As filed with the Securities and Exchange Commission on November 10, 1997.
Registration No. 333-____________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------
Form S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
--------------------
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware 16-1494566
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
--------------------
15 Link Drive
Binghamton, New York 13904
(607) 722-3800
(Address, including ZIP Code, and Telephone Number, including Area Code, of
Registrant's Principal Executive Offices)
--------------------
Geoffrey T. Burnham
Chief Executive Officer
Semiconductor Laser International Corporation
15 Link Drive
Binghamton, New York 13904
(607) 722-3800
(Name, Address, including ZIP Code, and Telephone Number, including Area Code,
of Agent for Service)
--------------------
WITH A COPY TO:
Walter M. Epstein, Esq.
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, NY 10112
Telephone: (212) 698-7700
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effectiveness of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this form is a post effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
<PAGE>
[COVER PAGE CONTINUED]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=============================================================================================================================
Title of Each Class of Securities Amount To Be Proposed Maximum Proposed Maximum Amount Of
to be Registered Registered Offering Price Aggregate Offering Registration Fee
Per Share(1) Price(1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par 2,805,000 $3.5625 $9,992,812.50 $3,028.13
value(2)(3) ...
=============================================================================================================================
</TABLE>
(1) Estimated pursuant to Rule 457(c) under the Securities Act of 1933 solely
for the purpose of calculating the registration fee based on the average
of the high ($3.625) and low ($3.50) prices as reported on the SmallCap
Market of The Nasdaq Stock Market on November 4, 1997.
(2) Includes (i) 2,000,000 shares of Common Stock, $0.01 par value per share
("Common Stock"), subject to adjustment, of Semiconductor Laser
International Corporation (the "Company") issuable upon conversion of
2,000,000 shares of Series A 8% Convertible Preferred Stock, $0.01 par
value per share ("Series A Preferred Stock"), which number of shares of
Common Stock, for purposes of this Registration Statement, was computed
assuming each share of Series A Preferred Stock is convertible into one
(1) share of Common Stock, (ii) 55,000 shares of Common Stock issuable to
attorneys for the Company as payment for outstanding legal fees of
$96,250, in aggregate, and (iii) 750,000 shares of Common Stock issuable
upon the exercise of warrants to purchase Common Stock issued to a
consultant to the Company. The actual number of shares of Common Stock
issuable upon conversion of the Series A Preferred Stock may be subject to
increase or decrease dependent upon the conversion rate in effect on the
date of conversion. See "Prospectus Summary-Recent Developments-October
1997 Private Placement" and "-Financial Public Relations Agreement,"
"Description of Securities-Series A Preferred Stock" and "-MDC Warrants,"
"Selling Stockholders" and "Legal Matters."
(3) Pursuant to Rule 416 promulgated under the Securities Act of 1933, as
amended, this Registration Statement is intended to include all of the
number of shares of Common Stock issuable upon conversion of the Series A
Preferred Stock which is subject to increase in accordance with the
conversion provisions and other adjustment provisions of the Series A
Preferred Stock, and, accordingly, such indeterminate number of additional
shares of Common Stock is registered hereunder. See "Description of
Capital Stock-Series A Preferred Stock."
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities Exchange Commission, acting pursuant to
said Section 8(a), may determine.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED NOVEMBER 10, 1997
PROSPECTUS
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION
This Prospectus covers an aggregate of 2,805,000 shares of Common Stock
-----------------------
This Prospectus relates to the offering of 2,805,000 shares (the "Shares")
of Common Stock, par value $0.01 per share ("Common Stock"), of Semiconductor
Laser International Corporation (the "Company") which may be offered for sale by
certain stockholders of the Company (the "Selling Stockholders"), consisting of
(i) 2,000,000 Shares, subject to adjustment, issuable upon conversion of
2,000,000 shares of Series A 8% Convertible Preferred Stock, par value $0.01 per
share ("Series A Preferred Stock"), of the Company, (ii) 55,000 Shares issuable
to attorneys for the Company as payment for outstanding legal fees of $96,250,
in aggregate, and (iii) 750,000 Shares issuable upon exercise of warrants (the
"MDC Warrants") to purchase shares of Common Stock issued to a consultant to the
Company. For purposes of this Registration Statement, the number of shares of
Common Stock issuable upon conversion of the 2,000,000 shares of Series A
Preferred Stock has been estimated by assuming each share of Series A Preferred
Stock is convertible into one (1) share of Common Stock. The actual number of
shares of Common Stock issuable upon conversion of the Series A Preferred Stock
may be subject to increase or decrease dependent upon the conversion rate in
effect on the date of conversion. See "Prospectus Summary-Recent
Developments-October 1997 Private Placement" and "-Financial Public Relations
Agreement," "Description of Securities-Series A Preferred Stock" and "-MDC
Warrants," "Selling Stockholders" and "Legal Matters."
The Shares may be sold from time to time by the Selling Stockholders, or
by the transferees of the holders of Common Stock, Series A Preferred Stock and
MDC Warrants. No underwriting arrangements have been entered into by the Selling
Stockholders. The distribution of the Shares of the Selling Stockholders and/or
their transferees may be effected in one or more transactions that may take
place on the over-the-counter market, including ordinary brokers transactions,
privately negotiated transactions or through sales to one or more dealers for
resale of the Shares as principals, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices. The Shares may be sold by the Selling Stockholders either (i) to a
broker or dealer as principal for resale by such broker or dealer for an amount
pursuant to this Prospectus (e.g., in a transaction with a "market maker"); (ii)
in brokerage transactions, including transactions in which the broker solicits
purchasers, or (iii) in privately negotiated transactions pursuant to any
applicable exemption under the Securities Act of 1933, as amended (the
"Securities Act"). Usual and customary or specifically negotiated brokerage fees
or commission may be paid by the Selling Stockholders in connection with such
sales. The Selling Stockholders and intermediaries through whom such Shares are
sold may be deemed "underwriters" within the meaning of the Securities Act, with
respect to the Shares offered. See "Plan of Distribution."
The Common Stock and certain warrants (the "Registered Warrants") to
purchase Common Stock (not including the MDC Warrants) are quoted on the Nasdaq
SmallCap Market under the trading symbols "SLIC" and "SLICW," respectively. On
November 4, 1997, the last reported sale prices of the Common Stock and the
Registered Warrants were $3.625 per share and $1.015625 per Registered Warrant,
respectively.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE PURCHASED
ONLY BY THOSE PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE
"RISK FACTORS" COMMENCING AT PAGE 12 OF THIS PROSPECTUS.
-----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS
THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-----------------------
The date of this Prospectus is __________, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-3 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with the Securities and Exchange Commission (the
"Commission") relating to the Shares offered hereby. This Prospectus does not
contain all the information set forth in the Registration Statement, certain
portions of which have been omitted pursuant to the rules and regulations of the
Commission. Reference is hereby made to the Registration Statement and to the
exhibits relating thereto for further information with respect to the Company
and the securities offered hereby. Any statements contained herein concerning
the provisions of any document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission are not necessarily complete, and in each
instance reference is made to the copy of such document so filed as an exhibit
to, or incorporated by reference into, the Registration Statement. Each
statement shall be qualified in its entirety by such reference.
The Company is subject to the informational requirements of the Securities
Exchange Securities Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith files reports, proxy and information statements and other
information with the Commission. Such reports, proxy and information statements
and other information filed by the Company can be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the following Regional Offices of the
Commission: Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and Seven World Trade Center, 13th Floor, New York, New
York 10048. Copies of such material may be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, registration statements and certain other filings
made electronically with the Commission through its "EDGAR" system are publicly
available through the Commission's site on the Internet's World Wide Web,
located at http://www.sec.gov. This Registration Statement, including all
exhibits thereto, has been filed with the Commission through EDGAR. Reports,
proxy and information statements and other information concerning the Company
can also be inspected at the offices of the National Association of Securities
Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated in this Prospectus by reference:
(a) The Company's Annual Report on Form 10-KSB for the year ended December
31, 1996 (including the Company's amended Annual Report on Form 10-KSB/A for the
year ended December 31, 1996);
(b) The Company's Quarterly Reports on Form 10-QSB for the quarters ended
September 30, 1997, June 30, 1997 and March 31, 1997;
(c) The Company's Proxy Statement with respect to its Annual Meeting of
Shareholders held on June 20, 1997.
In addition, all documents and reports subsequently filed by the Company
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Prospectus and prior to the termination of the offering shall
be deemed to be incorporated by reference herein from their respective dates of
filing. Any statements contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is incorporated or deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will furnish, without charge, to any person to whom a copy of
this Prospectus is delivered, upon such person's written or oral request, a copy
of any and all of the documents that have been incorporated by reference in the
Registration Statement and herein (not including exhibits to such documents,
unless such exhibits are specifically incorporated by reference into such
documents). The Company will also furnish, without charge, to any such person
upon such person's written or oral request, a copy of the Company's most recent
Annual Report to Stockholders. Any such request should be directed to Mr.
Nicholas L. Prioletti, Jr., Semiconductor Laser International Corporation, 15
Link Drive, Binghamton, New York 13904, telephone number (607) 722-3800.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is intended to set forth certain pertinent facts and
highlights from material contained in the body of this Prospectus and the
Company's Report on Form 10-KSB for the fiscal year ended December 31, 1996, as
amended in the Company's Report on Form KSB/A for the year ended December 31,
1996 (the "Form 10-KSB"), the Form 10-QSB for the quarters ended September 30,
1997, June 30, 1997 and March 31, 1997 (collectively, the "Forms 10-QSB"), and
the Company's Proxy Statement with respect to its Annual Meeting of Shareholders
held on June 20, 1997 (the "Proxy Statement"), all of which are incorporated
herein by reference. The summary is qualified in its entirety by reference to
the more detailed information and consolidated financial statements appearing
elsewhere in this Prospectus and Form 10-KSB, Forms 10-QSB and Proxy Statement.
Each prospective investor is urged to read this Prospectus and the Form 10-KSB,
Forms 10-QSBs and Proxy Statement in their entirety. This summary is further
qualified in its entirety by reference to, and should be read in conjunction
with, the detailed information and financial statements, including the notes
thereto, appearing elsewhere in this Prospectus.
THE COMPANY
General
Semiconductor Laser International Corporation (the "Company") is a
Delaware corporation focused on developing, producing and marketing high power
semiconductor diode lasers ("HPDLs") which meet the quality standards of
existing HPDLs at lower cost. In furtherance of such goals, the Company had been
engaged, since its inception in 1993, primarily in developing and improving upon
the use of patented technology (known as Desorption Mass Spectrometric Control
("DMS")) to control and increase the reliability of a commonly known laser
manufacturing process referred to as Molecular Beam Epitaxy ("MBE"). The use of
the DMS technology (exclusively licensed to the Company by the United States Air
Force (the "Air Force") through the year 2004 pursuant to a license agreement
(the "License Agreement")) to control the MBE production of HPDLs not only
offers significant cost advantages over the MBE production of HPDLs without DMS
but, more importantly, also offers significant cost advantages over the
currently prevailing manufacturing process for HPDLs known as Metal Organic
Chemical Vapor Deposition ("MOCVD"). In addition, the Company has been granted
an exclusive worldwide license from Northwestern University relating to aluminum
free HPDLs, which generate greater power and evidence substantially longer life
and greater reliability than existing HPDLs. The Company has capitalized upon
such advantages to produce HPDLs which meet or exceed the quality standards of
existing HPDLs, at lower cost, thereby permitting the Company to reduce the
prices charged for HPDLs and facilitate new market applications for HPDL
products. See "Prospectus Summary-The Company-Strategy."
The Company manufactures its products at a newly constructed,
state-of-the-art, ultra-high technology facility in Broome County, New York
built to the Company's specifications. The site was acquired through a sale and
lease back transaction with the Broome County Industrial Development Agency (the
"Broome County IDA"). The Company currently utilizes 15,000 square feet at such
location and plans to ultimately expand its operations to 60,000 square feet.
The Company was incorporated in New York in September of 1993 and
reincorporated in Delaware in September 1997. See "Prospectus Summary-Recent
Developments-Reincorporation in Delaware."
Industry Background
Lasers produce a beam of radiation in the electromagnetic spectrum which
can be varied in intensity and wavelength depending upon the desired
application. This variable intensity enables high power lasers to be used as
power sources in a broad range of applications, including the materials
processing, fiber optic, telecommunications, printing, medical, dental,
automotive, machining, and optical storage industries. HPDLs are increasingly
replacing traditional technologies, including other types of high power lasers,
in these and other applications, as HPDLs are generally less complex, smaller,
more reliable, more durable and/or more powerful than their predecessor
technologies. As a result, while worldwide sales of HPDLs in 1996 were
approximately $250 million, they are expected to reach in excess of $1 billion
by 2001, according to industry surveys conducted by two separate marketing firms
retained by the Company.
3
<PAGE>
The kind and number of applications that can benefit from utilizing HPDLs
include all applications requiring intense and efficient power, particularly
where reliability, long useful life (without adjustment or replacement of parts)
and, in some applications, smaller size and/or adaptability to fiber optic
coupling are significant. The immense variety and magnitude of these
applications and potential applications is creating an expanding demand for
HPDLs and, if lower prices for HPDLs can be achieved, it is anticipated that new
applications requiring lower priced HPDLs will create significant additional
demand.
There are currently three main types of high power lasers:
Carbon Dioxide Lasers. Carbon dioxide lasers are the oldest form of high
power lasers still in widespread use today. However, they are cumbersome, costly
to purchase and cannot be easily coupled to fiber optics. The principal market
for carbon dioxide lasers is materials processing where the relative power
inefficiency, bulk and waste emitting operating qualities of the carbon dioxide
laser are not significant deterrents to their continued use. The market for new
purchases of carbon dioxide lasers has shrunk dramatically in the last few years
in favor of solid state lasers.
Solid State Lasers. Solid state lasers improve upon many of the
troublesome carbon dioxide laser characteristics by virtue of their higher
efficiency, reduced cost and easy ability to be coupled to fiber optics and
their ability to incorporate HPDLs as a power source. As a result, solid state
lasers have increasingly dominated the medical laser device market and largely
replaced the purchase of new carbon dioxide lasers. Solid state lasers are
increasingly incorporating HPDLs to pump or boost their power output more
efficiently, creating a significant part of the current HPDL market. The
principal drawbacks of solid state lasers are that they have a relatively short
operating life, require frequent maintenance, including adjustments and parts
replacement, require more energy consumption than HPDLs and are otherwise less
efficient than HPDLs.
HPDLs. HPDLs, which have been incorporated increasingly as power sources
in solid state lasers, are starting to replace solid state lasers in certain
applications because of the longer operating life associated with HPDLs and
because HPDLs require little or no maintenance. HPDLs also have a distinct
advantage over solid state lasers in terms of efficiency. HPDLs convert
approximately 80% to 90% of their electrical input into photon energy while
solid state lasers without HPDLs to pump or boost their power output may convert
only about 5% to 10% of their energy input into photon output. This efficiency
explains why HPDLs have increasingly been utilized as a power source to boost a
solid state laser's output and why, when such efficiency is combined with the
HPDLs' other advantages over carbon dioxide lasers and solid state lasers, HPDLs
represent an increasing share of the high power laser markets.
Strategy
The Company competes against the existing MOCVD produced HPDLs by
producing HPDLs which exceed the quality standards of such products and can be
produced at substantially lower costs. The Company believes that its new
manufacturing technology permits it to reduce the prices charged for HPDLs of
superior power and longevity and greater reliability. In order to achieve this
objective, the Company will need to operate at higher production volumes. This
will require sales of large orders. To date, some customers have only purchased
products in smaller test quantities with further potential large orders
dependant upon the performance of such products. The Company is seeking to
attract and produce in larger quantities based upon manufacturing, marketing and
research strategies.
The Company's manufacturing strategy is to take advantage of the advance
in HPDL manufacturing technology made possible through its DMS/MBE process and
through its acquisition of rights relating to aluminum free HPDLs. The Company
controls all stages of HPDL manufacturing, including all aspects of the
processing and-packaging of its HPDL products, at its own manufacturing facility
where it utilizes the full benefit of its research and development efforts to
date. The new state-of-the-art equipment recently acquired by the Company for
its manufacturing facility incorporates the developments and modifications which
the Company had previously made to the DMS/MBE equipment used at the Air Force's
Wright Laboratory pursuant to the Cooperative Research and Development Agreement
(the "Wright CRDA"). The Wright CRDA expired in September 1996. The Company
plans to carry out a program of continuous improvement and expansion of its
manufacturing capabilities through the ongoing purchase of equipment
incorporating further improvements, as developed, and the expansion of its
manufacturing space, as needed, to capitalize on anticipated commercial market
acceptance of its products.
The Company believes that it has established, within the HPDL marketplace,
the credibility of its products, i.e. their comparable quality to those of
current HPDL manufacturers and their substantially lower cost. The Company
believes that once the quality of its
4
<PAGE>
product line and the lower prices charged for its products is fully recognized,
it will be able to achieve significant market penetration. The Company
participates in trade shows and publicizes its improvements in scientific and
trade journals.
The Company engages in ongoing research and development efforts to improve
its manufacturing process and new product development. The Company is also
involved in research and development partnerships with a number of academic
institutions which provide the Company, through their research collaboration,
with access to new technologies, new product applications, quality control
measures, testing equipment, and experienced research personnel.
In September 1996, the Company entered into a license agreement (the
"Northwestern License") with Northwestern University granting the Company
exclusive worldwide rights relating to aluminum free HPDLs under patent rights
of Northwestern University. Under the Northwestern License, an initial licensing
fee was paid along with the issuance of a small number of shares of the Common
Stock. An additional small issuance of shares of the Common Stock is expected to
occur in late 1997. The Northwestern License also provides for royalties on net
sales as well as a share of any payments received by the Company with respect to
sub-license fees. Certain obligations must be met by the Company in order to
maintain the Northwestern License, all of which the Company believes that it
will fully satisfy.
In connection with the Northwestern License, the Company entered into a
consulting agreement with Professor Manijeh Razeghi of the Center for Quantum
Devices at Northwestern University. Professor Razeghi is the inventor of
Northwestern's patented technology. In consideration for her consulting
services, the Company issued 120,000 shares of Common Stock to Professor
Razeghi.
With the benefit of the Northwestern License, the Company is aggressively
completing plans for the manufacture and sale of aluminum free HPDLs. The
significant advantage over existing HPDLs is the ability of aluminum free HPDLs
to generate five times greater power while evidencing substantially longer life
and greater reliability. The Company has received substantial interest in the
aluminum free HPDLs and believes it will offer major competitive advantages to
the aluminum based products of its competitors. The Company has been advised by
another company that it believes that the Northwestern License does not cover
the production of aluminum free HPDLs under manufacturing methods other than
MOCVD. Northwestern University and the Company believe that the patent rights
and the Northwestern License cover a broader range of production methods and
plan to take all steps necessary to protect their interests. The Company
believes that attempts by others to develop equivalent aluminum free technology
will infringe on its exclusive rights, which the Company, in coordination with
Northwestern University, plans to strongly enforce.
Current and Future Markets
The Company has been selling its products to customers for use in a wide
range of applications requested by customers. For a description of existing
products see "Prospectus Summary - Manufacturing and Products." A purchaser of
the Company's products will typically incorporate the products into a particular
device or application developed by such purchaser. Depending upon a customer's
needs, the products purchased from the Company can either be sold in an
unpackaged processed form or in a packaged processed form. In situations where
packaged products are sold, they generally provide the Company with a
substantially higher profit margin.
There are many industries which are currently engaged in product and
design programs for which specialized HPDL's will be essential. The development
of one or more of these areas could greatly increase the demand for the
Company's products. It should be noted that the Company may be required to
expand its operations in order to meet such potential demand and that there can,
however, be no assurance that such increased demand for the Company's products
will occur or that the Company will be able to sufficiently expand its
operations to meet such increased demand.
Manufacturing Facility
Initially, the Company has installed and is operating a single-wafer V-80H
DMS controlled MBE machine at its manufacturing facility, which machine is
capable of producing one three-inch HPDL wafer every 3 to 4 hours. (An HPDL
wafer is the completed crystal structure on which layers of material have been
deposited. The Company's HPDL products are produced from the completed HPDL
wafers.) The Company's manufacturing facility includes all related facilities
and equipment necessary for such production, such as a 4,500 sq. ft. class 1,000
clean room and the tooling and testing equipment for its production processing
line. The Company intends
5
<PAGE>
to expand its facility within the next year, consistent with anticipated sales
levels, and/or purchase additional equipment for its existing facility which
will provide the capability of producing three-inch HPDL wafers and four-inch
HPDL wafers.
As a result of a Sale and Leaseback arrangement, the Company leases from
the Broome County EDA a 60,000 square foot manufacturing site located at 15 Link
Drive, Binghamton, New York. Currently, the Company has utilized 15,000 square
feet of such site. However, after planned construction in 1997 and 1998, the
remainder of the site (approximately 45,000 square feet) will be utilized. The
lease provides for an annual rent of $1.00 per year for a term of 20 years. The
Company is responsible for the payment of abated taxes and governmental
assessments, all utility and other charges incurred, and all payment-in-lieu of
tax charges for the Town of Kirkwood, the County of Broome and the Windsor
Central School District. In consideration of the tax abatement program, the
Company is responsible for creating a certain number of jobs. The Company
believes that this facility is more than adequate for its current and projected
administrative and manufacturing needs.
The MBE equipment acquired by the Company for its new manufacturing
facility incorporates significant improvements developed by the Company in
connection with its prior research and development activities under the Wright
CRDA.
Manufacturing and Products
General
The manufacturing process for the growth of HPDL wafers and the further
manufacturing steps necessary to process and package these wafers into bars,
chips and multi-bar stacked arrays in original equipment manufacturer ("OEM") or
end user ready format is a highly technical process. The general description of
these processes which follows necessarily simplifies the essentials and by its
nature does not include many of the more intricate elements involved in
successfully carrying out the complex growth and manufacture of HPDLs.
Growth
The two principal growth methods which have been developed to manufacture
HPDLs are MOCVD, the process that the Company believes is used by most of its
competitors (including SDL, Inc.), and MBE, the process which the Company is
using. MOCVD has been the prevailing manufacturing process, to date, even though
the yields of acceptable or usable wafers associated with this process (when
compared with the total number of wafers grown) are believed to be as low as
10%. The MBE process has historically had even lower useable wafer yields.
However, by monitoring and controlling the MBE production process with its
licensed DMS technology, the Company has developed what it believes to be a
process capable of producing significantly higher yields of acceptable or usable
wafers (which meet the quality standards of existing MOCVD produced HPDLs) and,
thus, of producing such wafers at a significantly reduced cost per wafer.
The Company's HPDL manufacturing method, the MBE method, is a process of
growing HPDLs by depositing very thin layers of crystalline material on a wafer
substrate, using intense heat in an ultra high vacuum environment maintained
under strict clean room conditions. The process involves vaporizing aluminum,
gallium and arsenic in their metallic (molecular) forms (as opposed to a gaseous
form, such as that used in the MOCVD growth process, which would be subject to
extensive regulation) under intense heat, causing atoms of aluminum, gallium and
arsenic to travel from their sources to the heated wafer. This process results
in the depositing of layers of aluminum, gallium and arsenic on the wafer. The
MBE growth environment utilizes a vacuum at pressures so low that individual
molecules are unlikely to collide with one another; hence, they travel in a
molecular beam. It should be noted that the Company will also be producing
aluminum free wafers under the Northwestern License.
Prior to the development of DMS, the MBE process had limited success in
producing repeatable, high quality wafers that met the precise specifications
necessary for HPDLs. This resulted from an inability to sufficiently control the
growth process on a layer by layer basis. With DMS hardware and software
controls added to MBE, the Company has the ability to produce uniform HPDLs with
significantly higher yields of acceptable or useable wafers.
An additional cost advantage associated with the DMS controlled MBE
process is that while 100% of the wafers produced with MOCVD require testing
(due to the inherent lack of uniformity and reproducibility of the MOCVD process
output), only a 20% sample of the wafers produced with the DMS/MBE process needs
to be tested (due to the inherent uniformity of the MBE output when
6
<PAGE>
DMS is used to control the process). In addition, while an MOCVD wafer growth
production run takes less time than an MBE wafer growth production run, the time
required to load and unload the wafers and to prepare each wafer for growth is
less with the MBE process. As a result, overall production times associated with
the MOCVD and the MBE/DMS growth manufacturing processes are basically
equivalent.
Since the Company acquired the exclusive rights to the aluminum-free
technology from Northwestern University the Company has embarked upon a
development program to ascertain the most cost effective production technique
for this technology. The Company is evaluating MOCVD, gas source MBE and solid
source MBE/DMS. The Company currently has processed a number of aluminum-free
wafers and is encouraged by the preliminary results on this new product line.
See "Prospectus Summary-The Company-Strategy."
Processing
After the growth process is completed and the wafers have been tested (a
complicated process requiring dedicated testing equipment) acceptable wafers are
processed and cut (a process referred to as cleaving) into one centimeter
individual laser bars. Each laser bar contains multiple laser chips or laser
emitters. The actual number varies depending upon the desired power
characteristics of the laser chip or emitter. The surface of the bars is then
given optical facet coatings in order to create the laser beam path that is
formed by the laser mirrors.
Processing is a complex skill requiring specialized training and ability.
Although, once grown (regardless of whether on a single-wafer or a multi-wafer
machine), wafers can be processed in batches, such processing takes expensive
dedicated equipment and generally requires several weeks to complete. The
Company has hired and continues to interview a number of highly skilled
processing engineers and continues to interview candidates for positions in
processing who are thoroughly familiar with all facets of this highly
specialized technical manufacturing process.
Because of the higher uniformity of the wafers grown using the DMS
controlled MBE process, the Company expects to be able to produce as many as 400
laser bars from each three-inch wafer produced on a single-wafer MBE machine.
Thus, from a single wafer, the Company anticipates that it could produce up to
4,000 single laser emitters or chips, based on one industry processing standard
of approximately 10 chips per bar. However, due to the increased handling
involved with the manufacture of single chips, the yields of commercially
acceptable products are substantially lower with such production. In addition,
while certain HPDL customers do buy single chips, such chips generally must each
be individually packaged into user ready format. In addition to packaged chips
and bars, the Company intends to market a portion of its output to customers
wishing to purchase unpackaged laser chips or bars (at lower prices than
packaged products). These unpackaged HPDL products are not currently offered for
sale by most of the Company's principal competitors.
Packaging
The final steps in the production process are the actual assembly and
packaging of the fully processed chips and bars into an OEM or end user ready
format. The Company's packages include a range of products, from single chip
devices, such as the C-Mount, the 9mm package and the TO-18 package, to multiple
chip devices, such as the single-LD bar package and the stacked array package.
Customers' applications and preferences dictate which package is best for their
needs, and adaptations of packages for specific product requirements can be
designed. Wherever appropriate, portions of the packaging process may be
subcontracted by the Company. Each packaging configuration can be utilized for
different applications with the principal differences being the power of the
laser diode device or its output and/or coupling connections. The sizes of the
typical HPDL products are merely a function of industry convention. Thus, the
one centimeter single-laser bar size could be easily modified by the Company or
its competitors to a different size. Various laser chip and bar package
configurations, currently in production and offered for sale, are described
below:
C-Mount
This is a single-chip packaging configuration where a laser diode chip is
mounted on a copper heatsink with a piece of ceramic insulator soldered on. The
C-mount package can be used for diode chips with an output power of up to 2
watts. The end products can be easily incorporated into the customers' OEM
systems.
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9mm Package
This is also a single-chip packaging configuration mounted in a different
manner than that of the C-Mount. The 9mm package incorporates a copper heatsink
to which a cap with a window is added. This is a hermetically sealed package and
can be used in rough industrial environments. Diode chips with up to 1 watt
output power can be mounted on the 9mm packages, and the resulting units are
ready for OEM's to fit into their applications.
TO-18 Package
A single-chip packaging configuration mounted differently than the C-Mount
and 9mm package. The TO-18 package is unique in that it has a base with threads
on it. It is also a hermetically sealed package, and can take laser chips with
output power of up to 1 Watt.
Single-LD Bar Package #1 (LD #1)
This single laser diode bar package is designed to accommodate a
one-centimeter-long 15-Watt laser diode bar. It consists of a copper base plate,
an electrical insulating plate and a copper top plate. The diode laser bar is
mounted P-side down on the copper base plate, and the N-side of the bar is
connected to the copper top plate electrically. This packaged configuration
creates a product that is deliverable to either OEM or commercial end users.
Single-LD Bar Package #2 (LD #2)
This single bar package is similar to LD #1, but with a smaller base
plate. It is designed for laser diode bars with a 10 Watt or less output power.
The packaged laser bar can be deliverable to either OEM or commercial end users.
Single-LD Bar Package #3 (LD #3)
This particular bar package is intended for laser diode bars with an
output power of 20 Watts or more. It is similar to LD # 1 in design except that
it has a thicker base plate. The packaged unit can be deliverable to either OEM
or commercial end users.
Stacked-Array Package
A stacked-array package is a packaging configuration that stacks a number
of single laser diode bars together onto a compact heatsink to increase the
overall power and brightness of the device. The packaged products are
deliverable to either OEM or commercial end users.
Fiber-Coupled Laser Diode Bar Package
This is a packaging configuration that takes one or several single-LD bar
packages and couples the output beam from those diodes into a single fiber or
fiber bundle. The result of the fiber coupling process is much higher output
brightness and more user-friendly beam delivering system.
The office of the Company is at 15 Link Drive, Binghamton, New York 13904,
telephone number: (607) 722-3800.
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RECENT DEVELOPMENTS
October 1997 Private Placement
On October 27, 1997 (the "First Closing"), the Company completed a private
placement (the "Private Placement") of 10 Units (the "Units"), each Unit
consisting of 200,000 shares of Series A Preferred Stock, for an aggregate
purchase price of $3.5 million. Pursuant to the terms of the Private Placement,
one half of the purchase price of each Unit was paid at the First Closing with
the balance payable on or before the second closing (the "Second Closing") which
is scheduled to occur on December 11, 1997. Half of each Unit (100,000 shares of
Series A Preferred Stock) was delivered at the First Closing and the balance of
each Unit will be delivered at the Second Closing. State Street Securities,
Inc., the placement agent for the Units (the "Placement Agent"), will be paid
$525,000 for commissions and expenses of which $262,500 is payable at the First
Closing and $262,500 at the Second Closing. After deducting the Placement
Agent's estimated commissions and expenses of $525,000, in aggregate, the net
proceeds of the Private Placement to the Company are estimated to be $2.975
million. The net proceeds of the Private Placement will be used by the Company
for working capital and general corporate purposes.
The shares of Series A Preferred Stock underlying the Units are
convertible, in whole or in part, at the option of the holder thereof and upon
notice to the Company, into fully paid and nonassessable shares of Common Stock
at the Conversion Rate. The Conversion Rate, subject to certain adjustments,
shall be in the event the conversion date occurs (i) on or prior to December 5,
1997, one (1) share of Common Stock for each share of Series A Preferred Stock
being converted, and (ii) after December 5, 1997, the number of shares of Series
A Preferred Stock equal to the number of shares of Series A Preferred Stock
being converted divided by the average Market Price of the Common Stock for the
five (5) consecutive trading days immediately prior to such conversion date,
multiplied by 70%. The Market Price for any date shall be the closing bid price
of the Common Stock on such date as reported by the National Association of
Securities Dealers' Automated Quotation System (the "Market Price"). Therefore,
the lower the Market Price for the Common Stock, the greater the number of
shares of Common Stock that the converting holder of Series A Preferred Stock
will be able to receive, and the greater consequent dilution to existing
stockholders in the event shares of Series A Preferred Stock are converted after
December 5, 1997. See "Description of Securities-Series A Preferred Stock."
The Company has the right, on or after the date a registration statement
registering the shares of Common Stock issuable upon conversion of the Series A
Preferred Stock is declared effective by the Commission upon thirty (30) days
notice to the holders of the Series A Preferred Stock, to, at its option, cause
the Series A Preferred Stock to be converted into Common Stock at the then
effective Mandatory Conversion Rate. The Mandatory Conversion Rate shall be the
number of shares of Series A Preferred Stock outstanding on the mandatory
conversion date set forth in such notice divided by the average Market Price for
the Common Stock for the five (5) consecutive trading days immediately prior the
mandatory conversion date, multiplied by 70%. See "Description of Capital
Stock-Series A Preferred Stock."
In connection with the Private Placement, the Company agreed to file a
registration statement with the Commission within 15 days after October 27, 1997
(November 11, 1997) in order to register the shares of Common Stock underlying
the Series A Preferred Stock comprising the Units. The Second Closing, scheduled
for December 11, 1997, would be postponed one day for each day of delay in
filing such registration statement beyond November 11, 1997. The shares of
Common Stock underlying the Series A Preferred Stock are included in the
Registration Statment.
The Company has agreed to use its best efforts to have the Registration
Statement declared effective within 100 days following the First Closing. If the
Registration Statement has not been declared effective 100 days after the First
Closing, the Company has agreed to issue to each Unit holder 10,000 shares of
Common Stock for each Unit owned thereby. Thereafter further issuances of Common
Stock on a Unit basis shall be made for each additional thirty days of delay on
the effectiveness of such Registration Statement. The Company is obligated to
keep the Registration Statement effective for at least nine months.
Purchasers shall have no obligation to make payment on the Second Closing
unless a registration statement to register the shares of Common Stock
underlying the Series A Preferred Stock contained in the Units has been filed
with the Commission, and, as of the date of the Second Closing, the Company is a
Reporting Company as defined in the Exchange Act, not late on any of its
filings, listed on the National Association of Securities Dealers Automated
Quotations system, and not the subject of any bankruptcy or receivership
proceeding.
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In the event that a holder of the Series A Preferred Stock fails to pay
the second installment when due, the Company may at its option enforce its legal
rights against such holder and withdraw the shares of Common Stock underlying
the Series A Preferred Stock already purchased by such holder from the
Registration Statement. The Company may, at its option, cancel the right of such
holder to purchase the balance of the Units, and hold such holder responsible
for the damages therefrom. See "Selling Stockholders"
During the twelve (12) month period following the First Closing, the
Company has agreed to grant the Placement Agent a fifteen (15) day right of
first refusal to obtain equity financing on behalf of the Company on the same
terms as are offered by a bona fide third party or third party agent for such
financing. The Company has also granted the Placement Agent the option during
the ninety (90) day period following the Second Closing to have its investors
purchase one (1) million additional shares of Common Stock for an aggregate
purchase price of $1.75 million less commissions and expenses estimated at
$262,500 payable to the Placement Agent.
Financial Public Relations Agreement
The Company has entered into a one year agreement (the "MDC Consulting
Agreement") with Marketing Direct Concepts, Inc. ("MDC") in connection with
services related to the Private Placement and ongoing services of MDC from the
completion thereof. Under the MDC Consulting Agreement, the Company will receive
a range of services including the establishment of contact with a number of
brokers, the preparation of certain reports the establishment of a Web site and
the arrangement of broker teleconferences.
In consideration of the services to be provided by MDC, the Company will
provide MDC or its designees with the following compensation:
(i) A payment of $75,000 on or before November 3, 1997;
(ii) 40,000 shares of non-registered Common Stock on or before the Second
Closing;
(iii) Delivery on October 27, 1997 of 150,000 three year warrants to
purchase Common Stock with exercise prices as follows:
(A) 75,000 at $3.4688;
(B) 25,000 at $4.3438;
(C) 25,000 at $4.8438; and
(D) 25,000 at $5.3438;
(iv) Following the Second Closing, 600,000 warrants at $3.4688
exercisable for three (3) years from the Second Closing; and
(v) A fee of $10,000 per month commencing on November 1, 1997.
The warrants described in (iii) and (iv) above are referred to herein as the
"MDC Warrants". See "Description of Securities-MDC Warrants."
The Shares being offered hereby include those underlying the Series A
Preferred Stock and the MDC Warrants issued by the Company in connection with
the Private Placement as well as 55,000 shares issuable to attorneys for the
Company in payment for outstanding legal fees of $96,250, in aggregate. The
issuance of shares of Common Stock to such attorneys and by reason of
conversions of the Series A Preferred Stock or exercise of MDC Warrants may have
a depressive effect upon the market in that there may not exist sufficient depth
or breadth in the market for the Common Stock to absorb the sale of additional
shares that may come to the marketplace by reason of such issuances, conversions
and exercises. See "Prospectus Summary-Recent Developments-October 1997 Private
Placement" and "-Financial Public Relations Agreement," "Description of
Securities-Series A Preferred Stock" and "-MDC Warrants," "Selling Stockholders"
and "Legal Matters."
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<PAGE>
Reincorporation in Delaware
On September 26, 1997, the Company reincorporated under the laws of the
state of Delaware by merging into its wholly-owned Delaware subsidiary (the
"Merger"). The Company was originally incorporated in New York in September 1993
and received stockholder approval for the Merger prior to the Company's initial
public offering of its Common Stock. The Merger could not be completed until
clearance was received from the New York State Department of Taxation and
Finance, which clearance was granted on September 25, 1997.
THE OFFERING
Common Stock Outstanding Prior to
Offering (as of November 1, 1997) (1) ... 3,570,242 shares
Common Stock Outstanding After the
Offering(1)(2) .......................... 6,375,242 shares
Risk Factors ............................ This offering involves a high degree
of risk. See "Risk Factors."
Use of Proceeds ......................... All of the proceeds of this offering
will be paid to the respective
Selling Stockholders and none of the
proceeds will be received by the
Company. See "Use of Proceeds."
Nasdaq SmallCap Symbol
Common Stock ........................ SLIC
Registered Warrants ................. SLICW
- ----------
(1) Does not include (i) 250,000 shares of Common Stock reserved for issuance
under the Company's 1995 Stock Option Plan (the "Plan"), of which 86,500
shares have been reserved for currently outstanding options, (ii) 107,589
shares issuable upon exercise of options and warrants issued outside of
the Plan to certain executive officers, non-employee directors and
consultants, and (iii) 2,118,000 shares issuable in connection with the
issued and outstanding Registered Warrants.
(2) Includes (i) 2,000,000 shares of Common Stock issuable upon conversion of
2,000,000 shares of Series A Preferred Stock, which number of converted
shares for purposes of the Registration Sstatement, was computed by
assuming that each share of Series A Preferred Stock is convertible into
one (1) share of Common Stock, (ii) 55,000 shares issuable to attorneys
for the Company as payment for outstanding legal fees of $96,250, in
aggregate, and (iii) 750,000 shares of Common Stock issuable upon the
exercise of the MDC Warrant. The actual number of shares of Common Stock
issuable upon conversion of the Series A Preferred Stock may be subject to
increase or decrease dependent upon the conversion rate in effect at the
date of conversion. See "Prospectus Summary-Recent Developments-October
1997 Private Placement" and "-Financial Public Relations Agreement,"
"Description of Securities-Series A Preferred Stock" and "-MDC Warrants,"
"Selling Stockholders" and "Legal Matters."
11
<PAGE>
RISK FACTORS
An investment in the Shares offered hereby involves a high degree of risk.
The following factors, in addition to those discussed elsewhere in this
Prospectus should be considered carefully in evaluating the Company and its
business. An investment in the Shares is suitable only for those investors who
can bear the risk of loss of their entire investment.
Special Note Regarding Forward-Looking Statements and Risk Factors
Certain statements in this Prospectus, including information set forth in
the Company's report to the Commission filed under the Exchange Act which are
incorporated by reference herein, constitute or may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Litigation Reform Act"). The Company desires to avail itself of
certain "safe harbor" provisions of the Litigation Reform Act and is therefore
including this special note to enable the Company to do so. Forward-looking
statements included in this Prospectus or hereafter included in other publicly
available documents filed with the Commission, reports to the Company's
stockholders and other publicly available statements issued or released by the
Company involve known and unknown risks, uncertainties, and other factors which
could cause the Company's actual results, performance (financial or operating)
or achievements to differ from the future results, performance (financial or
operating) achievements expressed or implied by such forward looking statements.
Such future results are based upon management's best estimates based upon
current conditions and the most recent results of operations. These risks
include, but are not limited to, need for additional capital, certain patent and
technology considerations, competition and technological changes, governmental
regulations, dependence upon key personnel and other risks detailed in the
Company's Commission filings, each of which could adversely affect the Company's
business and the accuracy of the forward-looking statements contained herein.
Risk factors and investment considerations which may materially affect the
Company, impact upon any forward looking statements, and which otherwise should
carefully be considered, include the following:
History of Significant Losses; Accumulated Deficit; Shareholders' Deficit;
Anticipated Future Losses. Through March 31, 1997, the Company was classified as
a development-stage company for financial accounting purposes by reason of the
fact it has not generated significant revenues from operations prior to such
date. Since that date, while operating revenues have increased, the Company has
continued to incur significant losses. The Company has incurred operating losses
in each period since its inception, resulting in an accumulated deficit at
September 30, 1997 of $8,509,917 and has continued to incur losses through the
date hereof. It is anticipated that the Company will continue to incur losses
for the immediate future until it is able to generate sales levels sufficient to
support its operations. There can be no assurance that the Company will be able
to achieve profitable operations.
Need for Additional Capital. The proceeds from this offering will not be
sufficient to meet the future capital needs of the Company. The Company intends
to seek additional financing, from financial and banking institutions as well as
further equity financing. In the event that the Company's plans change or its
assumptions change or prove to be inaccurate, the Company could be required to
obtain additional financing sooner than currently anticipated. In connection
with the development of its business, the Company will be required to buy
substantial additional equipment as well as increase the size of its
manufacturing facility and expand its operating personnel. Such expansion will
require substantial additional capital beyond that currently available to the
Company. Such capital will have to be raised from the sale of additional equity
and/or from bank or institutional financing. There can be no assurance the
Company will be able to obtain additional financing including any institutional
financing, when needed, on commercially reasonable terms or at all. Any
inability to obtain additional financing when needed would have a material
adverse effect on the Company, including requiring the Company to curtail its
manufacturing plans and possibly cease its operations. In addition, any
additional equity financing may involve substantial dilution to the Company's
then existing shareholders.
Risk Associated with the Manufacturing Process. Although the Company is
currently engaged in the manufacturing process, the manufacture of HPDLs is a
highly complex and precise process, requiring production in a highly controlled
and clean environment. Even inadvertent or slight changes in the Company's
manufacturing process or use of defective or contaminated materials by the
Company could adversely affect the Company's ability to achieve acceptable
manufacturing yields and product reliability. Furthermore, the Company will have
a limited number of employees dedicated to the operation and maintenance of its
equipment and the loss of any of their services could affect the Company's
ability to effectively operate and service such equipment. There can be no
assurance that the Company will be able to maintain acceptable manufacturing
yields or ship products on time. Product shipment delays or the failure to
achieve acceptable manufacturing yields would have a material adverse effect on
the Company's business and operations. As additional manufacturing capacity is
required, problems may be experienced in establishing such capacity.
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<PAGE>
Competition; Rapid and Fundamental Technological Change. The HPDL market
is highly competitive. Competitors of the Company include SDL, Inc. ("SDL"),
which is believed to have the largest market share (over 38%), based on publicly
available information provided by SDL. Many of the Company's competitors have
substantially greater financial, manufacturing, personnel, technological,
marketing, distribution, operating, administrative and other resources than the
Company and have established reputations for success in the development,
licensing, sale and servicing of their products and technology. In addition, the
Company believes that all current competitors of the Company utilize MOCVD
production methods and can be expected to vigorously assert the claim that the
MOCVD technology is superior to that of the Company's DMS/MBE technology. By
entering the HPDL market, which is dominated by several large companies, and by
using MBE, technology which, without DMS, was not commercially successful, the
Company faces intense competitive pressure and may be unsuccessful even if its
products and manufacturing process are superior to those of its competitors.
Moreover, although the Company believes that current MOCVD methodology will be
vulnerable to competition from the DMS/MBE process, competitors have been
striving to improve yields under the MOCVD process and may, in the future,
develop a means of making such process more cost effective. In addition, certain
companies may be developing technologies or products of which the Company is
unaware, which may be functionally similar, or superior, to some or all of those
being developed by the Company. There can be no assurance that the Company will
be able to compete successfully with these companies or other competitors. As
the market for the Company's products grows, new competitors are likely to
emerge. Additional competition could adversely affect the Company's operations.
Moreover, the HPDL market is characterized by extensive research and rapid
technological change. The development by others of new or improved products,
processes or technologies may make the Company's current or future products
obsolete or less competitive than currently anticipated. Although the Company
intends to devote significant efforts and financial resources to further develop
and enhance its existing products, there can be no assurance that advances in
other or alternative technologies will not make the Company's products obsolete
or less competitive.
Dependence on Third Party Suppliers of Raw Materials and Components. The
Company's proposed products will require high quality raw materials and
components which the Company intends to purchase from others. The Company
believes that numerous suppliers exist for all of the raw materials and
components that it will need and that such items are readily available on
commercially reasonable terms; however, the Company's ability to manufacture its
products will depend upon its ability to establish commercial relationships with
at least some of such suppliers. The Company does not maintain, and does not
intend to maintain, supply agreements with any of its suppliers (intending
instead to purchase needed raw materials and components pursuant to purchase
orders in the ordinary course of business). The Company's production will also
be dependent upon its suppliers satisfying the Company's performance and quality
specifications and dedicating sufficient production capacity to meet the
Company's scheduled delivery, times. There can be no assurance that the Company
will be able to establish any commercial relationships with suppliers or, if it
is able to do so, that such suppliers will be able to satisfy the Company's
scheduled delivery or performance requirements or have sufficient production
capacity to satisfy such requirements during any period of sustained demand.
Failure or delay by the Company's suppliers in supplying the Company with needed
raw materials and components would adversely affect the Company's operating
margins and the Company's ability to manufacture and deliver products on a
timely and competitive basis, which could, in turn, have a material adverse
effect on the Company.
Dependence Upon Exclusive Rights to the DMS Technology and Aluminum Free
Technology; Uncertainty of Intellectual Proprietary Rights; No Assurance of
Enforceability or Significant Competitive Advantage. The Company's rights to the
DMS technology are governed by the Company's License Agreement with the Air
Force. The Company's rights to aluminum free technology are governed by a
Northwestern License. The Company's success and potential competitive advantage
are dependent upon its ability to exploit the technology under both such
agreements and to do so, if possible, on an exclusive basis. Accordingly, the
Company considers patent protection for such DMS technology, and its trade
secrets relating thereto, to be critical to the Company's business prospects.
While both licenses are based on patents received by the Air Force and
Northwestern University, respectively, there can be no assurance, however, that
the patents will not be invalidated, circumvented or challenged. Moreover, no
applications for patent protection in foreign countries have yet been made.
There can also be no assurance that others will not independently develop, or
have not already developed, similar or more advanced technologies than the
Company's technology; that others will not design around or have not already
designed around aspects of the technology and/or the Company's trade secrets
developed therefrom; or that the steps taken by the Company and the Air Force,
to date, will prevent misappropriation of the DMS technology. In addition, to
the extent that consultants, key employees or third parties apply technological
information independently developed by them or others to Company projects,
disputes may arise as to the proprietary rights to such information. The laser
industry is characterized by frequent litigation regarding patent and other
intellectual property rights. Litigation may be necessary in the future to
enforce the intellectual property rights of the Company or to determine the
validity and scope of the proprietary rights of others. There can be no
assurance that the Company will have the financial or other resources necessary
to enforce or defend a patent infringement or proprietary rights violation
action. If the Company's products or proposed products are deemed to infringe
upon the patents or proprietary rights of others, the Company could, under
certain circumstances, become liable for damages which could also have a
material adverse effect on the Company.
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<PAGE>
Potential Product Liability Claims. The products that the Company will
market are intended for use by commercial end users and OEMs in their end
products. Some of the Company's products when and if produced may become
critical components in medical and surgical devices or in printing, data storage
and data transmission and communications systems. The use of HPDLs is regulated
by the Center for Disease and Radiological Health because the misuse or
mishandling of such products could result in injury from exposure to the laser
light emissions. A malfunction of the Company's products in any application
could result in tort lawsuits based on injuries resulting from such
malfunctions, or in contract damages lawsuits resulting from the high costs of
repairing or replacing the Company's HPDLs in applications such as satellites or
fiber cables or due to lost profits for data transmission down time. There can
be no assurance that the Company's warranty disclaimers and liability
limitations and adherence to safety standards will be effective in limiting the
Company's liability for any such damages. Moreover, while the Company maintains
product liability insurance in the amount of $1,000,000 per occurrence with a
$2,000,000 aggregate limit, there can be no assurance that this insurance will
be sufficient to cover potential claims or that adequate levels of coverage will
be available in the future at reasonable cost. A partially insured or a
completely uninsured claim against the Company could have a material adverse
effect on the Company.
Potential Adverse Impact of Environmental Regulations. The Company is, and
will be, subject to a variety of federal, state and local governmental
regulations related to the storage, use, discharge and disposal of toxic,
volatile or otherwise hazardous or regulated chemicals used in its manufacturing
processes. There can be no assurance that changes in environmental regulations
will not impose the need for additional capital equipment or other requirements.
Further, such regulations could restrict expansion of the Company's operations.
Any failure by the Company to obtain required permits for, control the use of,
or adequately restrict the discharge of, hazardous or regulated substances under
present or future regulations could subject the Company to substantial
liability, require costly changes in the Company's manufacturing processes or
facilities, or cause its manufacturing operations to be suspended. Such
liability or suspension of manufacturing operations could have a material
adverse effect on the Company's results of operations or financial condition.
The Company would also be forced to eliminate certain substances from its
manufacturing processes. Failure to obtain adequate replacements could result in
decreased manufacturing yield, impairment of product reliability, inability to
fabricate certain products, and increased manufacturing costs.
Dependence Upon, and Need for, Additional Key Personnel. The success of
the Company will be largely dependent on the abilities and continued personal
efforts of Dr. Geoffrey T. Burnham, its Chairman, President and Chief Executive
Officer whose employment agreement expires in October 1998. Any incapacity or
inability of Dr. Burnham to perform his services would have a material adverse
effect on the Company. Moreover, other than key man life insurance on the life
of Dr. Burnham in the amount of $1 million, the Company does not intend to have
key man life insurance on the lives of its officers or employees. The success of
the Company will also be dependent upon its ability to attract and retain
experienced HPDL production, marketing and manufacturing personnel with the
specific executive skills necessary to assist the Company. The Company faces
competition for personnel from other companies, academic institutions,
government entities and other organizations, many of which have significantly
greater resources than the Company. There can be no assurance that the Company
will be able to attract and retain personnel, and the inability to do so could
have a material adverse affect on the Company.
Litigation. The Company is currently engaged in a dispute with Theodore
Konopelski ("Konopelski"), a former director, employee and officer of the
Company. The dispute involves the termination of Konopelski's employment for
cause. An arbitration proceeding was instituted by Konopelski in Syracuse, New
York challenging his termination under his employment contract. Konopelski is
seeking damages in the aggregate of $500,000. The arbitration is in process and
the Company believes the termination was proper and that no amount should be
awarded to Konopelski. There can be no assurance that the arbitration will be
decided in favor of the Company. The Company is currently engaged in litigation
with a former employee who the Company sought action against relative to a
breach of confidentiality and defamation of character. The former employee has
responded with a counterclaim alleging defamation of character and is seeking
$500,000 in damages. The Company believes the counterclaim is without merit and
is rigorously defending such action. There can, however, be no assurance that
the Company will be successful in defending the counterclaim.
No Dividends. Since its inception, the Company has not paid any dividends
on its Common Stock. The Company intends to retain future earnings, if any, to
finance its business operations and, accordingly, although the Company is not
restricted from doing so by virtue of its Certificate of Incorporation, By-laws
or any agreement, does not anticipate paying any cash dividends on its Common
Stock in the reasonably foreseeable future.
Tax Loss Carryforward. The Company's net operating loss carryforwards
("NOLs") expire in the years 2008 to 2010. Under Section 382 of the Internal
Revenue Code of 1986, as amended, utilization of prior NOLs is limited after an
ownership change, as defined in Section 382, to an annual amount equal to the
value of the loss corporation's outstanding stock immediately before the date of
the ownership change multiplied by the federal long-term exempt tax rate. The
additional equity financing obtained by the Company
14
<PAGE>
since its inception may have resulted in an ownership change and, thus, in a
limitation on the Company's use of its prior NOLs. In the event the Company
achieves profitable operations, any significant limitation on the utilization of
its NOLs would have the effect of increasing the Company's tax liability and
reducing net income and available cash resources.
Impact of Nasdaq Listing on Marketability of Securities. The Common Stock
and Registered Warrants are quoted on the Nasdaq as of the date of this
Prospectus. The National Association of Securities Dealers, Inc. ("NASD") has
rules which establish criteria for the continued listing of securities on
Nasdaq. For continued listing on Nasdaq, a company must maintain at least
$2,000,000 in net tangible assets, $35,000,000 in market capitalization or
$500,000 in net income (in the latest fiscal year or two of the last three
fiscal years), a public float of at least 500,000 shares and a $1,000,000 market
value, at least 300 shareholders, a minimum bid price of $1.00 per share and at
least two market makers. The Company may not be able to maintain the standards
for continued listing in the future and the listed securities could, at such
time, become subject to delisting from Nasdaq. If the shares or warrants are not
listed or are delisted in the future, trading in the securities could be
conducted on the OTC Bulletin Board or in the over-the-counter market in what is
commonly referred to as the "pink sheets." If this occurs, an investor will find
it more difficult to dispose of the securities or to obtain accurate quotations
as to the price of the securities and it could have an adverse effect on the
news coverage of the Company.
Disclosures Relating to Low Priced Stocks; Possible Restriction on Resales
of Low Priced Stocks and on Broker Dealer Sales; Possible Adverse Effect of
Penny Stock Rules on Liquidity of the Company's Securities. If the Company's
securities were delisted from Nasdaq, they may become subject to Rule 15g-9
under the Exchange Act, which imposes additional sales practice requirements on
broker-dealers which sell such securities to persons other than established
customers and accredited investors (generally, individuals with net worths in
excess of $1,000,000 or annual incomes exceeding $200,000 or $300,000 together
with their spouses). For transactions covered by this Rule, a broker-dealer must
make a special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. Consequently, such
Rule may affect the ability of broker-dealers to sell the Company's securities
and may affect the ability of purchasers in this offering to sell any of the
securities acquired hereby in the secondary market.
In addition, if the Company's securities were to become delisted from
trading on Nasdaq and the trading price of the Common Stock was to fall below
$5.00 per share, trading in the Common Stock would also be subject to the
requirements of certain rules promulgated under the Exchange Act, which require
additional disclosure by broker-dealers in connection with any trades involving
a stock defined as a penny stock (generally, any non-Nasdaq equity security that
has a market price (as therein defined) of less than $5.00 per share or an
exercise price of less than $5.00 per share, subject to certain exceptions). For
any transaction by broker-dealers involving a penny stock, unless exempt, the
rules require delivery, prior to a transaction in a penny stock, of a risk
disclosure document relating to the penny stock market. Disclosure is also
required to be made about compensation payable to both the broker-dealer and the
registered representative and current quotations for the securities. Finally,
monthly statements are required to be sent disclosing recent price information
for the penny stock held in the account and information on the limited market in
penny stocks. The additional burdens imposed upon broker-dealers similar to
those enumerated in the preceding paragraph and these requirements may
discourage broker-dealers from effecting transactions in the Company's
securities, which could severely limit the market liquidity of the Company's
securities and the ability of purchasers in this offering to sell the Company's
securities in the secondary market.
Certain Anti-Takeover Provisions. The Board of Directors of the Company
has the authority to issue up to 20,000,000 shares of Preferred Stock and to
determine the price, rights, preferences and privileges of those shares without
any further vote or action by the stockholders. The rights of the holders of
Common Stock will be subject to, and may be adversely affected by, the rights of
the holders of any Preferred Stock that may be issued in the future. The
issuance of shares of Preferred Stock could have the effect of making it more
difficult for a third party to acquire a majority of the outstanding voting
stock of the Company. Other than the issuance of the shares of Series A
Preferred Stock in connection with the Private Placement, the Company has no
present intention to issue additional shares of Preferred Stock. Additionally,
the Company is subject to anti-takeover provisions of Section 203 of the
Delaware General Corporation Law, which will prohibit the Company from engaging
in a "business combination" with an "interested stockholder" for a period of
three years after the date of the transaction in which the person became an
interested stockholder, unless the business combination is approved in a
prescribed manner. The application of Section 203 also could have the effect of
delaying or preventing a change-in-control of the Company. This provision may
also reduce the likelihood of an acquisition of the Company at a premium price
by another person or entity.
15
<PAGE>
USE OF PROCEEDS
The Company will receive no proceeds from any sales of Shares by the
Selling Stockholders.
DESCRIPTION OF SECURITIES
General
The authorized capital stock of the Company consists of 20,000,000 shares
of Common Stock and 5,000,000 shares of $0.01 par value Preferred Stock
("Preferred Stock"), of which 2,000,000 shares have been designated "Series A 8%
Convertible Preferred Stock." As of November 1, 1997, 3,570,242 shares of Common
Stock and 1,000,000 shares of Series A Preferred Stock are issued and
outstanding (1,000,000 additional shares of Series A Preferred Stock have been
subscribed for by certain Selling Stockholders). All of the issued and
outstanding shares of Common Stock and Series A Preferred Stock, are validly
issued, fully paid and non-assessable. See "Selling Stockholders."
Common Stock
Holders of Common Stock are entitled to one vote for each share held of
record on all matters to be voted on by stockholders, including the election of
directors. There is no cumulative voting with respect to the election of
directors, with the result that the holders of more than 50% of the shares
voting for the election of directors can elect all of the directors. Holders of
Common Stock will be entitled to receive dividends when, as and if declared by
the Board of Directors out of funds legally available therefor. In the event of
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share ratably in all assets remaining available for
distribution to them after payment of liabilities. The holders of shares of
Common Stock, as such, have no conversion, preemptive or other subscription
rights, and there are no redemption provisions applicable to the Common Stock.
Preferred Stock
In connection with the Company's reincorporation in Delaware, the Company
included within its Delaware Certificate of Incorporation, a provision
authorizing the Company to issue "blank check" Preferred Stock, from time to
time, in one or more series, upon authorization by the Company's Board of
Directors. The Board of Directors, without further approval of the stockholders,
will be authorized to fix the dividend rights and terms, conversion rights,
voting rights, redemption rights and terms, liquidation preferences, and any
other rights, preferences, privileges and restrictions applicable to each series
of preferred stock. The issuance of Preferred Stock, while providing flexibility
in connection with possible acquisitions and other corporate purposes, could,
among other things, adversely affect the voting power of the holders of the
Common Stock and, under certain circumstances, make it more difficult for a
third party to gain control of the Company, discourage bids for the Common Stock
at a premium or otherwise adversely affect the market price of the Common Stock
and Registered Warrants.
Series A Preferred Stock
The Company filed a Certificate of Designations (the "Certificate") on
October 16, 1997 with the Secretary of State of Delaware designating 2,000,000
shares of Preferred Stock as "Series A 8% Convertible Preferred Stock." The
following is a summary of the rights, preferences and privileges of the Series A
Preferred Stock.
Dividends and Distributions. Subject to the prior and superior rights of
the holders of any shares of any series or class of capital stock ranking prior
and superior to the shares of Series A Preferred Stock with respect to
dividends, the holders of shares of Series A Preferred Stock shall be entitled
to receive, as, when and if declared by the Board of Directors of the Company,
out of assets legally available for that purpose, non-cumulative cash dividends
at the rate of 8% per share per annum payable on each December 5 commencing one
year after December 5, 1997. If dividends are payable for less than one full
year, then dividends shall be calculated pro rata based on a 360 day year. All
dividends or distributions declared upon the Series A Preferred Stock shall be
declared pro rata per share. At the option of the Company, dividends may be paid
in shares of Common Stock. Such shares shall be issued in lieu of cash with such
shares to be valued at the average Market Price for the five (5) consecutive
trading days immediately prior to the applicable December 5 dividend date.
16
<PAGE>
Dividends on Junior Stock. So long as any shares of Series A Preferred
Stock shall be outstanding, no dividend (other than dividends payable in shares
of Common Stock) shall be paid or distribution shall be made on the shares of
Common Stock or on any other class or series of stock ranking junior to the
Series A Preferred Stock as to dividends.
Redemption Provisions. The Series A Preferred Stock shall be redeemable at
the option of the Company on thirty days prior written notice on or after
December 5, 1999 at the face amount thereof.
Liquidation Preference. In the event of any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, after payment or
provision for payment of debts and other liabilities of the Company, and the
liquidation preference of any Preferred Stock ranking senior to the Series A
Preferred Stock, the holders of the Series A Preferred Stock shall be entitled
to receive an amount equal to $1.75, subject to adjustment. After the full
preferential liquidation amount has been paid to, or determined and set apart
for the Series A Preferred Stock and all other series of Preferred Stock
hereafter authorized and issued ranking equally with or junior to the Series A
Preferred Stock, if any, the remaining assets of the Company available for
distribution to stockholders shall be distributed ratably to the holders of the
Common Stock. In the event the assets of the Company available for distribution
to its stockholders are insufficient to pay the full preferential liquidation
amount per share required to be paid the holders of the Series A Preferred
Stock, the entire amount of assets of the Company available for distribution to
stockholders shall be paid up to their respective full liquidation amounts first
to any Preferred Stock ranking senior to the Series A Preferred Stock, then to
the Series A Preferred Stock, and any Preferred Stock ranking equally to the
Series A Preferred Stock then to any other series of Preferred Stock hereafter
authorized and issued, all of which amounts shall be distributed ratably among
holders of each such series of Preferred Stock, and the common stock shall
receive nothing. A reorganization or any other consolidation or merger of the
Company with or into any other corporation, or any other sale of all or
substantially all of the holders of assets of the Company, shall not be deemed
to be a liquidation, dissolution or winding up of the Company and the Series A
Preferred Stock shall be entitled only to (i) the rights provided in any
agreement or plan governing the reorganization or other consolidation, merger or
sale of assets transaction, (ii) the rights contained in the Delaware General
Corporation Law, and (iii) the rights contained in the Company's Certificate of
Incorporation.
Right of Conversion. The shares of Series A Preferred Stock shall be
convertible, in whole or in part, at the option of the holder thereof and upon
notice to the Company, into fully paid and nonassessable shares of Common Stock
at the Conversion Rate. The Conversion Rate, subject to certain adjustments,
shall be in the event the conversion date occurs (i) on or prior to December 5,
1997, one (1) share of Common Stock for each share of Series A Preferred Stock
being converted, and (ii) after December 5, 1997, the number of shares of Series
A Preferred Stock equal to the number of shares of Series A Preferred Stock
being converted divided by the average Market Price of the Common Stock for the
five (5) consecutive trading days immediately prior to such conversion date,
multiplied by 70%.
Right of Conversion by Company. On or after the date a registration
statement registering the shares of Common Stock underlying the shares of Series
A Preferred Stock is declared effective by the Commission, the Company, at its
option, may, upon not less than thirty days notice to holders of shares of
Series A Preferred Stock, cause the Series A Preferred Stock to be converted in
whole, but not in part, into fully paid and nonassessable shares of Common Stock
at the then effective Mandatory Conversion Rate. The Mandatory Conversion Rate
shall be the number of shares of Series A Preferred Stock outstanding on the
mandatory conversion date set forth in such notice divided by the average Market
Price of the Common Stock for the five (5) consecutive trading days immediately
prior to the mandatory conversion date, multiplied by 70%. The shares of Series
A Preferred Stock so converted shall be treated as having been surrendered by
the holder thereof for conversion on the mandatory conversion date (unless
previously converted at the option of the holder).
Reclassification, Exchange and Substitution. If the Common Stock issuable
on conversion of the Series A Preferred Stock shall be changed into the same or
different number of shares of any other class or classes of stock, whether by
capital reorganization, reclassification, reverse stock split or forward stock
split or stock dividend or otherwise (other than a subdivision or combination of
shares provided for above), the holders of the Series A Preferred Stock shall,
upon conversion of the Series A Preferred Stock, be entitled to receive, in lieu
of the Common Stock which the holders would have become entitled to receive but
for such change, a number of shares of such other class or classes of stock that
would have been subject to receipt by the holders if they had exercised their
rights of conversion of the Series A Preferred Stock immediately before that
change.
Reorganizations, Mergers, Consolidations or Sale of Assets. If at any time
there shall be a capital reorganization of the Common Stock (other than a
subdivision, combination, reclassification or exchange of shares described above
or merger of the Company into another corporation, or the sale of the Company's
properties and assets as, or substantially as, an entirety to any other person,
then, as a part of such reorganization, merger or sale, lawful provision shall
be made so that the holders of the Series A Preferred Stock shall thereafter be
entitled to receive upon conversion of the Series A Preferred Stock, the number
of shares of stock or other securities or property of the Company, or of the
successor corporation resulting from such merger, to which holders of the
17
<PAGE>
Common Stock deliverable upon conversion of the Series A Preferred Stock would
have been entitled on such capital reorganization, merger or sale if the Series
A Preferred Stock had been converted immediately before the capital
reorganization, merger or sale to the end that the provisions of this
subparagraph (including adjustment of the Conversion Rate then in effect and
number of shares purchasable upon conversion of the Series A Preferred Stock)
will be applicable after that event as nearly equivalently as may be
practicable.
Voting Rights. Except as otherwise expressly provided or required by law,
the holders of the Series A Preferred Stock shall have no voting rights.
Preemptive Rights. The Series A Preferred Stock is not entitled to any
preemptive rights in respect of any securities of the Company.
No Sinking Fund. The Company is not required to provide for the retirement
or redemption of the Series A Preferred Stock through operation of a sinking
fund.
Registered Warrants
In connection with the Company's initial public offering, the Company
issued Registered Warrants to purchase an aggregate of 2,118,000 shares of
Common Stock at an exercise price of $5.00 per share. The Registered Warrants
are exercisable on or prior to March 19, 2000.
The Registered Warrants are redeemable by the Company, upon the consent of
the underwriter in the Company's initial public offering (the "Underwriter")
upon notice of not less than 30 days, at a price of $.10 per Registered Warrant,
provided that the closing bid quotation of the Common Stock for a period of 30
consecutive trading days ending on the third day prior to the day on which the
Company gives notice has been at least 150% (currently $7.50, subject to
adjustment) of the then effective exercise price of the Registered Warrants. The
holders of the Registered Warrants will have the right to exercise their
warrants until the close of business on the date fixed for redemption.
MDC Warrants
Pursuant to the MDC Agreement, the Company issued the MDC Warrants to MDC
to purchase an aggregate of 750,000 shares of Common Stock with unlimited
piggyback registration rights. Such MDC Warrants include (a) warrants
exercisable at any time for three (3) years from October 27, 1997, to purchase
the following number of shares of Common Stock at the exercise prices indicated:
(i) 75,000 shares of Common Stock at $3.4688; (ii) 25,000 shares of Common Stock
at $4.3438; (iii) 25,000 shares of Common Stock at $4.8438; and (iv) 25,000
shares of Common Stock at $5.3438, and (b) a warrant to purchase 600,000 shares
of Common Stock which will be issued following the Second Closing, and will be
exercisable at any time for three (3) years from the Second Closing at an
exercise price of $3.4688. See "Prospectus Summary-Recent Developments-Financial
Public Relations Agreement."
Transfer Agent and Registrar
The Company's Transfer Agent and Registrar is American Stock Transfer &
Trust Company, 40 Wall Street, 46th Floor, New York, New York 10005.
Reports to Stockholders
The Company furnishes its stockholders with annual reports containing
audited financial statements and such other periodic reports as the Company may
determine to be appropriate or as may be required by law.
18
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth the number of shares of Common Stock beneficially
owned by each of the Selling Stockholders as of November 1, 1997, the number of
Shares owned thereby covered by this Prospectus and the amount and percentage
ownership of each Selling Stockholder after the offering of the Shares offered
hereby assuming all the Shares covered by this Prospectus are sold by the
Selling Stockholders. Except as otherwise indicated by footnotes below, none of
the Selling Shareholders has had any position, office or other material
relationship with the Company within the past three years other than as a result
of the ownership of the Shares or other securities of the Company.
Percentage
Shares of Common Shares Of Shares
Stock Owned Owned
Name of Security Owned Beneficially Shares After After
Holder and of Record Offered Offering Offering
- ---------------------- ------------------- ------------- -------- ----------
Marketing Direct 750,000(1) 750,000(1) 0 0
Concepts, Inc.
Jacob Abramsky 200,000(2) 200,000(2) 0 0
Dafico Investment 400,000(2) 400,000(2) 0 0
Corp.
Econor 200,000(2) 200,000(2) 0 0
Firstimpex, Inc. 400,000(2) 400,000(2) 0 0
Maslo Fund L.td. 200,000(2) 200,000(2) 0 0
Mericorp Inc. 200,000(2) 200,000(2) 0 0
Isaac Plucki 200,000(2) 200,000(2) 0 0
Joseph Yud 200,000(2) 200,000(2) 0 0
Rubin Baum Levin 24,000(3) 24,000(3) 0 0
Constant & Friedman
Hugh D. Jaeger, Esq. 10,000(4) 10,000(4) 0 0
Hancock & Estabrook 21,000(5) 21,000(5) 0 0
- ----------
(1) Includes 750,000 shares of Common Stock issuable upon exercise of the MDC
Warrants. 600,000 shares of the shares listed underlie MDC Warrants which
are deliverable on the Second Closing. See "Prospectus Summary-Recent
Developments-Financial Public Relations Agreement," and "Description of
Securities -MDC Warrants."
(2) Represents shares of Common Stock issuable upon conversion of Series A
Preferred Stock which number of shares of Common Stock, for purposes of
this Registration Statement, is computed by assuming each share of Series
A Preferred Stock is convertible into one (1) share of Common Stock. The
actual number of shares of Common Stock issuable upon conversion of the
Series A Preferred Stock may be subject to increase or decrease dependent
upon the conversion rate in effect on the date of conversion of the Series
A Preferred Stock. One-half of the shares listed underlie shares of Series
A Preferred Stock which will be delivered to such Selling Stockholder on
the Second Closing. In the event such Selling Stockholder does not pay for
the shares of Series A Preferred Stock deliverabale on the Second Closing,
the Company may, at its option, withdraw the shares of Common Stock
underlying the shares of Series A Preferred Stock from the Shares being
offered hereby. See "Prospectus Summary-Recent Developments-October 1997
Private Placement" and "Description of Securities-Series A Preferred
Stock."
(3) Rubin Baum Levin Constant & Friedman ("Rubin Baum") is counsel to the
Company and has passed on the validity of the Shares being offered hereby.
The shares listed are issuable to Rubin Baum as payment for $42,000 in
outstanding legal fees. See "Legal Matters."
(4) Hugh D. Jaeger, Esq. is counsel to the Company and the shares listed are
issuable as payment for $17,500 in outstanding legal fees.
(5) Hancock & Estabrook is counsel to the Company and the shares listed are
issuable as payment for $36,750 in outstanding legal fees.
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PLAN OF DISTRIBUTION
The Shares may be offered and sold from time to time by the Selling
Stockholders as market conditions permit in the over-the-counter market, or
otherwise, at prices and terms then prevailing or at prices relating to the
then-current market price, or in negotiated transactions. The Shares may be sold
by one or more of the following methods, without limitation: (a) a block trade
in which a broker or dealer so engaged will attempt to sell the Shares as agent
but may position and resell a portion of the block as principal to facilitate
the transaction; (b) purchases by a broker or dealer as principal and resale by
such broker or dealer for its account pursuant to this Prospectus; (c) ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
and (d) face-to-face transactions between sellers and purchasers without a
broker-dealer. In effecting sales, brokers or dealers engaged by the Selling
Stockholder may arrange for other brokers or dealers to participate. Such
brokers or dealers may receive commissions or discounts from the Selling
Stockholders in amounts to be negotiated immediately prior to the sale. The
Selling Stockholders and such brokers and dealers and any other participating
brokers or dealers may be deemed to be "underwriters" within the meaning of the
Securities Act, in connection with such sales.
There is no assurance that the Selling Stockholders will sell any or all
of the Shares offered hereby. The Company will receive no proceeds from any
sales of the Shares offered hereby by the Selling Stockholders.
The Company has agreed to pay the filing fees, costs and expenses
associated with the Registration Statement, including compliance with any state
blue sky requirements, commissions and discounts of underwriters, dealers or
agents, if any, and any stock transfer taxes. The Company has also agreed to
indemnify the Selling Stockholders and any underwriters for certain civil
liabilities in connection with the Registration Statement and the securities
offered thereby and hereby, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the Shares offered hereby is being passed upon for the
Company by Rubin Baum Levin Constant & Friedman ("Rubin Baum"), New York, New
York. Walter M. Epstein, a partner of Rubin Baum, beneficially owns 5,000 shares
of Common Stock and 35,000 Registered Warrants. In addition, Rubin Baum acquired
24,000 shares of Common Stock in payment of $42,000 of outstanding legal fees
and has been included as a Selling Stockholder herein in respect of such shares.
See "Selling Stockholders."
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Company's Annual Report on Form 10-KSB for the year ended December 31, 1996
have been so incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
20
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================================================================================
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made hereby, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, the securities offered hereby to any person in
any state or other jurisdiction in which such offer or solicitation is unlawful.
The delivery of this Prospectus at any time does not imply that information
contained herein is correct as of any time subsequent to its date.
-----------------
TABLE OF CONTENTS
Page
Available Information ...................................................... 2
Incorporation of Certain Documents by Reference ............................ 2
Prospectus Summary ......................................................... 3
The Company ................................................................ 3
Recent Developments ........................................................ 9
The Offering ............................................................... 11
Risk Factors ............................................................... 12
Use of Proceeds ............................................................ 16
Description of Securities .................................................. 16
Selling Stockholders ....................................................... 19
Plan of Distribution ....................................................... 20
Legal Matters .............................................................. 20
Experts .................................................................... 20
-----------------
================================================================================
================================================================================
2,805,000 Shares of Common Stock
SEMICONDUCTOR
LASER
INTERNATIONAL
CORPORATION
Common Stock
----------
PROSPECTUS
----------
________, 1997
================================================================================
21
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
SEC registration fee ........................ $ 3,028.13*
Accounting fees and expenses ................ $10,000.00**
Legal fees and expenses ..................... $35,000.00**
Printing and Miscellaneous .................. $ 5,000.00**
----------
TOTAL ....................................... $53,028.13**
==========
* Actual
** Estimated
Item 15. Indemnification of Directors and Officers.
Under Section 145 of the Delaware General Corporation Law ("DGCL"), the
Registrant has broad powers to indemnify its directors, officers and other
employees. This section (i) provides that the statutory indemnification and
advancement of expenses provisions of the DGCL are not exclusive, provided that
no indemnification may be made to or on behalf of any director or officer if a
judgment or other final adjudication adverse to the director or officer
establishes that his acts were committed in bad faith or were the result of
active and deliberate dishonesty and were material to the cause of action so
adjudicated, or that he personally gained in fact a financial profit or other
advantage to which he was not legally entitled, (ii) establishes procedures for
indemnification and advancement of expenses that may be contained in the
certificate of incorporation or by-laws, or, when authorized by either of the
foregoing, set forth in a resolution of the stockholders or directors or an
agreement providing for indemnification and advancement of expenses, (iii)
applies a single standard for statutory indemnification for third-party and
derivative suits by providing that indemnification is available if the director
or officer acted in good faith, for a purpose which he reasonably believed to be
in the best interests of the corporation, and, in criminal actions, had no
reasonable cause to believe that his conduct was unlawful, and (iv) permits the
advancement of litigation expenses upon receipt of an undertaking to repay such
advance if the director or officer is ultimately determined not to be entitled
to indemnification or to the extent the expenses advanced exceed the
indemnification to which the director or officer is entitled. Section 145(g) the
DGCL permits the purchase of insurance to indemnify a corporation or its
officers and directors to the extent permitted.
The Registrant's Certificate of Incorporation provides that the Registrant
shall indemnify its officers and directors, as such, to the fullest extent
permitted by applicable law. The Registrant's By-laws provide that expenses
reasonably incurred by any such officer or director in connection with a
threatened or actual action or proceeding shall be advanced or promptly
reimbursed by the Registrant in advance of the final disposition of such action
or proceeding upon receipt of an undertaking by or on behalf of such officer or
director to repay such amount if and to the extent that it is ultimately
determined that such officer or director is not entitled to indemnification
thereafter.
Article Seventh of the Registrant's Certificate of Incorporation provides
that a director of the Registrant shall not be held personally liable to the
Registrant or its stockholders for monetary damages for breaches of fiduciary
duty as a director except for liability (i) for any breach of the director's
duty of loyalty to the Registrant or its stockholders (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from
which the director derived an improper personal benefit.
Item 16. Exhibits.
4.1 Form of Underwriter's Warrant Agreement, dated as of March 19, 1996,
between the Registrant and Whale Securities., L.P.(1)
II-1
<PAGE>
4.2 Form of Warrant Agreement, dated as of March 19, 1996, among the
Registrant, Whale Securities Co., L.P. and American Stock Transfer & Trust
Company(1)
4.3 Warrant, dated January 3, 1997 between the Registrant and Finova
Technology Finance, Inc.(1)
4.4 Corrected Certificate of Designations of Series A 8% Convertible Preferred
Stock(2)
4.5 Certificate of Correction of Certificate of Designations of Series A 8%
Convertible Preferred Stock(2)
4.6 Specimen Certificate of Registrant's Series A 8% Convertible Preferred
Stock(2)
4.7 Form of MDC Warrant, between the Registrant and Marketing Design Concepts,
Inc(2)
5.1 Opinion of Rubin Baum Levin Constant & Friedman regarding legality(2)
23.1 Consent of Rubin Baum Levin Constant & Friedman included in Exhibit 5.1(2)
23.2 Consent of Price Waterhouse LLP(2)
24.1 Power of Attorney (included on signature page hereto)
- ----------
(1) Incorporated by reference to Registrant's Registration Statement on Form
S-1 (Reg. No. 333-754) which was declared effective by the Securities and
Exchange Commission on March 19, 1996.
(2) Filed herewith.
II-2
<PAGE>
Item 17. Undertakings.
The Company hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to: (i) include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933, as
amended (the "Securities Act"); (ii) reflect in the prospectus any acts or
events which, individually or together, represent a fundamental change in the
information in the registration statement; and notwithstanding the forgoing, any
increase or decrease in volume of securities offered (if the total dollar value
of securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of prospects filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in the volume and price represent no
more than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement;
and (iii) include any additional or changed material information with respect to
the plan of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration Statement;
provided, however, that clauses (i) and (ii) above do not apply if the
information required to be included in a post-effective amendment by those
clauses is contained in periodic reports filed by the Company pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in this Registration Statement;
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effect amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Company's annual report
pursuant to Section 13(a) or Section 15(d) of the Exchange Securities Act that
is incorporated by reference in this Registration Statement shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Binghamton, New York, on November 7, 1997.
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION
By: /s/ Geoffrey T. Burnham
-----------------------
Geoffrey T. Burnham, Chairman of the Board, President
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Geoffrey T. Burnham and Nicholas L.
Prioletti, Jr., and each or any of them, his true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their, his or her substitutes
or substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Date: November 7, 1997
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION
By: /s/ Geoffrey T. Burnham
-----------------------
Geoffrey T. Burnham, Chairman of the Board, President
and Chief Executive Officer
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------- ------------------------------------------------ ------------------
<S> <C> <C>
/s/ Geoffrey T. Burnham Chairman of the Board, President and Chief November 7, 1997
- ----------------------- Executive Officer (principal executive officer)
Geoffrey T. Burnham
/s/ Susan M. Burnham Vice President, Treasurer and Director November 7, 1997
- --------------------
Susan M. Burnham
/s/ Nicholas L. Prioletti, Jr. Chief Financial Officer and Secretary November 7, 1997
- ------------------------------ (principal financial and accounting officer)
Nicholas L. Prioletti, Jr.
/s/ George W. Barrett Director November 7, 1997
- ---------------------
George W. Barrett
/s/ Brian J. Thompson Director November 7, 1997
- ---------------------
Brian J. Thompson
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
4.1 Form of Underwriter's Warrant Agreement, dated as of March 19,
1996, between the Registrant and Whale Securities., L.P.(1)
4.2 Form of Warrant Agreement, dated as of March 19, 1996, among the
Registrant, Whale Securities Co., L.P. and American Stock Transfer
& Trust Company(1)
4.3 Warrant, dated January 3, 1997 between the Registrant and Finova
Technology Finance, Inc.(1)
4.4 Corrected Certificate of Designations of Series A 8% Convertible
Preferred Stock(2)
4.5 Certificate of Correction of Certificate of Designations of Series
A 8% Convertible Preferred Stock(2)
4.6 Specimen Certificate of Registrant's Series A 8% Convertible
Preferred Stock(2)
4.7 Form of MDC Warrant, between the Registrant and Marketing Design
Concepts, Inc.(2)
5.1 Opinion of Rubin Baum Levin Constant & Friedman regarding
legality(2)
23.1 Consent of Rubin Baum Levin Constant & Friedman included in
Exhibit 5.1(2)
23.2 Consent of Price Waterhouse LLP(2)
24.1 Power of Attorney (included on signature page hereto)
- ----------
(1) Incorporated by reference to Registrant's Registration Statement on Form
S-1 (Reg. No. 333-754) which was declared effective by the Securities and
Exchange Commission on March 19, 1996.
(2) Filed herewith.
CORRECTED
CERTIFICATE OF DESIGNATIONS
OF
SERIES A 8% CONVERTIBLE PREFERRED STOCK
OF
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION
---------------------------------------------
Pursuant to Sections 103(f) and 151 of the General
Corporation Law of the State of Delaware
---------------------------------------------
Semiconductor Laser International Corporation, a corporation organized
under the laws of Delaware, hereby certifies as follows:
1. That the Certificate of Designations of Series A 8% Convertible
Preferred Stock of Semiconductor Laser International Corporation, a Delaware
corporation, which was filed with the Secretary of State of the State of
Delaware on October 16, 1997 at 9:00 a.m. is an inaccurate record in certain
respects of the corporate action referred to therein and said Certificate of
Designations requires correction as permitted by subsection (f) of Section 103
of the General Corporation Law of the State of Delaware.
2. That said Certificate of Designations was inaccurate in that page 2 of
said Certificate of Designations was inadvertently omitted therefrom.
3. That said Certificate of Designations should in its corrected form
read in its entirety as follows on Annex A hereto:
<PAGE>
ANNEX A
CERTIFICATE OF DESIGNATIONS
of
SERIES A 8 % CONVERTIBLE PREFERRED STOCK
of
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION, a corporation organized and
existing under the laws of the State of Delaware (the "Corporation"), does
hereby certify that, pursuant to the authority conferred on the Board of
Directors of the Corporation by the Certificate of Incorporation, as amended to
date (the "Certificate of Incorporation"), of the Corporation and in accordance
with Section 151 of the General Corporation Law of the State of Delaware, the
Board of Directors of the Corporation adopted the following resolution
establishing a series of 2,000,000 shares of Preferred Stock of the Corporation
designated as "Series A 8% Convertible Preferred Stock":
RESOLVED, that pursuant to the authority conferred on the Board of
Directors of this Corporation by the Certificate of Incorporation, a
series of Preferred Stock, par value $.0l per share, of the Corporation is
hereby established and created, and that the designation and number of
shares thereof and the voting and other powers, preferences and relative,
participating, optional or other rights of the shares of such series and
the qualifications, limitations and restrictions thereof are as follows:
Series A Convertible Preferred Stock
1. Designation and Amount. There shall be a series of Preferred
Stock designated as "Series A 8% Convertible Preferred Stock" and the number of
shares constituting such series shall be 2,000,000. Such series is referred to
herein as the "Series A Preferred Stock".
2. Dividends and Distributions. Subject to the prior and superior
rights of the holders of any shares of any series or class of capital stock
ranking prior and superior to the shares of Series A Preferred Stock with
respect to dividends, the holders of shares of Series A Preferred Stock shall be
entitled to receive, as, when and if declared by the Board of Directors of the
Corporation, out of assets legally available for that purpose, non-cumulative
cash dividends at the rate of 8% per share per annum payable on each December 5
commencing one year after
<PAGE>
December 5, 1997 (the "Closing Date"). If dividends are payable for less than
one full year, then dividends shall be calculated pro rata based on a 360 day
year. All dividends or distributions declared upon the Series A Preferred Stock
shall be declared pro rata per share. At the option of the Corporation,
dividends may be paid on shares of Common Stock. Such shares shall be issued in
lieu of cash with such shares to be valued at the average Market Price (as
defined below) for the five (5) day consecutive trading days immediately prior
to the applicable December 5 dividend date.
(b) Dividends on Junior Stock. So long as any shares of Series A
Preferred Stock shall be outstanding, no dividend (other than dividends payable
in shares of Common Stock) shall be paid or distribution shall be made on the
shares of Common Stock or on any other class or series of stock ranking junior
to the Series A Preferred Stock as to dividends.
(c) Redemption Provisions. The Series A Preferred Stock shall be
redeemable at the option of the Corporation on thirty days prior written notice
on or after December 5, 1999 at a price equal to the face amount thereof.
(d) Liquidation Preference. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
after payment or provision for payment of debts and other liabilities of the
Corporation, and the liquidation preference of any preferred stock ranking
senior to the Series A Preferred Stock, the holders of the Series A Preferred
Stock shall be entitled to receive an amount equal to $1.75 per share, subject
to adjustment. After the full preferential liquidation amount has been paid to,
or determined and set apart for the Series A Preferred Stock and all other
series of Preferred Stock hereafter authorized and issued ranking equally with
or junior to the Series A Preferred Stock, if any, the remaining assets of the
Corporation available for distribution to stockholders shall be distributed
ratably to the holders of the Common Stock. In the event the assets of the
Corporation available for distribution to its stockholders are insufficient to
pay the full preferential liquidation amount per share required to be paid the
holders of the Series A Preferred Stock, the entire amount of assets of the
Corporation available for distribution to stockholders shall be paid up to their
respective full liquidation amounts first to any preferred stock ranking senior
to the Series A Preferred Stock, then to the Series A Preferred Stock, and any
preferred stock ranking equally to the Series A Preferred Stock then to any
other series of Preferred Stock hereafter authorized and issued, all of which
amounts shall be distributed ratably among holders of each such series of
preferred stock, and the common stock shall receive nothing. A reorganization or
any other consolidation or merger of the Corporation with or into any other
corporation, or any other sale of all or substantially all of the holders of
assets of the Corporation, shall not be deemed to be a liquidation, dissolution
or winding up of the Corporation within the meaning of this Section 2, and the
Series A Preferred Stock shall be entitled only to (i) the rights provided in
any agreement or plan governing the reorganization or other consolidation,
merger or sale of assets transaction, (ii) the rights contained in the Delaware
General Corporation Law, and (iii) the rights contained in other sections
hereof.
- 2 -
<PAGE>
3. Conversion.
(a) Right of Conversion. The shares of Series A Preferred Stock
shall be convertible, in whole or in part, at the option of the holder thereof
and upon notice to the Corporation as set forth in Section 3(b) below, into
fully paid and nonassessable shares of Common Stock at the Conversion Rate. The
Conversion Rate, subject to adjustments described in Section 5, shall be in the
event the Conversion Date occurs (i) on or prior to December 5, 1997, one share
of Common Stock for each share of Series A Preferred Stock being converted, and
(ii) more than forty-five (45) days after the Closing Date, the number of shares
of Series A Preferred Stock equal to the number of shares of Series A Preferred
Stock being converted divided by the average Market Price of the Common Stock
for the five (5) consecutive trading days immediately prior to the Conversion
Date multiplied by 70%. The Market Price for any date shall be the closing bid
price of the Common Stock on such date as reported by the National Association
of Securities Dealers Automatic Quotation System.
(b) Conversion Procedures. In order to convert the shares of Series A
Preferred Stock into shares of Common Stock, the holder of Series A Preferred
Stock shall: (i) complete, execute and deliver to the Corporation the conversion
certificate attached hereto as Exhibit A (the "Notice of Conversion"); and (ii)
surrender the certificate or certificates representing the Preferred Shares
being converted (the "Converted Certificate") to the Corporation, which
certificate or certificates, if the Corporation shall so require, shall be duly
endorsed to the Corporation or in blank, or accompanied by proper instruments of
transfer to the Corporation or in blank, and specifying the name or names (with
address) in which a certificate or certificates evidencing shares of Common
Stock are to be issued. The Notice of Conversion shall be effective and in full
force and effect if delivered to the Corporation by facsimile transmission at
(607) 722-3900 (or the then current facsimile transmission number of the
Corporation). Provided that a copy of the Notice of Conversion is delivered to
the Corporation on such date by facsimile transmission or otherwise, and
provided that the original Notice of Conversion and the Converted Certificate,
duly executed and properly endorsed with all necessary signature guarantees, are
delivered to the Corporation within three (3) business days thereafter at 15
Link Drive, Binghamton, New York 13904, the date on which notice of conversion
is given (the "Conversion Date") shall be deemed to be the date set forth
therefor in the Notice of Conversion; and the person or persons entitled to
receive the shares of Common Stock issuable upon conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock as
of the Conversion Date. If the original Notice of Conversion and the Converted
Certificate are not delivered to the Corporation within three (3) business days
following the Conversion Date, the Notice of Conversion shall become null and
void as if it were never given and the Corporation shall, within two (2)
business days thereafter, return to the holder by overnight courier any
Converted Certificate that may have been submitted in connection with any such
conversion. In the event that any Converted Certificate submitted represents a
number of shares of Series A Preferred Stock that is, greater than the number of
such shares that is being converted pursuant to the Notice of Conversion
delivered in connection therewith, the Corporation shall deliver, together with
the certificates for the shares of Common stock issuable upon such conversion as
provided herein, a certificate
- 3 -
<PAGE>
representing the remaining number of shares of Series A Preferred Stock not
converted. No adjustments in respect of any dividends on shares surrendered for
conversion or any dividend on the Common Stock issued upon conversion shall be
made upon the conversion of any shares of Series A Preferred Stock. All Notices
of Conversion shall be irrevocable.
4. Mandatory Conversion. (a) Right of Conversion by Corporation. In
or after the date a registration statement registering the shares of Common
Stock underlying the shares of Series A Preferred Stock is declared effective by
the Securities and Exchange Commission, the Corporation, at its option, may
cause the Series A Preferred Stock to be converted in whole, but not in part,
into fully paid and nonassessable shares of Common Stock at the then effective
Mandatory Conversion Rate. The Mandatory Conversion Rate shall be the number of
shares of Series A Preferred Stock outstanding on the Mandatory Conversion Date
divided by the average Market Price of the Common Stock for the five (5)
consecutive trading days immediately prior to the Mandatory Conversion Date
multiplied by 70%. The shares of Series A Preferred Stock so converted shall be
treated as having been surrendered by the holder thereof for conversion pursuant
to Section 4 on the Mandatory Conversion Date (unless previously converted at
the option of the holder).
(b) Notice of Mandatory Conversion. Not less than 30 days prior to
the date of any such mandatory conversion, notice by first class mail, postage
prepaid, shall be given to the holders of record of the Series A Preferred Stock
to be converted, addressed to such holders at their last addresses as shown on
the stock transfer books of the Corporation. Each such notice shall specify the
date fixed for conversion, (the "Mandatory Conversion Date"), the place or
places for surrender of shares of Series A Preferred Stock, and the then
effective Mandatory Conversion Rate.
Any notice which is mailed as herein provided shall be conclusively
presumed to have been duly given by the Corporation on the date deposited in the
mail, whether or not the holder of the Series A Preferred Stock receives such
notice; and failure properly to give such notice by mail, or any defect in such
notice, to the holders of the shares to be converted shall not affect the
validity of the proceedings for the conversion of any other shares of Series A
Preferred Stock. On or after the Mandatory Conversion Date, each holder of
shares called to be converted shall surrender the certificate evidencing such
shares to the Corporation at the place designated in such notice for conversion.
Notwithstanding that the certificates evidencing any shares properly called for
conversion shall not have been surrendered, the shares shall no longer be deemed
outstanding and all rights whatsoever with respect to the shares so called for
conversion (except the right of the holders to convert such shares upon
surrender of their certificates therefor) shall terminate.
5. Adjustment of Conversion Rate and Conversion Price
(a) Reclassification, Exchange and Substitution. If the Common Stock
issuable on conversion of the Series A Preferred Stock shall be changed into the
same or different number of
- 4 -
<PAGE>
shares of any other class or classes of stock, whether by capital
reorganization, reclassification, reverse stock split or forward stock split or
stock dividend or otherwise (other than a subdivision or combination of shares
provided for above), the holders of the Series A Preferred Stock shall, upon
conversion of the Series A Preferred Stock, be entitled to receive, in lieu of
the Common Stock which the holders would have become entitled to receive but for
such change, a number of shares of such other class or classes of stock that
would have been subject to receipt by the holders if they had exercised their
rights of conversion of the Series A Preferred Stock immediately before that
change.
(b) Reorganizations, Mergers, Consolidations or Sale of Assets. If
at any time there shall be a capital reorganization of the Common Stock (other
than a subdivision, combination, reclassification or exchange of shares provided
for elsewhere in Section 4 or merger of the Corporation into another
corporation, or the sale of the Corporation's properties and assets as, or
substantially as, an entirety to any other person, then, as a part of such
reorganization, merger or sale, lawful provision shall be made so that the
holders of the Series A Preferred Stock shall thereafter be entitled to receive
upon conversion of the Series A Preferred Stock, the number of shares of stock
or other securities or property of the Corporation, or of the successor
corporation resulting from such merger, to which holders of the Common Stock
deliverable upon conversion of the Series A Preferred stock would have been
entitled on such capital reorganization, merger or sale if the Series A
Preferred Stock had been converted immediately before the capital
reorganization, merger or sale to the end that the provisions of this
subparagraph (b) (including adjustment of the Conversion Rate then in effect and
number of shares purchasable upon conversion of the Series A Preferred Stock)
shall be applicable after that event as nearly equivalently as may be
practicable.
(c) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Rate for any shares of Series A
Preferred Stock, the Corporation at its expense shall promptly compute such
adjustments or readjustments in accordance with the terms hereof and prepare and
furnish to each holder of Series A Preferred Stock effected thereby a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Corporation
shall, upon the written request at any time of any holder of Series A Preferred
Stock, furnish or cause to be furnished to such holder a like certificate
setting forth (i) such adjustments and readjustments, (ii) the Conversion Rate
at the time in effect, and (iii) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon the
conversion of such holder's shares of Series A Preferred Stock.
6. No Fractional Shares. No fractional shares or scrip representing
fractional shares of Common Stock shall be issued upon conversion of shares of
Series A Preferred Stock. If more than one certificate evidencing shares of
Series A Preferred Stock shall be surrendered for conversion at one time by the
same holder, the number of full shares issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of Series A Preferred
Stock so surrendered. Instead of any fractional share of Common Stock which
would otherwise
- 5 -
<PAGE>
be issuable upon conversion of any shares of Series A Preferred Stock, the
Corporation shall pay a cash adjustment in respect of such fractional interest
in an amount equal to the same fraction of the Market Price as of the close of
business on the day of conversion.
7. Reservation of Shares: Transfer Taxes: Etc. The Corporation shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock solely for the purpose of effecting the conversion of the shares
of the Series A Preferred Stock such number of its shares of Common Stock as
shall from time to time be sufficient, based on the Conversion Rate then in
effect, to effect the conversion of all then outstanding shares of the Series A
Preferred Stock. If at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Preferred Stock, then, in addition to all rights,
claims and damages to which the holders of the Series A Preferred Stock shall be
entitled to receive at law or in equity as a result of such failure by the
Corporation to fulfill its obligations to the holders hereunder, the Corporation
will take any and all corporate or other action as may, in the opinion of its
counsel, be helpful, appropriate or necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose.
The Corporation shall pay any and all issue or other taxes that may
be payable in respect of any issue or delivery of shares of Common Stock on
conversion of the Series A Preferred Stock. The Corporation shall not, however,
be required to pay any tax which may be payable in respect of any transfer
involved in the issue or delivery of Common Stock (or other securities or
assets) in a name other than that in which the shares of Series A Preferred
Stock so converted were registered, and no such issue or delivery shall be made
unless and until the person requesting such issue has paid to the Corporation
the amount of such tax or has established, to the satisfaction of the
Corporation, that such tax has been paid.
8. Prompt Delivery. The Corporation will cause the issuance of
certificates of Series A Preferred Stock or Common Stock, on conversion,
promptly after receipt of all documentation required by the transfer agent or
applicable law, including, but not limited to, representations, signature
guarantees, resolutions and certificates duly endorsed. Such issuance shall be
effected and mailed no later than ten (10) business days after receipt of all
such documentation. With respect to any conversion of Series A Preferred Stock
into Common Stock pursuant to Section 3 only, any delay beyond such date shall
result in a penalty equal to 1/4 of 1% of the face value of the Series A
Preferred Stock being converted. The Corporation's obligation shall be deemed
satisfied based on its records, or those of the transfer agent with respect to
date certificates were mailed by the Corporation or the transfer agent.
9. Ambiguities/Errors. The Board of Directors of the Corporation shall
have the power to resolve any ambiguity or correct any error in the provisions
relating to the convertibility of the Series A Preferred Stock, and its actions
in so doing shall be final and conclusive.
- 6 -
<PAGE>
10. Voting Rights.
(a) General. Except as otherwise expressly provided or required by law,
the holders of the Series A Preferred Stock shall have no voting rights.
11. Outstanding shares. For purposes of this Certificate of Designations,
all shares of Series A Preferred Stock shall be deemed outstanding except (i)
from the date, or the deemed date, of surrender of certificates evidencing
shares of Series A Preferred Stock, all shares of Series A Preferred Stock are
converted into Common Stock, (ii) from the date of registration of transfer, all
shares of Series A Preferred Stock held of record by the Corporation or any
subsidiary of the Corporation, and (iii) any and all shares of Series A
Preferred Stock held in escrow prior to delivery of such stock by the
Corporation to the initial beneficial owners thereof.
12. Status of Acquired Shares. Shares of Series A Preferred Stock received
upon conversion or otherwise acquired by the Corporation will be restored to the
status of authorized but unissued shares of Preferred Stock, without designation
as to class, and may thereafter be issued, but not as shares of Series A
Preferred Stock.
13. Preemptive Rights. The Series A Preferred Stock is not entitled to any
preemptive rights in respect of any securities of the Corporation.
14. No Amendment or Impairment. The Corporation shall not amend its
Articles of Incorporation or participate in any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, for the purpose of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in
carrying out all such action as may be reasonably necessary or appropriate in
order to protect the rights of the holders of the Series A Preferred Stock
against impairment.
15. Severability of Provisions. Whenever possible, each provision hereof
shall be interpreted in a manner as to be effective and valid under applicable
law, but if any provision hereof is held to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating or otherwise adversely affecting
the remaining provisions hereof. If a court of competent jurisdiction should
determine that a provision hereof would be valid or enforceable if a period of
time were extended or shortened or a particular percentage were increased or
decreased, then such court may make such change as shall be necessary to render
the provision in question effective and valid under applicable law.
- 7 -
<PAGE>
IN WITNESS WHEREOF, Semiconductor Laser International Corporation
has caused this certificate to be signed on its behalf by Geoffrey T. Burnham,
its President, this 24th day of October, 1997.
SEMICONDUCTOR LASER
INTERNATIONAL CORPORATION
By: /s/Geoffrey T. Burnham
---------------------------
Name: Geoffrey T. Burnham
Title: President
ATTEST:
/s/Walter M. Epstein
- ----------------------------
Secretary
- 8 -
<PAGE>
EXHIBIT A
CONVERSION CERTIFICATE
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION
Series A 8% Convertible Preferred Stock
The undersigned holder (the "Holder") is surrendering to Semiconductor
Laser International Corporation, a Delaware corporation (the "Company"), one or
more certificates representing shares of Series A 8% Convertible Preferred Stock
of the Company (the "Preferred Stock") in connection with the conversion of all
or a portion of the Preferred Stock into shares of Common Stock, $.0l par value
per share, of the Company (the "Common Stock" as set forth below.
1. The Holder understands that the Preferred Stock was issued by the Company
pursuant to the exemption from registration under the United States Securities
Act of 1933, as amended (the "Securities Act"), provided by Regulation D
promulgated thereunder.
2. The Holder represents and warrants that all offers and sales of the Common
Stock issued to the Holder upon such conversion of the Preferred Stock shall be
made (a) pursuant to an effective registration statement under the Securities
Act, (in which case the Holder represents that a prospectus has been delivered),
(b) in compliance with Rule 144, or (c) pursuant to some other exemption from
registration.
Number of Shares of Preferred Stock being converted: _____________________
Applicable Conversion Rate:_______________________________________________
Number of Shares of Common Stock Issuable: _______________________________
Conversion Date: _________________________________________________________
Delivery Instructions for certificates of Common Stock and for new
certificates representing any remaining shares of Preferred Stock:
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
NAME OF HOLDER:
_____________________________
_____________________________
(Signature of Holders)
- 9 -
CERITIFICATE OF CORRECTION
OF
CERTIFICATE OF DESIGNATIONS
OF
SERIES A 8% CONVERTIBLE PREFERRED STOCK
OF
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION
---------------------------------------------
Pursuant to Sections 103(f) and 151 of the General
Corporation Law of the State of Delaware
---------------------------------------------
Semiconductor Laser International Corporation, a corporation organized
under the laws of Delaware, hereby certifies as follows:
1. That the Certificate of Designations of Series A 8% Convertible
Preferred Stock of Semiconductor Laser International Corporation, a Delaware
corporation, which was filed with the Secretary of State of the State of
Delaware on October 16, 1997 at 9:00 a.m., as corrected on October 24, 1997, is
an inaccurate record in certain respects of the corporate action referred to
therein and said Certificate of Designations requires correction as permitted by
subsection (f) of Section 103 of the General Corporation Law of the State of
Delaware.
2. That said Certificate of Designations was inaccurate in that the phrase
Conversion Date set forth in Section 3(a)(ii) thereof is incorrect and Section
3(a)(ii) in its correct form is as follows:
"(ii) after December 5, 1997, the number of shares of Series A Preferred
Stock equal to the number of shares of Series A Preferred Stock being converted
divided by the average Market Price of the Common Stock for the five (5)
consecutive trading days immediately prior to the Conversion Date, multiplied by
70%."
<PAGE>
IN WITNESS WHEREOF, Semiconductor Laser International Corporation has caused
this certificate to be signed on its behalf by Geoffrey T. Burnham, its
President, this 4th day of November , 1997.
SEMICONDUCTOR LASER
INTERNATIONAL CORPORATION
By: /s/ Geoffrey T. Burnham
--------------------------
Name: Geoffrey T. Burnham
Title: President
ATTEST:
/s/ Walter M. Epstein
- --------------------------------
Name: Walter M. Epstein
Title: Assistant Secretary
- 2 -
================================================================================
====== ======
NUMBER SHARES
====== ====================================================== ======
P__ INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
====== ====================================================== ======
=============================================
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION
=============================================
TOTAL AUTHORIZED ISSUE 25,000,000 SHARES
See Reverse for
Certain Definitions
20,000,000 SHARES PAR VALUE $.01 EACH 5,000,000 SHARES PAR VALUE $.01 EACH
COMMON STOCK SERIES A 8% CONVERTIBLE
PREFERRED STOCK
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS, A
STATEMENT OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND
THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR
RIGHTS. ANY SUCH REQUEST SHOULD BE ADDRESSED TO THE SECRETARY OF THE
CORPORATION.
This is to Certify that _______________________________________ is the owner of
________________________________________________________________________________
FULLY PAID AND NON-ASSESSABLE SHARES OF SERIES A 8% CONVERTIBLE PREFERRED STOCK
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized Attorney upon surrender of this Certificate properly
endorsed.
Witness, the seal of the Corporation and the signatures of its duly authorized
officers.
Dated
/s/ Susan M. Burnham /s/ Geoffrey T. Burnham
- -------------------- -----------------------------
PRESIDENT
================================================================================
<PAGE>
[REVESE SIDE OF STOCK CERTIFICATE]
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
The following abbreviations, when used in the inscription on the face of
this certrificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenant in common
TEN ENT - as tenant by the entireties
JT TEN - as joint tenants with right of survivorship and not as
tenant in common
UNIF GIFT MIN ACT - ..... Custodian .......
(Cust) (Minor)
under Uniform Gifts to Minors Act ....................
(State)
Additional abbreviations may also be used though not in the above list
For the value received ______ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------------------------------------------------
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
______________________________________________________________________ Shares
represented by the within Certificate, and do hereby irrevocably constitute
and appoint
_____________________________________________________________________ Attorney
to transfer the said Shares on the books of the within named Corporation with
full power of substitution in the premises.
Dated _________________________ 19 _____
In presence of
______________________________________
____________________________________
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THESE SECURITIES UNDER THE SECURITIES ACT OF 1933 OR
AN OPINION OF THE COMPANY'S COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER SAID
ACT.
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN
REGISTERED UNDER THE-SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
ANY APPLICABLE STATE SECURITIES LAWS, BUT HAVE BEEN ACQUIRED FOR THE
PRIVATE INVESTMENT OF THE HOLDER HEREOF AND MAY NOT BE OFFERED, SOLD OR
TRANSFERRED UNTIL (A) A REGISTRATION STATEMENT UNDER THE
ACT OR SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME
EFFECTIVE WITH REGARD THERETO, OR (B) IN THE OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY REGISTRATION UNDER THE ACT OR SUCH
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH
SUCH PROPOSED OFFER, SALE OR TRANSFER.
This Common Stock Purchase Warrant is issued this __ day of_____,
199_, by Semiconductor Laser International Corporation, a Delaware corporation
(the "Company"), to Marketing Design Concepts, Inc. ("Holder").
W I T N E S S E T H:
1. Issuance of Warrant; Term. For good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Company hereby
grants to Holder, subject to the provisions hereinafter set forth, the right to
purchase _______ shares of the Company's Common Stock, $0.01 par value per share
(the "Common Stock"), (this "Warrant"). The shares of Common Stock issuable upon
exercise of this Warrant are hereinafter referred to as the "Shares". This
Warrant shall be exercisable at any time after the date hereof and on or before
5:00 p.m. on the ___ day of _____, 200_. The number of Shares issuable upon
exercise of this Warrant shall be subject to adjustment as hereinafter set
forth.
2. Exercise Price. The exercise price per share for which all or any
of the Shares may be purchased pursuant to the terms of this Warrant shall be
$_____, subject to adjustment as hereinafter set forth (hereinafter referred to
as the "Exercise Price").
3. Exercise.
(a) This Warrant may be exercised by the Holder (but only on the
conditions hereinafter set forth) in whole or in part, upon delivery of written
notice to the Company, specifying the number of Shares which the Holder has
elected to purchase, at the following address: Semiconductor Laser International
Corporation, 15 Link Drive, Binghamton, New York 13904, Attention: President, or
such other address as the Company shall designate in written notice to the
Holder hereof, together with this Warrant and payment (in the manner described
in Section 3(b) below) for the aggregate Exercise Price of the Shares so
purchased. Upon exercise of this Warrant as aforesaid, the Company shall as
promptly as practicable execute and deliver to the Holder a certificate or
certificates for the total number of whole Shares for which this Warrant is
being exercised in such names and denominations as are requested by such Holder.
If this Warrant shall be exercised with respect to less than all of the Shares,
the Holder shall be entitled to receive a new
<PAGE>
Warrant covering the number of Shares in respect of which this Warrant shall not
have been exercised, which new Warrant shall in all other respects be identical
to this Warrant.
(b) Payment for the Shares to be purchased upon exercise of this
Warrant shall be made by the delivery of a certified or cashier's check payable
to the Company for the aggregate Exercise Price of the Shares to be purchased.
(c) If on any exercise of this Warrant the Holder would be entitled
to acquire a fraction of a share of Common Stock, in lieu of such fraction of a
share, the Holder of this Warrant otherwise entitled to a fraction of such share
of Common Stock shall receive, upon surrender to the Company of the Warrant held
by such Holder, a cash amount for such fraction of a share equal to the product
obtained by multiplying (i) such fraction of a share of Common Stock, by (ii)
the amount obtained by subtracting the Exercise Price from the average of the
bid and asked prices for a share of Common Stock in the over-the-counter market
at the close of business on the date of exercise of the Warrant, as reported by
the National Association of Securities Dealers Automated Quotation System.
4. Covenants and Conditions. The above provisions are subject to the
following:
(a) Neither this Warrant nor the Shares have been registered under
the Securities Act of 1933, as amended (the "Act"), or any state securities laws
("Blue Sky Laws"). This Warrant has been acquired by Holder for investment
purposes and not with a view to distribution or resale and may not be made
subject to a security interest, pledged, hypothecated, sold or otherwise
transferred without an effective registration statement for this Warrant under
the Act and such applicable Blue Sky Laws or an opinion of counsel reasonably
satisfactory to the Company and its counsel that registration is not required
under the Act and under any applicable Blue Sky Laws. Transfer of the Shares
issued upon the exercise of this Warrant shall be restricted in the same manner
and to the same extent as this Warrant, and the certificates representing such
Shares shall bear substantially the following legend:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
ANY APPLICABLE STATE SECURITIES LAWS, BUT HAVE BEEN ACQUIRED FOR THE
PRIVATE INVESTMENT OF THE HOLDER HEREOF AND MAY NOT BE OFFERED, SOLD OR
TRANSFERRED UNTIL (A) A REGISTRATION STATEMENT UNDER THE ACT OR SUCH
APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD
THERETO OR (B) IN THE OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY
REGISTRATION UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS IS NOT
REQUIRED IN CONNECTION WITH SUCH PROPOSED OFFER, SALE OR TRANSFER.
Other legends as required by applicable federal and state laws may be placed on
this Warrant and such certificates. The Holder and the Company agree to execute
such other documents and instruments
-2-
<PAGE>
as counsel for the Company reasonably deems necessary to effect the compliance
of the issuance of this Warrant and any Shares issued upon exercise hereof with
applicable federal and state securities laws. The Holder agrees that the Company
may decline to permit a transfer of this Warrant if such transfer would result
in this Warrant being held by more than 35 persons, exclusive of "accredited"
investors as defined under Regulation D promulgated under the Act, or if such
proposed transferee does not meet then applicable qualifications for investors
in securities offerings exempt from registration. Furthermore, the unexercised
Warrant may be transferred in full (subject to the provisions hereof) but not in
part.
(b) The Company covenants and agrees that all Shares which may be
issued upon exercise of this Warrant shall, upon issuance and payment therefor
in accordance with the terms hereof, be legally and validly issued and
outstanding, fully paid and nonassessable. The Company shall at all times
reserve and keep available for issuance upon the exercise of this Warrant such
number of authorized but unissued shares of Common Stock as will be sufficient
to permit the exercise in full of this Warrant and all other outstanding
Warrants.
5. Warrant Holder Not Stockholder. This Warrant does not confer upon
the Holder hereof, as such, any right or privilege whatsoever as a stockholder
of the Company until the Holder shall have delivered the notice and tendered
payment as required under the provisions of Sections 2 and 3 hereof.
6. Anti-Dilution. Wherever this Warrant specifies a number of Shares
or an Exercise Price per share, the specified number of Shares or the specified
Exercise Price per share shall be changed to reflect adjustments required by
this section. If prior to the expiration or exercise of this Warrant there shall
be any change in the capital structure of the Company, the Shares covered by
this Warrant and the Exercise Price payable therefor shall be adjusted as
follows:
(a) If a stock dividend is declared on the Common Stock, there shall
be added to the shares of Common Stock issuable under this Warrant the number of
shares of Common Stock ("total additional shares") which would have been
issuable to the Holder had the Holder been the holder of record only of the
number of shares of Common Stock covered by this Warrant but not exercised at
the stock dividend record date. Such additional shares resulting from such stock
dividend shall be delivered without additional cost, upon the exercise of this
Warrant, and, in the event that less than all of the Shares covered by this
Warrant are purchased, the number of additional shares to be delivered shall be
the same fraction of the total additional shares as the number of shares
purchased bears to the total number of shares of Common Stock covered by this
Warrant. Any distribution to the holders of the Common Stock of the Company,
other than a distribution of cash as a dividend out of surplus or net profits or
a distribution by way of granting of rights to subscribe for shares of capital
stock of the Company, shall be treated as a stock dividend.
(b) If an increase shall be effected in the number of outstanding
shares of Common Stock by reason of a subdivision of such shares, the number of
shares which may thereafter be purchased under this Warrant shall be increased
by the number of shares that would have been
-3-
<PAGE>
received by the Holder on such subdivision had he been the holder of record only
of the number of shares of Common Stock covered by this Warrant at the effective
date of the subdivision. In such event, the Exercise Price per share shall be
decreased by multiplying the Exercise Price theretofore in effect by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately prior to such subdivision and the denominator of which is the number
of shares of Common Stock outstanding immediately after the subdivision.
(c) If a decrease shall be effected in the number of outstanding
shares of Common Stock by reason of a combination or reverse stock split, the
number of shares which may thereafter be purchased under this Warrant shall be
changed to the number of shares which would have been held by the Holder after
said combination or reverse stock split had he been the holder only of the
number of shares of Common Stock covered by this Warrant at the effective date
of the combination or reverse stock split. In such event, the Exercise Price per
share shall be increased by multiplying the Exercise Price theretofore in effect
by a fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately prior to the combination or reverse stock split and the
denominator of which is the number of shares of Common Stock outstanding
immediately after the combination or reverse stock split.
(d) If there is any capital reorganization or reclassification of
the capital stock of the Company, or any consolidation or merger of the Company
with any other corporation or corporations, or any sale or distribution of all
or substantially all of the Company's property and assets, adequate provision
shall be made by the Company so that there shall remain and be substituted under
this Warrant the stock, securities, or assets that would have been issuable or
payable in respect of or in exchange for the shares of Common Stock then
remaining under this Warrant and not theretofore purchased and issued hereunder,
as if the Holder had been the owner of such shares on the applicable record
date. Until the expiration or exercise of this Warrant, any shares of stock so
substituted under this Warrant shall be subject to adjustment as provided in
this Section 6 in the same manner and to the same effect as the shares of Common
Stock covered by this Warrant.
7. Registration Rights. The Company covenants and agrees as follows:
(a) Rights in Connection with a Public Offering by the Company. At
any time the Company intends to make a public offering of its securities under
any form of registration statement suitable for secondary offerings, the Company
shall so notify the Holder hereof in writing, no less than 30 days before the
intended filing of such registration statement, and shall permit the Holder to
include any or all of his Shares in such offering (limited only by the
provisions of paragraph (d) of this Section 7), provided the Holder notifies the
Company in writing within 15 days of the date of such notice of his desire to be
included in such offering. Thereafter, the Company shall use its best efforts to
(i) file with all due promptness and endeavor to make effective, as soon as
reasonably practicable, a registration statement under the Act covering any and
all shares proposed (the number being limited only by the provisions of
paragraph (d) of this Section 7) to be sold or otherwise disposed of by the
Holder; (ii) qualify such shares under the Blue Sky laws of the jurisdiction(s)
in which the offers and sales or other dispositions are proposed to be made;
(iii) qualify such shares under the rules of any
-4-
<PAGE>
appropriate self-regulatory organization or stock exchange; (iv) maintain the
effectiveness of the registration statement for a reasonable period of time but
in no event to exceed 30 days and from time to time (within any such period of
effectiveness) advise any Holder whose securities are being registered of any
stop order or any event or development requiring amendment of the registration
statement and prospectus or rendering it inadvisable to use the prospectus until
it is supplemented or amended; and (v) with reasonable promptness prevent the
issuance or cause to be removed any stop order, and amend or supplement the
registration statement and prospectus used in connection therewith to the extent
necessary or appropriate in order to comply with the Act. Notwithstanding
anything else to the contrary contained herein, once the Holder has been
afforded the right to have all of its Shares registered under the Act and has
elected to have some or all of its Shares so registered this Section 7 shall be
of no further force or effect if all of such request has been effected.
(b) Expenses. All expenses (including, but not limited to, all
registration fees paid to the Securities and Exchange Commission, fees and
expenses of accountants, fees and expenses of counsel, printing and engraving
expenses, transfer agent fees, escrow fees, N.A.S.D. registration or exchange
listing fees, but not including underwriting discounts and commissions relating
to Shares of any holder being offered thereby and fees and expenses of any
special counsel of any selling shareholder) of any registration(s) made pursuant
to paragraph (a) hereof shall be borne and paid by the Company. Underwriting
discounts and commissions shall be borne pro rata by any selling shareholder in
proportion to the number of shares being offered by such selling shareholder.
(c) Indemnification. The Company shall indemnify and hold harmless
the Holder, and any officer, director, partner or controlling person of each,
against any claim, liability, loss, damage, cost or expense (including
attorneys' fees) arising out of any violation of federal or state securities
laws or any alleged material misstatement or omission in any registration
statement filed pursuant to paragraph (a) hereof, or in documents incorporated
therein by reference, unless such misstatement or omission is contained in, or
relates to, information furnished or to have been furnished by the Holder,
provided the Company receives prompt written notice of any claim of any such
misstatement or omission and is afforded a reasonable opportunity, if it so
elects, to participate in or control the defense of such claim.
(d) Underwriting. If any registration is intended to be an
underwritten public offering, the Company shall so advise the Holder as a part
of the written notice given pursuant to paragraph (a) hereof. In such event, the
right of the Holder to registration, pursuant to paragraph (a) hereof, shall be
conditioned upon the Holder's participation in such underwriting and the
inclusion of the Holder's Company Common Stock in the underwriting to the extent
provided herein. The Holder proposing to distribute its securities through such
underwriting shall (together with the Company and any other persons distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the underwriter or underwriters or representative
thereof, selected for such underwriting by the Company (hereinafter the
"Underwriter"). Notwithstanding any other provision of paragraph (a), if the
Underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten [, the Underwriter may exclude some of the Holder's
shares of stock from such registration and underwriting, provided that shares
-5-
<PAGE>
of stock proposed to be sold by stockholders other than the Holder are first
excluded and provided further that in any joint primary or secondary offering,
no less than one-third (1/3) of the aggregate number of shares offered thereby
are offered by the Holder (or such lesser fraction as will include all of the
shares which the Holder then desire to so offer)]. The number of shares of stock
that may be included in the registration and underwriting shall be allocated to
each Holder proposing to sell, in proportion, as nearly as practicable, to the
number of shares of capital stock of the Company held by such Holder at the time
of filing of the registration statement. If any such Holder disapproves of the
terms of any such underwriting, he may elect to withdraw therefrom by written
notice to the Company and the Underwriter. Any securities excluded or withdrawn
from such underwriting shall be withdrawn from such registration.
(e) Assignment of Registration Rights. The rights to cause to
register securities granted the Holder under paragraph (a) may be assigned to a
transferee or assignee, provided that the Company shall be notified of any such
transfer within thirty (30) days of the date such transaction is effected, and
provided further that: (i) such assignee or transferee agrees to be bound by the
terms of this Plan; and (ii) such assignee or transferee is unable to publicly
transfer such stock without registration.
8. Notices. All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally, given by prepaid
telegram or mailed first class, postage prepaid, registered or certified mail as
follows:
If to the Company: Semiconductor Laser International
Corporation
15 Link Drive
Binghamton, New York 13904
Attention: President
If to Holder: Marketing Direct Concepts, Inc.
333 Northe Rancho Drive, 9th Floor
Las Vegas, Nevada 89100
Attention: Michael Calderone
9. Governing Law. This Warrant shall be construed and enforced in
accordance with the laws of the state of New York.
10. Successors, Assigns. This Warrant shall be binding upon and
inure to the benefit of any successor or successors of the Company, and shall
inure to the benefit of and shall be enforceable by the Holder and the Holder's
legal representatives, successors, heirs and permitted assigns.
-6-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed and delivered by its duly authorized officer as of the date first above
written.
SEMICONDUCTOR LASER INTERNATIONAL
CORPORATION
By:
-----------------------------------
Geoffrey T. Burnham
President
-7-
EXHIBIT 5.1
November 7, 1997
Semiconductor Laser International Corporation
15 Link Drive
Binghamton, New York 13904
Re: Semiconductor Laser International Corporation - Registration
Statement on Form S-3
Ladies and Gentlemen:
You have requested our opinion in connection with the above-captioned
Registration Statement on Form S-3 (the "Registration Statement") being filed by
Semiconductor Laser International Corporation, a Delaware corporation (the
"Company"), with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations
promulgated thereunder (the "Rules"). The Registration Statement is being filed
in connection with the offering by certain holders of shares of Common Stock,
$.01 par value per share (the "Common Stock") of the Company, issued or issuable
as follows:(i) 2,000,000 shares of Common Stock (the "Preferred Shares"),
subject to adjustment issuable upon the conversion of the Series A 8%
Convertible Preferred Stock, par value $.01 per share when paid ("Series A
Preferred Stock"); (ii) 55,000 shares of Common Stock (the "Law Firm Shares")
issuable to attorneys for the Company as payment for outstanding legal fees, and
(iii) 750,000 shares of Common Stock (the "Warrant Shares") issuable upon
exercise of warrants (the "MDC Warrants") to purchase shares of Common Stock
issued or issuable to a consultant to the Company.
We have examined such records and documents and have made such
examination of law as we considered necessary to form a basis for the opinions
set forth herein. In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, and
the conformity with the originals of all documents submitted to us as copies
thereof.
Based upon such examination, it is our opinion that (i) the Preferred
Shares when issued upon conversion of fully paid shares of Series A Preferred
Stock in accordance with the provisions of the Series A Preferred Stock will be
duly authorized, validly issued, fully paid and nonassessable; (ii) the Law Firm
shares when issued will be duly authorized, validly issued, fully paid and non
assessable and (iii) the Warrant Shares issuable upon exercise of the MDC
Warrants, when issued, will be duly authorized, validly issued, fully paid and
nonassessable.
<PAGE>
We hereby consent to the filling of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Registration Statement. In so doing, we do not admit that we are
in the category of persons whose consent is required under Section 7 of the Act
or under the Rules.
Walter M. Epstein, a partner of Rubin Baum Levin Constant & Friedman
owns 5,000 shares of the Company's Common Stock and 30,000 publicly traded
warrants to purchase 30,000 shares of the Company's Common Stock. In addition,
24,000 Law Firm Shares are issuable to Rubin Baum Levin Constant & Friedman.
Very truly yours,
/s/ Rubin Baum Levin Constant & Friedman
RUBIN BAUM LEVIN CONSTANT & FRIEDMAN
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
March 5, 1997 appearing on page 18 of Semiconductor Laser International
Corporation's Annual Report on Form 10-KSB for the year ended December 31, 1996.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
PRICE WATERHOUSE LLP
Morristown, NJ
November 4, 1997
