR SEC FILE OR
EXHIBIT REGISTRATION REGISTRATION EXHIBIT
NUMBER DESCRIPTION STATEMENT NUMBER REFERENCE
- ------- ----------- --------- ------ ---------
10.4* Loan Agreement Form 8-K dated
dated April 30, April 30, 1996 33-49972 1(E)
1996 with
Comerica Bank-
Texas.
10.5 First Amendment
to Loan
Agreement dated
April 30, 1996
with Comerica
Bank - Texas.
10.6 Indemnification
Agreement dated
January 15, 1996
with Company
Officers and
Directors
10.7* 1996 Incentive Proxy Statement
Stock Option dated June 24, 1996 0-28566
Plan
10.8* 1996 Amended Proxy Statement
and Restated dated June 24, 1996 0-28566
Non-Employee
Director Stock
Option Plan
19
EXHIBIT 10.5
FIRST AMENDMENT TO LOAN AGREEMENT
This FIRST AMENDMENT TO LOAN AGREEMENT (the "AMENDMENT"), dated effective
as of April 30, 1996, is made by and between LASERMEDICS, INC. ("BORROWER"), a
Texas corporation, and COMERICA BANK-TEXAS ("LENDER"), a Texas banking
association.
RECITALS:
A. Borrower and Lender entered into that certain Loan Agreement dated as
of April 30, 1996 (as the same may have heretofore been amended, modified,
restated or supplemented from time to time, the "LOAN AGREEMENT").
B. Borrower and Lender now desire to (1) modify certain financial
covenants, (2) waive defaults under certain covenants set forth in the Loan
Agreement, (3) modify, delete, and add certain definitions, and (4) make certain
other changes to the Loan Agreement, all of which is more fully described
hereinbelow, which such provisions contained below shall control over any
inconsistencies with the foregoing recitals.
AGREEMENTS:
In consideration of the premises and the mutual agreements herein set
forth, the parties hereto hereby agree as follows:
1. CASH FLOW DEFINITION AMENDED. The definition of "Cash Flow" contained
in Section 1.1 of the Loan Agreement is hereby amended in its entirety to be and
read as follows:
"`CASH FLOW' shall mean (without duplication), as to any Person and
for any period, the sum of (a) Net Income AND (b) the sum of (1)
depreciation, amortization, depletion, obsolescence of property, and (2)
interest expense, all determined in accordance with GAAP."
2. FIXED CHARGE COVERAGE RATIO DEFINITION AMENDED. The definition of
"Fixed Charge Coverage Ratio" contained in Section 1.1 of the Loan Agreement is
hereby amended in its entirety to be and read as follows:
"`FIXED CHARGE COVERAGE RATIO' shall mean, as of any day and for any
Person, (a) if such day is prior to July 31, 1997, the RATIO OF (i) Cash
Flow for the period beginning on July 1, 1996 through and including the
most recently ended calendar month as of such day TO (ii) an amount equal
to the sum of (1) Current Maturities of Long Term Debt as of the end of
such period, (2) interest expense for such period, and (3) non-financed
Capital Expenditures
<PAGE>
for such period, and (b) if such day is on or after July 31, 1997, the
RATIO OF (x) an amount equal to Cash Flow for the most recently ended 12
month period as of such day TO (y) an amount equal to the sum of (1)
Current Maturities of Long Term Debt as of the end of such period, (2)
interest expense for such period, and (3) non-financed Capital
Expenditures for such period."
3. INTEREST COVERAGE RATIO DEFINITION DELETED. Section 1.1 of the Loan
Agreement is hereby amended by deleting therefrom the definition of "Interest
Coverage Ratio" where it appears therein.
4. EFFECTIVE TANGIBLE NET WORTH DEFINITION ADDED. Section 1.1 of the Loan
Agreement is hereby amended by adding thereto a new definition for "Effective
Tangible Net Worth" which shall be and read as follows:
"`EFFECTIVE TANGIBLE NET WORTH' shall mean as of any day the
consolidated Tangible Net Worth of the Borrower as of such day PLUS the
Debt evidenced by the Subordinated Debt Documents as of such day."
5. TANGIBLE NET WORTH STEP-UP AMENDED. Section 1.1 of the Loan Agreement
is hereby amended in its entirety to be and read as follows:
"`TANGIBLE NET WORTH STEP-UP' shall mean, on any date it is
determined, an amount equal to seventy-five percent of the aggregate
amount of Net Income of the Companies earned during each calendar month
which has ended as of such date of determination, beginning with the
calendar month ending September 30, 1996.
6. TANGIBLE NET WORTH COVENANT AMENDED. Section 6.5 of the Loan Agreement
is hereby amended in its entirety to be and read as follows:
"6.5. MAINTAIN EFFECTIVE TANGIBLE NET WORTH. Maintain an Effective
Tangible Net Worth of not less than THE SUM OF (a)(i) $6,740,000 at all
times on or before June 30, 1996, (ii) $6,730,000 at all times from and
including July 1, 1996 through and including July 31, 1996, and (iii)
$6,820,000 from and including August 1, 1996 and at all times thereafter
PLUS (b) (beginning with the calendar month ending September, 1996) the
Tangible Net Worth Step-Up."
7. LEVERAGE RATIO AMENDED. Section 6.6 of the Loan Agreement is hereby
amended in its entirety to be and read as follows:
"6.6. MAINTAIN LEVERAGE RATIO. Have on a consolidated statement basis,
beginning with July 1, 1996, the ratio of (a) Debt less the Debt evidenced by
the
2
<PAGE>
Subordinated Debt Documents to (b) Effective Tangible Net Worth of not
more than 1.25 to 1.00 at all times."
8. WORKING CAPITAL COVENANT DELETED. The Working Capital Covenant
contained in Section 6.7 of the Loan Agreement is hereby deleted and the Section
is intentionally left blank so as to not affect the numbering of the
subsequently appearing sections of Section 6 of the Loan Agreement.
9. FIXED CHARGE COVERAGE RATIO AMENDED. Section 6.8 of the Loan Agreement
is hereby amended in its entirety to be and read as follows:
"6.8 FIXED CHARGE COVERAGE RATIO. Maintain a Fixed Charge Coverage
Ratio of not less than (a) 1.10 to 1.00 at all times on or after July 1,
1996 but before September 30, 1996, and (b) 1.20 to 1.00 on September 30,
1996 and at all times thereafter."
10. INTEREST COVERAGE RATIO COVENANT DELETED. The Interest Coverage Ratio
Covenant in Section 6.9 of the Loan Agreement is hereby deleted and the Section
is intentionally left blank so as to not affect the numbering of the
subsequently appearing sections of Section 6 of the Loan Agreement.
11. QUICK RATIO COVENANT DELETED. The Quick Ratio Covenant in Section 6.10
of the Loan Agreement is hereby deleted and the Section is intentionally left
blank so as to not affect the numbering of the subsequently appearing sections
of Section 6 of the Loan Agreement.
12. CURRENT RATIO COVENANT AMENDED. The Current Ratio Covenant in Section
6.11 of the Loan Agreement is hereby amended in its entirety to be and read as
follows:
"6.11.CURRENT RATIO. Maintain at all times on a consolidated
statement basis the ratio of (a) Current Assets to (b) Current Liabilities
(inclusive of outstanding Revolving Loans), of not less than 2.00 to 1.00
at all times."
13. WAIVER OF CERTAIN DEFAULTS. The Lender hereby waives the occurrence of
any Default or Event of Default which has occurred through the effective date
hereof (but not thereafter) and of which the Lender has received written notice
from the Borrower, under any or all of the provisions of Sections 6.5 through
6.11 of the Loan Agreement.
14. NEW EXHIBIT ATTACHED. Exhibit G to the Loan Agreement is hereby
deleted in its entirety and there is hereby substituted therefor a new Exhibit
G, which shall be in the form of EXHIBIT A attached hereto and incorporated
herein by reference.
3
<PAGE>
15. CERTAIN DEFINITIONS AND REFERENCES. Terms used but not defined herein,
but which are defined in the Loan Agreement or in the other Loan Documents,
shall have the meanings herein ascribed to them therein. The term "Agreement" as
used in the Loan Agreement and the term "Loan Agreement," as used in the other
Loan Documents or any other instrument, document or writing furnished to Lender
by any Borrower shall mean the Loan Agreement as hereby amended.
16. EXPENSES; INDEMNIFICATION. TO THE EXTENT NOT PROHIBITED BY APPLICABLE
LAW, BORROWERS WILL JOINTLY AND SEVERALLY PAY ALL COSTS AND EXPENSES AND
REIMBURSE LENDER FOR ANY AND ALL EXPENDITURES OF EVERY CHARACTER INCURRED OR
EXPENDED FROM TIME TO TIME, REGARDLESS OF WHETHER A DEFAULT HAS OCCURRED, IN
CONNECTION WITH THE PREPARATION, NEGOTIATION, DOCUMENTATION, RECORDING, CLOSING,
RENEWAL, REVISION, MODIFICATION, INCREASE, REVIEW OR RESTRUCTURING OF THIS
AMENDMENT.
17. NO USURY INTENDED; SPREADING. Notwithstanding any provision to the
contrary contained in this Amendment, the Notes or any of the other Loan
Documents, it is expressly provided that in no case or event shall the aggregate
of (i) all interest on the unpaid balance of the Notes, accrued or paid from the
date hereof and (ii) the aggregate of any other amounts accrued or paid pursuant
to the Notes or any of the other Loan Documents, which under applicable laws are
or may be deemed to constitute interest upon the indebtedness evidenced by the
Notes ever exceed the Maximum Legal Rate. In this connection, the parties hereto
expressly stipulate and agree that it is their common and overriding intent to
contract in strict compliance with the applicable usury laws. In furtherance
thereof, none of the terms of the Notes or any of the other Loan Documents shall
ever be construed to create a contract to pay, as consideration for the use,
forbearance or detention of money, interest at a rate in excess of the Maximum
Legal Rate. No Borrower nor any other parties now or hereafter becoming liable
for payment of the indebtedness evidenced by the Notes shall ever be liable for
interest in excess of the Maximum Legal Rate. If, for any reason whatever, the
interest paid or received on the Notes during its full term produces a rate
which exceeds the Maximum Legal Rate, the holder of the Notes shall credit
against the principal of the Notes (or, if such indebtedness shall have been
paid in full, shall refund to the payor of such interest) such portion of said
interest as shall be necessary to cause the interest paid on the Notes to
produce a rate equal to the Maximum Legal Rate. All sums paid or agreed to be
paid to the holder of the Notes for the use, forbearance or detention of the
indebtedness evidenced thereby shall, to the extent permitted by applicable law,
be amortized, prorated, allocated and spread in equal parts throughout the full
term of the Notes, so that the interest rate is uniform throughout the full term
of the Notes. The provisions of this paragraph shall control all agreements,
whether now or hereafter existing and whether written or oral, between Borrowers
and Lender.
18. BUSINESS LOANS. Each Borrower warrants and represents to Lender and
all other holders of the Notes that all loans evidenced by the Notes are and
will be for business,
4
<PAGE>
commercial, investment or other similar purpose and not primarily for personal,
family, household or agricultural use, as such terms are used in Chapter One.
19. WAIVER OF JURY TRIAL. THE BORROWER AND THE LENDER HEREBY IRREVOCABLY
WAIVE THE RIGHT TO TRAIL BY JURY WITH RESPECT TO ANY AND ALL ACTIONS OR
PROCEEDINGS AT ANY TIME IN WHICH THE BORROWER AND LENDER ARE PARTIES ARISING OUT
OF THIS AMENDMENT, THE LOAN AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
20. LIEN CONTINUATION; MISCELLANEOUS. Borrowers and Lender hereby
acknowledge, confirm and agree that the Security Documents secure and shall
continue to secure the obligations of Borrowers and any other party to any of
the Loan Documents (other than Lender) under the Loan Documents, including,
without limitation, this Amendment, the Notes, the Letter of Credit Liabilities
and the Security Documents are hereby deemed modified to the extent necessary to
evidence the foregoing acknowledgments, agreements and confirmations. Nothing
contained in this Amendment or the Notes or any other document, instrument or
other writing executed in connection with this Amendment shall be construed as a
release or impairment of any of the liens, assignments and security interests
created or granted pursuant to the Security Documents and such liens,
assignments and security interests are hereby ratified and confirmed. The Liens
are not waived. To the extent of any conflict between the Loan Agreement or any
of the other Loan Documents (or any earlier modification of any of them) and
this Amendment, this Amendment shall control. Except as hereby expressly
modified, all terms of the Loan Agreement and the other Loan Documents (as any
of them may have been previously modified by any written agreement) remain in
full force and effect. This Amendment (a) shall bind and benefit Borrowers and,
except as herein expressly limited, Lender, and their respective receivers,
trustees, successors and assigns (PROVIDED, that no Borrower may assign its
rights hereunder without the prior written consent of Lender); (b) may be
modified or amended only by a writing signed by each party; (c) SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE APPLICABLE LAWS OF THE STATE OF
TEXAS AND THE UNITED STATES OF AMERICA FROM TIME TO TIME IN EFFECT; (d) may be
executed in several counterparts, and by the parties hereto in separate
counterparts, and each counterpart, when executed and delivered, shall
constitute an original agreement enforceable against all who signed it without
production of or accounting for any other counterpart, and all separate
counterparts shall constitute the same agreement and (e) embodies the entire
agreement and understanding between the parties with respect to modifications of
instruments provided for herein and supersedes all prior conflicting or
inconsistent agreements, consents and understandings relating to such subject
matter. Each Borrower acknowledges and agrees that there are no oral agreements
among any of them with respect to the transactions contemplated by the Loan
Documents which have not been incorporated in this Amendment or in the Loan
Documents. If any provision of this Amendment should be determined by any court
of competent jurisdiction to be illegal, invalid or unenforceable under present
or future laws, the legality, validity and enforceability of the remaining
provisions of this Amendment shall not be affected thereby. Each waiver in this
Amendment is subject to the overriding and controlling
5
<PAGE>
rule that it shall be effective only if and to the extent that (a) it is not
prohibited by applicable law and (b) applicable law neither provides for nor
allows any material sanctions to be imposed against Lender for having bargained
for and obtained it. Wherever the term "including" or a similar term is used in
this Amendment, it shall be read as if it were "including by way of example only
and without in any way limiting the generality of the clause or concept referred
to." Any exhibits, appendices and annexes described in this Amendment as being
attached to it are hereby incorporated into it. The headings in this Amendment
shall be accorded no significance in interpreting it. EACH BORROWER HEREBY
RELEASES, DISCHARGES AND ACQUITS FOREVER LENDER AND ITS OFFICERS, DIRECTORS,
TRUSTEES, AGENTS, EMPLOYEES AND COUNSEL (IN EACH CASE, PAST, PRESENT AND FUTURE)
FROM ANY AND ALL CLAIMS EXISTING AS OF THE DATE HEREOF (OR THE DATE OF ACTUAL
EXECUTION HEREOF BY THE APPLICABLE PERSON OR ENTITY, IF LATER). AS USED HEREIN,
THE TERM "CLAIM" SHALL MEAN ANY AND ALL LIABILITIES, CLAIMS, DEFENSES, DEMANDS,
ACTIONS, CAUSES OF ACTION, JUDGMENTS, DEFICIENCIES, INTEREST, LIENS, COSTS OR
EXPENSES (INCLUDING BUT NOT LIMITED TO COURT COSTS, PENALTIES, ATTORNEYS' FEES
AND DISBURSEMENTS, AND AMOUNTS PAID IN SETTLEMENT) OF ANY KIND AND CHARACTER
WHATSOEVER, INCLUDING BUT NOT LIMITED TO CLAIMS FOR USURY, BREACH OF CONTRACT,
BREACH OF COMMITMENT, NEGLIGENT MISREPRESENTATION OR FAILURE TO ACT IN GOOD
FAITH, IN EACH CASE WHETHER NOW KNOWN OR UNKNOWN, SUSPECTED OR UNSUSPECTED,
ASSERTED OR UNASSERTED OR PRIMARY OR CONTINGENT, AND WHETHER ARISING OUT OF
WRITTEN DOCUMENTS, UNWRITTEN UNDERTAKINGS, COURSE OF CONDUCT, TORT, VIOLATIONS
OF LAWS OR REGULATIONS OR OTHERWISE. TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, EACH BORROWER HEREBY WAIVES ALL RIGHTS, REMEDIES, CLAIMS AND
DEFENSES BASED UPON OR RELATED TO SECTIONS 51.003, 51.004 AND 51.005 OF THE
TEXAS PROPERTY CODE, TO THE EXTENT THE SAME PERTAIN OR MAY PERTAIN TO ANY
ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS.
NOTICE PURSUANT TO TEX. BUS. & COMM. CODE SS.26.02
THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS EXECUTED BY ANY OF THE PARTIES
BEFORE OR SUBSTANTIALLY CONTEMPORANEOUSLY WITH THE EXECUTION HEREOF
TOGETHER CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
6
<PAGE>
EXECUTED effective as of the date first set forth above.
LASERMEDICS, INC., a Texas corporation
By: /s/ CHIKE J. OGBOENYIYA
Name: Chike J. Ogboenyiya
Title: Vice President
COMERICA BANK-TEXAS, a Texas banking
corporation
By: /s/ JAMES R. McNUTT
Name: James R. McNutt
Title: Vice President
Attachments:
7
<PAGE>
COMPLIANCE CERTIFICATE
The undersigned hereby certifies that [he] [she] is the ______________
______________________________ of Lasermedics, Inc. ("BORROWER"), and that as
such is authorized to execute this certificate on behalf of the above-named
Borrower pursuant to the Loan Agreement (the "LOAN AGREEMENT") dated as of ,
1996 by and between the Borrower and Comerica Bank - Texas (the "BANK"); and
that a review of the Borrower has been made under [his] [her] supervision with a
view to determining whether the Borrower has fulfilled all of its obligations
under the Loan Agreement and the other Loan Documents; and on behalf of the
above-named Borrower further certifies, represents and warrants as follows (each
capitalized term used herein having the same meaning given to it in the Loan
Agreement unless otherwise specified):
(a) the Borrower has fulfilled its respective obligations under the Loan
Documents.
(b) The representations and warranties made in each Loan Document are true
and correct in all respects on and as of the time of delivery hereof, with the
same force and effect as if made on and as of the time of delivery hereof.
(c) The financial statements delivered to the Bank concurrently with this
Compliance Certificate have been prepared in accordance with GAAP consistently
followed throughout the period indicated and fairly present in all material
respects the financial condition and results of operations of the applicable
Persons as at the end of, and for, the period indicated.
(d) No Default has occurred and is continuing. In this regard, the
compliance with the provisions of SECTIONS 6.5, 6.6, 6.7, 6.8, 6.9, 6.10, 6.11,
and 7.1 of the Loan Agreement is as follows:
SECTION 6.5 -- EFFECTIVE TANGIBLE NET WORTH
actual Effective Tangible Net Worth for the Borrower (on a consolidated
basis) as of the date hereof:
$___________________
EXHIBIT G
EXHIBIT A TO FIRST AMENDMENT TO LOAN AGREEMENT
PAGE 1 OF 4 PAGES
<PAGE>
required Tangible Net Worth for the Borrower (on a consolidated basis) as
of the date hereof:
$___________________
SECTION 6.6 -- LEVERAGE RATIO
actual Debt LESS the Debt evidenced by the Subordinated Debt Documents to
Effective Tangible Net Worth for the Borrower (on a consolidated basis) as
of the date hereof:
__.____ : 1.00
required Debt LESS the Debt evidenced by the Subordinated Debt Documents
to Effective Tangible Net Worth Ratio for the Borrower (on a consolidated
basis) as of the date hereof:
1.25 : 1.00
SECTION 6.7 -- [INTENTIONALLY DELETED]
SECTION 6.8 -- FIXED CHARGE COVERAGE RATIO
actual Fixed Charge Coverage Ratio for the Borrower as of the date hereof:
__.____ : 1.00
required Fixed Charge Coverage Ratio for the Borrower (on a consolidated
basis) as of the date hereof:
__.____ : 1.00
SECTION 6.9 -- [INTENTIONALLY DELETED]
EXHIBIT G
EXHIBIT A TO FIRST AMENDMENT TO LOAN AGREEMENT
PAGE 2 OF 4 PAGES
<PAGE>
SECTION 6.10 -- [INTENTIONALLY DELETED]
SECTION 6.11 -- CURRENT RATIO
actual ratio of (a) Current Assets to (b) Current Liabilities (inclusive
of outstanding Revolving Loans) as of the date hereof:
__.____ to 1.00
required ratio of (a) Current Assets to (b) Current Liabilities (inclusive
of outstanding Revolving Loans) as of the date hereof:
2.00 to 1.00
SECTION 7.1 -- CAPITAL EXPENDITURES
actual Capital Expenditures on a consolidated basis during the most
recently ended fiscal year of the Borrower as of the date hereof:
$_______________
maximum permitted Capital Expenditures on a consolidated basis for the
most recently ended fiscal year of the Borrower as of the date hereof:
$500,000
SECTION 7.1 -- FDA EXPENDITURES
actual FDA Expenditures on a consolidated basis during the most recently
ended fiscal year of the Borrower as of the date hereof:
$________________
maximum permitted FDA Expenditures on a consolidated basis for the most
recently ended fiscal year of the Borrower as of the date hereof:
$200,000
EXHIBIT G
EXHIBIT A TO FIRST AMENDMENT TO LOAN AGREEMENT
PAGE 3 OF 4 PAGES
<PAGE>
DATED as of ________________________________.
[ADD SIGNATURE LINE FOR
INDIVIDUAL EXECUTING
CERTIFICATE]
EXHIBIT G
EXHIBIT A TO FIRST AMENDMENT TO LOAN AGREEMENT
PAGE 4 OF 4 PAGES
EXHIBIT 10.6
INDEMNIFICATION AGREEMENT
This Indemnification Agreement, made and entered into this ____ day of
___________, 1996 ("Agreement"), by and between Lasermedics, Inc., a Texas
corporation ("Company"), and __________________("Indemnitee"):
WHEREAS, highly competent persons are becoming more reluctant to serve
publicly-held corporations as directors or in other capacities unless they are
provided with adequate protection through insurance or adequate indemnification
against inordinate risks of claims and actions against them arising out of their
service to and activities on behalf of the corporation; and
WHEREAS, the current impracticability of obtaining adequate insurance and
the uncertainties relating to indemnification have increased the difficulty of
attracting and retaining such persons;
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that the inability to attract and retain such persons is detrimental
to the best interests of the Company's stockholders and that the Company should
act to assure such persons that there will be increased certainty of such
protection in the future; and
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the
Company free from undue concern that they will not be so indemnified;
WHEREAS, Indemnitee is willing to serve, continue to serve and to take on
additional service for or on behalf of the Company on the condition that he be
so indemnified; and
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
SECTION 1. SERVICES BY INDEMNITEE. Indemnitee agrees to serve as
_______________ of the Company. Indemnitee may at any time and for any reason
resign from such position (subject to any other contractual obligation or any
obligation imposed by operation of law), in which event the Company shall have
no obligation under this Agreement to continue Indemnitee in any such position.
SECTION 2. INDEMNIFICATION - GENERAL. The Company shall indemnify, and
advance Expenses (as hereinafter defined), to Indemnitee as provided in this
Agreement and to the fullest extent permitted by applicable law in effect on the
date hereof and to such greater extent as applicable law may thereafter from
time to time permit. The rights of Indemnitee provided under
1
<PAGE>
the preceding sentence shall include, but shall not be limited to, the rights
set forth in the other Sections of this Agreement.
SECTION 3. PROCEEDINGS OTHER THAN PROCEEDINGS BY OR IN THE RIGHT OF THE
COMPANY. Indemnitee shall be entitled to the rights of indemnification provided
in this Section 3 if, by reason of his Corporate Status (as hereinafter defined)
or by reason of anything done or not done by Indemnitee in any such capacity, he
is, or is threatened to be made, a party to any threatened, pending, or
completed Proceeding (as hereinafter defined), other than a Proceeding by or in
the right of the Company. Pursuant to this Section 3, Indemnitee shall be
indemnified against Expenses, judgments, penalties, fines and amounts paid in
settlement actually and reasonably incurred by him or on his behalf in
connection with such Proceeding or any claim, issue or matter therein, 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 Company, and, with respect to any criminal
Proceeding, had no reasonable cause to believe his conduct was unlawful.
SECTION 4. PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. Indemnitee shall
be entitled to the rights of indemnification provided in this Section 4 if, by
reason of his Corporate Status, he is, or is threatened to be made, a party to
any threatened, pending or completed Proceeding brought by or in the right of
the Company to procure a judgment in its favor. Pursuant to this Section,
Indemnitee shall be indemnified to the full extent of the law against Expenses
actually and reasonably incurred by him or on his behalf in connection with such
Proceeding 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 Company. Notwithstanding the
foregoing, no indemnification against such Expenses shall be made in respect of
any claim, issue or matter in such Proceeding as to which Indemnitee shall have
been adjudged to be liable to the Company if applicable law prohibits such
indemnification; provided, however, that, if applicable law so permits,
indemnification against Expenses shall nevertheless be made by the Company in
such event if and only to the extent that the Courts of the State of Texas, or
the court in which such Proceeding shall have been brought or is pending, shall
determine.
SECTION 5. INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS WHOLLY OR PARTLY
SUCCESSFUL. Notwithstanding any other provision of this Agreement, to the extent
that Indemnitee is, by reason of his Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified against all Expenses actually and reasonably incurred by him or on
his behalf in connection therewith. If Indemnitee is not wholly successful in
such Proceeding but is successful, on the merits or otherwise, as to one or more
but less than all claims, issues or matters in such Proceeding, the Company
shall indemnify Indemnitee against all Expenses actually and reasonably incurred
by him or on his behalf in connection with each successfully resolved claim,
issue or matter. For purposes of this Section and without limitation, the
termination of any claim, issue or matter in such a Proceeding by dismissal,
with or without prejudice, shall be deemed to be a successful result as to such
claim, issue or matter.
2
<PAGE>
SECTION 6. INDEMNIFICATION FOR EXPENSES OF A WITNESS. Notwithstanding any
other provision of this Agreement, to the extent that Indemnitee is, by reason
of his Corporate Status, a witness in any Proceeding, he shall be indemnified
against all Expenses actually and reasonably incurred by him or on his behalf in
connection therewith.
SECTION 7. ADVANCEMENT OF EXPENSES. The Company shall advance all
reasonable Expenses incurred by or on behalf of Indemnitee in connection with
any Proceeding within twenty days after the receipt by the Company of a
statement or statements from Indemnitee requesting such advance or advances from
time to time, whether prior to or after final disposition of such Proceeding.
Such statement or statements shall reasonably evidence the Expenses incurred by
Indemnitee and shall include or be preceded or accompanied by an undertaking by
or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately
be determined that Indemnitee is not entitled to be indemnified against such
Expenses; provided, however, that Indemnitee shall not be required to reimburse
Company for any advancement of Expenses until a final judicial determination is
made as to which all rights of appeal have been exhausted or lapsed.
SECTION 8. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION.
(a) To obtain indemnification under this Agreement, Indemnitee shall
submit to the Company a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. The Secretary of the Company shall, promptly upon
receipt of such a request for indemnification, advise the Board of Directors in
writing that Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for indemnification pursuant
to the first sentence of Section 8(a) hereof, a determination, if required by
applicable law, with respect to Indemnitee's entitlement thereto shall be made
in the specific case: (i) if a Change in Control (as hereinafter defined) shall
have occurred, by Independent Counsel (as hereinafter defined) (unless
Indemnitee shall request that such determination be made by the Board of
Directors or the stockholders, in which case by the person or persons or in the
manner provided for in clauses (ii) or (iii) of this Section 8(b) in a written
opinion to the Board of Directors, a copy of which shall be delivered to
Indemnitee); (ii) if a Change of Control shall not have occurred, (A) by the
Board of Directors by a majority vote of a quorum consisting of Disinterested
Directors (as hereinafter defined), or (B) if a quorum of the Board of Directors
consisting of Disinterested Directors is not obtainable or, even if obtainable,
such quorum of Disinterested Directors so directs, by Independent Counsel in a
written opinion to the Board of Directors, a copy of which shall be delivered to
Indemnitee or (C) if so directed by the Board of Directors, by the stockholders
of the Company; or (iii) as provided in Section 9(b) of this Agreement; and, if
it is so determined that Indemnitee is entitled to Indemnification, payment to
Indemnitee shall be made within ten (10) days after such determination.
Indemnitee shall cooperate with the person, persons or entity making such
determination with respect to Indemnitee's entitlement to indemnification,
including providing to such person, persons or entity upon reasonable advance
request any documentation
3
<PAGE>
or information which is not privileged or otherwise protected from disclosure
and which is reasonably available to Indemnitee and reasonably necessary to such
determination. Any costs or expenses (including attorneys, fees and
disbursements) incurred by Indemnitee in so cooperating with the person, persons
or entity making such determination shall be borne by the Company (irrespective
of the determination as to Indemnitee's entitlement to indemnification) and the
Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
(c) In the event the determination of entitlement to indemnification
is to be made by Independent Counsel pursuant to Section 8(b) hereof, the
Independent Counsel shall be selected as provided in this Section 8(c). If a
Change of Control shall not have occurred, the Independent Counsel shall be
selected by the Board of Directors, and the Company shall give written notice to
Indemnitee advising him of the identity of the Independent Counsel so selected.
If a Change of Control shall have occurred, the Independent Counsel shall be
selected by Indemnitee (unless Indemnitee shall request that such selection be
made by the Board of Directors, in which event the preceding sentence shall
apply), and Indemnitee shall give written notice to the Company advising it of
the identity of the Independent Counsel so selected. In either event, Indemnitee
or the Company, as the case may be, any, within 7 days after such written notice
of selection shall have been given, deliver to the Company or to Indemnitee, as
the case may be, a written objection to such selection. Such objection may be
asserted only on the ground that the Independent Counsel so selected does not
meet the requirements of "Independent Counsel" as defined in Section 17 of this
Agreement, and the objection shall set forth with particularity the factual
basis of such assertion. If such written objection is made, the Independent
Counsel so selected may not serve as Independent Counsel unless and until a
court has determined that such objection is without merit. If, within 20 days
after submission by Indemnitee of a written request for indemnification pursuant
to Section 8(a) hereof, no Independent Counsel shall have been selected without
objection, either the Company or Indemnitee may petition the courts of the State
of Texas or other court of competent jurisdiction for resolution of any
objection which shall have been made by the Company or Indemnitee to the other's
selection of Independent Counsel and/or for the appointment as Independent
Counsel of a person selected by the Court or by such other person as the Court
shall designate, and the person with respect to whom an objection is so resolved
or the person so appointed shall act as Independent Counsel under Section 8(b)
hereof. The Company shall pay any and all reasonable fees and expenses of
Independent Counsel incurred by such Independent Counsel in connection with
acting pursuant to Section 8(b) hereof, and the Company shall pay all reasonable
fees and expenses incident to the procedures of this Section 8(c), regardless of
the manner in which such Independent Counsel was selected or appointed. Upon the
due commencement of any judicial proceeding or arbitration pursuant to Section
10(a)(iii) of this Agreement, Independent Counsel shall be discharged and
relieved of any further responsibility in such capacity (subject to the
applicable standards of professional conduct then prevailing).
SECTION 9. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS.
(a) In making a determination with respect to entitlement to
indemnification hereunder, the person or persons or entity making such
determination shall presume that
4
<PAGE>
Indemnitee is entitled to indemnification under this Agreement if Indemnitee has
submitted a request for indemnification in accordance with Section 8(a) of this
Agreement, and the Company shall have the burden of proof to overcome that
presumption in connection with the making by any person, persons or entity of
any determination contrary to that presumption.
(b) If the person, persons or entity empowered or selected under
Section 8 of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made a determination within 60 days after receipt
by the Company of the request therefor, the requisite determination of
entitlement to indemnification shall be deemed to have been made and Indemnitee
shall be entitled to such indemnification, absent (i) a misstatement by
Indemnitee of a material fact, or an omission of a material fact necessary to
make Indemnitee's statement not materially misleading, in connection with the
request for indemnification, or (ii) a prohibition of such indemnification under
applicable law; PROVIDED, HOWEVER, that such 60-day period may be extended for a
reasonable time, not to exceed an additional 30 days, if the person, persons or
entity making the determination with respect to entitlement to indemnification
in good faith requires such additional time for the obtaining or evaluating of
documentation and/or information relating thereto; and PROVIDED, FURTHER, that
the foregoing provisions of this Section 9(b) shall not apply (i) if the
determination of entitlement to indemnification is to be made by the
stockholders pursuant to Section 8(b) of this Agreement and if (A) within 15
days after receipt by the Company of the request for such determination the
Board of Directors has resolved to submit such determination to the stockholders
for their consideration at an annual meeting thereof to be held within 75 days
after such receipt and such determination is made thereat, or (B) a special
meeting of stockholders is called within 15 days after such receipt for the
purpose of making such determination, such meeting is held for such purpose
within 60 days after having been so called and such determination is made
thereat, or (ii) if the determination of entitlement to indemnification is to be
made by Independent Counsel pursuant to Section 8(b) of this Agreement.
(c) The termination of any Proceeding or of any claim, issue or
matter therein, by judgment, order, settlement or conviction, or upon a plea of
NOLO CONTENDERE or its equivalent, shall not (except as otherwise expressly
provided in this Agreement) of itself adversely affect the right of Indemnitee
to indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that his conduct was unlawful.
SECTION 10. REMEDIES OF INDEMNITEE.
(a) In the event that (i) a determination is made pursuant to
Section 8 of this Agreement that Indemnitee is not entitled to indemnification
under this Agreement, (ii) advancement of Expenses is not timely made pursuant
to Section 7 of this Agreement, (iii) the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section 8(b) of
this Agreement and such determination shall not have been made and delivered in
a written opinion within 90 days after receipt by the Company of the request for
5
<PAGE>
indemnification, or (iv) payment of indemnification is not made pursuant to
Section 6 of this Agreement within ten (10) days after receipt by the Company of
a written request therefor, or (v) payment of indemnification is not made within
ten (10) days after a determination has been made that Indemnitee is entitled to
indemnification or such determination is deemed to have been made pursuant to
Sections 8 or 9 of this Agreement, Indemnitee shall be entitled to an
adjudication in an appropriate court of the State of Texas, or in any other
court of competent jurisdiction, of his entitlement to such indemnification or
advancement of Expenses, and Company hereby consents to service of process and
to appear in any such proceeding. Alternatively, Indemnitee, at his option, may
seek an award in arbitration to be conducted by a single arbitrator pursuant to
the rules of the American Arbitration Association. Indemnitee shall commence
such proceeding seeking an adjudication or an award in arbitration within 180
days following the date on which Indemnitee first has the right to commence such
proceeding pursuant to this Section 10(a); provided, however, that the foregoing
clause shall not apply in respect of a proceeding brought by an Indemnitee to
enforce his rights under Section 5 of the Agreement.
(b) In the event that a determination shall have been made pursuant
to Section 8 of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to
this Section 10 shall be conducted in all respects as a DE NOVO trial, or
arbitration, on the merits and Indemnitee shall not be prejudiced by reason of
that adverse determination. In any judicial proceeding or arbitration commenced
pursuant to this Section 10, the Company shall have the burden of proving that
Indemnitee is not entitled to indemnification or advancement of Expenses, as the
case may be.
(c) If a determination shall have been made or deemed to have been
made pursuant to Section 8 or 9 of this Agreement that Indemnitee is entitled to
indemnification, the Company shall be bound by such determination in any
judicial proceeding or arbitration commenced pursuant to this Section 10, absent
(i) a misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii) a
prohibition of such indemnification under applicable law.
(d) The Company shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 10 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all the provisions of this Agreement.
(e) In the event that Indemnitee, pursuant to this Section 10, seeks
a judicial adjudication of or an award in arbitration to enforce his rights
under, or to recover damages for breach of, this Agreement, Indemnitee shall be
entitled to recover from the Company, and shall be indemnified by the Company
against, any and all expenses (of the types described in the definition of
Expenses in Section 17 of this Agreement) actually and reasonably incurred by
him in such judicial adjudication or arbitration, but only if he prevails
therein. If it shall be determined in said judicial adjudication or arbitration
that Indemnitee is entitled to receive part
6
<PAGE>
but not all of the indemnification or advancement of expenses sought, the
expenses incurred by Indemnitee in connection with such judicial adjudication or
arbitration shall be appropriately prorated.
SECTION 11. NON-EXCLUSIVITY; INSURANCE; SUBROGATION.
(a) The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, the Certificate of Incorporation, the By-Laws, any agreement, a vote of
stockholders or a resolution of directors, or otherwise. No amendment,
alteration or repeal of this Agreement or any provision hereof shall be
effective as to any Indemnitee with respect to any action taken or omitted by
such Indemnitee in his Corporate Status prior to such amendment, alteration or
repeal.
(b) To the extent that the Company maintains an insurance policy or
policies providing liability insurance for directors, officers, employees,
agents or fiduciaries of the Company or of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, which such
person serves at the request of the Company, Indemnitee shall be covered by such
policy or policies in accordance with its or their terms to the maximum extent
of the coverage available for any such director, officer, employee or agent
under such policy or policies.
(c) In the event of any payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Company to bring suit to enforce such rights.
(d) The Company shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if and to the extent that
Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.
SECTION 12. BINDING EFFECT; SURVIVAL OF RIGHTS. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties and
their respective successors, assigns (including any direct or indirect
successors by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the Company), spouses, heirs,
executors, administrators, and personal and legal representatives. The Company
shall require and cause any successor (whether direct or indirect by purchase,
merger, consolidation or otherwise) to all, substantially all or a substantial
part, of the business and/or assets of the Company, by written agreement in form
and substance satisfactory to the Indemnitee, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform if no such succession had taken place.
7
<PAGE>
This Agreement shall continue in effect regardless of whether Indemnitee
continues to serve as an officer or director of the Company or of any other
enterprise at the Company's request.
SECTION 13. LIMITATIONS PERIOD. No legal action shall be brought and no
cause of action shall be asserted by or in the right of the Company or any
affiliate of the Company against Indemnitee, Indemnitee's spouse, heirs,
executors or personal or legal representatives after the expiration of two years
from the date of accrual of such cause of action, and any claim or cause of
action of the Company or its affiliate shall be extinguished and deemed released
unless asserted by the timely filing of a legal action within such two year
period; provided, however, that if any shorter period of limitations is
otherwise applicable to any such cause of action such shorter period shall
govern.
SECTION 14. SEVERABILITY. If any provision of this Agreement shall be held
to be invalid, illegal or unenforceable for any reason whatsoever; (a) the
validity, legality and enforceability of the remaining provisions of this
Agreement (including without limitation, each portion of any Section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby; and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, each
portion or any Section of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that is not itself invalid, illegal or
unenforceable.
SECTION 15. EXCEPTION TO RIGHT OF INDEMNIFICATION OR ADVANCEMENT OF
EXPENSES. Notwithstanding any other provision of this Agreement, Indemnitee
shall not be entitled to indemnification or advancement of Expenses under this
Agreement with respect to any Proceeding, or any claim therein, brought or made
by him against the Company or the Individual Indemnitors, unless the Company has
joined in or consented to the initiation of such Proceeding.
SECTION 16. 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 one and the same Agreement.
Only one such counterpart signed by the party against whom enforceability is
sought needs to be produced to evidence the existence of this Agreement.
SECTION 17. HEADINGS. The headings of the paragraphs of this Agreement
are inserted for convenience only and shall not be deemed to constitute part
of this Agreement or to affect the construction thereof.
SECTION 18. DEFINITIONS. For purposes of this Agreement:
(a) "Change in Control" means a change in control of the Company
occurring after the Effective Date of a nature that would be required to be
reported in response to item 6(e)
8
<PAGE>
of Schedule 14A of Regulation 14A (or in response to any similar item on any
similar schedule or form) promulgated under the Securities Exchange Act of 1934
(the "Act"), whether or not the Company is then subject to such reporting
requirement; provided, however, that, without limitation, such a Change in
Control shall be deemed to have occurred if after the Effective Date (i) any
"person" (as such term is used in Section 13(d) and 14(d) of the Act) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Act),
directly or indirectly, of securities of the Company representing 10% or more of
the combined voting power of the Company's then outstanding securities without
the prior approval of at least two-thirds of the members of the Board of
Directors in office immediately prior to such person attaining such percentage
interest; (ii) the Company is a party to a merger, consolidation, sale of assets
or other reorganization, or a proxy contest, as a consequence of which members
of the Board of Directors in office immediately prior to such transaction or
event constitute less than a majority of the Board of Directors thereafter; or
(iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (including for this
purpose any new director whose election or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning of such
period) cease for any reason to constitute at least a majority of the Board of
Directors
(b) "Corporate Status" describes the status of a person who is or
was a director, officer, employee, agent or fiduciary of the Company or of any
other corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise which such person is or was serving at the request of the
Company.
(c) "Disinterested Director' means a director of the Company who is
not and was not a party to the Proceeding in respect of which indemnification is
sought by Indemnitee.
(d) "Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements or expenses of the
types customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, or being or preparing to be a witness in
a Proceeding.
(e) "Independent Counsel" means a law firm, or a member of a law
firm, that is experienced in matters of corporation law and neither presently
is, nor in the past five years has been, retained to represent: (i) the Company
or Indemnitee in any matter material to either such party, or (ii) any other
party to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the Company
or Indemnitee in an action to determine Indemnitee's rights under this
Agreement.
(f) "Proceeding" includes any action, suit, arbitration, alternate
dispute resolution mechanism, investigation, administrative hearing or any other
proceeding whether civil,
9
<PAGE>
criminal, administrative or investigative, except one initiated by an Indemnitee
pursuant to Section 10 of this Agreement to enforce his rights under this
Agreement.
SECTION 19. MODIFICATION AND WAIVER. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provision of this Agreement shall
be deemed or shall constitute a waiver of any other provision hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
SECTION 20. NOTICE BY INDEMNITEE. Indemnitee agrees promptly to notify the
Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding
or matter which may be subject to indemnification or advancement of Expenses
covered hereunder.
SECTION 21. NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if (i) delivered by hand and receipted for by the party to whom said
notice or other communication shall have been directed, or (ii) mailed by
certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed:
(a) If to Indemnitee, to:
-------------------------------------------
-------------------------------------------
-------------------------------------------
(b) If to the Company or the Individual Indemnitors to:
Lasermedics, Inc.
2427 FM 1092
Missouri City, Texas 77459
or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.
SECTION 22. GOVERNING LAW. The parties agree that this Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Texas.
SECTION 23. MISCELLANEOUS. Use of the masculine pronoun shall be deemed to
include usage of the feminine pronoun where appropriate.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
LASERMEDICS, INC.
By:
Title:
Indemnitee
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM BALANCE SHEET, STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 598,421
<SECURITIES> 0
<RECEIVABLES> 4,657,024
<ALLOWANCES> 0
<INVENTORY> 4,736,797
<CURRENT-ASSETS> 10,295,032
<PP&E> 3,442,325
<DEPRECIATION> 0
<TOTAL-ASSETS> 15,052,536
<CURRENT-LIABILITIES> 4,363,540
<BONDS> 0
0
0
<COMMON> 26,950
<OTHER-SE> 1,404,277
<TOTAL-LIABILITY-AND-EQUITY> 15,052,536
<SALES> (8,093,719)
<TOTAL-REVENUES> (8,093,719)
<CGS> (3,755,479)
<TOTAL-COSTS> (3,755,479)
<OTHER-EXPENSES> (4,413,794)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (559,612)
<INCOME-PRETAX> (661,781)
<INCOME-TAX> 0
<INCOME-CONTINUING> (661,781)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (661,781)
<EPS-PRIMARY> (0.36)
<EPS-DILUTED> (0.36)
</TABLE>
