SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM 10-QSB
(Mark one)
[x] Quarterly Report under section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarter ended June 30, 1999
[ ] Transition Report under section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File No. 0-27908
Semiconductor Laser International Corporation
------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 16-1494566
- ---------------------------------------- -------------------
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
15 Link Drive, Binghamton, New York 13904
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (607) 722-3800
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for a shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes [x] No [ ]
As of July 12, 1999 there were outstanding 12,884,632 shares of the issuers
common stock, par value $.01 per share.
Transitional Small Business Disclosure Format
Yes [ ] No [x]
<PAGE>
1
Part I. Financial Information
Item 1. Financial Statements
Semiconductor Laser International Corporation
Balance Sheet
<TABLE>
<CAPTION>
December 31, June 30,
1998 1999
(unaudited)
------------ ------------
<S> <C> <C>
Assets
Current assets
Cash $ 112,695 $ 1,490,641
Accounts Receivable, net of allowance for
doubtful accounts of $560,645 and $560,645,
respectively 296,193 240,464
Inventory 333,806 330,253
Prepaid expenses and other assets 180,853 154,990
------------ ------------
Total current assets 923,547 2,216,348
Property, plant and equipment, net 2,691,926 2,636,844
Deposits and other assets 123,957 149,828
------------ ------------
Total assets $ 3,739,430 $ 5,003,020
============ ============
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 1,127,589 $ 1,016,303
Notes payable ( Line of Credit ) 550,000 1,000,000
Accrued expenses and other liabilities 164,235 148,013
Current portion of long-term debt 37,170 42,308
------------ ------------
Total current liabilities 1,878,994 2,206,624
Long-term debt 765,687 736,042
Accrued royalty payments 100,000 100,000
------------ ------------
Total liabilities 2,744,681 3,042,666
------------ ------------
Commitments and contingencies (Notes 2 and 5)
Shareholders' Equity
Preferred stock, $.01 par value, 1,000,000 shares
authorized; 1,000,000 issued and outstanding at
December 31, 1998 and June 30, 1999 - 10,000
Common stock, $.01 par value, 20,000,000 shares
authorized, 10,039,552 issued and outstanding
at December 31, 1998, and 12,884,632 issued
and outstanding at June 30, 1999 100,396 128,846
Common Stock Issuable 41,073 -
Treasury stock (248,241) (248,241)
Additional paid-in capital 18,061,560 21,078,810
Accumulated deficit (16,960,039) (19,009,061)
------------ ------------
Total Shareholders' Equity 994,749 1,960,354
------------ ------------
Total liabilities and
Shareholders' Equity $ 3,739,430 $ 5,003,020
============ ============
</TABLE>
See accompanying notes to financial statements
<PAGE>
2
Semiconductor Laser International Corporation
Statement of Operations
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1999 1998 1999
(unaudited) (unaudited) (unaudited) (unaudited)
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net sales $ 517,224 $ 363,003 $ 774,906 $ 661,548
Cost of sales (784,511) (687,050) (1,436,944) (1,350,936)
---------- --------- ----------- -----------
(267,287) (324,047) (662,038) (689,388)
Operating expenses:
R & D Expenses - - 7,273 1,738
Sales and marketing expenses 176,172 133,354 303,446 196,574
General and admin.expenses 558,218 596,920 1,068,524 1,167,724
---------- ---------- ----------- -----------
Loss from operations 1,001,677 1,054,321 2,041,281 2,055,424
Interest income 15,156 6,097 32,010 6,402
---------- ---------- ----------- -----------
Net loss $ 986,521 $ 1,048,224 $ 2,009,271 $ 2,049,022
========== ========== =========== ===========
Net loss per share ($0.11) ($0.09) ($0.23) ($0.17)
========== ========== =========== ===========
Weighted average shares
outstanding 8,788,453 12,397,465 8,590,104 11,814,995
========== ========== =========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE>
3
Semiconductor Laser International Corporation
Statement of Cash Flows
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1998 1999
(unaudited) (unaudited)
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(2,009,271) $(2,049,022)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization 101,509 103,980
Amortization of deferred expenses - 9,404
Change in assets and liabilities:
(Increase)decrease in accounts
receivable, net (305,502) 55,279
(Increase)decrease in inventory (162,686) 3,553
Decrease in prepaid expenses
and other assets 65,360 25,863
(Increase)decrease in deposits
and other assets 273,776 (25,871)
Increase(decrease) in accounts
payable 88,666 (111,286)
Increase(decrease) in accrued
expenses and other liabilities (102,038) (16,222)
----------- -----------
Net cash used in operating activities (2,050,186) (2,003,872)
----------- -----------
Cash flows from investing activities:
Purchase of property, plant and
equipment (151,140) (49,364)
----------- -----------
Net cash used for investing activities (151,140) (49,364)
----------- -----------
Cash flows from financing activities
Proceeds from short-term debt 300,000 450,000
Payments on long-term debt (18,044) (24,507)
Issuance of warrants - 31,500
Issuance of stock, net of expenses 1,044,345 2,974,189
----------- -----------
Net cash provided by financing activities 1,326,301 3,431,182
----------- -----------
Net (decrease) increase in cash (875,025) 1,377,946
Cash at beginning of period 1,934,574 112,695
----------- -----------
Cash at end of period $ 1,059,549 $ 1,490,641
=========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE>
4
Semiconductor Laser International Corporation
Notes to Financial Statements
June 30, 1999
(Unaudited)
1. Organization
Semiconductor Laser International Corporation (the"Company") was
incorporated in New York State in September 1993 (inception) and,
subsequently, reincorporated in Delaware in September 1997, to produce high
power semiconductor diode laser wafers and bars ("HPDLs"), and to market
these products worldwide.
The Company's primary activities since incorporation, as a development stage
enterprise, had been research and development, business and financial
planning, raising capital and constructing and equipping its manufacturing
facility. The Company had previously relied on facilities provided through
the Wright Cooperative Research and Development Agreement (CRDA) with the
U.S. Air Force for the development and quality control testing of its HPDLs
The CRDA expired in September 1996. The Company has since completed the
construction of its manufacturing facility in Binghamton, New York, where it
is conducting all activities.
Effective April 1, 1997, the Company ceased operating as a development stage
enterprise as it began commercial production of its products.
2. Financial Resources and Liquidity
The Company has incurred net losses from inception (September 21, 1993) and
had at June 30, 1999 an accumulated deficit of $19,009,061 and working
capital of $9,724. Such losses have resulted primarily from a lack of
adequate sales revenue to generate net profits. Subsequently, the Company has
operated with the proceeds from the Company's initial public offering and
private equity financing (see Note 5). The Company expects that its cash and
working capital requirements will continue to be significant as its
operations expand. The Company expects that such cash and working capital
requirements will be satisfied through a combination of revenue growth and
additional private equity financing.
There is no assurance, however, that the Company will be able to obtain funds
to support its operations. As a result of the foregoing, there remains
substantial doubt as to the Company's ability to continue as a going concern.
In the past the Company has been able to raise the capital necessary ($21.0
million inception to date) but there can be no assurance that the Company
will be able to raise additional capital. If the Company achieves cash
breakeven by the end of 1999, then its cash needs would be minimized or
eliminated. However, based upon past performance there can be no assurance
that this will happen. The accompanying financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
3. Basis of Presentation
The accompanying unaudited financial statements have been prepared by the
Company. Certain information and footnote disclosures normally included in
financial statements prepared in conformity with generally accepted
accounting principles have been condensed or omitted. In the opinion of the
Company's management, the disclosures made are adequate to make the
information presented not misleading, and the financial statements contain
all adjustments necessary to present fairly the financial position as of June
30, 1999 and the results of operations and cash flows for the six months
ended June 30, 1999 and 1998. The results of operations for the six months
ended June 30, 1999 are not necessarily indicative of the results to be
expected for the full year.
<PAGE>
5
4. Summary of Significant Accounting Policies
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial statements
and the reported amounts of revenue and expenses during the period. Actual
results could differ from those estimates.
Inventory
Inventory, primarily consisting of raw materials, is valued at the lower of
cost or market. Cost is determined by the first in, first out (FIFO) method.
Depreciation and amortization
Property, plant and equipment are recorded at cost and depreciated over the
assets' estimated useful lives ranging from three to twenty years.
Depreciation is computed using the straight-line method for financial
reporting and the modified accelerated cost recovery system for income tax
purposes. Expenditures for major renewals and betterments that extend the
useful lives of property, plant and equipment are capitalized. Expenditures
for maintenance and repairs are charged to expense as incurred.
Intangible assets are amortized using the straight-line method over five
years.
Impairment of long-lived assets
Assessments of the recoverability of long-lived assets are conducted when
events or circumstances occur that indicate that the carrying value of the
asset may not be recoverable. The measurement of impairment is based on the
ability to recover such carrying value from the future undiscounted cash
flows of related operations.
<PAGE>
6
Revenue recognition
Revenue recognition is based on the terms of the underlying sales agreements
(purchase orders or contracts). Revenues for fixed price milestone contracts
are recognized upon the completion and billing of the milestone. Customers
entering into long-term contracts with the Company include the U. S.
Government, prime or subcontractors for which the U.S. Government may be the
end customer and other domestic end-users.
Warranty Costs
The Company provides for the recognition of the potential for rework to its
products by establishing a warranty reserve based on an historic analysis of
past experience.
Research and development
Research and development costs are expensed as incurred.
Supplemental Cash Flow Disclosures
Common Stock was issued to Company vendors in February and May, 1999 to
satisfy payable obligations. A total of 135,147 shares of Common Stock were
issued to satisfy $50,023 of accounts payable.
Income taxes
The Company follows the asset and liability method for deferred income taxes.
This method provides that deferred tax assets and liabilities are recorded
using currently enacted tax rates applied to the differences between the tax
bases of assets and liabilities and their carrying values for financial
statement purposes. A valuation allowance is recorded when it is more likely
than not that deferred tax assets will not be realized.
Net loss per share
Net loss per share is computed using the weighted average number of common
shares outstanding.
As of June 30, 1999, the Company had outstanding warrants and options to
purchase 3,446,334 and 170,730 shares of common stock, respectively, which
are not included in the calculation of earnings per share for the six months
ended June 30, 1999, and would not be included in such calculation due to the
anti-dilutive nature of these instruments.
<PAGE>
7
5. Commitment, Contingencies and Other Matters
Operating Leases
In October 1996, the Company entered into a master equipment lease agreement
with FINOVA Technology Finance, Inc. ("FINOVA"). The agreement provided for
the sale and ultimate leaseback by the Company of up to $3,500,000 of
equipment, furnishings and fixtures. As part of the consideration for the
agreement, the Company issued a warrant certificate for 58,334 warrants,
entitling FINOVA to purchase a corresponding number of shares of the
Company's common stock at $5.00 per share. The warrants could not have been
assigned, sold, transferred or otherwise disposed of prior to February 27,
1998. The warrants are currently exercisable. The warrants have been valued
at $167,710, the fair market value of the Company's warrants at the date of
issuance and such value is being amortized over the term of the lease.
Rent expense under non-cancellable operating leases, including the FINOVA
leases, was $555,233 for the six months ended June 30,1999. Rent expense
under non-cancellable operating leases, including the FINOVA leases, was
$556,212 for the six months ended June 30, 1998.
Future minimum payments under non-cancellable operating leases, including the
FINOVA lease agreement, at June 30, 1999, are as follows:
<TABLE>
<CAPTION>
Year ending
December 31, Commitment
------------- -------------
<S> <C> <C>
1999(1) $ 515,102(1)
2000 1,088,460
2001 124,741
-------------
$1,728,303
=============
(1) Six months
</TABLE>
Litigation/Investigation
The Company is currently engaged in litigation with a former employee who the
Company sought action against relative to a breach of confidentiality and
defamation of character. The former employee has responded with a counter
claim alleging defamation of character and is seeking $500,000 in damages.
The litigation is presently in the discovery stage. The Company believes the
counter claim is without merit and is vigorously defending such action. The
Company further believes that the ultimate outcome of such action will not
have a material impact on the financial condition or results of operations of
the Company.
Since April 1998, the Company has been responding to informal requests for
information from the Securities and Exchange Commission. In August 1998, the
Company learned that in June 1998, the Commission had issued a formal order
of investigation to determine whether violations of certain aspects of the
federal securities laws had occurred in connection with the Company. Pursuant
to this formal order of investigation, the Company and certain of its current
and former officers and directors have produced documents pursuant to
subpoenas from the Northeast Regional Office of the Commission. The Company
is not able to speculate as to the specific subject matter of the
investigation on the Company. There can be no assurance as to the timeliness
of the completion of the investigation or as to the final result thereof, and
no assurance can be given that the final result of the investigation will not
have a material adverse effect on the Company. The Company has cooperated
with the investigation, and will continue to respond to requests for
information in connection with the investigation if received.
In August 1998, the Company learned that the United States Attorney's Office
for the Southern District of New York is investigating whether violations of
securities laws have occurred in connection with the Company's public
disclosures. The Company has cooperated with the investigation and has
responded to a grand jury subpoena issued in connection with the
investigation. There can be no assurance as to the timeliness of the
completion of the investigation or as to the final result thereof, and no
assurance can be given that the final result of the investigation will not
have a material adverse effect on the Company or its current management.
Management believes that there are meritorious defenses to the issues raised
by this investigation and intends to defend this matter vigorously.
The Company is currently engaged in litigation with Newport Corporation, a
vendor who is seeking to recover $100,508 for goods allegedly sold to the
Company. Based on losses sustained by the Company as a result of previously
supplied defective equipment from this vendor, the Company's counterclaim
exceeds the amount sued for by Newport Corporation. The Company believes
that the ultimate outcome of the action will not have a material impact on
the financial condition or results of operations of the Company.
<PAGE>
8
Financing
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 (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 as contemplated by the Securities
Purchase Agreement 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"),
on May 31, 1999 bmp purchased 192,500 shares of Series B Stock for a purchase
price of $385,000 (the "May Installment") and on June 26, 1999, bmp
purchased 575,000 shares of Series B Stock for a purchase price of $1,150,000
(the "June Installment").
The shares of common stock issued to bmp contain certain demand and piggyback
registration rights and the preferred stock contains certain antidilution
rights.
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 and (iii) six monthly installments beginning six months
following the funding of the April Installment and ending eleven months
following such funding date. As of June 30, 1999, bmp Consultants had been
paid $24,480.
In connection with the Amendment, on June 26, 1999, the Company issued to bmp
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"). The
shares issuable upon exercise of the bmp warrant contain certain demand and
piggyback registration rights. In addition, bmp is eligible to receive a
finder's fee(the "Finder's Fee") in the amount of 5% of the net proceeds of
any transaction involving the raising of debt or equity capital in a private
placement from a source introduced to the Company by bmp consummated by the
Company within 24 months following payment of the June Installment.
In conjunction with the Securities Purchase Agreement, on February 16, 1999,
the Company issued to BSB Bank & Trust Company, warrants to purchase an
aggregate of 500,000 shares of the Company's common stock at an exercise
price of $0.575 per share. The warrants expire on February 16, 2004, and
contain certain registration rights. The value of the warrants has been
reflected as deferred financing costs in the Company's financial statements
and will be amortized over the period commencing from date of issue to
May 31, 2000.
The Company is in the process of completing a private placement of Common
Stock with certain accredited investors introduced to the Company by a
funding source referred to the Company by bmp. As of July 31, 1999,
2,979,256 shares of Common Stock have been subscribed for but not yet issued
at an aggregate purchase price of $1,117,221. The Company will receive
$1,061,122 net of Finder's fees. Of such amount, $266,225 has been received
representing payment for 709,933 shares through June 30, 1999. The shares of
Common Stock issued in this private placement contain certain piggyback
registration rights.
<PAGE>
9
Item 2. Managements Discussion and Analysis of Plan of Operation
Certain statements in this Report under the caption "Management's Discussion and
Analysis and Plan of Operation" and elsewhere constitute or may constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Litigation Reform Act"), including, without
limitation, statements regarding future cash requirements. The Company desires
to avail itself of certain "safe harbor" provisions of the Litigation Reform Act
and is therefore including this special note to enable the Company to do so.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of the Company, or industry results, to be materially different
from any future results, performance, or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
following: inability to obtain additional financing on acceptable terms;
manufacturing delays due to equipment or technical problems; delays in product
development; costs associated with and outcome of pending investigations
described elsewhere herein; failure to receive or delays in receiving regulatory
approval; lack of enforceability of patents and proprietary rights;
general economic and business conditions; industry capacity; industry trends;
demographic changes; competition; material costs and availability; the loss
of any significant customers; changes in business strategy or development plans;
quality of management; availability, terms and deployment of capital; business
abilities and judgment of personnel; availability of qualified personnel;
changes in, or the failure to comply with, government regulations; and other
factors referenced in this report.
Overview
The Company was considered a development stage company until April 1, 1997.
During 1997, the Company began the commercialization of many of its proposed
products. Since its inception in 1993, the Company had been engaged primarily in
research and development, business and financial planning, recruitment of key
management and technical personnel, raising capital to fund operations and the
development of its HPDL product prototypes. The Company has since completed the
construction and equipping of the first phase of its manufacturing facility and
has begun the commercialization of its products and the generation of sales
revenues. The Company is seeking to increase sales in order to fully utilize its
production capacity. Increasing sales levels and higher utilization of
production capacity are critical to the Company's financial success. Financial
resources and liquidity during this period of growth are of utmost importance
and concern to the Company. Recent events including cash flow problems have
placed considerable strain on Company management, financial, manufacturing and
other resources.
The manufacture of semiconductor lasers such as those sold by the Company is a
highly complex and precise process, requiring production in a highly controlled
and clean environment with the utilization of materials free of defects and
contamination. These factors have a significant impact on production yields and
product reliability which in turn affect operating results and future customer
acceptance. The Company as well as other semiconductor laser manufacturers have,
from time to time, experienced technical production problems which have resulted
in adverse financial consequences. No assurance can be given that the Company's
systems, procedures, procurement efforts and production process are such that
these problems will not be experienced in the future.
Since the onset of commercial production, the Company, on occasion, has been
unable to manufacture certain products in quantities sufficient to meet the
demands of its existing customer base and that of new customers based upon
equipment and/or other technical problems arising at various points during the
production process. Previous problems with fiber coupling subcontractors have
been corrected. At this time the Company is experiencing problems with its
clean room HVAC which has been unable to maintain necessary humidity levels for
the last two weeks in July. This has caused some delays in shipments of product
to certain customers. The Company has hired a new HVAC company to fix the
problem. To date solutions have been presented and necessary modifications to
the existing equipment have begun. However, there can be no assurance that
these fixes will definitely correct the problems. If these problems are not
corrected, the Company could sustain additional periods of time when certain
humidity critical tasks cannot be performed leading to delays in production.
The Company entered into a licensing agreement with Northwestern University (the
"Northwestern License") on September 1, 1996. The Northwestern License is for
the exclusive rights to produce, market and sell aluminum-free HPDLs worldwide
using certain patents and knowhow, as defined in the Northwestern License, owned
by Northwestern University. Under the terms of the Northwestern License, the
rights expire upon the expiration of the patents or ten years from the date of
the first commercial sale in countries where no patent rights exist. The Company
also has the right to terminate the Northwestern License after three years.
Northwestern University has the right to terminate the Northwestern License
after three years, subject to certain exceptions, if the Company does not have
the licensed product, based on the technology, available for sale. On June 14,
1999, the Company received notice from Northwestern University that it has
failed to comply with certain milestones concerning the production and sale of
the licensed products under the Northwestern License. Northwestern University
has advised the Company that it intends to terminate the Northwestern License as
of September 10, 1999 if the Company has not provided evidence by such date that
it has or will fulfill its obligations to comply with these milestones. The
Company intends to defend its rights under the Northwestern License vigorously
and, if necessary, will submit any dispute that may exist to binding arbitration
as contemplated by the Northwestern License.
In consideration for the Northwestern License, the Company paid Northwestern
University a non-refundable license fee of $21,000 plus $10,000 of the Company's
unregistered common stock (1,231 shares). In addition, the Company issued 1,500
shares of unregistered common stock, valued at $2,586. These amounts have been
charged to research and development expense. Royalties are also payable for
sales derived from this technology, based on net sales volume on a sliding scale
from 4% to 1%.
The Company has been engaged in the development of aluminum-free HPDLs for
almost three years and has expended significant resources on such development
efforts. The Company has developed and is currently testing in its laboratories
one and two watt single chip aluminum-free diodes which it anticipates will be
ready for shipment to customers very shortly. Of course, technical difficulties
and reliability issues, which are not now anticipated, could delay large scale
production of the product.
The Company received notice from The Nasdaq Stock Market that its securities
were delisted from The Nasdaq SmallCap Market, effective as of the close of
business on May 26, 1999. The Nasdaq Stock Market based its determination on the
Company's failure to meet the minimum bid price requirement for its common stock
and the minimum net tangible assets requirement set forth under the Nasdaq
Marketplace Rules. The Company's securities are currently quoted on the
NASDAQ OTC Bulletin Board(Symbol SLIC) and are also traded over the Berliner
Freiverkehr, an electronic quotation system in Germany similar to the OTC
Bulletin Board. The delisting of the Company's Common Stock could cause the
market price of the Common Stock to decline and could make it much more
difficult to buy or sell the Common Stock on the open market.
<PAGE>
10
Results of Operations
Three months ended June 30, 1999, compared to three months ended June 30, 1998.
Sales were $363,003 for the three months ended June 30, 1999 as compared to
$517,224 for the same period in the prior year. The decrease in sales is the
result of decreased government contract and commercial revenue. The decrease in
commercial revenue was caused by fewer orders received.
Cost of sales for the three months ended June 30,1999 decreased approximately
$97,000 as a result of the decrease in product sales. This reduction was in
direct labor and materials. However, as a substantial portion of the Company's
manufacturing costs are fixed in nature and sales were insufficient to cover its
fixed costs, the Company experienced negative gross margin.
There were no research and development costs recorded for the second quarter of
1998 or 1999 as operating expenses. The Company has engaged in considerable R &
D efforts which have been expensed as cost of goods sold as incurred.
Sales and Marketing expenses decreased approximately $43,000 for the three
months ended June 30, 1999 as compared to the same period in 1998 primarily
due to decreased advertising costs offset in part by costs of catalogues and
trade show expenses.
General and administrative expenses increased approximately $39,000 for the
three months ended June 30, 1999 as compared to the same period in the prior
year primarily as a result of increases in utilities expense, amortization
expense(as a result of BSB warrants issued in 1999) and warranty expense. Loan
interest expense increased in the second quarter of 1999 as compared to the
second quarter of 1998 due to the draw down on the line of credit of the full
$1 million in availability.
Interest income decreased for the three months ended June 30, 1999 as compared
to the three months ended June 30, 1998, as a result of lower cash balances
available for investment.
Six months ended June 30, 1999, as compared to the six months ended June 30,
1998.
Sales for the six months ended June 30, 1999 decreased approximately $113,000
over the same period in the prior year primarily as a result of reduced
government contract revenue.
Cost of sales for the six months ended June 30, 1999, decreased approximately
$986,000 over the six months ended June 30, 1998, as a result of reduced costs
associated with decreased sales. These reductions were in labor and materials.
However, as a substantial portion of the Company's manufacturing costs are fixed
in nature and sales were insufficient to cover its fixed costs, it experienced
negative gross margin.
During the six months ended June 30, 1999, the Company has engaged in
considerable R & D efforts which have been expensed as cost of goods sold as
incurred. Research and development recorded as operating expenses were $1,738
for the first six months ended June 30, 1999 as compared to $7,273 for the same
period in 1998.
Sales and marketing expense decreased approximately $107,000 for the six months
ended June 30, 1999 as compared to the six months ended June 30, 1998 primarily
as a result of decreased costs associated with advertising partially offset by
an increase in trade show expense and the cost of catalogs.
General and administrative expenses increased approximately $99,000 for the six
months ended June 30, 1999 as compared to the same period in the prior year
primarily as a result of increases in legal fees related to the SEC
investigation, increased litigation, patent activity and general corporate
matters partially offset by decreases in contract labor costs. Loan interest
expense increased in the first half of 1999 compared to the first half of 1998
due to the full utilization of the $1 million line of credit in 1999.
Interest income decreased as a result of lower cash balances available for
investment.
Liquidity and Capital Resources
The Company's cash and cash equivalents at June 30, 1999 were $1,490,641 as
compared to $112,695 at December 31, 1998, a net increase of $1,377,946 for the
six months ended June 30, 1999. The increase is the result of $2,003,872 used in
operating activities, $49,364 used in investing activities and $3,431,182
provided by financing activities.
<PAGE>
11
The $3,431,182 provided by financing activities was derived from the issuance of
2,709,933 shares of common stock which provided $974,189(net of legal
expenses and fees), 1,000,000 shares of Series B Convertible Preferred Stock
which provided $2,000,000 and 500,000 warrants which provided $31,500 and an
increase in the availability under the line of credit(See "Financing" under Note
5 in the Notes to the Financial Statements). The Company drew down on the line
by borrowing $300,000 in the month of March and $150,000 in the month of April.
The aforementioned were offset by payments on the long-term debt.
The Company has a $1,000,000 secured line of credit with BSB for purposes of
providing working capital. The line of credit bears interest at prime plus 2.5%
on the used portion and matures May 31, 2000. At June 30, 1999, the Company had
the full $1,000,000 outstanding under this Line of Credit.
The Company has entered into the Securities Purchase Agreement, dated as of
February 5, 1999, between the Company and bmp, as amended by Amendment No. 1 to
the Securities Purchase Agreement, dated as of April 28, 1999, between the
Company and bmp.
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 (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 as contemplated by the Securities
Purchase Agreement 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, on May 31, 1999 bmp purchased
192,500 shares of Series B Stock for a purchase price of $385,000 and on
June 26, 1999, bmp purchased 575,000 shares of Series B Stock for a purchase
price of $1,150,000.
In connection with the first installment of the bmp investment, BSB agreed to
increase the amount available under the Line of Credit to $1,000,000, to extend
the maturity date thereof until June 30, 1999 and to further extend the maturity
of the Line of Credit until May 31, 2000 upon the investment by bmp in the
Company of an additional $1.3 million dollars, subject to the absence of any
material adverse change in the business. BSB waived the requirement that the
Company maintain the balance of the Line of Credit within its collateral base
formula until the earlier of June 30, 1999 or the date that the Company was in
receipt of funds equaling an additional $1.3 million arising out of the final
installments of the bmp investment. Upon funding by bmp of the full amount of
the final installments of the investment, BSB extended the maturity date of the
Line of Credit until May 31, 2000. The Company issued warrants to purchase an
aggregate of 500,000 shares of Common Stock to BSB, at an exercise price of
$0.575 per share, in consideration for the modifications to the Line of Credit.
The warrants expire in 2004 and contain certain registration rights.
The Company is in the process of completing a private placement of Common
Stock with certain accredited investors introduced to the Company by a
funding source referred to the Company by bmp. As of July 31, 1999,
2,979,256 shares of Common Stock have been subscribed for but not yet issued
at an aggregate purchase price of $1,117,221. The Company will receive
$1,061,122 net of finder's fees. Of such amount, $266,225 had been received
representing payment for 709,933 shares through June 30, 1999. The shares of
Common Stock issued in this private placement contain certain piggyback
registration rights.
<PAGE>
12
The Company has incurred net losses from inception (September 21, 1993) and has
an accumulated deficit at June 30, 1999 of $19,009,061. Such losses have
resulted from the Company's activities as a development stage company and have
been financed primarily out of proceeds from the Company's initial public
offering and private equity financing. The Company expects that its cash and
working capital requirements will continue to be significant as its operations
expand. Potential sources for such cash and working capital requirements are
revenue growth and additional private equity financing. It is anticipated that
the Company will continue to incur losses for the immediate future until it is
able to achieve profitable operations or to generate sales sufficient to support
its operations.
The need to raise equity capital at current stock prices is likely to result in
substantial dilution to shareholders and could result in a change of control.
The Company's current business plan requires additional capital infusion by the
end of this fiscal year and subsequent infusions until such time as the
Company's sales are sufficient to provide internally generated and sustainable
cash flows. However, achieving positive cash flow is dependent upon sales
levels which the Company has not historically achieved. The Company is
currently seeking to raise additional equity capital through a private
placement. Without an additional equity infusion, the Company estimates it
would have sufficient cash flow to operate at least through the end of the
current fiscal year and perhaps beyond.
There can be no assurance that the Company will be able to obtain additional
financing, including any institutional financing, when needed, on commercially
reasonable terms or at all.
<PAGE>
13
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is involved in litigation described in Note 5 in the financial
statements.
Item 2. Changes in Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held its 1999 Annual Meeting of Stockholders (the "Annual
Meeting") on June 11, 1999. As of the record date of April 15, 1999, there
were 12,150,832 shares of the Company's Common Stock eligible to vote. Of
these shares, 8,221,470 (67.7%) were represented either in person or by
proxy at the Annual Meeting. At the Annual Meeting, Geoffrey T. Burnham,
Susan M. Burnham, George W. Hippisley, Roger D. O'Brien and Edwin B.
Spievack were elected directors of the Company. The number of shares of the
Company's Common Stock voted in favor of the election of Messrs. Burnham,
Hippisley, O'Brien and Spievack and Ms. Burnham were 8,030,305, 8,030,305,
8,030,305, 8,030,305 and 8,030,305, respectively, and the number of such
shares withheld were 191,165, 191,165, 191,165, 191,165 and 191,165,
respectively. At the Annual Meeting, the Company's stockholders also voted
to ratify the selection of PricewaterhouseCoopers LLP as independent public
accountants for the fiscal year ending December 31, 1999. The number of
shares of the Company's Common Stock voted in favor of the ratification of
appointment of accountants was 8,100,916, the number of shares of the
Company's Common Stock voted against was 100,620 and the number of shares
of the Company's Common Stock abstaining was 19,934. The Company initially
proposed 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 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 and a proposal to
approve the issuance of an aggregate of 5,500,000 shares of Common Stock
issuable (x) upon the conversion of the Company's Series B Stock and (y)
upon exercise of the bmp warrant. The reverse stock split proposal was part
of the Company's two-step plan to reattain compliance with the NASDAQ
SmallCap Market continued listing requirements. In light of the NASDAQ
decision to delist the Company's Common Stock, the Board of Directors
determined that it was not in the best interest of the Company to effect
such stock split and withdrew the proposal, as contemplated by the
Company's Proxy Statement. The approval of the Common Stock issuance was
also withdrawn by the Board of Directors, as contemplated by the Company's
Proxy Statement, because the Company was delisted from the NASDAQ Smallcap
Market and it was no longer necessary.
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10.1 Common Stock Purchase Warrant, dated June 26,1999,
issued to bmp
10.2 Form of Securities Purchase Agreement
10.3 Form of Registration Rights Agreement
(Exhibit A to Form of Securities Purchase Agreement)
10.4 Promissory Note from BSB Bank & Trust
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
None
<PAGE>
14
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
Semiconductor Laser International Corporation
---------------------------------------------
(Registrant)
Date: August 16, 1999 By:/s/ Geoffrey T Burnham
----------------------------
Geoffrey T. Burnham
Chairman of the Board, President
and Chief Executive Officer
(principal executive officer)
August 16, 1999 By:/s/ Leonard E. Lundberg
----------------------------
Leonard E. Lundberg
Chief Financial Officer,
Principal Financial Officer
And Principal Accounting Officer
[TYPE] EX-10.1
FORM OF COMMON STOCK PURCHASE WARRANT
Void after June 26, 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 June 26,
1999 and before 5:00 P.M., New York City time, on June 26, 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 June 26, 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.
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-assess able
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 June 26, 2004.
20. Assignability. This Warrant is fully assignable, in whole but not in
part, at any time, subject to applicable securities laws.
Dated: June 26, 1999 SEMICONDUCTOR LASER INTERNATIONAL CORPORATION
By:
/s/ Geoffrey T. Burnham
-----------------------
Geoffrey T. Burnham
President
[Corporate Seal]
Witness:
/s/ Leonard E. Lundberg
-----------------------
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.
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 June 26, 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
[TYPE] EX-10.2
FORM OF SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of _________ __, 1999 by and between Semiconductor Laser International
Corporation, a Delaware corporation whose principal place of business is 15 Link
Drive, Binghamton, New York 13904 (the "Company"), and the purchaser or
purchasers set forth on Schedule 1 hereto (individually, "each Purchaser" and
collectively, the "Purchaser"), with its address as set forth on Schedule 1
hereto.
WHEREAS, the Company is desirous of selling, and the Purchaser is desirous
of acquiring, the number of shares set forth opposite its name on Schedule 1
hereto (the "Shares") of the common stock, par value $.01 per
share (the "Common Stock"), of the Company, on the terms and subject to the
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the promises and of the mutual
obligations hereinafter set forth, and for such other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and the Purchaser hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE SHARES; CLOSINGS
Section 1.01 Purchase and Sale of the Shares. Subject to the terms and
conditions set forth in this Agreement, the Company agrees to issue and sell to
each Purchaser at the Closing, and each Purchaser agrees to purchase from the
Company at the Closing, the number of Shares set forth opposite its name on
Schedule 1 hereto, for a purchase price of thirty seven and one half cents
($.375) per share or an aggregate purchase price set forth opposite its name on
Schedule 1 hereto (the "Purchase Price").
Section 1.02 Closing. The sale of the Shares by the Company to the
Purchaser shall take place on the date hereof at the offices of the Company or
at such other place and time as may be agreed upon by the Purchaser and the
Company (the "Closing"). At the Closing, the Company shall deliver to the
Purchaser certificates evidencing the Shares against payment of the Purchase
Price for the Shares, by certified or official bank check or wire transfer of
immediately available funds to an account designated by the Company.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to, and agrees with, the
Purchaser, as of the date hereof and as of the date of each Closing, as follows:
Section 2.01 Incorporation and Corporate Existence. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all necessary corporate power and
authority to own, operate or lease the properties and assets now owned, operated
or leased by the Company and to carry on the business of the Company, as it is
now being conducted.
Section 2.02 Authority. The Company has all necessary corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The Company has taken all necessary corporate
action to authorize the execution, delivery and performance by it of this
Agreement and to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by the Company and, and assuming due
execution and delivery of the Agreement by the Purchaser, this Agreement
constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, subject to the effect of any
applicable bankruptcy, reorganization, insolvency (including, without
limitation, all laws relating to fraudulent transfers), moratorium or similar
laws affecting creditors' rights and remedies generally, subject, as to
enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and subject to the effect of applicable securities laws as to rights to
indemnification.
Section 2.03 Consents and Approvals; No Conflict. The execution and
delivery of this Agreement by the Company do not, and the performance of this
Agreement by the Company will not (i) require any consent, approval,
authorization or other action by, or filing with or notification to, any
governmental or regulatory authority, except where failure to obtain such
consent, approval, authorization or action, or to make such filing or
notification, would not prevent the Company from performing any of its material
obligations under this Agreement and would not have a material adverse effect on
the Company; (ii) conflict with or violate the charter or by-laws of the
Company; or (iii) conflict with or violate any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award applicable to the
Company, except as would not prevent the Company from performing any of its
material obligations under this Agreement and would not have a material adverse
effect on the Company.
Section 2.04 Absence of Litigation. No claim, action, proceeding or
investigation is pending, or to the best knowledge of the Company, threatened,
which seeks to delay or prevent the consummation of the transactions
contemplated hereby or which would be reasonably likely to adversely affect or
restrict the Company's ability to consummate the transactions contemplated
hereby.
Section 2.05 Brokers. No broker, finder or investment banker is entitled to
any brokerage, finders or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
Section 2.06 Company SEC Documents. The Company has filed with the
Commission, and has heretofore made available to the Purchaser, true and
complete copies of its Annual Report on Form 10-KSB for the year ended December
31, 1998, its quarterly report on Form 10-QSB for the quarter ended March 31,
1999, and its definitive proxy statement dated May 18, 1999 (collectively, the
"Company SEC Documents"). As of their respective dates, the Company SEC
Documents did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Each Purchaser hereby represents and warrants to, and agrees with, the
Company as to itself, as of the date hereof and as of each Closing, as follows:
Section 3.01 Authority. The Purchaser has all necessary power and authority
to execute and deliver this Agreement, to purchase the Shares from the Company
and to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by the Purchaser and, and assuming due
authorization, execution and delivery of the Agreement by the Company, this
Agreement constitutes a legal, valid and binding obligation of the Purchaser
enforceable against the Purchaser in accordance with its terms, subject to the
effect of any applicable bankruptcy, reorganization, insolvency (including,
without limitation, all laws relating to fraudulent transfers), moratorium or
similar laws affecting creditors' rights and remedies generally, subject, as to
enforceability, to the effect of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and subject to the effect of applicable securities laws as to rights to
indemnification.
Section 3.02 Consents and Approvals; No Conflict. The execution and
delivery of this Agreement by the Purchaser do not, and the performance of this
Agreement by the Purchaser will not (i) require any consent, approval,
authorization or other action by, or filing with or notification to, any
governmental or regulatory authority, except where the failure to obtain such
consent, approval, authorization or action, or to make such filing or
notification, would not prevent the Purchaser from performing any of its
material obligations under this Agreement; or (ii) except as would not prevent
the Purchaser from performing any of its material obligations under this
Agreement, conflict with or violate any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award applicable to the
Purchaser.
Section 3.03 Absence of Litigation. No claim, action, proceeding or
investigation is pending, or to the best knowledge of the Purchaser, threatened,
which seeks to delay or prevent the consummation of the transactions
contemplated hereby or which would be reasonably likely to adversely affect or
restrict the Purchaser's ability to consummate the transactions contemplated
hereby.
Section 3.04 Investment Purpose; Legend; Private Placement.
(a) The Purchaser is acquiring the Shares solely for the purpose of
investment and not with a view to, or for offer or sale in connection with, any
distribution thereof.
(b) The Purchaser acknowledges that the Shares are not registered
under the Securities Act and that none of the Shares may be transferred or sold
except pursuant to the registration provisions of the Securities Act or pursuant
to an applicable exemption therefrom and subject to state securities laws and
regulations, as applicable. The Purchaser acknowledges that the certificates
evidencing the Shares shall contain a legend substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AND SUCH SECURITIES MAY NOT BE SOLD, ENCUMBERED OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN
EXEMPTION SHALL BE APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY (WHICH ACCEPTANCE SHALL NOT BE UNREASONABLY
WITHHELD) THAT SUCH REGISTRATION IS NOT REQUIRED.
(c) The Purchaser acknowledges that the Shares involve a great deal of
risk and that there is a limited or no market for the Shares. The Purchaser is
able to (i) bear the economic risk of the investment in the Company, (ii) afford
a complete loss of such investment, and (iii) hold indefinitely the Shares. In
reaching an informed decision to invest in the Company, the Purchaser has
sufficient information to evaluate the merits and risks of an investment in the
Shares of the Company. In that connection, (x) the Purchaser has received the
Company SEC Documents and (y) representatives of the Company have (A) fully and
satisfactorily answered any questions which duly authorized representatives of
the Purchaser desired to ask concerning the Company, and (B) furnished the
Purchaser with any additional information or documents requested to verify the
accuracy of or supplement any information previously delivered to or discussed
with duly authorized representatives of the Purchaser.
(d) The address of the Purchaser set forth on Schedule 1 of this
Agreement is the true and correct address of the Purchaser and the Purchaser has
no present intention of becoming a resident or domiciliary of any other state or
jurisdiction.
Section 3.05 Accredited Investor. The Purchaser is an "accredited investor"
within the meaning of Rule 501 of Regulation D promulgated under the Securities
Act because (please check as appropriate):
[ ](a) the Purchaser is an individual whose net worth, either
individually or with his spouse, exceeds $1,000,000 on the date hereof;
[ ](b) the Purchaser is an individual whose individual income exceeded $200,000
in each of the two previous years or whose joint income with his spouse exceeded
$300,000 in each of the three previous years, and has a reasonable expectation
of reaching the same income level in the current year;
[ ](c) the Purchaser is a corporation, partnership or New York or similar
business trust, not formed for the specific purpose of acquiring the Shares,
with total assets in excess of $5,000,000; or
[ ](d) the investor hereby certifies that it is an accredited investor because
it is an entity in which each of the equity owners qualifies as an accredited
investor under items (a), (b) or (c) above.
Section 3.06 Brokers. No broker, finder or investment banker is entitled to
any brokerage, finders or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Purchaser.
Section 3.07 No General Solicitation. The Shares were not offered or
sold by any form of general solicitation or general advertising.
ARTICLE IV
REGISTRATION RIGHTS
Section 4.01 Piggy-Back Registration. Each Purchaser shall have certain
piggy-back registration rights as set forth in that certain Registration Rights
Agreement, dated as of the date hereof, between the Company and the Purchaser,
attached hereto as Exhibit A.
<PAGE>
ARTICLE V
MISCELLANEOUS
Section 5.01 Expenses. Each Purchaser hereby agrees that all fees and
expenses incurred by such Purchaser in connection with this Agreement shall be
borne by such Purchaser, and the Company hereby agrees that all fees and
expenses incurred by the Company shall be borne by the Company, in each case
including without limitation all fees and expenses of such party's counsel and
accountants.
Section 5.02 Public Announcements. Except as required by law, each
Purchaser agrees not to make any public announcements in respect of this
Agreement or the transactions contemplated herein or otherwise communicate with
any news media without prior notification to the other party.
Section 5.03 Survival of Representations and Warranties. All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement, the Closings and any investigation at any time made
by or on behalf of either party hereto.
Section 5.04 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes any prior oral or written agreement between the parties.
Section 5.05 No Third-Party Beneficiaries; Assignment. This Agreement is
for the sole benefit of and binding upon the parties hereto and their permitted
successors and assigns and nothing herein, express or implied, is intended to or
shall confer upon any other person or entity any legal or equitable right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
This Agreement shall be binding upon the parties hereto and their respective
successors and assigns, and shall inure to the benefit of and be enforceable by
the parties hereof and their respective successors and assigns.
Section 5.06 Amendment. This Agreement may be amended or modified
only by an instrument in writing signed by the Company and the Purchaser.
Section 5.07 Counterparts. This Agreement may be executed in one or more
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
Section 5.08 Gender and Number; Headings. Whenever used in this Agreement,
the singular number shall include the plural, the plural the singular, and the
use of any gender shall be applicable to all genders. The headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement
Section 5.09 Governing Law; Jurisdiction. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York without
giving effect to the principles of conflicts of laws thereof. The Company and
each Purchaser hereby consent to the jurisdiction of the state and federal
courts of the State of New York for all disputes arising under this Agreement.
<PAGE>
IN WITNESS WHEREOF, each Purchaser and the Company have caused this
Agreement to be executed as of the date first written above.
SEMICONDUCTOR LASER
INTERNATIONAL CORPORATION
By:_____________________________
Name: Geoffrey T. Burnham
Title:President, CEO & Chairman of the
Board
------------------------------------
By:_____________________________
Name:
Title:
<PAGE>
SCHEDULE 1
<TABLE>
<CAPTION>
<S> <C> <C>
Number of Shares of Aggregate Purchase
Name and Address of Investor Common Stock Price
_________________________________
_________________________________
Attention:_______________________
Telecopier No.: _________________
--------------------- $--------------
shares, at a purchase price
of $.375 per share
</TABLE>
[TYPE] EX-10.3
REGISTRATION RIGHTS AGREEMENT
BETWEEN
--------------------------
AND
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION
Dated as of ___________ __, 1999
TABLE OF CONTENTS
Page No.
ARTICLE 1.
DEFINITIONS 2
SECTION 1.1. Definitions 2
ARTICLE 2.
REGISTRATION RIGHTS 5
SECTION 2.1. Piggy-Back Registration 5
SECTION 2.2. Reduction of Offering 5
ARTICLE 3.
REGISTRATION PROCEDURES 6
SECTION 3.1. Filings; Information 6
SECTION 3.2. Registration Expenses 9
ARTICLE 4.
MISCELLANEOUS 9
SECTION 4.1. Participation in Underwritten Registrations 9
SECTION 4.2. Amendment and Modification 9
SECTION 4.3. Successors and Assigns; Third Party Beneficiaries 9
SECTION 4.4. Entire Agreement 10
SECTION 4.5. Headings 10
SECTION 4.6. Notices 10
SECTION 4.7. Governing Law; Forum; Process 11
SECTION 4.8. Consent to Jurisdiction, Waiver of Immunities 11
SECTION 4.9. Counterparts 11
SECTION 4.10. Severability 11
SECTION 4.11. No Prejudice 11
SECTION 4.12. Words in Singular and Plural Form 12
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of _______, 1999 (this
"Agreement"), between Semiconductor Laser International Corporation, a Delaware
corporation (the "Company") and the purchaser or purchasers set forth on
Schedule 1 hereto (individually, "each Purchaser" and collectively, the
"Purchaser"), with its address as set forth on Schedule 1 hereto.
WHEREAS, the Company and the Purchaser have entered into a Securities
Purchase Agreement, dated as of the date hereof (the "Purchase Agreement"),
pursuant to which the Purchaser will acquire the number of shares set forth on
Schedule 1 hereto (the "Shares") of the common stock, par value $.01 per share
(the "Common Stock"), of the Company, on the terms and subject to the conditions
set forth therein; and
WHEREAS, it is a condition precedent to the purchase of the Common
Stock under the Purchase Agreement that the Company provide certain registration
rights to the Purchaser with respect to the shares of Common Stock purchased
pursuant to the terms of the Purchase Agreement.
NOW, THEREFORE, in consideration on the foregoing premises and for
other good and valuable consideration, the adequacy and receipt of which are
hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE 1.
DEFINITIONS
SECTION 1.1. Definitions. The following terms shall have the
meanings ascribed to them below:
"Agreement" means this Agreement, as amended, modified or supplemented
from time to time, in accordance with the terms hereof, together with any
exhibits, schedules or other attachments thereto.
"Business Day" means any day that is not a Saturday, Sunday or a day
on which banking institutions in New York, New York and Berlin, Germany are
authorized or obligated by law, executive order or government decree to be
closed.
"Commission" means the United States Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
"Common Stock" has the meaning ascribed thereto in the introduction
hereof.
"Company" has the meaning ascribed thereto in the introduction
hereof.
"Holder" means any Person who now holds or shall hereafter acquire and
hold Registrable Securities.
"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 other agency or political
subdivision thereof.
"Piggy-Back Registration" has the meaning ascribed thereto in
Section 2.1.
"Prospectus" means the prospectus included in any Registration
Statement (including without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective Registration
Statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the securities covered by such Registration
Statement, and all other amendments and supplements to the prospectus, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in such prospectus.
"Purchase Agreement" has the meaning ascribed thereto in the
introduction hereof.
"Purchaser" has the meaning ascribed thereto in the introduction
hereof.
"Registrable Securities" means (i) the shares of Common Stock issued
pursuant to the terms of the Purchase Agreement and (ii) any other shares of
Common Stock acquired as a result of stock splits, stock dividends,
reclassifications, recapitalizations, or similar events relating to the shares
described in clauses (i) and (ii) above, in each case until such time as (x) a
Registration Statement covering such shares of Common Stock has been declared
effective by the Commission and such shares of Common Stock have been disposed
of pursuant to such effective Registration Statement, or (y) such shares of
Common Stock would be eligible for sale pursuant to Rule 144 under the
Securities Act (or any similar provisions then in force), without regard to the
volume limitations set forth in Rule 144(e), or (z) such shares of Common Stock
have been otherwise transferred and the Company has delivered a new certificate
or other evidence of ownership for such Common Stock not bearing a restrictive
legend and not subject to any stop transfer or similar restrictive order and all
of such Common Stock may be resold by the Person receiving such certificate
without complying with the registration requirements of the Securities Act.
"Registration Statement" means any registration statement of the
Company which covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such registration statement, including post-effective amendments,
all exhibits and all material incorporated by reference in such registration
statement.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Selling Holder" means a Holder who is selling Registrable Securities
pursuant to a Registration Statement under the Securities Act.
"Underwriter" means a securities dealer who purchases any
Registrable Securities as principal in an underwritten offering and not as
part of such dealer's market-making activities.
<PAGE>
ARTICLE 2.
REGISTRATION RIGHTS
SECTION 2.1. Piggy-Back Registration. If at any time the Company
proposes to file a Registration Statement under the Securities Act with respect
to an offering by the Company for its own account or for the account of any of
its respective security holders (other than a Registration Statement on Form S-4
or Form S-8 (or any substitute form that may be adopted by the Commission) or on
any other form inappropriate for an underwritten public offering or related
solely to securities to be issued in a merger, acquisition of the stock or
assets of another entity or in a similar transaction), then the Company shall
give written notice of such proposed filing to the Holders as soon as
practicable (but in no event less than 30 days before the anticipated filing
date), and such notice shall offer such Holders the opportunity to register such
number of Registrable Securities as each such Holder may request (which request
shall specify the number of shares and the type of Registrable Securities
intended to be disposed of by such Holder and shall also state the firm intent
of the Holder to offer Registrable Securities for sale) (a "Piggy-Back
Registration"). The Company shall use its best efforts to cause the managing
Underwriter or Underwriters of a proposed underwritten offering to permit the
Registrable Securities requested to be included in a Piggy-Back Registration on
the same terms and conditions as any similar securities of the Company or any
other security holder included therein and to permit the sale or other
disposition of such Registrable Securities in accordance with the intended
method of distribution thereof. Any Holder shall have the right to withdraw its
request for inclusion of its Registrable Securities in any Registration
Statement pursuant to this Section 2.1 by giving written notice to the Company
of its request to withdraw. The Company may withdraw a Piggy-Back Registration
at any time prior to the time it becomes effective.
SECTION 2.2. Reduction of Offering.
(a) Piggy-Back Registration. (i) Notwithstanding anything contained
herein, if the managing Underwriter or Underwriters of any underwritten offering
described in Section 2.1 have informed, in writing, the Holders requesting
inclusion in such offering that it is their opinion that the total number of
shares which the Company, Holders and any other Persons holding securities of
the same class as the Registrable Securities desiring to participate in such
registration intend to include in such offering is such as to materially and
adversely affect the success of such offering, then, the Company will include in
such registration (A) first, all the shares the Company offered for its own
account, if any, (B) then, if additional shares may be included in such
registration without materially and adversely affecting the success of such
offering, the shares offered by the holders of securities as a result of their
exercise of "demand" registration rights by such holders, if any, and (C) then,
if additional shares may be included in such registration without materially and
adversely affecting the success of such offering, the number of shares offered
by such other holders of securities of the same class as the Registrable
Securities whose piggy-back registration rights may not be reduced without
violating their contractual rights (provided such contractual rights were in
existence prior to the date of this Agreement), (D) then, if additional shares
may be included in such registration without materially and adversely affecting
the success of such offering, the number of shares offered by the Holders and
any other holders of securities of the same class as the Registrable Securities
who have piggy-back registration rights not referred to in Section 2.2(c) on a
pro rata basis in proportion to the relative number of Registrable Securities of
the Holders and any other such holders participating in such registration.
(ii) If the managing Underwriter or Underwriters of any
underwritten offering described in Section 2.1 notify the Holders requesting
inclusion in such offering that the kind of securities that the Holders, the
Company and any other Persons desiring to participate in such registration
intend to include in such offering is such as to materially and adversely affect
the success of such offering, (A) the Registrable Securities to be included in
such offering shall be reduced as described in clause (i) above or (B) if such
reduction would, in the judgment of the managing Underwriter or Underwriters, be
insufficient to substantially eliminate the material adverse effect that
inclusion of the Registrable Securities requested to be included would have on
such offering, such Registrable Securities will be entirely excluded from such
offering.
(b) If, as a result of the proration provisions of this Section 2.2,
any Holder shall not be entitled to include all Registrable Securities in a
Piggy-Back Registration that such Holder has requested to be included, such
Holder may elect to withdraw his request to include Registrable Securities in
such registration without prejudice.
(c) Holdback Agreements. If any registration of Registrable Securities
shall be in connection with an underwritten public offering, each Holder agrees
not to effect any public sale or distribution, including any sale pursuant to
Rule 144 under the Securities Act, of any Registrable Securities, and not to
effect any such public sale or distribution of any other equity security of the
Company or of any security convertible into or exchangeable or exercisable for
any equity security of the Company (in each case, other than as part of such
underwritten public offering) during the five (5) days prior to, and during the
one hundred eighty (180) day period beginning on, the effective date of such
Registration Statement (except as part of such registration).
ARTICLE 3.
REGISTRATION PROCEDURES
SECTION 3.1. Filings; Information. Whenever the Company is required to
effect or cause the registration of the offer and sale of Registrable Securities
pursuant to Section 2.1 hereof, the Company will use its best efforts to effect
the registration of the offer and the sale of such Registrable Securities, and
in connection with any such request:
(a) The Company will prepare and file with the Commission a
Registration Statement with respect to the offer and sale of such securities and
use its best efforts to cause such Registration Statement to become and remain
effective until the completion of the distribution contemplated thereby;
provided, however, the Company shall not be required to keep such Registration
Statement effective for more than the period otherwise determined to be
appropriate by the Company.
(b) The Company will comply with the provisions of the Securities Act
applicable to it with respect to the disposition of all Registrable Securities
covered by such Registration Statement.
(c) The Company, at least fifteen (15) Business Days prior to filing a
Registration Statement or at least ten (10) Business Days prior to filing a
Prospectus or any amendment or supplement to such Registration Statement or
Prospectus, will furnish to each Selling Holder, copies of such Registration
Statement as proposed to be filed, together with exhibits thereto (whether or
not incorporated by reference in such Registration Statement), which documents
will be subject to review and approval by each of the foregoing within five (5)
Business Days after delivery (except that such review and approval of any
Prospectus or any amendment or supplement to such Registration Statement or
Prospectus must be within two (2) Business Days after delivery), and thereafter,
furnish to such Selling Holders, at the Company's expense, such number of
conformed copies of such Registration Statement, each amendment and supplement
thereto (in each case including all exhibits thereto and documents incorporated
by reference therein), the Prospectus included in such Registration Statement
(including each preliminary Prospectus) and such other documents or information
as such Selling Holders may reasonably request in order to facilitate the
disposition of the Registrable Securities.
(d) On or prior to the date on which the Registration Statement is
declared effective, use its best efforts to register or qualify such Registrable
Securities under such other securities or "blue sky" laws of such jurisdictions
as any Selling Holder (but not more than three states), reasonably requests and
do any and all other acts and things which may be necessary or advisable to
enable such Selling Holder to consummate the disposition in such jurisdictions
of such Registrable Securities owned by such Selling Holder; use its best
efforts to keep each such registration or qualification (or exemption therefrom)
effective during the period which the Registration Statement is required to be
kept effective; and use its best efforts to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by the applicable Registration Statement;
provided that the Company will not be required to (i) qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this paragraph (e), (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction.
(e) The Company will notify each Selling Holder, (i) when a Prospectus
or any Prospectus supplement or post-effective amendment has been filed and,
with respect to a Registration Statement or any post-effective amendment, when
the same has become effective, (ii) of the issuance by the Commission of any
stop order suspending the effectiveness of a Registration Statement or the
initiation or threatening of any proceedings for that purpose, (iii) of the
issuance by any state securities commission or other regulatory authority of any
order suspending the qualification or exemption from qualification of any of the
Registrable Securities under state securities or "blue sky" laws or the
initiation of any proceedings for that purpose, and (iv) of the happening of any
event which makes any statement made in a Registration Statement or related
Prospectus or any document incorporated or deemed to be incorporated by
reference therein untrue in a material respect or which requires the making of
any changes in such Registration Statement, Prospectus or documents so that they
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
in the Registration Statement and Prospectus not misleading in light of the
circumstances in which they were made; and, as promptly as practicable
thereafter, prepare and file with the Commission and furnish a supplement or
amendment to such Prospectus so that, as thereafter deliverable to the buyers of
such Registrable Securities, such Prospectus will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, such amendment to be subject to the Holders' review under
Section 3.1(c).
The Company may require each Selling Holder to promptly furnish in
writing to the Company such information regarding the distribution of the
Registrable Securities as the Company may from time to time reasonably request
and such other information as may be legally required in connection with such
registration including, without limitation, all such information as may be
requested by the Commission or the National Association of Securities Dealers,
Inc.
Each Selling Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3.1(e)
hereof, such Selling Holder will forthwith discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Selling Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 3.1(e) hereof, and,
if so directed by the Company, such Selling Holder will deliver to the Company
all copies, other than permanent file copies then in such Selling Holder's
possession, of the most recent Prospectus covering such Registrable Securities
at the time of receipt of such notice.
SECTION 3.2. Registration Expenses. The Company shall pay all expenses
incident to the Company's performance of or compliance with this Agreement
including, without limitation: (i) all registration and filing fees, (ii) the
fees and expenses of compliance with securities or blue sky laws (including fees
and disbursements of counsel in connection with blue sky qualifications of the
Registrable Securities), (iii) all printing, messenger and delivery expenses,
(iv) the Company's internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), (v) the fees and expenses incurred in connection with the
listing or quotation, as appropriate, of the Registrable Securities, (vi) the
fees and disbursements of counsel for the Company and the fees and expenses for
independent certified public accountants retained by the Company (including the
expenses of any special audit or cold comfort letters) and (vii) the fees and
expenses of any special experts retained by the Company in connection with such
registration. The Company shall have no obligation to pay any underwriting fees,
discounts or commissions attributable to the sale of Registrable Securities and
any of the expenses incurred by Selling Holders (including fees of counsel to
the Selling Holders) which are not payable by the Company, such costs to be
borne by the Selling Holder or Selling Holders.
ARTICLE 4.
MISCELLANEOUS
SECTION 4.1. Participation in Underwritten Registrations. No Person
may participate in any underwritten registration hereunder unless such Person
(a) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements, and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements and these
registration rights.
SECTION 4.2. Amendment and Modification. Any provision of this
Agreement may be waived, provided that such waiver is set forth in a writing
executed by the party against whom the enforcement of such waiver is sought.
This Agreement may not be amended, modified or supplemented other than by a
written instrument signed by the holders of at least a majority of the
Registrable Securities. No course of dealing between or among any Persons having
any interest in this Agreement will be deemed effective to modify, amend or
discharge any part of this Agreement or any rights or obligations of any Person
under or by reason of this Agreement.
SECTION 4.3. Successors and Assigns; Third Party Beneficiaries. This
Agreement and all of the provisions hereof shall be binding upon and inure to
the benefit of the parties hereto, each subsequent Holder and their respective
successors and assigns and executors, administrators and heirs. Holders are
intended third party beneficiaries of this Agreement and this Agreement may be
enforced by such Holders.
SECTION 4.4. Entire Agreement. This Agreement sets forth the entire
agreement and understanding between the parties as to the subject matter hereof
and merges and supersedes all prior discussions, agreements and understandings
of any and every nature among them.
SECTION 4.5. Headings. Subject headings are included for
convenience only and shall not affect the interpretation of any provisions of
this Agreement.
SECTION 4.6. Notices. Any notice, demand, request, waiver, or other
communication under this Agreement shall be in writing and shall be deemed to
have been duly given on the date of service if personally served or sent by
telecopy, on the Business Day after notice is delivered to a courier or mailed
by express mail if sent by courier delivery service or express mail for next day
delivery and on the third day after mailing if mailed to the party to whom
notice is to be given, by first class mail, registered, return receipt
requested, postage prepaid and addressed as follows:
If to the Company to:
15 Link Drive
Binghamton, New York 13904
Attention: Chief Executive Officer
Telecopier No.: (607) 722-5045
with a copy to:
Swidler Berlin Shereff Friedman, LLP
919 Third Avenue
20th Floor
New York, New York 10022
Attention: Richard A. Goldberg, Esq.
Telecopier No.: (212) 758-9526
If to the Purchaser, to the Notice Address set forth opposite its name
on Schedule 1 hereto.
SECTION 4.7. Governing Law; Forum; Process. This Agreement shall be
governed by and construed in accordance with the laws of the State of New
York, without regard to any choice-of-law principles thereof.
SECTION 4.8. Consent to Jurisdiction, Waiver of Immunities. The Company and
the Holders hereby irrevocably submit to the non-exclusive jurisdiction of any
court of the State of New York or United States federal court sitting in the
Borough of Manhattan, The City of New York, and any appellate court therefrom,
in any action or proceeding arising out of or relating to this Agreement and
hereby irrevocably agree that all claims in respect of such action or proceeding
may be heard and determined in such court. The Company and the Holders
irrevocably waive, to the fullest extent permitted by applicable law, the
defense of an inconvenient forum to the maintenance of such action or
proceeding.
SECTION 4.9. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, and all of which
taken together shall constitute one and the same agreement.
SECTION 4.10. Severability. In the event that any one or more of the
immaterial provisions contained in this Agreement shall for any reason be held
to be invalid, illegal or unenforceable, the same shall not affect any other
provision of this Agreement, but this Agreement shall be construed in a manner
which, as nearly as possible, reflects the original intent of the parties.
SECTION 4.11. No Prejudice. The terms of this Agreement shall not be
construed in favor of or against any party on account of its participation in
the preparation hereof.
SECTION 4.12. Words in Singular and Plural Form. Words used in the
singular form in this Agreement shall be deemed to import the plural, and vice
versa, as the sense may require.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION,
a Delaware corporation
By: __________________________________
Name: Geoffrey T. Burnham
Title: President & Chief Executive Officer
--------------------------------------
By:___________________________________
Name:
Title:
<PAGE>
SCHEDULE 1
<TABLE>
<CAPTION>
<S> <C> <C>
Number of Shares of Aggregate Purchase
Name and Address of Investor Common Stock Price
_________________________________
_________________________________
Attention:_______________________
Telecopier No.: _________________
--------------------- $--------------
shares, at a purchase price
of $.375 per share
</TABLE>
[TYPE] EX-10.4
<TABLE>
<CAPTION>
PROMISSORY NOTE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
$1,000,000 06-25-1999 05-31-2000 11543 04A) IC 5710 141
</TABLE>
References in the shaded area are for Lender's use only and do not limit the
applicability of this document to any particular loan or item. Any item above
containing "***" has been omitted due to text length limitations.
Borrower: Semiconductor Laser Int'l. Corp. Lender: BSB Bank & Trust Co.
15 Link Dr. PO Box 1056(58-68 Exchange St.)
Binghamton, NY 139043218 Binghamton, NY 13902
Principal Amount:$1,000,000.00 Initial Rate: 10.250% Date of Note: June 25, 1999
PROMISE TO PAY. To repay Borrower's loan, Semiconductor Laser International
Corporation ("Borrower") promises to pay to BSB Bank & Trust Company ("Lender"),
or order, in lawful money of the United States of America, the principal amount
of One Million & 00/100 Dollars ($1,000,000.00) or so much as may be
outstanding, together with interest on the unpaid outstanding principal balance
of each advance. Interest shall be calculated from the date of each advance
until repayment of each advance.
PAYMENT: Borrower will pay this loan in one payment of all outstanding principal
plus all accrued unpaid interest on May 31, 2000. In addition, Borrower will
pay regular monthly payments of all accrued unpaid interest due as of each
payment date, beginning August 1, 1999, with all subsequent interest payments to
be due on the same day of each month after that. Unless otherwise agreed or
required by applicable law, payments will be applied first to accrued unpaid
interest, then to principal, and any remaining amount to any unpaid collection
costs and late charges. The annual interest rate for this Note is computed on a
365/360 basis; that is, by applying the ratio of the annual interest rate over
a year of 360 days, multiplied by the outstanding principal balance, multiplied
by the actual number of days the principal balance is outstanding. Borrower
will pay Lender at Lender's address shown above or at such other place as Lender
may designate in writing.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an index which is Lender's Prime Rate (the
"Index"). This is the rate Lender charges, or would charge, on 90-day unsecured
loans to the most creditworthy corporate customers. This rate may or may not be
the lowest rate available from Lender at any given time. Lender will tell
Borrower the current Index rate upon Borrower's request. The interest rate
change will not occur more often than each day. Borrower understands that Lender
may make loans based on other rates as well. The Index currently is 7.750% per
annum. The interest rate to be applied to the unpaid principal balance of this
Note will be at a rate of 2.500 percentage points over the Index, resulting in
an initial rate of 10.250% per annum. NOTICE: Under no circumstances will the
interest rate on this Note be more than the maximum rate allowed by applicable
law.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount
owed earlier than it is due. Early payments will not, unless agreed to by Lender
in writing, relieve Borrower of Borrower's obligation to continue to make
payments of accrued unpaid interest. Rather, early payments will reduce the
principal balance due. Borrower agrees not to send Lender payments marked "paid
in full", "without recourse", or similar language. If Borrower sends such a
payment, Lender may accept it without losing any of Lender's rights under this
Note, and Borrower will remain obligated to pay any further amount owed to
Lender. All written communications concerning disputed amounts, including any
check or other payment instrument that indicates that the payment constitutes
"payment in full" of the amount owed or that is tendered with other conditions
or limitations or as full satisfaction of a disputed amount must be mailed or
delivered to: BSB BANK & TRUST COMPANY, P.O. Box 1056 (58-68 Exchange Street),
Binghamton, NY 13902.
LATE CHARGE: If a payment is 10 days or more late Borrower will be charged
4.000% of the unpaid portion of the regularly scheduled payment or $10.00,
whichever is greater. No Late Charge will be payable in the event of a Default
rate of interest is being charged.
INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final
maturity, Lender, at its option, may, if permitted under applicable law,
increase the variable interest rate on this Note to 3.500 percentage points over
the Index. The interest rate will not exceed the maximum rate permitted by
applicable law.
DEFAULT. Each of the following shall constitute an event of default ("Event of
Default") under this Note:
PAYMENT DEFAULT. Borrower fails to make any payment when due under this
Note.
OTHER DEFAULTS. Borrower fails to comply with or to perform any other
term, obligation, covenant or condition contained in this Note or in any
of the related documents or to comply with or to perform any term, obligation,
covenant or condition contained in any other agreement between Lender and
Borrower.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf under this Note or the
related documents is false or misleading in any material respect, either now or
at the time made or furnished or becomes false or misleading at any time
thereafter.
INSOLVENCY. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a receiver for
any part of Borrower's property, any assignment for the benefit of creditors,
any type of creditor workout, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help, repossession
or any other method, by any creditor of Borrower or by any governmental agency
against any *Material* collateral securing the loan. This includes a garnishment
of any of Borrower's accounts, including deposit accounts, with Lender. However,
this Event of Default shall not apply if there is a good faith dispute by
Borrower as to the validity or reasonableness of the claim which is the basis of
the credits or forfeiture proceeding and if Borrower gives Lender written notice
of the creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount determined
by Lender, in its sole discretion, as being an adequate reserve or bond for the
dispute, being an adequate reserve or bond for the dispute.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect
to any guarantor, endorser, surety, or accommodation party of any of the
indebtedness or any guarantor, endorser, surety, or accommodation party dies or
becomes incompetent, or revokes or disputes the validity of, or liability under,
any guaranty of the indebtedness.
CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent (25%)
or more of the common stock of Borrower.
ADVERSE CHANGE. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of this
Note is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid
principal balance on this Note and all accrued unpaid interest immediately due,
and then Borrower will pay that amount.
ATTORNEY'S FEES; EXPENSES. Borrower agrees to pay all costs and expenses
Lender incurs to collect the loan. This includes, subject to any limits under
applicable law, Lender's reasonable attorneys' fees and Lender's legal expenses
whether or not there is a lawsuit, including reasonable attorneys' fees and
expenses for bankruptcy proceedings (including efforts to modify or vacate any
automatic stay or injunction), and appeals. If not prohibited by applicable law,
Borrower also will pay any court costs, in addition to all other sums provided
by law.
JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial
in any action, proceeding, or counterclaim brought by either Lender or Borrower
against the other.
GOVERNING LAW. This Note will by governed by, construed and enforced in
accordance with federal law and the laws of the State of New York. This Note
has been accepted by Lender in the State of New York.
RIGHT OF SETOFF. In addition to Lender's right of setoff arising by
operation of law, Borrower grants to Lender a contractual security interest in
all Borrower's accounts with Lender (whether checking, savings, or some other
account and whether evidenced by a certificate of deposit). This includes all
accounts Borrower holds jointly with someone else and all accounts Borrower may
open in the future. However, this does not include any IRA or Keogh accounts, or
any trust accounts for which the grant of a security interest would by
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on the Indebtedness against
any and all such accounts.
COLLATERAL. Borrower acknowledges this Note is secured by a All Accounts,
Inventory, Equipment and General Intangibles now owed or acquired later,
together with all proceeds of collateral. If there is any inconsistency between
the terms and conditions of the collateral documents, the terms and conditions
of this Note shall prevail.
LINE OF CREDIT. This note evidences a revolving line of credit. Advances
under this Note, as well as directions for payment from Borrower's accounts, may
be requested orally or in writing by Borrower or by an authorized person. Lender
may, but need not, require that all oral requests by confirmed in writing.
Borrower agrees to by liable for all sums either: (A) advanced in accordance
with the instructions of an authorized person or (B) credited to any of
Borrower's accounts with Lender. The unpaid principal balance owing on this Note
at any time may be evidenced by endorsements on this Note or by Lender's
internal records, including daily computer print-outs. Lender will have no
obligation to advance funds under this Note if (A) Borrower or any guarantor is
in default under the terms of this Note or any agreement that Borrower or any
guarantor has with Lender, including any agreement made in connection with the
signing of this Note; (B) Borrower or any guarantor ceases doing business or is
insolvent; (C) any guarantor seeks, claims or otherwise attempts to limit,
modify or revoke such guarantor's guarantee of this Note or any other loan with
Lender; or (D) Borrower has applied funds provided pursuant to this Note for
purposes other than those authorized by Lender.
YEAR 2000. Borrower warrants and represents that all software utilized in
the conduct of Borrower's business will have appropriate capabilities and
compatibility for operation to handle calendar dates falling on or after January
1, 2000, and all information pertaining to such calendar dates, in the same
manner and with the same functionality as the software does respecting calendar
dates falling on or before December 31, 1999. Further, Borrower warrants and
represents that the data-related user interface functions, data-fields, and
data-related program instructions and functions of the software include the
indication of the century.
BORROWING BASE. Availability of funds under this line of credit shall be
reviewed monthly, based on company prepared financial statements, and shall be
limited to the lesser of $1,000,000.00, or an amount representing the sum of 85%
of eligible accounts receivable 90 days or less from invoice date, plus 30% of
inventories, with a maximum inventory value eligible accounts receivable 90 days
or less from invoice date, plus 30% of inventories, with a maximum inventory
value eligibility of $250,000.00, plus available unrestricted cash balances
owned by the Borrower.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights
or remedies under this Note without losing them. Borrower and any other person
who signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, and notice of dishonor. Upon any change in the
terms of this Note, and unless otherwise expressly stated in writing, no party
who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan or release
any party or guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any other action deemed
necessary by Lender without the consent of or notice to anyone. All such parties
also agree that Lender may modify this loan without the consent of or notice to
anyone other than the party with whom the modification is made. The
obligations under this Note are joint and several. Note are joint and several.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE.
BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.
BORROWER:
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION
/s/ Geoffrey T. Burnham
By:_____________________________________________
Geoffrey T. Burnham, Pres/CEO of Semiconductor
Laser International Corporation
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,490,641
<SECURITIES> 0
<RECEIVABLES> 801,109
<ALLOWANCES> 560,645
<INVENTORY> 330,253
<CURRENT-ASSETS> 2,216,348
<PP&E> 3,146,797
<DEPRECIATION> 509,953
<TOTAL-ASSETS> 5,003,020
<CURRENT-LIABILITIES> 2,206,624
<BONDS> 0
0
10,000
<COMMON> 128,846
<OTHER-SE> 1,821,508
<TOTAL-LIABILITY-AND-EQUITY> 5,003,020
<SALES> 661,548
<TOTAL-REVENUES> 661,548
<CGS> 1,350,936
<TOTAL-COSTS> 1,350,936
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75,901
<INCOME-PRETAX> (2,049,022)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,049,022)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,049,022)
<EPS-BASIC> (.17)
<EPS-DILUTED> (.17)
</TABLE>
