SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
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Check the appropriate box:
Preliminary Proxy Statement
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14a-6(e)(2))
X Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to Sect 240.14a-11(c) or Sect 240.14a-12
Semiconductor Laser International Corporation
________________________________________________________________________________
(Name of Registrant as Specified in its Charter)
________________________________________________________________________________
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Payment of Filing Fee (Check the appropriate box):
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1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
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<PAGE>
SEMICONDUCTOR LASER
INTERNATIONAL CORPORATION
15 LINK DRIVE
BINGHAMTON, NEW YORK 13904
__________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 11, 1999
__________________
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Semiconductor Laser International Corporation (the "Company") will be held at
9:30 o'clock a.m., local time, on June 11, 1999, at the New York Hilton Hotel
and Tower, 1335 Avenue of the Americas, New York, New York 10019, for the
following purposes:
1. To elect 5 directors of the Company to hold office until the next
Annual Meeting of Stockholders and until the election and qualification of
their respective successors;
2. To consider and vote upon a proposal to approve an amendment to
the Certificate of Incorporation of the Company to effect a reverse stock
split of the Company's common stock, par value $0.01 per share such that every
seven (7) shares of Common Stock outstanding on the effective date of such
reverse stock split would be converted into one (1) share of Common Stock;
3. To consider and vote upon a proposal to approve the issuance of
an aggregate of 5,500,000 shares of the Common Stock issuable (x) upon the
conversion of the Company's Series B Convertible Preferred Stock, par value
$0.01 per share and (y) upon exercise of a warrant to purchase an aggregate of
500,000 shares of Common Stock, at an exercise price of $0.50 per share,
issued to bmp Mobility AG Venture Capital;
4. To ratify the selection of PricewaterhouseCoopers LLP as
independent public accountants for the Company for the fiscal year ending
December 31, 1999; and
5. To transact such other business as may properly come before the
meeting.
Only holders of record of the Common Stock at the close of business on
April 15, 1999 are entitled to notice of, and to vote at, the meeting and any
adjournment thereof. Such stockholders may vote in person or by proxy.
STOCKHOLDERS WHO FIND IT CONVENIENT ARE CORDIALLY INVITED TO ATTEND THE
MEETING IN PERSON. IF YOU ARE NOT ABLE TO DO SO AND WISH THAT YOUR STOCK BE
VOTED, YOU ARE REQUESTED TO FILL IN, SIGN, DATE AND RETURN THE ACCOMPANYING
PROXY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.
By Order of the Board of Directors,
GEOFFREY T. BURNHAM
Chairman of the Board
Dated: May 18, 1999
<PAGE>
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION
15 Link Drive
Binghamton, New York 13904
_________________
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Semiconductor Laser International Corporation (the
"Company") of proxies to be used at the Annual Meeting of Stockholders of the
Company (the "Meeting") to be held at 9:30 o'clock a.m., local time, on June
11, 1999, at the New York Hilton Hotel and Tower, 1335 Avenue of the
Americas, New York, New York 10019 and at any adjournments thereof. The
purposes of the meeting are:
1. To elect 5 directors of the Company to hold office until the next
Annual Meeting of Stockholders and until the election and qualification of
their respective successors;
2. To consider and vote upon a proposal to approve an amendment to
the Certificate of Incorporation of the Company (the "Certificate of
Incorporation") to effect a reverse stock split of the Company's common
stock, par value $0.01 per share (the "Common Stock") such that every seven (7)
shares of Common Stock outstanding on the effective date of such reverse stock
split would be converted into one (1) share of Common Stock (the "Stock Split");
3. To consider and vote upon a proposal to approve the issuance of
an aggregate of 5,500,000 shares of the Common Stock issuable (x) upon the
conversion of the Company's Series B Convertible Preferred Stock (the "Series
B Stock"), par value $0.01 per share (the "Series B Stock") and (y) upon
exercise of a warrant to purchase an aggregate of 500,000 shares of Common
Stock (the "bmp Warrant"), at an exercise price of $0.50 per share, issued to
bmp Mobility AG Venture Capital ("bmp");
4. To ratify the selection of PricewaterhouseCoopers LLP as
independent public accountants for the Company for the fiscal year ending
December 31, 1999; and
5. To transact such other business as may properly come before the
meeting.
If proxy cards in the accompanying form are properly executed and
returned, the shares of Common Stock (the "Voting Stock") represented thereby
will be voted as instructed on the proxy. If no instructions are given, such
shares will be voted (i) for the election as directors of the nominees of the
Board of Directors named below; (ii) for the proposal to amend the
Certificate of Incorporation to effect a one-for-seven reverse stock split of
all issued and outstanding shares of the Common Stock; (iii) for the proposal to
approve the issuance of 5,500,000 shares of Common Stock issuable upon the
conversion of the Company's Series B Stock and upon exercise of the bmp Warrant;
(iv) for the proposal to ratify the selection of PricewaterhouseCoopers LLP as
independent public accountants for the fiscal year ending December 31, 1999,
and (v) in the discretion of the Proxies named in the proxy card on any other
proposals to properly come before the meeting or any adjournment thereof. Any
proxy may be revoked by a stockholder prior to its exercise upon written
notice to the Chief Executive Officer of the Company, or by the vote of a
stockholder cast in person at the meeting. The approximate date of mailing
of this Proxy Statement is May 18, 1999.
The person named as proxy is Geoffrey T. Burnham, the Chief Executive
Officer, President, Chief Financial Officer and Chairman of the Board of the
Company. The cost of preparing, assembling and mailing the Notice of
Meeting, the proxy card, this Proxy Statement and the other material enclosed
and all clerical and other expenses of solicitation will be borne by the
Company. In addition to the solicitation of proxies by use of the mails,
directors, officers and employees of the Company may solicit proxies by
telephone, telegram or personal interview. The Company also will request
brokerage houses and other custodians, nominees and fiduciaries to forward
soliciting material to the beneficial owners of the Common Stock held of record
by such custodians and will reimburse such custodians for all of their costs
and expenses in forwarding such soliciting materials.
VOTING
Holders of record of Common Stock on April 15, 1999, will be entitled to
vote at the Annual Meeting or any adjournment thereof. A majority of
outstanding shares as of the record date will constitute a quorum for the
transaction of business. As of April 15, 1999 there were 12,150,832 shares of
Common Stock outstanding and entitled to vote. Abstentions and broker
non-votes are counted for purposes of determining the presence or absence of a
quorum for the transaction of business. Each share of Common Stock entitles
the holder thereof to one vote on all matters to come before the Annual
Meeting. Holders of shares of Common Stock are not entitled to cumulative
voting rights.
The favorable vote of a plurality of the votes of the shares of Common
Stock present in person or represented by proxy at the Annual Meeting is
necessary to elect the nominees for directors of the Company, the favorable
vote of a majority of the votes of the shares of Common Stock present in
person or represented by proxy at the Annual Meeting is necessary to approve
the issuance of Common Stock upon conversion of the Series B Stock and upon
exercise of the bmp Warrant and the favorable vote of a majority of the votes
of the outstanding shares of Common Stock is necessary to approve the
amendment to the Company's Charter effecting the Stock Split. Abstentions are
counted as a vote against the proposals being considered, except for the
election of directors as to which they will have no effect. Broker non-votes
will have no effect on the outcome of the proposals set forth above. There
are no rights of appraisal or similar rights of dissenters with respect to any
matter to be acted upon.
To the best knowledge of the Company, none of the persons who were
executive officers or directors of the Company at any time since the beginning
of 1998, none of the nominees for election as directors and none of the
associates of any of the foregoing, have any interest in the matters to be
acted upon at the Meeting, other than with reference to their election as
directors.
The Board of Directors recommends a vote FOR each of the proposals set
forth above.
ITEM 1. ELECTION OF THE DIRECTORS
Five directors are to be elected at the Annual Meeting. The Board of
Directors has recommended the persons named in the table below as nominees for
election as directors. All such persons are presently directors of the
Company. Unless otherwise specified in the accompanying proxy, the shares
voted pursuant to such proxy will be voted for the persons named below as
nominees for election as directors. If, for any reason, at the time of the
election any of the nominees should be unable or unwilling to accept election,
it is intended that such proxy will be voted for the election, in such
nominee's place, of a substitute nominee recommended by the Board of
Directors. However, the Board of Directors has no reason to believe that any
nominee will be unable or unwilling to serve as a director.
George W. Barrett and Brian J. Thompson, who both served as directors during
fiscal 1998, have advised the Company of their determination to retire as
directors of the Company. Mr. Barrett is retiring effective as of the date
of the Company's Annual Meeting and Mr. Thompson resigned as of May 5, 1999.
There has been no disagreement between the Company and either of Messrs.
Barrett and Thompson.
The following information is supplied with respect to the nominees for
election as directors of the Company:
NOMINEES FOR DIRECTOR
<TABLE>
<CAPTION>
Name of Director Age Director of the Company Since
---------------- --- -----------------------------
<S> <C> <C>
Geoffrey T. Burnham 51 September 1993
Susan M. Burnham 43 September 1993
George W. Hippisley 58 Nominee
Edwin B. Spievack 66 Nominee
Roger D. O'Brien 50 Nominee
</TABLE>
Dr. Geoffrey T. Burnham, a founder of the Company, has served as its
Chairman, President, and Chief Executive Officer, since its incorporation in
September 1993, and devoted his full-time efforts to the establishment of the
Company commencing in May 1993. From April 1990 through July 1990, Dr. Burnham
served as a consultant to, and from July 1990 until May 1993, he was employed
by, Northeast Semiconductor, Inc. ("NSI"), and served as its President and as
a director from October 1991 through May 1993. Dr. Burnham resigned from NSI
upon its acquisition in a hostile take-over. Approximately five months after
his resignation, NSI filed for Chapter 7 bankruptcy protection. Prior to
April 1990, Dr. Burnham had over 16 years of experience in the laser field,
including 10 years in the semiconductor laser field, holding management
positions with Hercules Aerospace Corporation (1987 to 1989), General
Optronics Corporation, a company involved in manufacturing laser equipment for
telecommunications applications (1984 to 1986) and General Electric Co.
("General Electric") (1975 to 1984). Dr. Burnham founded and, for five years,
directed General Electric's Laser Business Venture. In addition, he was
corporate liaison between General Electric and the University of Rochester on
General Electric's Consortium on Inertial Confinement Fusion. Dr. Burnham
served as General Electric's Corporate Technical Recruiter at the University
of Rochester as well as Chairman of the United States government's laser
section of the Military Critical Technologies List. Dr. Burnham is married to
Susan Burnham.
Susan M. Burnham has been Vice President, Treasurer and a director of the
Company since its incorporation in September 1993. From May 1993 to September
1993, Ms. Burnham assisted Dr. Burnham in the establishment of the Company
and, from February 1992 through April 1993, Ms. Burnham was not employed. From
August 1986 through January 1992, she served as a national account executive
in marketing and sales for MALI Industries Inc., a company involved in
turn-key subcontract manufacturing of electronic components,
electro-mechanical assemblies, and copy machine refurbishment and
manufacturing, and was responsible for handling all major company accounts, as
well as all new accounts. She established a customer base that included
several divisions of General Electric, IBM and Eastman Kodak Company,
initiating partnership agreements for all major customers. Ms. Burnham was
employed by General Electric from December 1977 through July 1984, during
which time she held administrative positions in various laser and electronic
programs with a particular emphasis on the monitoring of operating budgets.
Ms. Burnham is married to Dr. Burnham.
George W. Hippisley is a nominee for director of the Company. Mr.
Hippisley is currently the owner of Cohasset Enterprises, a sole-proprietorship
founded in late 1997 to provide business development consulting services to
technology-intensive manufacturing firms and not-for-profit organizations.
Since August of 1998, Mr. Hippisley has been a member of the Board of
Directors, Secretary, and Executive Director of the Photonics Industry
Association of New York, Inc. ("PIANY"), a not-for-profit New York
corporation which has filed with the Internal Revenue Service for 501(c)(6)
trade association status. PIANY's mission is to promote the photonics,
optics, and imaging industry of New York State. Since 1991 he has served as
Executive Director of the New York Photonics Development Corporation, a
501(c)(3) not-for-profit New York corporation, responsible for developing
and executing technology transfer and commercialization programs to improve
the competitiveness of small and mid-size photonics manufacturing firms
throughout New York State. From 1985 to 1990 Mr. Hippisley was Chief
Operating Officer for Eagle Comtronics, Inc., a privately-held manufacturer of
electronic filters and encryption systems for the CATV industry
Edwin B. Spievack is a nominee for director of the Company. Mr. Spievack
served from 1982 through April 1995 as President of the North American
Telecommunications Association, a worldwide telecommunications industry trade
association. Since January 8, 1996, Mr. Spievack has served as Vice President
and General Counsel of Source Inc., a communications equipment distributor.
Since March 18,1999, Mr. Spievack has served as Principal, Vice President and
General Counsel of Shotwell & Carr, Inc., a company specializing in providing
regulatory approval services for human and veterinary pharmaceutical and
medical device company. Mr. Spievack currently also serves as Vice President
and General Counsel to Source, Inc., a secondary market supplier of
telecommunications products. He is also President of EBSco, Limited, a
business consulting concern, from 1982 to the present. Mr. Spievack served
as a director of Communications World International, Inc., a communications
equipment distributor, from 1993 to 1998, and as a director of TPI
Enterprises, Inc., a company involved in restaurant operations, from 1986 to
1996.
Roger D. O'Brien is a nominee for director of the Company. Since 1996, Mr.
O'Brien has served as Chief Operating Officer of Ultralife Batteries, Inc., a
publicly held manufacturer of advanced battery power sources based in Newark,
NY. From 1991 to 1996 Mr. O'Brien was Chief Executive Officer as well as a
major shareholder of Holotek Ltd., a high-technology company with a proprietary
position in the design, development, manufacture and sales of laser imaging
systems worldwide. Mr. O'Brien is a member of the Board of Directors of
Odyssey Software, Inc., a private telecommunications software company, and
Rochester General Hospital. He is an Advisory Board member of the Rochester
Venture Capital Group and serves as a member of the NRS Executive Committee
for The Rochester Institute of Technology, as well as the Venture Development
Council of High-Technology Rochester. Since 1996 he has served as Chairman of
the Science and Technology Committee for the Rochester Chamber Annual Civic
Awards. In 1994 and 1995, Mr. O'Brien was appointed by Mayor William Johnson
as Chairman of the Roundtable for Small and Mid-Sized Businesses in the City
of Rochester.
MEETINGS OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 1998, the Board of Directors
met, or acted by unanimous written consent, on eight (8) occasions. Each of
the directors attended 75% or more of the aggregate number of meetings of the
Board of Directors and committees on which he served during the 1998 fiscal
year.
The Board of Directors has no standing nominating committee.
During fiscal 1998, the Compensation Committee consisted of George W.
Barrett and Brian J. Thompson. The Compensation Committee makes recommendations
to the Board of Directors with respect to compensation of executive officers.
In addition, the Compensation Committee administers the Company's 1995 Stock
Option Plan, as amended (the "Option Plan"), determining the persons to whom
options should be granted and the number of options to be granted to such
persons. The Compensation Committee also administers plans and programs
relating to the employee benefits, incentives and compensation. The
Compensation Committee did not meet in 1998.
During fiscal 1998, the Audit Committee consisted of Messrs. Barrett and
Thompson. The Audit Committee, among other things, makes recommendations to the
Board of Director regarding the selection of independent auditors, reviews and
evaluates the result and scope of the audit and other services provided by the
Company's independent auditors, reviews the Company's financial statements and
reviews and evaluates the Company's internal control functions. The Audit
Committee met on one (1) occasion in 1998.
SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of May 12, 1999
(except as otherwise noted) with respect to the beneficial ownership of the
Common Stock by (i) each person known by the Company to be the beneficial
owner of more than 5% of the outstanding shares of Common Stock (ii) each
director of the Company, (iii) each named officer of the Company listed in the
Summary Compensation Table and (iv) all officers and directors of the Company
as a group. Unless otherwise noted, the Company believes that all persons
named in the table have sole voting and investment power with respect to all
shares of Common Stock beneficially owned by them.
<TABLE>
<CAPTION>
<S> <C> <C>
Amount and Nature of Percent of
Name and Address of Beneficial Owner(1) Beneficial Ownership(2) Common Stock
- --------------------------------------- ----------------------- ------------
Geoffrey T. Burnham 431,894(3) 3.5%
Susan M. Burnham 431,894(4) 3.5%
Leonard E. Lundberg 0 0%
Brian J. Thompson
692 Mount Hope Avenue
Rochester, NY 14620(10) 17,351(5) *
George Barrett
119 High Crest Drive
West Milford, NJ 07840(10) 17,841(6) *
bmp Mobility AG Venture Capital
Charlottenstrasse 16, D-10117
Berlin
Germany 2,367,650(7) 19.5%
Dafico Investment Corporation
c/o Frank R. Cohen, Esq.
Cohen & Cohen
445 Park Avenue, 15th Floor
New York, New York 10022(8) 660,468 5.4%
All Directors and executive officers
as a group(5 persons) 898,980(9) 7.3%
</TABLE>
* Represents beneficial ownership of less than 1% of the Common Stock
(1)Unless otherwise indicated, the address of each beneficial owner identified
is 15 Link Drive, Binghamton, NY 13904.
(2)A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from May 12, 1999 upon the exercise
of options, warrants or convertible securities. Each beneficial owner's
percentage ownership is determined by assuming that options, warrants or
convertible securities that are held by such person (but not those held by any
other person) and which are exercisable within 60 days of May 12, 1999 have
been exercised or converted. Assumes a base of 12,150,832 shares of Common
Stock outstanding, before any consideration is given to outstanding options or
warrants.
(3)Includes 23,823 shares held in trust by Dr. Burnham as trustee, as to which
Dr. Burnham disclaims any beneficial interest; 4,925 shares, and 4,925 shares
issuable upon exercise of Private Warrants (as defined in Footnote 8), held in
an IRA trust for the benefit of Dr. Burnham; certain non-plan options to
purchase 39,404 shares; and 165,405 shares owned by Susan M. Burnham, the wife
of Dr. Burnham, and 31,000 shares issuable upon the exercise of options
granted to Ms. Burnham pursuant to the Company's 1995 Stock Option Plan, as
amended (the "Option Plan"), as to which Dr. Burnham disclaims any beneficial
interest.
(4)Includes 162,412 shares owned by Dr. Burnham; 23,823 shares held in trust by
Dr. Burnham as trustee; 4,925 shares, and 4,925 shares issuable upon exercise
of Private Warrants, held in an IRA trust for the benefit of Dr. Burnham; and
39,404 shares issuable upon exercise of certain non-plan options held by Dr.
Burnham, as to all of which Susan M. Burnham disclaims any beneficial
interest; and 31,000 shares issuable upon the exercise of Option Plan options
granted to Ms. Burnham.
(5)Consists of certain non-plan options to purchase 9,851 shares and Option
Plan options to purchase 7,500 shares.
(6)Consists of 10,341 purchased shares and Option Plan options to purchase
7,500 shares.
(7)Consists of 2,000,000 shares of common stock purchased February 8,1999 and
367,650 shares previously owned. Excludes 1,162,500 shares of Common Stock
issuable upon conversion of the Series B Stock because such shares are not
convertible by bmp according to the terms of the Securities Purchase Agreement,
as amended, pursuant to which such shares were acquired and, in any case, are
not convertible into Common Stock by anybody unless stockholder approval is
obtained.
(8)Based upon numbers provided to the Company as of July 28, 1998.
(9)Includes an aggregate of 93,170 shares of Common Stock issuable upon the
exercise of Option Plan options, certain non-plan options and warrants (the
"Private Warrants"), through April 1995 to investors in the Company's December
1994 private placement, to purchase 4,925 shares of Common Stock purchased by
Dr. Burnham and warrants purchased in the Company's initial public offering.
(10)George W. Barrett and Brian J. Thompson, who both served as directors during
fiscal 1998, have advised the Company of their determination to retire as
directors of the Company. Mr. Barrett is retiring effective as of the date of
the Company's Annual Meeting and Mr. Thompson resigned as of May 5, 1999. There
has been no disagreement between the Company and either of Messrs. Barrett and
Thompson.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the names, ages and all positions and
offices with the Company held by the Company's present executive officers.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Dr. Geoffrey T. Burnham 51 Chairman, President,Chief Executive Officer
Susan M Burnham 43 Vice President, Treasurer and Director
Leonard E. Lundberg 52 Chief Financial Officer
</TABLE>
Following is information with respect to the Company's executive officers
who are not also directors of the Company:
Leonard E. Lundberg has been Chief Financial Officer of the Company since
November, 1998. From March 1998 through November 1998 Mr. Lundberg was
employed as Chief Executive Officer by Miller Aviation, Inc., a company
engaged in providing general aviation services. Miller Aviation, Inc. and
Corporate Wings, Inc. merged in October 1998, at which time Mr. Lundberg
resigned. From January 1996 until February 1998 Mr. Lundberg was employed by
Maines Paper and Food Service, Inc., a company engaged in the food and paper
warehousing and distribution business, in the capacity of Vice President of
Finance. Previously, Mr. Lundberg held the position of Corporate Controller
of Taylor Industries, Inc. from 1988 until 1995. Taylor Industries is
involved in the meat packing and rendering industries.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the cash and other compensation paid by the
Company to Dr. Geoffrey T. Burnham, its President and Chief Executive Officer,
during the fiscal years ended December 31, 1998, 1997 and 1996. No other
executive officer of the Company received aggregate compensation and bonuses
which exceeded $100,000 during such years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual
Fiscal Yr Compensation Long-Term
Ended Dec --------------- Compensation:Securities
Name and Principal Position 31 Salary Bonus Underlying Options
<S> <C> <C> <C> <C>
Dr. Geoffrey T. Burnham 1998 $133,000 - -
Chairman,President and Chief 1997 $127,395 - -
Executive Officer 1996 $116,269 - -
</TABLE>
There were no options to purchase Common Stock or stock appreciation rights
granted to Dr. Burnham during the fiscal year ended December 31, 1998.
Aggregated Option Exercise During Fiscal 1998 and Year End Option Values
The following table sets forth information concerning outstanding options to
purchase Common Stock held by Dr. Burnham as of the year ended December 31,
1998. Dr, Burnham did not exercise any options during fiscal 1998.
<TABLE>
<CAPTION>
Number of Securities Value of
Underlying Unexercised Unexercised "In-the-Money"
Options at Fiscal Y/E(#) Options at Fiscal Y/E($)(1)
Shares ------------------------ ---------------------------
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dr. Geoffrey T. Burnham 0 0 39,404 0 14,777 0
</TABLE>
(1)Based upon an estimated fair market value of $0.375 per share of Common
Stock as of December 31, 1998, less the $0.050 exercise price of such
options.
Compensation of Directors
Other than compensation otherwise payable under employment agreements to
Dr. Burnham and Ms. Burnham, employee directors receive no cash compensation
for serving on the Board of Directors (other than reimbursement of reasonable
expenses incurred in attending meetings). The Company pays its non-employee
directors $1,000 for each personal appearance at Board Meetings and
reasonable out-of-pocket expenses for each Board and committee meeting
attended. In addition, all non-employee directors receive, pursuant to the
Option Plan, annual grants of options to purchase 2,500 shares of Common
Stock as compensation for their service as directors in the following year.
The Board is permitted to grant non-employee directors such
additional options as it shall determine in its discretion. In addition,
newly elected non-employee directors receive a cash payment of $2,000
following their initial election or appointment. Newly elected non-employee
directors receive a pro rata portion of such grant based on the period
remaining until the next date of grant following their date of election. In
March 1999, under the Option Plan, the Company granted additional options to
purchase 2,500 shares of Common Stock at to each of Mr. Barrett and Dr. Thompson
exercisable on September 19, 1999 at an exercise price of $1.50 per share.
Employment Agreements
The Company entered into employment agreements with Dr. Geoffrey T.
Burnham and Susan M. Burnham in October 1995. Each of Dr. Burnham's and Ms.
Burnham's employment agreements provides for an initial three-year term,
commencing on October 1, 1995, and each requires full-time service to the
Company. Dr. Burnham's agreement provides for a base salary $110,000 per
annum, and Ms. Burnham's agreement provides for a base salary $75,000 per
annum. Each of the agreements provides for continuing automatic one-year
extensions to maintain its three-year term, until the agreement is terminated
by either party. Certain fringe benefits are also provided, including split
dollar life insurance and certain expense allowances. Dr. Burnham and Ms.
Burnham also may be granted annual increases of 10% per annum at the
discretion of the Board and bonuses based upon meeting defined goals
established by the Board. No such bonuses have been awarded to date. All
such bonuses and other increases were required to be approved by Whale
Securities Co., L.P., the underwriter of the Company's initial public
offering, for a period of three years following the effective date of such
offering (i.e., until March 19, 1999). These agreements also provide that the
Company will continue to pay the base salary to the employee or the employee's
legal representative in the event of the employee's termination due to
disability or death, such payment to be made during the time period
commencing at the time of such termination and ending at the end of what would
have been the full employment term. The agreements contain
provisions prohibiting the employee from competing with the Company during the
term of employment and for a period of two years thereafter. Dr. Burnham's
agreement provides that he will serve as Chairman of the Board, and Ms.
Burnham's agreement provides that she will serve as a director on the
Board.
CERTAIN TRANSACTIONS
The Company entered into the Securities Purchase Agreement (the
"Securities Purchase Agreement"), dated as of February 5, 1999, between the
Company and bmp, as amended by Amendment No. 1 to Securities Purchase
Agreement (the "Amendment"), dated as of April 28, 1999, between the Company
and bmp (the Securities Purchase Agreement, as amended by the Amendment is
hereinafter referred to as the "Amended Purchase Agreement").
Pursuant to the terms of the Securities Purchase Agreement, bmp agreed
to make a two stage equity investment in the Company in an amount ranging
between $2,050,000 and $2,750,000. The first stage of the investment was
consummated on February 8, 1999 by the parties, and bmp purchased 2,000,000
newly issued shares of the Company's Common Stock at a purchase price of
$0.375 per share for an aggregate purchase price of $750,000. bmp had
previously purchased 367,650 shares of the Company's Common Stock in unrelated
open market transactions. In the second stage of the investment, bmp agreed
to purchase a minimum of 650,000 and a maximum of 1,000,000 newly issued
shares of non-voting Series B Stock of the Company and (such minimum or
maximum number of shares to constitute all of the issued and outstanding
shares of Series B Stock) at a purchase price of $2.00 per share, or $0.40
per share of Common Stock into which the Series B Stock is convertible, for
a minimum aggregate purchase price of $1,300,000 and a maximum aggregate
purchase price of $2,000,000, subject to the satisfaction of certain
conditions contained in the Securities Purchase Agreement.
Pursuant to the Amendment, bmp agreed to purchase the maximum of
1,000,000 newly issued shares of Series B Stock for an aggregate purchase
price of $2,000,000, to be paid in several installments. On April 29, 1999,
bmp purchased 232,500 shares of Series B Stock for a purchase price of $465,000
(the "April Installment"), and bmp agreed to purchase 192,500 shares of
Series B Stock on or before May 31, 1999 for a purchase price of $385,000 (the
"May Installment") and 575,000 shares of Series B Stock on or before June 30,
1999 for a purchase price of $1,150,000 (the "June Installment"). If the
Nasdaq Conditions (as hereinafter defined under Item 3 of this Proxy
Statement) are satisfied prior to the consummation of any particular
installment, the remaining portion of the purchase price will be due upon
issuance of the remaining number of unissued shares, and if the Nasdaq
Conditions are not satisfied prior to June 30, 1999, payment of the June
Installment and issuance of the remaining number of shares of Series B Stock
yet to be issued under the Amended Purchase Agreement at such time will be
postponed until the Nasdaq Conditions are satisfied (in either case, such
installment is hereinafter referred to as the "Final Installment").
If the Nasdaq Conditions (as hereinafter defined under Item 3 of this Proxy
Statement) are satisfied prior to the consummation of any particular
installment, the remaining portion of the purchase price will be due upon
issuance of the remaining number of unissued shares, and if the Nasdaq
Conditions are not satisfied prior to June 30, 1999, payment of the June
Installment and issuance of the remaining number of shares of Series B Stock
yet to be issued under the Amended Purchase Agreement at such time will be
postponed until the Nasdaq Conditions are satisfied (in either case, such
installment is hereinafter referred to as the "Final Installment"). If the
Nasdaq Conditions are not satisfied by July 31, 1999, the Board of Directors
of the Company will be increased by such number as is equal to one more than
the number of directors constituting the Board of Directors at such time
(i.e., if such Board is constituted by five (5) directors then the number of
directors shall be increased by six (6), for a total of eleven (11) directors),
and the holders of a majority of the outstanding shares of Series B Stock will
have the right to elect the directors necessary to fill the vacancies created
by such increase in the size of the Board of Directors. Upon satisfaction of
the Nasdaq Conditions, these additional directors will cease to be directors
and the additional voting rights granted to the holders of the Series B Stock
will be terminated. A more complete discussion of the Amended Purchase
Agreement and certain provisions of the Series B Stock is contained in Item 3
of this Proxy Statement.
The purchases of Series B Stock under the Amended Purchase Agreement are
subject to the terms and conditions set forth therein including, but not
limited to, the satisfaction of the Nasdaq Conditions. In connection with the
Amendment, the Company entered into a consulting agreement (the "Consulting
Agreement"), dated as of April 28, 1999, between the Company and bmp
Management Consultants GmbH ("bmp Consultants"), a German limited liability
corporation wholly owned by bmp AG Venture Capital & Network Management, the
parent company of bmp, providing for the retention of bmp Consultants as
strategic and financial consultants to the Company, for an aggregate
consulting fee of $200,000. The $200,000 aggregate consulting fee is payable as
follows:
(i) six monthly installments of $15,000 beginning immediately following the
funding of the April Installment and ending five months following such funding
date, (ii) $50,000 payable at the closing of the June Installment or the Final
Installment, as applicable, and (iii) six monthly installments of $10,000
beginning six months following the funding of the April Installment and ending
eleven months following such funding date.
In connection with the Amendment, the Company also agreed to issue to bmp,
on the date of the June Installment or the Final Installment, as the case may
be, a five year warrant to purchase an aggregate of 500,000 shares of Common
Stock, at an exercise price of $0.50 per share(the bmp Warrant is attached
hereto as Exhibit "C". The issuance of the bmp Warrant is subject to
stockholder approval as set forth under Item 3 of this Proxy Statement and to
the funding by bmp of the June Installment or the Final Installment, as the
case may be. In addition, subject to the funding of the June Installment or
the Final Installment, as the case may be, bmp is eligible to receive a
finder's fee in the amount of 5% of the net proceeds of any transaction
consummated by the Company within 24 hours following payment of the June
Installment or the Final Installment, as the case may be, involving the
raising of debt or equity capital in a private placement from a source
introduced to the Company by bmp.
In connection with its equity investment, bmp intends to assist the
Company in organizing and structuring the distribution system relating to the
Company's products and services throughout Europe. To date, bmp has begun to
assist the Company in such respect, and has facilitated the execution of a
distributor agreement between the Company and a western European distributor.
The Company has entered into a Distributor Agreement(the "Distributor
Agreement", dated February 22, 1999, with LG Laser Graphics GmbH ("Laser
Graphics"), an entity in which bmp has invested, whereby Laser Graphics has
been granted rights to distribute the Company's products on an exclusive
basis throughout Germany, Switzerland and Austria and on a non-exclusive basis
worldwide outside of Germany, Switzerland and Austria. The Distributor
Agreement also provides for certain discounts on products sold by the Company
to Laser Graphics. In addition to the foregoing, bmp plans generally to assist
and advise the Company in connection with any future listing of the Company's
securities on stock exchanges in Germany.
ITEM 2. AMENDMENT OF CERTIFICATE OF INCORPORATION
TO EFFECT A REVERSE STOCK SPLIT OF THE COMMON STOCK
General
The Board of Directors of the Company has unanimously approved (subject
to stockholder approval), an amendment to the Company's Certificate of
Incorporation, substantially in the form of Exhibit "A" attached to this Proxy
Statement (the "Stock Split Charter Amendment"), and incorporated herein by
this reference, effecting the Stock Split with respect to all issued shares of
Common Stock. However, such text is subject to change as may be required by
the Secretary of State of the State of Delaware (the "Secretary of State").
If the Stock Split Charter Amendment is approved by the actions of the
Company's stockholders, as a result of the Stock Split, every seven (7) shares
of existing Common Stock outstanding ("Old Common Stock") as of the time of
filing of the Stock Split Charter Amendment with the Secretary of State (the
"Effective Date") would be automatically converted into one (1) new share of
Common Stock ("New Common Stock").
The Charter provides for 20,000,000 authorized shares of Common Stock,
$0.01 par value per share; 12,150,832 shares of Common Stock are issued and
outstanding as of May 5, 1999.
Purposes and Reasons for the Stock Split
The Board of Directors believes that the Stock Split is beneficial to the
Company and the stockholders. The principal reasons for the Stock Split are
to increase the effective marketability and liquidity of the Common Stock for
the Company's shareholders and to help the Company to maintain the listing of
the Common Stock on the Nasdaq SmallCap Market ("Nasdaq/SCM").
The Common Stock is currently listed on the Nasdaq/SCM. The closing bid
price per share of the Common Stock on May 5, 1999 was approximately $0.31.
The Company received notice from the Nasdaq/SCM that the Common Stock may
be delisted from the Nasdaq/SCM, based on having a bid price below $1.00 and
on the Company's maintenance of net tangible assets at below $2 million. On
March 18, 1999, the Company participated in an oral hearing before a Panel
authorized by the Nasdaq Board of Directors in Washington, D.C. regarding the
Company's continued listing on the Nasdaq/SCM. The Company presented a two-step
plan for reattaining compliance with Nasdaq/SCM requirements for continued
listing set forth above, which included the Stock Split and the consummation
of an equity investment by bmp . The Nasdaq/SCM has not made any
determination regarding the status of the Common Stock at this time and the
Company is not able to predict the outcome of the hearing.
If the Common Stock were to be delisted from Nasdaq/SCM it would likely
have an adverse effect on the trading in, and liquidity of, the Common Stock.
In such event, the Common Stock would be quoted on the OTC Bulletin Board, to
the extent eligible therefore.
The Board of Directors of the Company believes that the current price per
share of the Company's Common Stock has a tendency to diminish the effective
marketability of the Common Stock because of the reluctance of many brokerage
firms to recommend lower-priced stocks to their clients. Additionally, the
policies and practices of a number of brokerage houses tend to discourage
individual brokers within those firms from dealing in lower-priced stocks.
Some of these policies and practices relate to the payment of broker's
commissions and to time-consuming procedures that operate to make the handling
of lower-priced stocks economically unattractive to brokers. The structure of
trading commissions also tends to have an adverse impact upon holders of
lower-priced stocks because the brokerage commission payable on the sale of a
lower-priced stock generally represents a higher percentage of the sales price
than the commission on relatively higher-priced stock.
The Board of Directors also believes that the relatively low price of the
Common Stock, when compared with the market prices of the common stock of the
Company's competitors, impairs the marketability of the Common Stock to
institutional investors and members of the investing public and creates a
negative impression with respect to the Company. Theoretically, the number of
shares of Common Stock outstanding should not, by itself, affect the
marketability of the Common Stock, the type of investor who acquires it or the
Company's reputation in the financial community. In practice this may not
necessarily be the case, as many investors view low-priced stock as unduly
speculative in nature and, as a matter of practice, avoid or limit investments
in such stocks. The foregoing factors adversely affect not only the liquidity
of the Common Stock, but also the Company's ability to raise additional
capital through a sale of equity securities.
The Board of Directors is hopeful, although no assurance can be given,
that the decrease in the number of shares of Common Stock outstanding as a
consequence of the proposed Stock Split, and the anticipated corresponding
increased price per share, will stimulate interest in the Company's Common
Stock and possibly promote greater liquidity for the Company's shareholders
with respect to those shares presently held by them. However, the possibility
does exist that such liquidity may be adversely affected by the reduced number
of shares which would be outstanding if the proposed Stock Split is effected.
The Board of Directors is also hopeful that the proposed Stock Split will
result in a price level for the shares that will mitigate the present
reluctance, policies and practices on the part of brokerage firms referred to
above, diminish the adverse impact of trading commissions on the potential
market for the Company's shares and enable the Common Stock to remain listed
on the Nasdaq/SCM. However, there can be no assurance that the proposed Stock
Split will achieve the desired results outlined above, nor can there be any
assurance that the price per share of the Common Stock immediately after the
proposed Stock Split will increase proportionately with the reverse split or
that any increase can be sustained for a long period of time. In addition,
there can be no assurance that the Common Stock will meet the listing
requirements for the Nasdaq/SCM following the Stock Split or that the Common
Stock will not be delisted prior to the date of the Annual Meeting.
Management of the Company is not aware of any present efforts by any
persons to accumulate Common Stock or to obtain control of the Company and the
proposed Stock Split of Common Stock is not intended to be an anti-takeover
device. The Stock Split Charter Amendment is being sought simply to enhance
the image of the Company, its corporate flexibility and to price the stock in
a price range generally more acceptable to the brokerage community and to
investors and to enable the Common Stock to remain listed on the Nasdaq/SCM.
Certain Effects of the Stock Split
If effected, the Stock Split would reduce the number of outstanding
shares of Old Common Stock from 12,150,832 as of May 5, 1999 to approximately
1,735,833 shares of New Common Stock as of the Effective Date. (The foregoing
assumes no issuances of Common Stock between the Record Date and the Effective
Date.) The Stock Split itself would have no effect on the number of authorized
shares of Common Stock or the par value of the stock.
All outstanding options, warrants, rights and convertible securities
would be appropriately adjusted, as required by their terms, for the Stock
Split automatically on the Effective Date. The Stock Split would not affect
any stockholder's proportionate equity interest in the Company except for
those stockholders who would receive an additional share of Common Stock in
lieu of fractional shares. None of the rights currently accruing to holders
of the Company's Common Stock, or options or warrants to purchase Common
Stock, will be affected by the Stock Split.
The result of the Stock Split effected due to the Stock Split Charter
Amendment would be that stockholders of the Company who own seven (7) or more
shares of Old Common Stock would receive one (1) share of New Common Stock for
each seven (7) shares of Old Common Stock and one additional share in lieu of
the issuance of fractional shares of New Common Stock. Stockholders of the
Company who own fewer than seven (7) shares of Old Common Stock on the date
the Stock Split is effected, will be entitled to receive one (1) share of New
Common Stock in lieu of receiving fractional shares resulting from the Stock
Split.
Although the Board of Directors believes as of the date of this Proxy
Statement that the Stock Split is advisable, the Stock Split may be abandoned
by the Board of Directors at any time before, during or after the Annual
Meeting and prior to the Effective Date.
The Board of Directors may make any and all changes to the Stock Split
Charter Amendment that it deems necessary in order to file the Stock Split
Charter Amendment with the Secretary of State and give effect to the Stock
Split.
Mechanics of Stock Split
If the Stock Split is approved by the requisite vote of the Company's
stockholders, the Company will file the Stock Split Charter Amendment as soon
as practicable thereafter, and the Stock Split will be effective on the date
of such filing, unless abandoned by the Board of Directors as described
above. Upon filing of the Stock Split Charter Amendment, every seven (7)
issued and outstanding shares of Old Common Stock will, effective upon such
filing, be automatically and without any action on the part of the
stockholders converted into and reconstituted as one (1) share of New Common
Stock.
As soon as practical after the Effective Date, the Company will forward,
or cause to be forwarded, a letter of transmittal to each holder of record of
shares of Old Common Stock outstanding as of the Effective Date. The letter
of transmittal will set forth instructions for the surrender of certificates
representing shares of Old Common Stock to the Company's transfer agent in
exchange for certificates representing the number of whole shares of New Common
Stock into which the shares of Old Common Stock have been converted as a result
of the Stock Split.
CERTIFICATES SHOULD NOT BE SENT TO THE COMPANY OR THE TRANSFER AGENT PRIOR TO
RECEIPT OF SUCH LETTER OF TRANSMITTAL FROM THE COMPANY.
Until a stockholder forwards a completed letter of transmittal together
with certificates representing his, her or its shares of Old Common Stock to
the transfer agent and receives a certificate representing shares of New
Common Stock, such stockholder's Old Common Stock shall be deemed equal to the
number of whole shares of New Common Stock to which each stockholder is
entitled as a result of the Stock Split.
No scrip or fractional certificates will be issued in the Stock Split.
Instead, the Company will issue one additional share of New Common Stock to
each affected Stockholder at no cost to the stockholder. The ownership of a
fractional interest will not give the holder thereof any voting, dividend or
other rights except the right to receive an additional share therefor as
described herein. The number of shares of New Common Stock to be issued in
connection with settling such fractional interests is not expected to be
material.
For the purpose of determining ownership of Common Stock at the Effective
Date, shares will be considered to be held by the person in whose name those
shares are registered on the stock records of the Company, regardless of the
beneficial ownership of those shares. For example, if certain shares are
registered in the name of a husband and his wife, those two amounts of shares
will be treated separately and as held by two different stockholders for the
purposes of determining ownership of Common Stock at the Effective Date.
No service charges will be payable by stockholders in connection with the
exchange of certificates, all expenses of which will be borne by the Company.
Federal Income Tax Consequences of the Stock Split
The following is a summary of the material anticipated federal income tax
consequences of the Stock Split to stockholders of the Company. This summary
is based on the provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), the Treasury Department Regulations (the "Regulations") issued
pursuant thereto, and published rulings and court decisions in effect as of
the date hereof, all of which are subject to change. This summary does not
take into account possible changes in such laws or interpretations, including
amendments to the Code, applicable statutes, Regulations and proposed
Regulations or changes in judicial or administrative rulings; some of which
may have retroactive effect. No assurance can be given that any such changes
will not adversely affect the discussion of this summary.
This summary is provided for general information only and does not
purport to address all aspects of the possible federal income tax consequences
of the Stock Split and is not intended as tax advice to any person or entity.
In particular, and without limiting the foregoing, this summary does not
consider the federal income tax consequences to stockholders of the Company in
light of their individual investment circumstances or to stockholders subject
to special treatment under the federal income tax laws (for example, tax
exempt entities, life insurance companies, regulated investment companies and
foreign taxpayers). In addition, this summary does not address any
consequences of the Stock Split under any state, local or foreign tax laws.
As a result, it is the responsibility of each Stockholder to obtain and rely
on advice from his, her or its personal tax advisor as to: (i) the effect on
his, her or its personal tax situation of the Stock Split, including the
application and effect of state, local and foreign income and other tax laws;
(ii) the effect of possible future legislation and Regulations; and (iii) the
reporting of information required in connection with the Stock Split on his,
her or its own tax returns. It will be the responsibility of each stockholder
to prepare and file all appropriate federal, state and local tax returns.
No ruling from the Internal Revenue Service ("Service") or opinion of
counsel will be obtained regarding the federal income tax consequences to the
Stockholders of the Company as a result of the Stock Split. Accordingly, each
stockholder is encouraged to consult his, her or its tax advisor regarding the
specific tax consequences of the proposed transaction to such stockholder,
including the application and effect of state, local and foreign income and
other tax laws.
The Company believes that the Stock Split will qualify as a
"recapitalization" under Section 368(a)(1)(E) of the Code. As a result, no
gain or loss will be recognized by the Company or its Stockholders in connection
with the Stock Split. A stockholder of the Company who exchanges his, her or
its Old Common Stock solely for New Common Stock will recognize no gain or
loss for federal income tax purposes. A stockholder's aggregate tax basis in
his, her or its shares of New Common Stock received from the Company will be
the same as his, her or its aggregate tax basis in the Old Common Stock
exchanged therefor. The holding period of the New Common Stock received by
such stockholder will include the period during which the Old Common Stock
surrendered in exchange therefor was held, provided all such Common Stock was
held as a capital asset on the date of the exchange.
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.
Stockholder Approval
The favorable vote of a majority of the votes of the outstanding shares
of the Common Stock is necessary to approve the Stock Split Charter Amendment
to the Company's Charter effecting the Stock Split.
Dissenting stockholders have no appraisal rights under Delaware law or
under the Company's Certificate of Incorporation or Bylaws in connection with
the approval of the Stock Split Charter Amendment to effect the Stock Split.
The Board of Directors recommends a vote FOR the proposal to amend the
Certificate of Incorporation to effect the Stock Split.
<PAGE>
ITEM 3. PROPOSAL TO APPROVE THE ISSUANCE OF THE CORPORATION'S COMMON STOCK
UPON CONVERSION OF THE SERIES B PREFERRED STOCK AND UPON EXERCISE OF THE BMP
WARRANT
Description of Proposal
Stockholders are being asked to consider and approve the issuance of up
to an aggregate of 5,500,000 shares of Common Stock issuable upon the
conversion of the Series B Stock issued and the exercise of the bmp Warrant
issuable pursuant to the Amended Purchase Agreement, subject to the terms and
conditions set forth therein. If the Stock Split is approved by the
stockholders, and effected by the Company prior to such issuance, the number
of shares of Common Stock issuable pursuant to the Amended Purchase Agreement
will be reduced to approximately 785,714 shares. It is anticipated that the
net proceeds from the issuance of the issuance of the Preferred Stock and the
bmp Warrant (estimated to be approximately $2.0 million) will be used for
capital expenditures approved by the Board of Directors and working capital,
however, such proceeds initially will be used to pay down the balance of the
Corporation's existing debt.
Pursuant to the terms of the Securities Purchase Agreement, bmp agreed
to make a two stage equity investment in the Company in an amount ranging
between $2,050,000 and $2,750,000. The first stage of the investment was
consummated on February 8, 1999 by the parties, and bmp has purchased
2,000,000 newly issued shares of the Company's Common Stock at a purchase
price of $0.375 per share for an aggregate purchase price of $750,000. bmp had
previously purchased 367,650 shares of the Company's Common Stock in unrelated
open market transactions. In the second stage of the investment, bmp agreed to
purchase a minimum of 650,000 and a maximum of 1,000,000 newly issued shares
of non-voting Series B Stock of the Company(such minimum or maximum number of
shares to constitute all of the issued and outstanding shares of Series B
Stock) at a purchase price of $2.00 per share, or $0.40 per share of Common
Stock into which the Series B Stock is convertible, for a minimum aggregate
purchase price of $1,300,000 and a maximum aggregate purchase price of
$2,000,000, subject to the satisfaction of certain conditions discussed below.
Pursuant to the Amendment, bmp agreed to purchase the maximum of
1,000,000 newly issued shares of Series B Stock for an aggregate purchase
price of $2,000,000, to be paid in several installments. On April 29, 1999,
bmp purchased 232,500 shares of Series B Stock for a purchase price of
$465,000, and bmp agreed to purchase 192,500 shares of Series B Stock on or
before May 31, 1999 for a purchase price of $385,000 and 575,000 shares of
Series B Stock on or before June 30, 1999 for a purchase price of $1,150,000.
If the Nasdaq Conditions (as hereinafter defined) are satisfied prior to the
consummation of any particular installment, the remaining portion of the
purchase price will be due upon issuance of the remaining number of unissued
shares, and if the Nasdaq Conditions are not satisfied prior to June 30, 1999,
payment of the June Installment and issuance of the remaining number of shares
of Series B Stock yet to be issued under the Amended Purchase Agreement at
such time will be postponed until the Nasdaq Conditions are satisfied. If the
Nasdaq Conditions are not satisfied by July 31, 1999 the Board of Directors of
the Company will be increased by such number as is equal to one more than the
number of directors constituting the Board of Directors at such time (i.e., if
such Board is constituted by five (5) directors then the number of directors
shall be increased by six (6), for a total of eleven (11) directors), and the
holders of a majority of the outstanding shares of Series B Stock will have
the right to elect the directors necessary to fill the vacancies created by
such increase in the size of the Board of Directors. Upon satisfaction of the
Nasdaq Conditions, these additional directors will cease to be directors and
the additional voting rights granted to the holders of the Series B Stock will
be terminated.
The purchases of Series B Stock under the Amended Purchase Agreement are
subject to the terms and conditions set forth therein, including, but not
limited to, the satisfaction of the Nasdaq Conditions. In connection with the
Amendment, the Company entered into the Consulting Agreement providing for the
retention of bmp Consultants as strategic and financial consultants to the
Company, for an aggregate consulting fee of $200,000. The $200,000 aggregate
consulting fee is payable as follows: (i) six monthly installments of
$15,000 beginning immediately following the funding of the April Installment and
ending five months following such funding date, (ii) $50,000 payable at the
closing of the June Installment or the Final Installment, as applicable, and
(iii) six monthly installments of $10,000 beginning six months following the
funding of the April Installment and ending eleven months following such
funding date.
The Company has agreed to issue the bmp Warrant to bmp upon funding of
the June Installment or the Final Installment, as the case may be. In
addition, subject to the funding of the June Installment or the Final
Installment, as the case may be, bmp is eligible to receive a finder's fee in
the amount of 5% of the net proceeds of any transaction consummated by the
Company within 24 months following payment of the June Installment or the
Final Installment, as the case may be, involving the raising of debt or equity
capital in a private placement from a source introduced to the Company by
bmp. The April Installment was subject to the absence of any event or
condition which has had a Material Adverse Effect (as defined in the Amended
Purchase Agreement). The purchase of Series B Stock in the June or Final
Installment, as the case may be, is subject to the extension by BSB Bank and
Trust Company ("BSB Bank") of the maturity of the outstanding balance under
the Company's $1,000,000 secured line of credit (the "Line of Credit") from
May 31, 1999 to May 31, 2000. BSB Bank has agreed to extend the Line
of Credit until May 31, 2000 upon consummation of bmp's investment of
$1,3000,000 in the Company, subject to the absence of any material
adverse change in the business. In addition, BSB has agreed to
advance an additional $450,000 under the Line of Credit, to extend the
maturity of the Line of Credit from March 31, 1999 to June 30, 1999, and to
waive the requirement that the Company maintain the Line of Credit balance
within its collateral base formula until the earlier of June 30, 1999 or the
date of receipt by the Company of funds arising out of the second stage of the
investment. In consideration for the modifications to the Line of Credit, the
Company issued to BSB, on February 16, 1999, a warrant to purchase an
aggregate of 500,000 shares of the Common Stock, at an exercise price of
$0.575 per share. Such warrant expires on February 16, 2004 and contains
certain registration rights.
The issuance of Common Stock upon conversion of the Series B Stock and
the exercise of the bmp Warrant may not take place unless (x) permitted by the
applicable rules and regulations of the Nasdaq/SCM on which the Common Stock
is listed or traded (whether because the Company has obtained requisite
shareholder approval or otherwise) or (y) the Company's securities are not
then listed on the Nasdaq/SCM (the conditions contained in clauses (x) and (y)
of this sentence are referred to herein as the "Nasdaq Conditions").
Rule 4310(c)(25)(H)(i)(d) of the National Association of Securities
Dealers, Inc. requires that each issuer of securities authorized for quotation
on the Nasdaq/SCM shall require stockholder approval prior to the sale or
issuance by the issuer of common stock (or securities convertible into or
exercisable for common stock) in connection with a transaction other than a
public offering equal to 20% or more of the common stock or 20% or more of the
voting power outstanding before the issuance for less than the greater of book
or market value of the stock. Where stockholder approval is required, the
minimum vote which will constitute stockholder approval is a majority of the
total votes cast on the proposal in person or by proxy.
The Common Stock is authorized for quotation on the Nasdaq/SCM and, at
the time of the execution of the Securities Purchase Agreement, (i) the
aggregate number of shares of Common Stock to be issuable upon the conversion
of the Series B Stock and the exercise of the bmp Warrant (alone, and when
considered together with the number of shares of Common Stock previously
issued under the Securities Purchase Agreement) was in excess of 20% of the
outstanding shares of Common Stock. Accordingly, pursuant to the terms and
conditions of the Amended Purchase Agreement and the Series B Stock, the
Company is seeking approval of the issuance of the Common Stock upon the
conversion of the Series B Stock and the exercise of the bmp Warrant. The
convertible feature of the Series B Stock is described more fully under the
heading "Series B Stock" of this Item 3 of this Proxy Statement.
The Series B Stock and the bmp Warrant
The following summary of certain provisions of the Series B Stock and the
bmp Warrant does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Series B Stock and
the bmp Warrant which are filed herewith.
Series B Stock
The Series B Stock(attached hereto as Exhibit "B") has a liquidation
preference of $1.00 per share and the holders of shares of Series B Stock are
entitled to share, equally and ratably in any dividends declared by the Board
of Directors of the Company on the Common Stock, whether payable in cash,
shares of Common Stock (or fractions thereof) or property.
Subject to the satisfaction of the Nasdaq Conditions, the Series B Stock
is convertible at any time by the holder at a conversion rate of 5.0, i.e.,
5.0 shares of Common Stock for each share of Series B Stock being converted;
provided, however, that the number of shares of Common Stock issued upon
conversion, taken together with the shares of Common Stock already owned by
bmp, may not exceed 18% of the Company's outstanding Common Stock prior to
satisfaction of the Nasdaq conditions. The conversion rate is subject to
adjustment in certain situations. Pursuant to the terms of the Amended
Purchase Agreement, bmp may not exercise the conversion feature of the Series
B Stock; such feature may only be exercised by an unaffiliated transferee from
bmp. Within ten(10) days of satisfaction of the Nasdaq Conditions, the
limitations upon conversion described in this paragraph will be deleted from the
Certificate of Designations of the Series B Stock, upon the filing by the
Company of an amendment to such Certificate of Designations with the Secretary
of the State of Delaware.
The holders of Series B Stock have no voting rights thereunder except as
provided by the Delaware General Corporate Law, provided, however, that if
the conversion feature is not exercisable by July 31, 1999 because the Nasdaq
Conditions have not been satisfied, the Board of Directors of the Company
will be increased by such number as is equal to one more than the number of
directors constituting the Board of Directors at such time (i.e., if such
Board is constituted by five (5) directors then the number of directors shall
be increased by six (6), for a total of eleven(11) directors), and the holders
of a majority of the outstanding shares of Series B Stock will have
the right to elect the directors necessary to fill the vacancies created by
such increase in the size of the Board of Directors. Upon satisfaction of the
Nasdaq Conditions, these additional directors will cease to be directors and
the additional voting rights granted to the holders of the Series B Stock will
be terminated.
bmp Warrant
The bmp Warrant will entitle the holder thereof to purchase, upon
exercise, at any time subject to satisfaction of the Nasdaq Conditions, an
aggregate of 500,000 shares of Common Stock for an exercise price of $0.50 per
share. The exercise price may be paid in cash or by certified or official
bank check payable to the Company. The bmp Warrant may be exercised in full
or in part, by surrender of the bmp Warrant provided, however, that the amount
payable upon partial exercise shall be the amount obtained by multiplying (i)
the number of shares of Common Stock (without giving effect to any adjustment
thereof) designated by the holder of the bmp Warrant by (ii) the then
applicable exercise price for one share of Common Stock. Upon partial
exercise, the Company will issue a new warrant to the holder. The bmp Warrant
contains customary anti-dilution provisions with respect to future stock
dividends, reclassification, reorganization, consolidations, mergers,
issuances of Common Stock or convertible securities other than the Series B
Stock below the then current market price, and similar actions; provided,
however, that no such adjustment will be made if such adjustment would be an
amount less than 5% of the exercise price then in effect. The bmp Warrant
expires five years from its date of issuance (which will be the date of the
June Installment or the Final Installment, as the case may be).
The bmp Warrant will provide that the shares of Common Stock issuable
upon the exercise thereof and any other securities of the Company that the
holder of the bmp Warrant shall be entitled to receive, or shall have
received, upon the exercise of the bmp Warrant in lieu of or in addition to
shares of Common Stock (the "Other Securities") or in exchange or replacement
of such shares of Common Stock or Other Securities will be "Registrable
Securities" (as defined in the Registration Rights Agreement (the
"Registration Rights Agreement"), dated as of February 5, 1999 between the
Company and bmp. The Registration Rights Agreement and the applicable rights
contained therein are described below.
Amended Purchase Agreement
The Amended Purchase Agreement provides that from the date of the
execution of the Securities Purchase Agreement until the closing of the Final
Installment or the June Installment, as applicable, the Company shall not: (i)
subject to certain exceptions, issue, deliver, sell, redeem, acquire,
authorize or propose to issue, deliver, sell, redeem, acquire or authorize,
any shares of its capital stock of any class or any securities convertible
into, or any rights, warrants or options to acquire, any such shares or
convertible securities or other ownership interest; (ii) amend its certificate
of incorporation, by-laws or the terms of its 1995 Stock Option Plan, as
amended (the "1995 Plan"), to increase the number of authorized shares of
Common Stock or preferred stock thereunder, as the case may be, without the
consent of bmp in any such case; (iii) propose to or declare, set aside, make
or pay any dividend or other distribution, payable in cash, stock, property or
otherwise, with respect to any of its capital stock; (iv) recapitalize or
otherwise modify its capital stock, except that it may effectuate the Stock
Split, and if such Stock Split is consummated by the Company prior to any of
each of the May Installment, the June Installment or the Final Installment, as
applicable, then, following the record date fixed for such Stock Split, the
number of shares of Series B Stock to be acquired by bmp and the purchase
price to be paid for each of the May Installment, the June Installment or the
Final Installment, as applicable, shall remain the same, but the number of
shares of Common Stock into which the Series B Stock may be converted shall be
appropriately adjusted by the Company in order to maintain the proportionate
conversion ratio set forth in the Amended Purchase Agreement; and (v) take any
action to accelerate the exercisability or vesting of any outstanding warrants
or options to purchase Common Stock or modify any other terms of such warrants
or options, including the terms of the 1995 Plan, as a result of the
transactions contemplated by the Amended Purchase Agreement.
The Amended Purchase Agreement also provides that from the date of the
execution of the Securities Purchase Agreement until the funding of the June
Installment or the Final Installment, as applicable, the Company shall use its
best efforts to continue the listing of the Common Stock on the Nasdaq/SCM and
to insure that the shares of Common Stock to be issued upon conversion of the
Preferred Shares are listed or authorized to be quoted on the Nasdaq/SCM or on
any national securities exchange on which shares of Common Stock are then
listed, to the extent that such listing is permitted at such time.
The Amended Purchase Agreement further provides that during the time
period in which bmp holds at least fifty percent (50%) of all or any portion
of the Common Shares and the Series B Stock (including the Common Stock
issuable upon conversion of the Series B Stock), bmp shall have co-investment
rights with respect to any issuances of equity securities of the Company (or
securities or rights convertible into or exercisable for equity securities of
the Company), pursuant to which bmp shall have the right, at its option, to
maintain up to its percentage ownership of outstanding equity of the Company
(on a fully diluted basis, with respect to ownership and with respect to
voting rights) by participating in such issuance of securities on terms no
less favorable in any respect than the terms on which any other purchaser of
such securities participates in such issuance. The maintenance of such
percentage ownership of bmp shall be required only to the extent practicable,
and bmp shall take into account the difficulty of achieving a precise
percentage for the Company while also satisfying a prospective purchaser's
objectives; provided, however, that any shortfall in such maintenance of bmp's
percentage ownership shall be de minimus.
bmp's co-investment rights do not apply to the issuance of (i) the
warrant exercisable for up to 500,000 shares of Common Stock in connection
with the Company's amendment to its Line of Credit maintained by BSB Bank upon
the terms and conditions agreed to by the Company and BSB Bank, (ii) employee
stock options and (iii) the shares of Common Stock issuable upon exercise of
any such employee stock options.
The Amended Purchase Agreement provides that either party may terminate
the Amended Purchase Agreement and the transactions contemplated thereby, in
the event, among other things, of the death or permanent physical disability
or mental incapacity of Dr. Geoffrey T. Burnham, Chief Executive Officer of
the Issuer.
Registration Rights Agreement
Concurrently with entering into the Securities Purchase Agreement, the
Company and bmp entered into the Registration Rights Agreement, pursuant to
which the Company has agreed to grant certain "demand" and "piggyback"
registration rights with respect to the shares of Common Stock issued pursuant
to the Securities Purchase Agreement and issuable upon conversion of the
Series B Stock and exercise of the bmp Warrant to be issued pursuant to the
Amendment. These registration rights are subject to certain customary
blackout and cutback provisions, and are accompanied by customary
indemnification provisions.
If the proposal to approve the issuance of 5,500,000 shares of Common
Stock upon the conversion of the Series B Stock and the exercise of the bmp
Warrant is not approved, then the Series B Stock would remain duly authorized
and outstanding but the conversion feature will not be exercisable and the bmp
Warrant would not be exercisable. If such proposal is not approved and the
Nasdaq Conditions are not otherwise satisfied, the Company would also not be
able to consummate the June Installment or the Final Installment of the equity
infusion, as applicable, contemplated by the Amended Purchase Agreement (i.e.
575,000 shares of Series B Stock for a purchase price of $1,150,000), as
certain conditions to the obligations of the purchaser would not be
satisfied, and the holders of the Series B Stock would have the ability to
elect additional members of the Board of Directors constituting a majority of
the Board of Directors. See "Series B Stock." The issuance will not have any
effects on the rights of existing security holders other than the ones
described above.
The favorable vote of a majority of the outstanding Common Stock
represented at the meeting in person or by proxy is necessary to approve the
proposal to issue the Common Stock upon conversion of the Series B Stock and
upon the exercise of the bmp Warrant.
The Board of Directors has unanimously approved the issuance and
recommends that stockholders vote FOR the proposal to issue Common Stock upon
conversion of the Series B Stock and upon exercise of the bmp Warrant.
The proposal to issue Common Stock upon conversion of the Series B Stock
and upon exercise of the bmp Warrant shall be withdrawn and shall not be
submitted for the approval of the stockholders at the Annual Meeting in the
event that the Nasdaq Conditions are satisfied prior to the date of the Annual
Meeting without procuring stockholder approval.
ITEM 4. RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS FOR FISCAL YEAR 1999
The Board of Directors believes it is appropriate to submit for
ratification by the stockholders its selection of PricewaterhouseCoopers LLP
as the independent public accountants for the Company for fiscal year 1999.
PricewaterhouseCoopers LLP has served as independent accountants for the
Company since fiscal year 1993. A representative of PricewaterhouseCoopers
LLP is expected to be present at the Meeting, will have the opportunity to
make a statement if they desire to do so and are expected to be available to
respond to appropriate questions. Unless otherwise specified, shares
represented by proxies will be voted for the ratification of
PricewaterhouseCoopers LLP as the independent public accountants for the
Company. If the stockholders do not so approve, the selection of independent
public accountants will reconsidered by the Board of Directors.
The Board of Directors recommends a vote FOR the proposal to ratify
PricewaterhouseCoopers as independent public accountants for fiscal year 1999.
COMPLIANCE WITH THE EXCHANGE ACT
The Company's executive officers and directors are required under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Copies of those reports must also be furnished to the Company.
Based solely on the Company's review of the copies of such reports it has
received, the Company believes that all its executive officers and directors
and greater than ten percent beneficial owners complied with all filing
requirements applicable to them.
OTHER BUSINESS
The Board of Directors of the Company currently knows of no other matters
to be presented at the Annual Meeting. However, if any other matters properly
come before the meeting, or any adjournment thereof, it is intended that
proxies in the accompanying form will be voted in accordance with the
judgment of the persons named therein.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the next annual
meeting of the Company's stockholders must be received by the Company for
inclusion in the Company's 2000 Proxy Statement and form of proxy on or prior
to February 27, 2000 in accordance with Rule 14a-8(e) promulgated under the
Exchange Act. This Proxy Statement confers discretionary authority to vote on
any stockholder proposal with respect to which the Company did not receive
notice a reasonable time before mailing of this Proxy Statement in accordance
with Rule 14a-4(c) under the Exchange Act.
ANNUAL REPORTS
The Company's Annual Report on Form 10-KSB for the year ended December
31, 1998 (the "Form 10-KSB") is being furnished simultaneously herewith. The
Form 10-KSB is not considered a part of this Proxy Statement.
The Company will also furnish to any stockholder of the Company a copy of
any exhibit to the Form 10-KSB as listed thereon, upon request and upon payment
of the Company's reasonable expenses of furnishing such exhibit. Requests
should be directed to Geoffrey T. Burnham, Chief Executive Officer,
Semiconductor Laser International Corporation, 15 Link Dive, Binghamton, New
York 13904.
<PAGE>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Company has engaged PricewaterhouseCoopers LLP as independent public
accountants for the Company for fiscal year 1999. PricewaterhouseCoopers LLP
has served as the independent accountant for the Company since fiscal year
1993. A representative of PricewaterhouseCoopers LLP is expected to be
present at the Meeting, will have the opportunity to make a statement if they
desire to do so and are expected to be available to respond to appropriate
questions.
It is important that your shares be represented at the meeting. If you
are unable to be present in person, you are respectfully requested to sign the
enclosed proxy and return it in the enclosed stamped and addressed envelope as
promptly as possible.
By Order of the Board of Directors,
GEOFFREY T. BURNHAM
Chairman of the Board
Dated: May 18, 1999
Binghamton, New York
<PAGE>
EXHIBIT A
PROPOSAL TO AUTHORIZE THE COMPANY'S BOARD OF DIRECTORS TO FILE AN
AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION TO EFFECT A 1-FOR-6
REVERSE SPLIT OF THE COMPANY'S COMMON STOCK
AMENDMENT TO CERTIFICATE OF INCORPORATION OF
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION'S
CERTIFICATE OF INCORPORATION
a Delaware Corporation
(Pursuant to Sections 242 and 228 of the Delaware General Corporation Law)
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION, a corporation organized and
existing under the General Corporation Law of the State of Delaware, hereby
certifies as follows:
FIRST: That at a meeting of the Board of Directors of Semiconductor
Laser International Corporation (hereinafter called the "Corporation")
resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of the Corporation to effect a reverse stock
split of shares of Common stock of the Corporation, par value $ .01 per share
("Common Stock") on the basis if issuing one (1) share of Common Stock for
each seven (7) issued shares of Common Stock, declaring said amendment to be
advisable and in the best interests of the Corporation and its stockholders
and authorizing the appropriate officers of the Corporation to solicit the
consent of the stockholders therefor, which resolution is as follows:
RESOLVED, that the Board of Directors is authorized to file an
amendment to the Company's Articles of Incorporation following this proposal
to effect a reverse 1-for-7 stock split (the "Stock Split"). Upon the filing
of this amendment with the office of the Secretary of State of the State of
Delaware, each share of Common Stock of the Corporation, issued at such time,
shall be changed into one-seventh of one fully paid and non-assessable share
of Common Stock of the Corporation. In lieu of the issuance of any fractional
shares that would otherwise result from the reverse stock split effected
hereby, the Corporation shall issue to any stockholder that would otherwise
receive fractional shares of Common Stock one (1) additional share of Common
Stock; and
RESOLVED, that following the effectiveness of this amendment,
certificates for the shares of Common Stock to be outstanding after the Stock
Split shall be issued pursuant to procedures adopted by the Corporation's
Board of Directors and communicated to those who are to receive new
certificates.
SECOND: That said amendment of the Certificate of Incorporation of
the Corporation was authorized by a vote of the holders of the necessary
number of shares at a meeting duly called and held, upon notice in accordance
with Section 222 of the General Corporation Law of the State of Delaware at
which meeting a majority of the outstanding shares entitled to vote thereon
were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH: That the capital of the Corporation shall not be reduced
under or by reason of said amendment.
By:_______________________________
Geoffrey T. Burnham, President,
Chief Executive Officer and
Chairman of the Board
<PAGE>
EXHIBIT B
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES B CONVERTIBLE
PREFERRED STOCK
OF
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION
(Pursuant to Section 151 of the Delaware General Corporation Law)
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION, a corporation organized
and existing under the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY THAT:
Pursuant to authority conferred upon the Board of Directors (the
"Board") by the Certificate of Incorporation of the Corporation, as amended to
date (the "Certificate of Incorporation") and pursuant to the provisions of
Sect 151 of the Delaware General Corporation Law, the Board, at a meeting
held on February 2, 1999, adopted the following resolution providing for the
voting powers, designations, preferences and rights, and the qualifications,
limitations and restrictions of the Series B Convertible Preferred Stock.
WHEREAS, the Certificate of Incorporation provides for two classes
of shares known as common stock, $.01 par value per share (the "Common
Stock"), and preferred stock, $.01 par value per share (the "Preferred
Stock"); and
WHEREAS, the Board is authorized by the Certificate of Incorporation
to provide for the issuance of the shares of Preferred Stock in one or more
series and, by filing a certificate pursuant to the applicable law of the
State of Delaware, to establish from time to time the number of shares to be
included in any such series and to fix the voting powers, designations,
preferences and rights of the shares of any such series and the
qualifications, limitations and restrictions thereof.
NOW, THEREFORE, BE IT RESOLVED, that the Board deems it advisable
to, and hereby does, designate a Series B Convertible Preferred Stock and
fixes and determines the voting powers, designations, preferences and rights,
and the qualifications, limitations and restrictions relating to the Series B
Convertible Preferred Stock as follows:
1. Designation. The shares of such series of Preferred Stock
individually and in the aggregate shall be designated "Series B Convertible
Preferred Stock" (referred to herein as the "Series B Stock").
2. Authorized Number. The number of shares constituting the Series B
Stock shall be one million (1,000,000). The number of authorized shares of
Series B Stock may be reduced by further resolution of the Board of Directors
of the Company and by the filing of a certificate pursuant to the provisions
of the Section 151(g) of the General Corporation Law of the State of Delaware
stating that such reduction has been so authorized (but not below the number
of shares of Series B Stock then outstanding) but the number of authorized
shares of Series B Stock shall not be increased.
3. Ranking. The Series B Stock shall rank as to dividends pari passu
with the Common Stock of the Corporation. The Series B Stock shall rank as to
liquidation, dissolution or winding up, senior and prior to the Common Stock
of the Corporation and to all other classes or series of stock issued by the
Corporation, except as otherwise approved by the affirmative vote or consent
of the holders of shares of Series B Stock pursuant to Section 8(b) hereof.
(All equity securities of the Corporation with respect to which the Series B
Stock ranks senior and prior with respect to liquidation, dissolution and
winding up, including the Common Stock, are collectively referred to herein as
"Junior Securities" and all equity securities of the Corporation with which
the Series B Stock ranks on a parity, with respect to dividends, are
collectively referred to herein as "Parity Securities.")
4. Dividends. The holders of shares of Series B Stock shall be
entitled to share, equally and ratably in any dividends declared by the Board
on the Common Stock, whether payable in cash, shares of Common Stock (or
fractions thereof) or property. The pro rata entitlement to such dividends of
each share of Series B Stock shall be computed on the basis of the conversion
rate then in effect (as defined in Section 6 hereof).
5. Liquidation.
a. Liquidation Preference. Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders
of the shares of Series B Stock shall be entitled to receive and to be paid
out of the assets of the Corporation available for distribution to its
stockholders, before any distribution or payment is made upon any Junior
Securities, to be paid an amount equal to (i) $1.00 per share of Series B
Stock, representing the liquidation preference per share of the Series B Stock
(as adjusted for any combinations, divisions or similar recapitalizations
affecting the shares of Series B Stock) (the "Liquidation Payments"). If upon
any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the assets to be distributed among the holders of
Series B Stock and the Parity Securities shall be insufficient to permit
payment in full to both the holders of Series B Stock of the Liquidation
Payments and to the holders of the Parity Securities any applicable
liquidation payments, then the entire assets of the Corporation shall be
distributed ratably among such holders in proportion to the full respective
distributive amounts to which they are entitled.
b. Remaining Assets. Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, after the
holders of Series B Stock shall have been paid in full the Liquidation
Payments, the remaining assets of the Corporation shall be distributed ratably
per share to the holders of the Series B Stock and the other Parity
Securities. The pro rata entitlement of each share of Series B Stock in any
such distribution shall be computed on the basis of the conversion rate then
in effect.
c. Notice of Liquidation. Written notice of a liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, stating a payment date, the amount of the Liquidation Payments
and the place where said Liquidation Payments shall be payable, shall be given
by mail, postage prepaid, not less than 30 days prior to the payment date
stated therein, to each holder of record of Series B Stock at his post office
address as shown by the records of the Corporation.
d. Fractional Shares. The Liquidation Payments with respect to
each outstanding fractional share of Series B Stock shall be equal to a
ratably proportionate amount of the Liquidation Payments with respect to each
outstanding share of Series B Stock.
e. Certain Actions not Liquidation. Neither the sale, lease or
exchange (for cash, stock, securities or other consideration) of all or
substantially all of the property and assets of the Corporation, nor the
merger or consolidation of the Corporation with or into any other corporation,
nor the merger or consolidation of any other corporation with or into the
Corporation, shall be deemed to be a dissolution, liquidation or winding up,
voluntary or involuntary, for the purposes of this paragraph 5.
6. Conversion.
The holders of the Series B Stock shall have the following
conversion rights:
a. Conversion. Each share of Series B Stock shall be
convertible at any time, at the option of the holder of record thereof,
subject to the limitations on conversion set forth in paragraph (f) below,
into fully paid and nonassessable shares of Common Stock at the "conversion
rate" (as defined in paragraph (b) below) then in effect upon surrender to the
Corporation or its transfer agent of the certificate or certificates
representing the Series B Stock to be converted, as provided below, or if the
holder notifies the Corporation or its transfer agent that such certificate or
certificates have been lost, stolen or destroyed, upon the execution and
delivery of an agreement satisfactory to the Corporation to indemnify the
Corporation from any losses incurred by it in connection therewith.
b. Basis For Conversion; Converted Shares. The basis for any
conversion under this Section 6 shall be the "conversion rate" in effect at
the time of conversion, which for the purposes hereof shall mean the number of
shares of Common Stock issuable for each share of Series B Stock surrendered
for conversion under this Section 6. Initially, the conversion rate shall be
5.0, i.e., 5.0 shares of Common Stock for each share of Series B Stock being
converted. Such conversion rate shall be subject to adjustment as provided in
Section 7 below. If any fractional interest in a share of Common Stock would
be deliverable upon conversion of Series B Stock, then such fractional share
shall be disregarded if less than one half a share, or if more than one-half a
share, the number of shares issuable upon conversion shall be rounded out to
the next full share. Any shares of Series B Stock which have been converted
shall be canceled and the certificates representing shares of Series B Stock
so converted shall represent the right to receive such number of shares of
Common Stock into which such shares of Series B Stock are convertible. The
Board of Directors of the Corporation shall at all times reserve a sufficient
number of authorized but unissued shares of Common Stock to be issued in
satisfaction of the conversion rights and privileges aforesaid.
c. Mechanics of Conversion. In the case of a conversion, before
any holder of Series B Stock shall be entitled to convert the same into shares
of Common Stock, it shall surrender the certificate or certificates for such
shares of Series B Stock, duly endorsed, at the office of the Corporation or
its transfer agent for the Series B Stock, and shall give written notice to
the Corporation of the election to convert the same and shall state therein
the name or names in which the certificate or certificates for shares of
Common Stock are to be issued. The Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series B Stock,
or to the nominee or nominees of such holder, a certificate or certificates
for the number of shares of Common Stock to which such holder shall be
entitled as aforesaid. A certificate or certificates will be issued for the
remaining shares of Series B Stock in any case in which fewer than all of the
shares of Series B Stock represented by a certificate are converted.
d. Issue Taxes. The Corporation shall pay all issue taxes, if
any, incurred in respect of the issue of shares of Common Stock on
conversion. If a holder of shares surrendered for conversion specifies that
the shares of Common Stock to be issued on conversion are to be issued in a
name or names other than the name or names in which such surrendered shares
stand, the Corporation shall not be required to pay any transfer or other
taxes incurred by reason of the issuance of such shares of Common Stock to the
name of another, and if the appropriate transfer taxes shall not have been
paid to the Corporation or the transfer agent for the Series B Stock at the
time of surrender of the shares involved, the shares of Common Stock issued
upon conversion thereof may be registered in the name or names in which the
surrendered shares were registered, despite the instructions to the contrary.
e. Rights of Holders of Shares. Each conversion of shares of Series
B Stock shall be deemed to have been made as of the close of business on the
applicable conversion date so that the rights of the holder of shares of such
Series B Stock shall, to the extent of such conversion, cease at such time and
the person or persons entitled to receive shares of the Common Stock upon
conversion of the shares of Series B Stock shall be treated for all purposes
as having become the record holder or holders of the Common Stock at such
time.
f. Limitations on Conversions. The conversion of shares of Series B
Stock shall be subject to the following limitations (each of which limitations
shall be applied independently):
i. Nasdaq Cap Amount. Unless (x) permitted by the applicable
rules and regulations of The Nasdaq SmallCap Market on which the Common Stock
is listed or traded (whether because the Corporation has obtained requisite
shareholder approval or otherwise) or (y) the Corporation's securities are not
then listed on The Nasdaq SmallCap Market (the conditions contained in clauses
(x) and (y) of this sentence are referred to herein as the "Nasdaq
Conditions"), in no event shall the total number of shares of Common Stock
issued upon conversion of the Series B Stock purchased by the holders exceed
the maximum number of shares of Common Stock that the Corporation can so issue
without the approval of its common stockholders pursuant to Rule 4310(c)(25)
(H)(i)(d) of the Nasdaq SmallCap Market; provided that prior to such
shareholder approval, the total number of shares of Common Stock issued
upon conversion of the Series B Stock, taken together with such shares of
Common Stock purchased pursuant to Section 2.2(a) of that certain Securities
Purchase Agreement, dated as of February 5, 1999, between the Corporation and
bmp Mobility AG Venture Capital, shall not exceed 18% of the Corporation's
outstanding Common Stock (the "Nasdaq Cap Amount") The Nasdaq Cap Amount shall
be allocated pro rata among the holders of Series B Stock as set forth in
subparagraph (ii) hereof. No prior inability to convert shares of Series B
Stock pursuant to this subparagraph (i) shall have any effect on the
applicability of the provisions of this subparagraph (i) with respect to any
subsequent determination of convertibility.
ii. Allocations of Initial Cap Amounts. The Nasdaq Cap Amount
(including voting restrictions, if any) shall be allocated pro rata among the
holders of Series B Stock based on the number of shares of Series B Stock
registered in the name of such holder.
iii. Non-conversion Notice. If at any time any shares of
Series B Stock are not convertible into Common Stock as a result of this
Section 6(f), the Corporation shall, upon the request of any holder, provide
within three business days a certificate of the Chief Financial Officer or the
Corporation to such holder of such Series B Stock stating the number of such
holder's shares of Series B Stock that may be converted into Common Stock. In
the event that any shares of Series B Stock that were intended to be converted
into Common Stock are determined not to be convertible, the Corporation, at
the written request of the holder, will return such shares of Series B Stock
to the holder thereof.
iv. Within ten (10) days of such date upon which one of the
Nasdaq Conditions is satisfied, the Corporation shall, having obtained the
written consent of the holders of not less than a majority of the then
outstanding shares of Series B Stock in accordance with section 8 hereof, file
a Certificate of Amendment to this Certificate of Designations, Preferences
and Rights to delete the provisions relating to "Limitations on Conversions"
set forth in this Section 6(f).
7. Adjustment of Conversion Price and Conversion Rate. The number
and kind of securities issuable upon the conversion of the Series B Stock, the
conversion price and the conversion rate shall be subject to adjustment from
time to time in accordance with the following provisions:
a. Distributions Combinations and Subdivisions of Capital Stock. If
at any time the outstanding shares of Common Stock of the Corporation shall be
subdivided into a greater or combined into a lesser number of shares (whether
with the same or a different par value or without par value), including,
without limitation, through a reverse stock split, the conversion rate shall
be proportionately increased or decreased.
b. Distributions in Respect of Capital Stock. If the Corporation
shall distribute by way of dividend or otherwise upon its shares of Common
Stock any cash, securities or property (excluding cash dividends paid out of
earnings or surplus), then upon conversion of shares of Series B Stock
occurring after such distribution date, the holder of the Series B Stock will
be entitled to receive the number of shares of the Common Stock of the
Corporation then deliverable pursuant to the terms hereof, and, in addition,
the cash, securities or property which such holder would have received by way
of such dividends or other distributions if such holder had been the record
holder of the number of shares of such Common Stock, which would have been
deliverable upon the exercise of such holder's conversion right if such
conversion had been effected immediately prior to the record date for such
distribution of cash, securities or property.
c. Recapitalization, Reclassification and Succession. If any
recapitalization of the Corporation or reclassification of shares of Common
Stock of the Corporation or any merger or consolidation of the Corporation
into or with a corporation or other business entity shall be effected, then
the holder of the Series B Stock shall thereafter have the right to receive
the kind and number of shares of stock or other securities or other property
of the Corporation which the holder of Series B Stock would have been entitled
to receive if the holder had held the Common Stock issuable upon conversion of
his Series B Stock immediately prior to such recapitalization,
reclassification, merger or consolidation.
d. Fractional Shares. In the event that the application of the
provisions of this Section 7 would result in the issuance of a fraction of a
share of Common Stock of the Corporation, or a number of full shares plus a
fraction of a share of such Common Stock, then such fractional share shall be
disregarded if less than one-half a share, or, if more than one-half of a
share, the number of shares issuable upon such exchange shall be rounded out
to the next full share.
e. Issuance of Additional Shares of Capital Stock. If the
Corporation shall issue any additional shares of Common Stock or Common Stock
equivalents (other than as provided in the foregoing subsections (a) through
(d) of this Section) for no consideration or for a consideration per share
less than Fair Market Value (as defined below) (or, in the case of a Common
Stock equivalent, if the exercise price or conversion price shall be less than
Fair Market Value) in effect on the date of and immediately prior to the issue
of such additional shares of Common Stock or Common Stock equivalents, then
and in such event, the Corporation shall cause notice of such issuance to be
mailed to each holder of shares of Series B Stock at its then registered
address by first-class mail, postage prepaid, and an equitable adjustment as
determined by the Board in good faith shall be made to the conversion rate as
soon as practicable and retroactive to such issue date in order to prevent
dilution resulting from such below market issuance of the relative equity
interest in the Corporation represented by shares of Series B Stock then
outstanding compared to the total capital stock of the Corporation (including
the Series B Stock) outstanding immediately prior to such issuance; provided,
however, that this provision shall not apply to (i) the issue of up to 500,000
Warrants, convertible into 500,000 shares of Common Stock in connection with
the Corporation's contemplated amendment to its $1,000,000 secured line of
credit (the "Line of Credit") maintained by BSB Bank & Trust Company ("BSB");
(ii) the issuance of shares upon exercise or conversion of a Common Stock
equivalent, as long as the exercise price or conversion price on the date of
issuance of such Common Stock equivalent was in excess of Fair Market Value,
and (iii) the issuance of Common Stock to a person that is not an Affiliate of
the Corporation in a private placement at a discount to market not to exceed
twenty five percent (25%) to reflect an illiquidity discount.
The term "Fair Market Value" means the higher of (a) the Market
Price on the date of issuance of Common Stock or Common Stock equivalent or
(b) the average closing sales price per share of Common Stock for the ten (10)
trading days immediately preceding the date of issuance of Common Stock or
Common Stock equivalents; provided, however, that, in the case of the issuance
of shares of Common Stock or Common Stock equivalents for consideration other
than cash, the Board shall determine in good faith the value of such shares of
Common Stock or Common Stock equivalents.
The term "Market Price" means, with respect to the shares of Common
Stock issuable upon conversion of the Series B Stock, (a) if the shares are
listed or admitted for trading on any national securities exchange or included
in The Nasdaq National Market or Nasdaq SmallCap Market, the last reported
sales price as reported on such exchange or market; (b) if the shares are not
listed or admitted for trading on any national securities exchange or included
in The Nasdaq National Market or Nasdaq SmallCap Market, the average of the
last reported closing bid and asked quotation for the shares as reported on
NASDAQ or a similar service if NASDAQ is not reporting such information; (c)
if the shares are not listed or admitted for trading on any national
securities exchange or included in The Nasdaq National Market or Nasdaq
SmallCap Market or quoted by NASDAQ or a similar service, the average of the
last reported bid and asked quotation for the shares as quoted by a market
maker in the shares (or if there is more than one market maker, the bid and
asked quotation shall be obtained from two market makers and the average of
the lowest bid and highest asked quotation). In the absence of any available
public quotations for the Common Stock, the Board of Directors of the Company
shall determine in good faith the fair value of the Common Stock, which
determination shall be set forth in a certificate by the Secretary of the
Company.
The term "Affiliate" means any Person (i) which, directly or
indirectly, through one or more intermediaries controls, or is controlled by,
or is under common control with, another Person, (ii) which beneficially owns
or holds 20% or more of any class of the outstanding Voting Stock of such
other Person or (iii) which is a relative or spouse of such Person, or any
relative of such spouse, who has the same home as such Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of Voting Stock, by contract or otherwise.
The term "Person" means any individual, entity or group, including,
without limitation, any corporation, limited liability company, limited or
general partnership, joint venture, association, joint stock company, trust,
unincorporated organization, or government or any agency or political
subdivision thereof.
The term "Voting Stock" means any class or classes of capital stock
pursuant to which the holders thereof have the general voting power under
ordinary circumstances to vote for the election of directors, managers or
trustees of any Person (irrespective of whether or not at the time capital
stock of any class or classes will have, or might have, voting power by the
reason of the happening of any contingency).
f. Corporation to Prevent Dilution. If any event or condition occurs
as to which other provisions of this Section 7 are not strictly applicable or
if strictly applied would not fairly protect the exercise of conversion rights
hereunder in accordance with the essential intent and principles of such
provisions, or which might materially and adversely affect the conversion
rights of the holder of Series B Stock under any provisions hereof, then the
Board of Directors shall in good faith make an adjustment in the application
and interpretation of such provisions, in accordance with such essential
intent and principles, so as to protect such rights as aforesaid, and any
adjustment necessary with respect to the conversion rate or the nature or kind
of securities issuable upon conversion hereunder so as to preserve without
dilution the rights of such holder; provided, however, that in no event shall
any such adjustment (other than a reverse stock split or the like) have the
effect of decreasing the conversion rate as otherwise determined pursuant to
this Certificate.
g. Valid Issuance. All shares of Common Stock which may be
issued in connection with the conversion provisions set forth herein shall,
upon issuance by the Corporation, be validly issued, fully paid and
nonassessable, free from preemptive rights and free from all taxes, liens or
charges with respect thereto created or imposed by the Corporation.
h. Other Provisions Applicable to Adjustment Under this
Section. The following provisions shall be applicable to the adjustments in
Conversion Price as provided in this Section 7:
i. Treasury Shares. The number of shares of Common Stock at any
time outstanding shall not include any shares thereof then directly or
indirectly owned or held by or for the account of the Corporation.
ii. Minimum Adjustment. No adjustment of the conversion rate
shall be made if the amount of any such adjustment would be an amount less
than five percent (5%) of the conversion rate then in effect, but any such
amount shall be carried forward and an adjustment in respect thereof shall be
made at the time of and together with any subsequent adjustment which,
together with such amount and any other amount or amounts so carried forward,
shall aggregate an increase or decrease of five percent (5%) or more.
8. Voting Rights.
a. General. Holders of Series B Stock shall be entitled to
notice of all meetings of the Corporation's stockholders but shall not be
entitled to vote except in respect of such matters as to which they are
entitled to vote as a class under the Delaware General Corporation Law and
except as provided herein. In connection with the foregoing,
i. Amendment. The Corporation shall not, without the approval
by vote or written consent of the holders of not less than a majority of the
then outstanding shares of Series B Stock, voting as a separate class, amend,
alter or repeal any of the provisions of the Certificate of Incorporation or
the Certificate of Designation creating this Series B Stock which would alter
or change the powers, preferences or special rights of the shares of Series B
Stock so as to affect them adversely, including, but not limited to,
increasing or decreasing the par value of the Series B Stock.
ii. Right to Designate Directors. If the convertible feature of
the Series B Stock into Common Stock is not exercisable by July 31, 1999
because neither of the Nasdaq Conditions has been satisfied, then the number
of directors constituting the Board of Directors shall, without further
action, be increased by such number as is equal to one more than the number of
directors constituting the Board at such time (i.e., if such Board is
constituted by four (4) directors then the number of directors shall be
increased by five (5), for a total of nine directors), and the holders of a
majority of the outstanding shares of Series B Stock shall have, in addition
to the other voting rights set forth herein, the exclusive right, voting
together as a single class, to elect the directors necessary to fill the
vacancies created by such increase in the size of the Board (the "Additional
Directors"). Additional Directors shall continue as directors and such
additional voting right shall continue until such time as one of the Nasdaq
Conditions is satisfied, at which time such Additional Directors shall cease
to be directors and such additional voting right of the holders of shares of
Series B Stock shall terminate.
iii. Procedures. The foregoing rights of holders of shares of
Series B Stock to take any action as provided in this Section 8 may be
exercised at any annual meeting of stockholders or at a special meeting of
stockholders held for such purpose as hereinafter provided or at any
adjournment thereof, or by the written consent, delivered to the Secretary of
the Corporation, of the holders of the minimum number of shares of Series B
Stock required to take such action. So long as such right to vote continues
(and unless such right has been exercised by written consent of the minimum
number of shares required to take such action), the Chairman of the Board of
Directors may call, and upon the written request of holders of record of 20%
of the outstanding shares of Series B Stock, addressed to the Secretary of the
Corporation at the principal office of the Corporation, shall call, a special
meeting of the holders of shares entitled to vote as provided herein. The
Corporation shall use its best efforts to hold such meeting within 60 days
after delivery of such request to the Secretary, at the place and upon the
notice provided by law and in the Bylaws for the holding of meetings of
stockholders.
iv. Additional Director Vacancies and Removals. Each Additional
Director elected pursuant to Subsection 8c hereof shall serve until the annual
meeting for the year in which his or her term expires and until his or her
successor shall be elected and shall qualify, unless such Additional
Director's term of office shall have terminated pursuant to the provisions of
Subsection c hereof, as the case may be. In case any vacancy shall occur
among the Additional Directors elected pursuant to Subsection 8c hereof, such
vacancy may be filled for the unexpired portion of the term by vote of the
remaining Additional Director or Additional Directors theretofore elected by
such holders (or such Additional Director's or Additional Directors' successor
in office), if any. If any such vacancy is not so filled within 20 days after
the creation thereof or if all of the Additional Directors so elected shall
cease to serve as directors before their term shall expire, the holders of the
shares of Series B Stock then outstanding and entitled to vote for such
director pursuant to the provisions of Subsection 8c hereof, as the case may
be, may elect successors to hold office for the unexpired terms of any vacant
directorships, by written consent as herein provided, or at a special meeting
of such holders called as provided herein. The holders of a majority of the
shares of Series B Stock entitled to vote for Additional Directors pursuant to
Subsection 8c hereof, as the case may be, shall have the right to remove with
or without cause at any time and replace any Additional Directors such holders
have elected pursuant to such section, by written consent as herein provided,
or at a special meeting of such holders called as provided herein.
9. No Reissuance of Series B Stock. No share or shares of Series B
Stock acquired by the Corporation by reason of purchase, conversion or
otherwise shall be reissued, and all such shares of Series B Stock shall be
canceled, retired and eliminated from the shares of Series B Stock which the
Corporation shall be authorized to issue. Upon the filing of a certificate
with the Secretary of State of the State of Delaware as contemplated by
paragraph 2 hereof, any such shares of Series B Stock acquired by the
Corporation shall have the status of authorized and unissued shares of
Preferred Stock issuable in undesignated Series and may be redesignated and
reissued in any series other than as Series B Stock.
10. Exclusion of Other Rights. Except as may otherwise be required
by law, shares of Series B Stock shall not have any voting powers,
designations, preferences and rights, other than those specifically set forth
herein (as may be amended from time to time) and in the Certificate of
Incorporation.
11. Registered Holders. A holder of Series B Stock registered on the
Corporation's stock transfer books as the owner of shares of Series B Stock
shall be treated as the owner of such shares for all purposes. All notices
and all payments required to be mailed to a holder of shares of Series B Stock
shall be mailed to such holder's registered address on the Corporation's stock
transfer books, and all dividend and redemption payments to a holder of shares
of Series B Stock made hereunder shall be deemed to be paid in compliance
hereof on the date such payments are deposited into the mail addressed to such
holder at his registered address on the Corporation's stock transfer books.
12. Headings of Subdivisions. The headings of the various
subdivisions hereof are for convenience of reference only and shall not affect
the interpretation of any of the provisions hereof.
13. Severability of Provisions. If any right, preference or
limitation of the Series B Stock set forth herein (as may be amended) from
time to time is invalid, unlawful or incapable of being enforced by reason of
any rule of law or public policy, such right, preference or limitation
(including, without limitation, the dividend rate) shall be enforced to the
maximum extent permitted by law and all other rights, preferences and
limitations set forth herein (as so amended) which can be given effect without
the invalid, unlawful or unenforceable right, preference or limitation shall,
nevertheless, remain in full force and effect, and no right, preference or
limitation herein set forth shall be deemed dependent upon any other such
right, preference or limitation unless so expressed herein.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate
this 27th day of April, 1999.
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION
By: __________________________
Geoffrey T. Burnham
President & Chief Executive Officer
<PAGE>
EXHIBIT C
FORM OF COMMON STOCK PURCHASE WARRANT
Void after [Final Installment Date] __, 2004
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THIS WARRANT AND
SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN EXEMPTION THEREFROM UNDER SAID ACT. THIS WARRANT AND SUCH SHARES MAY
NOT BE TRANSFERRED EXCEPT UPON CONDITIONS SPECIFIED IN THIS WARRANT, AND NO
TRANSFER OF THIS WARRANT OR SUCH SHARES SHALL BE VALID OR EFFECTIVE UNLESS AND
UNTIL SUCH CONDITIONS SHALL HAVE BEEN COMPLIED WITH.
_________________
COMMON STOCK PURCHASE WARRANT
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION, a Delaware corporation
(the "Company"), having its principal office at 15 Link Drive, Binghamton, New
York 13904, hereby certifies that, for value received, bmp MOBILITY AG VENTURE
CAPITAL ("bmp"), or assigns, is entitled, subject to the terms set forth
below, to purchase from the Company at any time on or from time to time after
[Final Installment Date] __, 1999 and before 5:00 P.M., New York City time, on
[Final Installment Date] __, 2004, Five Hundred Thousand (500,000) fully paid
and non-assessable shares of Common Stock of the Company, at the price per
share (the "Purchase Price") of Fifty Cents ($0.50 USD). The number and
character of such shares of Common Stock and the Purchase Price are subject to
adjustment as provided herein.
This Warrant is one of the Common Stock Purchase Warrants (the
"Warrants") originally issued as of the Original Issue Date (as defined below)
and evidencing the right to purchase an aggregate of Five Hundred Thousand
(500,000) shares of Common Stock of the Company, subject to adjustment as
provided herein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" includes the Company and any corporation which
shall succeed to or assume the obligations of the Company hereunder.
(b) The term "Common Stock" includes all stock of any class or classes
(however designated) of the Company, authorized upon the Original Issue
Date or thereafter, the holders of which shall have the right, without
limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to preference,
and the holders of which shall ordinarily, in the absence of
contingencies, be entitled to vote for the election of a majority of
directors of the Company (even though the right so to vote has been
suspended by the happening of such a contingency).
(c) The term "Series B Convertible Preferred Stock" shall mean the
Company's "Series B Convertible Preferred Stock" as authorized by the
Company's Certificate of Incorporation as amended through the Original
Issue Date.
(d) The "Original Issue Date" is [Final Installment Date] __, 1999, the
date as of which this Warrant was first issued.
(e) The term "Other Securities" refers to any stock (other than Common
Stock) and other securities of the Company or any other person
(corporate or otherwise) which the holder of this Warrant at any time
shall be entitled to receive, or shall have received, upon the exercise
of this Warrant, in lieu of or in addition to Common Stock, or which at
any time shall be issuable or shall have been issued in exchange for or
in replacement of Common Stock or Other Securities pursuant to
section 6 or otherwise.
(f) The term "Purchase Price per share" shall be the then applicable
exercise price for one share of Common Stock.
(g) The terms "registered" and "registration" refer to a registration
effected by filing a registration statement in accordance with the
Securities Act, to permit the disposition of Common Stock (or Other
Securities) issued or issuable upon the exercise of this Warrant, and
any post-effective amendments and supplements filed or required to be
filed to permit any such disposition.
(h) The term "Securities Act" means the Securities of Act of 1933 as the
same shall be in effect at the time.
<PAGE>
1. Registration, etc.
1.1 This Warrant, the shares of Common Stock issuable upon exercise
thereof and the Other Securities shall be Registrable Securities (as
defined in the Registration Rights Agreement, dated as of February 5,
1999, between the Company and bmp, the "Registration Rights Agreement")
and shall have such registration rights as provided in the Registration
Rights Agreement.
2. Sale or Exercise Without Registration. If, at the time of any
exercise, transfer or surrender for exchange of this Warrant or of
Common Stock (or Other Securities) previously issued upon the exercise
of this Warrant, this Warrant or Common Stock (or Other Securities)
shall not be registered under the Securities Act, the Company may
require, as a condition of allowing such exercise, transfer or
exchange, that the record owner or transferee of this Warrant or Common
Stock (or Other Securities), as the case may be, furnish to the
Company a satisfactory opinion of counsel to the effect that such
exercise, transfer or exchange may be made without registration
under the Securities Act, provided that the disposition thereof shall
at all times be within the control of such record owner or transferee,
as the case may be, and provided further that nothing contained in this
section 2 shall relieve the Company from complying with any request
for registration pursuant to section 1 hereof. The first holder of
this Warrant represents to the Company that it is acquiring this
Warrant for investment and not with a view to the distribution
thereof.
3. Exercise of Warrant; Partial Exercise; Exercise by Surrender.
3.1 Exercise In Full. Subject to the provisions hereof, this Warrant may
be exercised in full by the record owner hereof by surrender of this
Warrant, with the form of subscription at the end hereof duly executed
by such record owner, to the Company at its principal office
accompanied by payment, in cash or by certified or official bank check
payable to the order of the Company, in the amount obtained by
multiplying the number of shares of Common Stock called for on the
face of this Warrant (without giving effect to any adjustment
therein) by the Purchase Price.
3.2 Partial Exercise. Subject to the provisions hereof, this Warrant may be
exercised in part by surrender of this Warrant in the manner and at the
place provided in subsection 3.1 except that the amount payable by the
record owner upon any partial exercise shall be the amount obtained by
multiplying (a) the number of shares of Common Stock (without giving
effect to any adjustment therein) designated by the record owner in the
subscription at the end hereof by (b) the Purchase Price. Upon any such
partial exercise, the Company at its expense will forthwith issue and
deliver to or upon the order of the record owner hereof a new Warrant
or Warrants of like tenor, in the name of the record owner hereof or
as such record owner (upon payment by such record owner of any
applicable transfer taxes) may request, calling in the aggregate on the
face or faces thereof for the number of shares of Common Stock equal
(without giving effect to any adjustment therein) to the number of such
shares called for on the face of this Warrant minus the number of such
shares designated by the record owner in the subscription at the end
hereof.
3.3 Definition of Market Price. As used herein, the phrase "Market Price"
at any date shall be deemed to be (i) if the principal trading market for
such securities is an exchange, the last reported sale price, or, in case
no such reported sale takes place on such date, the average of the last
reported sale prices for the last three (3) trading days, in either case
as officially reported on any consolidated tape, (ii) if the principal
market for such securities is the over-the-counter market, the high bid
price on such date as set forth by NASDAQ or, if the security is not
quoted on NASDAQ, the high bid price as set forth in the National
Quotation Bureau sheet listing such securities for such day.
Notwithstanding the foregoing, if there is no reported closing price
or high bid price, as the case may be, on the date next preceding the
event requiring an adjustment hereunder, then the Market Price shall
be determined as of the latest date prior to such day for which such
closing price or high bid price is available, or if the securities are
not quoted on NASDAQ, as determined in good faith by resolution of the
Board of Directors of the Company, based on the best information
available to it.
3.4 Company to Reaffirm Obligations. The Company will, at the time of any
exercise of this Warrant, upon the request of the record owner hereof,
acknowledge in writing its continuing obligation to afford to such
record owner any rights (including, without limitation, any right to
registration of the shares of Common Stock or Other Securities issued
upon such exercise) to which such record owner shall continue to be
entitled after such exercise in accordance with the provisions of this
Warrant, provided that if the record owner of this Warrant shall fail
to make any such request, such failure shall not affect the continuing
obligation of the Company to afford such record owner any such rights.
4. Delivery of Stock Certificates, etc., on Exercise. As soon as
practicable after the exercise of this Warrant in full or in part, and in
any event within ten (10) days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to
be issued in the name of and delivered to the record owner hereof, or as
such record owner (upon payment by such record owner of any applicable
transfer taxes) may direct, a certificate or certificates for the
number of full paid and non-assessable shares of Common Stock (or
Other Securities) to which such record owner shall be entitled upon
such exercise, plus, in lieu of any fractional share to which such
record owner would otherwise be entitled, cash equal to such fraction
multiplied by the then current market value of one full share,
together with any other stock or other securities and property
(including cash, where applicable) to which such record owner is
entitled upon such exercise pursuant to section 5 or otherwise.
5. Adjustment for Dividends in Other Stock, Property, etc.;
Reclassification, etc. In case at any time or from time to time after
the Original Issue Date the holders of Common Stock (or Other
Securities) shall have received or (on or after the record date fixed for
the determination of stockholders eligible to receive) shall have
become entitled to receive without payment therefor
(a)other or additional stock or other securities or property (other than
cash) by way of dividend, or
(b)any cash paid or payable (including, without limitation, by way of
dividend other than a dividend payable out of earned surplus of the
Company), or
(c)other or additional (or less) stock or other securities or property
(including cash) by way of spin-off, split-up, recapitalization,
combination of shares or similar corporate rearrangement,
then, and in each such case the record owner of this Warrant, upon the
exercise hereof as provided in section 3, shall be entitled to receive
the amount of stock and other securities and property (including cash
in the cases referred to in subdivisions (b) and (c) of this section 5)
which such record owner would hold on the date of such exercise if on the
Original Issue Date he had been the holder of record of the number of
shares of Common Stock called for on the face of this Warrant and had
thereafter, during the period from the Original Issue Date to and
including the date of such exercise, retained such shares and all such
other additional (or less) stock and other securities and property
(including cash in the cases referred to in subdivisions (b) and (c)
of this section 5) receivable by him as aforesaid during such period,
giving effect to all adjustments called for during such period by section
6 and 7 hereof.
6. Reorganization, Consolidation, Merger, etc. In case the Company after
the Original Issue Date shall (a) effect a reorganization, (b)
consolidate or merge with any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under
any plan or arrangement contemplating the dissolution of the Company,
then, in each such case, the record owner of this Warrant, upon the
exercise hereof as provided in Section 3 at any time after the
consummation of such reorganization, consolidation or merger or the
effective date of such dissolution, as the case may be, shall be entitled
to receive (and the Company shall be entitled to deliver), in lieu of
the Common Stock (or Other Securities) issuable upon such exercise prior
to such consummation or such effective date, the stock and other
securities and property (including cash) to which such record owner
would have been entitled upon such consummation or in connection with
such dissolution, as the case may be, if such record owner had so
exercised this Warrant immediately prior thereto, all subject to
further adjustment thereafter as provided in sections 5 and 7 hereof.
7. Other Adjustments.
7.1 General. In any case to which sections 5 and 6 hereof are not applicable,
where the Company shall issue or sell shares of its Common Stock after the
Original Issue Date and prior to the expiration of this Warrant either (a)
in the case of securities traded on an exchange, for consideration per
share less than the then current Market Price or (b) in the case of
securities privately placed for sale by the Company other than the purchase
by bmp of the Series B Convertible Preferred Stock, for a consideration per
share less than Seventy-Five Percent (75%) of the then current Market Price
(as such term is defined above) (hereinafter, the "Lower Exercise Price"),
then the Purchase Price in effect hereunder shall simultaneously with such
issuance or sale be equitably adjusted by the Board of Directors of the
Company in good faith and/or the number of shares of Common Stock issuable
upon exercise hereof shall be increased, so that the record owner of this
Warrant does not suffer any dilution.
7.2 Convertible Securities. In case the Company shall issue or sell any
securities convertible into Common Stock of the Company ("Convertible
Securities") after the date hereof other than the Series B Convertible
Preferred Stock, there shall be determined the price per share for which
Common Stock is issuable upon the conversion or exchange thereof, such
determination to be made by dividing (a) the total amount received or
receivable by the Company as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or
exchange thereof, by (b) the maximum number of shares of Common Stock of
the Company issuable upon the conversion or exchange of all of such
Convertible Securities.
If the price per share so determined shall be less than the
applicable Purchase Price per share, then such issue or sale shall be deemed
to be an issue or sale for cash (as of the date of issue or sale of such
Convertible Securities) of such maximum number of shares of Common Stock at
the price per share so determined, provided that, if such Convertible
Securities shall by their terms provide for an increase or increases, with the
passage of time, in the amount of additional consideration, if any, to the
Company, or in the rate of exchange, upon the conversion or exchange thereof,
the adjusted Purchase Price per share shall, forthwith upon any such increase
becoming effective, be readjusted to reflect the same, and provided further,
that upon the expiration of such rights of conversion or exchange of such
Convertible Securities, if any thereof shall not have been exercised, the
adjusted Purchase Price per share shall forthwith be readjusted and thereafter
be the price which it would have been had an adjustment been made on the basis
that the only shares of Common Stock so issued or sold were issued or sold
upon the conversion or exchange of such Convertible Securities, and that they
were issued or sold for the consideration actually received by the Company
upon such conversion or exchange, plus the consideration, if any, actually
received by the Company for the issue or sale of all of such Convertible
Securities which shall have been converted or exchanged.
7.3 Rights and Options. In case the Company shall grant any rights or options
to subscribe for, purchase or otherwise acquire Common Stock , there shall
be determined the price per share for which Common Stock is issuable upon
the exercise of such rights or options, such determination to be made by
dividing (a) the total amount, if any, received or receivable by the
Company as consideration for the granting of such rights or options, plus
the minimum aggregate amount of additional consideration payable to the
Company upon the exercise of such rights or options, by (b) the maximum
number of shares of Common Stock of the Company issuable upon the exercise
of such rights or options.
If the price per share so determined shall be less than the
applicable Purchase Price per share, then the granting of such rights or
options shall be deemed to be an issue or sale for cash (as of the date of the
granting of such rights or options) of such maximum number of shares of Common
Stock at the price per share so determined, provided that, if such rights or
options shall by their terms provide for an increase or increases, with the
passage of time, in the amount of additional consideration payable to the
Company upon the exercise thereof, the adjusted Purchase Price per share
shall, forthwith upon any such increase becoming effective, be readjusted to
reflect the same, and provided, further, that upon the expiration of such
rights or options, if any thereof shall not have been exercised, the adjusted
Purchase Price per share shall forthwith be readjusted and thereafter be the
price which it would have been had an adjustment been made on the basis that
the only shares of Common Stock so issued or sold were those issued or sold
upon the exercise of such rights or options and that they were issued or sold
for the consideration actually received (by the Company) upon such exercise,
plus the consideration, if any, actually received by the Company for the
granting of all such rights or options, whether or not exercised.
7.4 Minimum Adjustment. No adjustment shall be made under this Article 7 if
the amount of any such adjustment would be an amount less than five
percent (5%) of the Purchase Price then in effect, but any such amount
shall be carried forward and an adjustment in respect thereof shall be made
at the time of and together with any subsequent adjustment which, together
with such amount and any other amount or amounts so carried forward, shall
aggregate an increase or decrease of five percent (5%) or more.
8. Further Assurances. The Company will take all such action as may
be necessary or appropriate in order that the Company may validly and
legally issue fully paid and non-assessable shares of stock upon the
exercise of all Warrants from time to time outstanding.
9. Certificate of Chief Financial Officer as to Adjustments. In each
case of any adjustment or readjustment in the shares of Common Stock (or Other
Securities) issuable upon the exercise of this Warrant, the Company at its
expense will promptly cause the Company's Chief Financial Officer to compute
such adjustment or readjustment in accordance with the terms of this Warrant
and prepare a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is
based, and the number of shares of Common Stock outstanding or deemed to be
outstanding; provided that if any similar certificate is provided by the
Company's regularly retained auditor to the holder of any other warrant of the
Company, the Company's regularly retained auditor shall provide this
certificate to the record owner of this Warrant. The Company will forthwith
mail a copy of each such certificate to the record owner of this Warrant.
10. Notices of Record Date, etc.
In the event of
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than
a cash dividend payable out of earned surplus of the Company)
or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class
or any other securities or property, or to receive any other
right, or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any
transfer of all or substantially all the assets of the
Company to or consolidation or merger of the Company with or
into any other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then and in each such event the Company will mail or cause to be mailed to
the record owner of this Warrant a notice specifying (i) the date on which
any such record is to be taken for the purpose of such dividend, distribution
or right, and stating the amount and character of such dividend, distribution
or right and (ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up is to take place, and the time, if any, as of which the holders of
record of Common Stock (or Other Securities) shall be entitled to exchange
their shares of Common Stock (or Other Securities) for securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up. Such notice shall be mailed at least twenty (20) days prior to
date therein specified.
11. Reservation of Stock, etc., Issuable on Exercise of Warrants.
The Company will at all times reserve and keep available, solely for issuance
and delivery upon the exercise of this Warrant, all shares of Common Stock (or
Other Securities) from time to time issuable upon the exercise of this
Warrant.
12. Listing on Securities Exchanges; Registration. If the Company at
any time after the Original Issue Date shall list any Common Stock on any
national securities exchange and shall register such Common Stock under the
Securities Exchange Act of 1934 (as then in effect, or any similar statute
then in effect), the Company will, at its expense, to the extent permitted by
the rules of such exchange, simultaneously list on such exchange, upon
official notice of issuance upon the exercise of this Warrant, all shares of
Common Stock from time to time issuable upon the exercise of this Warrant, and
maintain such listing of all shares of Common Stock from time to time issuable
upon the exercise of this Warrant, and the Company will so list on any
national securities exchange, will so register and will maintain such listing
of, any Other Securities if and at the time that any securities of like class
or similar type shall be listed on such national securities exchange by the
Company.
13. Exchange of Warrants. Subject to the provisions of section 2
hereof, upon surrender for exchange of this Warrant, properly endorsed, to the
Company, the Company at its own expense will issue and deliver to or upon the
order of the record owner thereof a new Warrant of like tenor, in the name of
such record owner or as such record owner (upon payment by such record owner
of any applicable transfer taxes) may direct, calling in the aggregate on the
face or faces thereof for the number of shares of Common Stock called for on
the face of this Warrant.
14. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount
to the Company or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
15. Warrant Agent. The Company may, by written notice to each
record owner of this Warrant, appoint an agent having an office in New York,
New York, for the purpose of issuing Common Stock (or Other Securities) upon
the exercise of this Warrant pursuant to section 3, exchanging this Warrant
pursuant to section 13, and replacing this Warrant pursuant to section 14, or
any of the foregoing, and thereafter any such issuance, exchange or
replacement, as the case may be, shall be made at such office by such agent.
16. Negotiability, etc. This Warrant is issued upon the following
terms, to all of which each holder or owner hereof by the taking hereof
consents and agrees:
(a) subject to the provisions hereof, title to this Warrant may be
transferred, in whole but not in part, by endorsement (by the holder
hereof executing the form of assignment at the end hereof) and
delivery in the same manner as in the case of a negotiable
instrument transferable by endorsement and delivery;
(b) subject to the foregoing, any person in possession of this Warrant
properly endorsed is authorized to represent himself as absolute
owner hereof and is empowered to transfer absolute title hereto by
endorsement and delivery hereof to a bona fide purchaser hereof for
value; each prior taker or owner waives and renounces all of his
equities or rights in this Warrant in favor of each such bona fide
purchaser and each such bona fide purchaser shall acquire absolute
title hereto and to all rights represented hereby; and
(c) until this Warrant is transferred on the books of the Company, the
Company may treat the record owner hereof as the absolute owner hereof
for all purposes, notwithstanding any notice to the Company.
17. Notices, etc. All notices and other communications from the
Company to the record owner of this Warrant shall be mailed by first class
registered or certified mail, postage prepaid, at such address as may have
been furnished to the Company in writing by such record owner, or, until an
address is so furnished, to and at the address of the last record owner of
this Warrant who has so furnished an address to the Company.
18. Miscellaneous. This Warrant and any term thereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by
the party against which enforcement of such change, waiver, discharge or
termination is sought. This Warrant is being delivered in the State of New
York and shall be construed and enforced in accordance with and governed by
the internal laws of such state. The headings in this Warrant are for
purposes of reference only, and shall not limit or otherwise affect any of the
terms hereof.
19. Executed Expiration. The right to exercise this Warrant shall
expire at 5:00 P.M., New York City time, on [Final Installment Date] __, 2004.
20. Assignability. This Warrant is fully assignable, in whole but
not in part, at any time, subject to applicable securities laws.
<PAGE>
Dated:[Final Installment Date] __, 1999
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION
By:
Geoffrey T. Burnham
President
[Corporate Seal]
Witness:
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To: SEMICONDUCTOR LASER INTERNATIONAL CORPORATION
15 Link Drive
Binghamton, NY 13904
The undersigned, the record owner of the within Warrant, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
for, and to purchase thereunder,* shares of Common Stock of SEMICONDUCTOR
LASER INTERNATIONAL CORPORATION, and herewith make payment of $
therefor, and requests that the certificates for such shares be issued in the
name of, and delivered to, , whose address is .
Dated:
(Signature must conform in all respects to name of record owner as
specified on the face of the Warrant
(Address)
* Insert here the number of shares called for on the face of the Warrant (or,
in the case of a partial exercise, the portion thereof as to which the Warrant
is being exercised), in either case without making any adjustment for
additional Common Stock or any other stock or other securities or property or
case which, pursuant to the adjustment provisions of the Warrant, may be
deliverable upon exercise.
<PAGE>
FORM OF ASSIGNMENT
(To be signed only upon transfer of Warrant)
For value received, the undersigned hereby sells, assigns and transfers
unto the right represented by the within Warrant to
purchase shares of Common Stock of SEMICONDUCTOR LASER INTERNATIONAL
CORPORATION to which the within Warrant relates, and appoints
as Attorney-in-Fact to transfer such right on the books of
with full power of substitution in the premises. The Warrant being
transferred hereby is the Common Stock Purchase Warrant initially issued by
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION as of [Final Installment Date]
, 1999.
Dated:
(Signature must conform in all respects to name of record owner as specified
on the face of the Warrant)
(Address)
Signature guaranteed by a Bank or
Trust Company having its principal
office in New York City or by a Member
Firm of the New York or American
Stock Exchange
<PAGE>
[front]
PROXY COMMON STOCK
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE CORPORATION FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 11, 1999
The undersigned hereby constitutes and appoints Geoffrey T. Burnham
attorney and proxy to represent and to vote all of the shares of Common Stock
which the undersigned would be entitled to vote, with all powers the
undersigned would possess if personally present, at the Annual Meeting of the
Stockholders of SEMICONDUCTOR LASER INTERNATIONAL CORPORATION, to be held on
June 11, 1999 at 9:30 o'clock a.m. at the New York Hilton Hotel and Tower,
1335 Avenue of the Americas, New York, New York 10019, and at any adjournment
or postponement thereof, on all matters coming before said meeting.
1. TO ELECT DIRECTORS.
Nominees: Geoffrey T. Burnham, Susan M. Burnham, George W. Hippisley, Roger
O'Brien and Edwin B. Spievack. (Mark only one of the following boxes.)
VOTE FOR all nominees listed above, except vote withheld as to the
following nominees (if any):
VOTE WITHHELD from all nominees.
2. To approve an amendment to the Certificate of Incorporation of the
Company (the "Certificate of Incorporation") to effect a reverse stock split of
the Company's common stock, par value $0.01 per share (the "Common Stock") such
that every seven (7) shares of Common Stock outstanding on the effective date
of such reverse stock split would be converted into one (1) share of Common
Stock (the "Stock Split")
VOTE FOR VOTE AGAINST ABSTAIN
3. To approve the issuance of an aggregate of 5,500,000 shares of the
Common Stock issuable(x) upon the conversion of the Company's Series B
Convertible Preferred Stock, par value $0.01 per share and (y)upon exercise
of a warrant to purchase an aggregate of 500,000 shares of Common Stock, at
an exercise price of $0.50 per share, issued to bmp Mobility AG Venture
Capital(This proposal shall be withdrawn and shall not be submitted for the
approval of the stockholders in the event that the Nasdaq Conditions(as defined
in the Proxy Statement) are satisfied prior to the date of the Annual Meeting
without procuring stockholder approval.
VOTE FOR VOTE AGAINST ABSTAIN
4. To ratify the appointment of PricewaterhouseCoopers, LLP as the
Company's independent public accountants.
VOTE FOR VOTE AGAINST ABSTAIN
5. At their discretion, upon any other business which may properly come
before the meeting or any adjournment thereof.
<PAGE>
[back]
This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder.
If no directions are given, proxies will be voted (i) FOR the election
of the nominees named below under the caption "Election of the
Directors-Nominees for Director," (ii) FOR the proposal to amend the
Certificate of Incorporation to effect a one-for-seven reverse stock split of
all issued and outstanding shares of the Common Stock; (iii) FOR the proposal
to approve the issuance of an aggregate of 5,500,000 shares of the Common
Stock issuable (x) upon the conversion of the Company's Series B Convertible
Preferred Stock, par value $0.01 per share and (y) upon exercise of a warrant
to purchase an aggregate of 500,000 shares of Common Stock, at an exercise
price of $0.50 per share, issued to bmp Mobility AG Venture Capital, (iv) FOR
the proposal to ratify the selection of PricewaterhouseCoopers LLP as
independent public accountants for the fiscal year ending December 31, 1999,
and (v) in the discretion of the Proxies named in the proxy card on any other
proposals to properly come before the meeting or any adjournment thereof.
The undersigned acknowledges receipt of the accompanying Proxy
Statement dated May 18, 1999
Date:________________________________, 1999
___________________________________
___________________________________
Signature of Stockholder(s)
(When signing as attorney, trustee, executor, administrator, guardian,
corporate officer, etc., please give full title. If more than one trustee,
all should sign. Joint owners must each sign.)
Please date and sign exactly as name appears above.
I plan I do not plan
to attend the 1999 Annual Meeting of Stockholders.
