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 March 31, 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 April 30, 1999, there were outstanding 12,150,832 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, March 31,
1998 1999
(unaudited)
------------ ------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 112,695 $ 313,846
Accounts Receivable, net of allowance for
doubtful accounts of $560,645 and $560,645,
respectively 296,193 151,448
Inventory 333,806 323,416
Prepaid expenses and other assets 180,853 176,122
------------ ------------
Total current assets 923,547 964,832
Property, plant and equipment, net 2,691,926 2,639,789
Intangible assets, net 0 0
Deposits and other assets 123,957 151,590
------------ ------------
Total assets $ 3,739,430 $ 3,756,211
============ ============
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 1,127,589 $ 1,108,591
Notes Payable ( Line of Credit ) 550,000 850,000
Accrued expenses and other liabilities 164,235 171,117
Current portion of long-term debt 37,170 41,260
------------ ------------
Total current liabilities 1,878,994 2,170,968
Long-term debt 765,687 751,828
Accrued royalty payments 100,000 100,000
------------ ------------
Total liabilities 2,744,681 3,022,796
------------ ------------
Commitments and contingencies (Notes 2 and 5)
Shareholders' Equity
Common stock, $.01 par value, 20,000,000 shares
authorized, 10,039,552 issued and outstanding
at December 31, 1998; 12,150,832 issued and
outstanding at March 31, 1999 100,396 121,508
Common Stock Issuable 41,073 0
Treasury stock (248,241) (248,241)
Additional paid-in capital 18,061,560 18,820,985
Accumulated deficit (16,960,039) (17,960,837)
------------ ------------
Total Shareholders' Equity 994,749 733,415
------------ ------------
Total liabilities and
Shareholders' Equity $ 3,739,430 $ 3,756,211
============ ============
</TABLE>
See accompanying notes to financial statements
<PAGE>
2
Semiconductor Laser International Corporation
Statement of Operations
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1999
(unaudited) (unaudited)
----------- -----------
<S> <C> <C>
Net sales $ 257,682 298,545
Cost of sales (652,433) (663,886)
----------- -----------
Gross margin (394,751) (365,341)
Operating expenses:
Research and development expenses $ 7,273 $ 1,738
Sales and marketing expenses 127,274 63,220
General and administrative expenses 510,306 570,804
---------- ----------
Loss from operations 1,039,604 1,001,103
Interest income 16,853 305
---------- ----------
Net loss 1,022,751 1,000,798
========== ==========
Net loss per share ($0.12) ($0.09)
========== ==========
Weighted average shares outstanding 8,354,089 11,226,052
========== ==========
</TABLE>
See accompanying notes to financial statements
<PAGE>
3
Semiconductor Laser International Corporation
Statement of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1999
(unaudited) (unaudited)
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,022,751) $(1,000,798)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization 50,407 51,990
Change in assets and liabilities:
(Increase)/decrease in accounts
receivable, net (113,479) 144,745
(Increase)/decrease in inventory (100,483) 10,390
Decrease in prepaid expenses
and other assets 26,967 4,731
(Increase) in deposits
and other assets (4,067) (27,160)
Increase/(decrease) in accounts
payable 246,155 (18,998)
Increase/(decrease) in accrued
expenses and other liabilities (32,250) 6,882
----------- -----------
Net cash used in operating activities (949,501) (828,218)
----------- -----------
Cash flows from investing activities:
Purchase of property, plant and
equipment (139,740) (326)
Sale of equipment - -
----------- -----------
Net cash provided from (used for)
investing activities (139,740) (326)
----------- -----------
Cash flows from financing activities
Issuance of stock, net of expenses - 707,964
Issuance of warrants - 31,500
Proceeds from short-term debt - 300,000
Payments on long-term debt (8,646) (9,769)
----------- -----------
Net cash provided by (used for) financing
activities (8,646) 1,029,695
----------- -----------
Net (decrease) increase in cash, cash
equivalents and restricted cash (1,097,887) 201,151
Cash, cash equivalents and restricted
cash at beginning of period 1,934,574 112,695
----------- -----------
Cash, cash equivalents and restricted
cash at end of period $ 836,687 313,846
=========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE>
4
Semiconductor Laser International Corporation
Notes to Financial Statements
March 31, 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 and was not renewed. 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
has at March 31, 1999 an accumulated deficit of $17,960,837 and a working
capital deficit of $1,206,135. Such losses have resulted primarily from the
Company's activities as a development stage enterprise and have been financed
primarily from 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.
However, there is no assurance 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.
The accompanying financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
<PAGE>
5
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
March 31, 1999 and the results of operations and cash flows for the three
months ended March 31, 1999 and 1998. The results of operations for the
three months ended March 31, 1999 are not necessarily indicative of the
results to be expected for the full year.
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 cosisting 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 is 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.
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 March 31, 1999, the Company had outstanding warrants and options to
purchase 3,446,334 and 148,455 shares of common stock, respectively, which
are not included in the calculation of earnings per share for the three
months ended March 31, 1999, and would not be included in such calculation
due to the anti-dilutive nature of these instruments.
As of March 31, 1998, the Company had outstanding warrants and options to
purchase 2,946,334 and 141,305 shares of common stock, respectively, which
are not included in the calculation of earnings per share for the three
months ended March 31, 1998, 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 $252,250 for the three months ended March 31,1999. Rent expense
under non-cancellable operating leases, including the FINOVA leases, was
$262,662 for the three months ended March 31, 1998.
Future minimum payments under non-cancellable operating leases, including
the FINOVA lease agreement, at March 31, 1999, are as follows:
<TABLE>
<CAPTION>
Year ending
December 31, Commitment
------------- -------------
<S> <C> <C>
1999(1) $ 756,750(1)
2000 1,009,000
2001 213,000
-------------
$1,978,750
=============
(1) Nine 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 litigations are presently in the discovery stage. The Company believes
the counter claim is without merit and is vigorously defending such action
and 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.
<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 for an aggregate purchase price of
$2,000,000, to be paid in several installments. On April 29, 1999, bmp
purchased 232,500 shares of Series B Stock for a purchase price of
$465,000 (the "April Installment"), and bmp agreed to purchase 192,500
shares of Series B Stock on or before May 31, 1999 for a purchase price of
$385,000 (the "May Installment") and 575,000 shares of Series B Stock on or
before June 30, 1999 for a purchase price of $1,150,000 (the "June
Installment"). If the Nasdaq Conditions (as hereinafter defined under Item 3
of this Proxy Statement) are satisfied prior to the consummation of any
particular installment, the remaining portion of the purchase price will be
due upon issuance of the remaining number of unissued shares, and if the
Nasdaq Conditions are not satisfied prior to June 30, 1999, payment of the
June Installment and issuance of the remaining number of shares of Series B
Stock yet to be issued under the Amended Purchase Agreement at such time will
be postponed until the Nasdaq Conditions are satisfied (in either case, such
installment is hereinafter referred to as the "Final Installment"). If the
Nasdaq Conditions are not satisfied by July 31, 1999, the Board of Directors
of the Company will be increased by such number as is equal to one more than
the number of directors constituting the Board of Directors at such time
(i.e., if such Board is constituted by four (4) directors then the number of
directors shall be increased by five (5), for a total of nine (9)
directors), and the holders of a majority of the outstanding shares of Series
B Stock will have the right to elect the directors necessary to fill the
vacancies created by such increase in the size of the Board of Directors.
Upon satisfaction of the Nasdaq Conditions, these additional directors will
cease to be directors and the additional voting rights granted to the holders
of the Series B Stock will be terminated. The Company has filed a
preliminary proxy statement with the Securities and Exchange Commission and
expects to hold an annual meeting of stockholders on June 11, 1999 in order
to obtain the necessary stockholder approval.
The purchases of Series B Stock under the Amended Purchase Agreement are
subject to certain terms and conditions set forth therein. The April
Installment was made upon satisfaction of all conditions precedent relating
to the second stage of the bmp investment contained in the Securities
Purchase Agreement and upon execution and delivery of the Consulting
Agreement (as defined below); the May Installment is subject to satisfaction
of certain customary closing conditions set forth in Section 4.3 of the
Securities Purchase Agreement; and payment of the June Installment is subject
to (i) satisfaction of certain customary closing conditions set forth in
Section 4.3 of the Securities Purchase Agreement, (ii) satisfaction of either
of the Nasdaq Conditions, (iii) the execution and delivery of the bmp
Warrant (as defined below) and (iv) the extension by BSB Bank and Trust
Company ("BSB Bank") of the maturity of the outstanding balance under the
Company's $1,000,000 secured line of credit (the "Line of Credit") from May
31, 1999 to May 31, 2000. BSB Bank has agreed to extend the Line of Credit
until May 31, 2000 upon consummation of bmp's investment of $1,3000,000 in
the Company, subject to the absence of any material adverse change in the
business. In addition, BSB agreed to advance an additional $450,000 under the
Line of Credit, to extend the maturity of the Line of Credit from March 31,
1999 to June 30, 1999, and to waive the requirement that the Company maintain
the Line of Credit balance within its collateral base formula until the
earlier of June 30, 1999 or the date of receipt by the Company of funds
arising out of the second stage of the investment.
For purposes of the foregoing, "Nasdaq Conditions" means (i)satisfaction
of the applicable rules and regulations of the Nasdaq SmallCap Market in
respect of the issuance of Common Stock, or securities convertible into or
exercisable for Common Stock, by the Company (whether because the Company
has obtained shareholder approval for such issuance or otherwise) or (ii) the
lack of need to satisfy such conditions of the Nasdaq SmallCap Market because
the Company's securities are not then listed thereon.
In connection with the Amendment, the Company entered into a consulting
agreement (the "Consulting Agreement"), dated as of April 28, 1999, between
the Company and bmp Management Consultants GmbH ("bmp Consultants"), a
German limited liability corporation wholly owned by bmp AG Venture Capital
& Network Management, the parent company of bmp, providing for the retention
of bmp Consultants as strategic and financial consultants to the Company, for
an aggregate consulting fee of $200,000. The $200,000 aggregate consulting
fee is payable as follows: (i) six monthly installments of $15,000 beginning
immediately following the funding of the April Installment and ending five
months following such funding date, (ii) $50,000 payable at the closing of
the June Installment or the Final Installment, as applicable, and (iii) six
monthly installments of $10,000 beginning six months following the funding
of the April Installment and ending eleven months following such funding
date.
In connection with the Amendment, the Company also agreed to issue to
bmp, on the date of the June Installment or the Final Installment, as the
case may be, a five year warrant to purchase an aggregate of 500,000 shares
of Common Stock, at an exercise price of $0.50 per share (the "bmp
Warrant"). The issuance of the bmp Warrant is subject to stockholder
approval and to the funding by bmp of the June Installment or the Final
Installment, as the case may be. In addition, subject to the funding of the
June Installment or the Final Installment, as the case may be, bmp is
eligible to receive a finder's fee in the amount of 5% of the net proceeds of
any transaction consummated by the Company within 24 months following payment
of the June Installment or the Final Installment, as the case may be,
involving the raising of debt or equity capital in a private placement
from a source introduced to the Company by bmp.
The Company has entered into a Distributor Agreement, dated February 22,
1999, with LG Laser Graphics GmbH ("Laser Graphics"), an entity in which bmp
has invested, whereby Laser Graphics has been granted rights to distribute
the Company's products on an exclusive basis throughout Germany, Switzerland
and Austria, and on a non-exclusive basis worldwide outside of Germany,
Switzerland and Austria. The agreement provides for certain discounts on
products sold to Laser Graphics.
In conjunction with the Securities Purchase Agreement, the Company issued to
BSB Bank & Trust Company, on February 16, 1999, 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, as
determined by the market price at the date of issue, have 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.
<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.
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. At this time the Company is experiencing technical
difficulty with its fiber coupling subcontractors and has been unable to ship
certain products for several months. Recent events including the investigation
and cash flow problems have placed considerable strain on Company management,
financial, manufacturing and other resources. Lack of financial resources
could have a material adverse impact on the Company's business and results of
operations.
The Company has not generated material revenues or profits to date.
<PAGE>
10
Results of Operations
Sales for the three months ended March 31, 1999 were $298,545,
representing an increase of 16% over the first quarter of 1998.
Cost of sales, which includes materials, production labor and certain overheads
increased 2% to $663,886 for the three months ended March 31, 1999 as compared
to $652,433 for the same period in 1998. Cost of sales levels are expected
to exceed sales levels until the volume of sales increases. The Company
expects sales levels to increase in the future, thus steadily increasing
production levels to levels approaching optimum capacity,although no such
assurance can be provided.
<PAGE>
11
Research and Development expenditures were $1,738 for the three
months ended March 31, 1999 as compared to $7,273 in the same
period in 1998. The decrease in such expenditures is primarily associated with
a change in focus from R & D to production.
Sales and Marketing expenses were $63,220 for the three months
ended March 31, 1999 as compared to $127,274 for the same period
in 1998. The decrease is attributable to decreases in costs associated with
advertising, brochures, and travel partially offset by an increase in trade
show expense.
General and Administrative expenses were $570,804 for the three months ended
March 31, 1999 as compared to $510,306 for the same period in 1998. Such
increase was primarily attributable to an increase in legal fees of $45,739
attributable in part to increased litigation and investigation activity
related to the SEC investigation, patent activity and general corporate matters.
Accounting fees were recorded at an increase of $51,140 in 1999 over the first
quarter of 1998 due to tax and special project work performed in 1999 which
was not required in 1998. Loan interest expense increased $14,225 due to the
use of the line of credit in the first quarter of 1999. Offsetting these
increases were decreases in maintenance expenses of $18,998 due to less
frequent repairs and a decrease in recruiting expenses of $7,124 due to
reduced recruitment activity. Decreases amounting to $24,484 were experienced
in consulting fees, dues and subscriptions, office expense, investor relations
and other miscellaneous expense related to the results of close monitoring of
operating expenses.
Interest income decreased $16,548 as a result of lower levels
of invested cash occasioned by operating demands.
Liquidity and Capital Resources
The Company's cash and cash equivalents at March 31, 1999 were $313,846 as
compared to $112,695 at December 31, 1998, a net increase of $201,151 for
the three months ended March 31, 1999. The increase is the result of
$828,218 used in operating activities, $326 used for investing activities and
$1,029,695 provided by financing activities.
The $1,029,695 provided by financing activities was derived from the issuance
of 2,000,000 shares of common stock which provided $707,964(net of legal
expenses and fees) 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. 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 June 30,1999. At March 31, 1999, the
Company had $850,000 outstanding under this Line of Credit and no additional
availability under the eligibility formula. On February 5, 1999, the Company
entered into the Securities Purchase Agreement with bmp and completed the
first tranche of a two tranche equity investment in the Company. Accordingly,
it issued 2,000,000 shares of Common Stock for an aggregate purchase price
of $750,000. The Company entered into the Amendment with bmp, pursuant bmp
agreed to purchase 1,000,000 newly issued shares of Series B Stock for an
aggregate purchase price of $2,000,000, to be paid in several installments.
On April 29, 1999, bmp purchased 232,500 shares of Series B Stock for a
purchase price of $465,000, and bmp agreed, subject to certain conditions(see
"Financing" under Note 5 of the Notes to the Financial Statements), to
purchase 192,500 shares of Series B Stock on or before May 31, 1999 for a
purchase price of $385,000 and 575,000 shares of Series B Stock on or before
June 30, 1999 for a purchase price of $1,150,000. In connection with the
first stage 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 $1.3 million
dollars, subject to the absence of any material adverse change in the
business and 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 is in receipt of funds equaling $1.3 million
arising out of the second stage of the bmp investment. In March 1999, the
Company increased its borrowings under the Line of Credit to $850,000. In April
1999, the Company increased its borrowings under the Line of Credit to the
full $1,000,000. 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.
<PAGE>
12
The Company has incurred net losses from inception (September 21, 1993)
and has an accumulated deficit at March 31, 1999 of $18,002,836. 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 Company is currently in the midst of a multi-installment private placement
of equity capital, as described above. 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. After the completion of all
installments under the second stage of the bmp investment(aggregate of
$2,000,000) pursuant to the Amended Purchase Agreement, and assuming the
Company meets its business plan the Company estimates that it would have
sufficient cash flow to operate at least through year end, and that it would
turn cash flow positive by year end. However, the Company's business plan is
dependent upon a substantial increase in sales levels, which the Company has
not historically achieved. bmp has contractually committed to purchase
$1,535,000 of additional equity capital($465,000 was invested in May 1999)
of the Company, subject to the satisfaction of certain conditions, including
stockholder approval or a determination that such stockholder approval is not
required. However, if the conditions to such additional equity infusion are
not met or bmp fails to satisfy its obligations to provide such infusion, the
Company estimates that it has sufficient cash flow to operate only through
approximately the middle of July, 1999. In addition, the extension of the Line
of Credit by BSB until May 31, 2000 is conditioned upon the consummation of
bmp's investment of at least $1.3 million. At this time, BSB has extended
the maturity of the Line of Credit until June 30, 1999. The above estimates
of cash flow for operations assume the current level of sales and the current
level of fixed and variable costs. If the level of sales increases, such
dates may be later, and alternatively, if current sales levels decrease, such
dates may be sooner. The Company is also taking actions to reduce operating
expenses. Legal fees associated with pending investigations (See Litigation/
Investigation) could be an additional drain on the Company's cash flow.
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. Additionally, there can be no
assurance that the complete second stage of the bmp investment will be
consummated.
<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.
None
Item 5. Other Information.
George W. Barrett and Brian J. Thompson, who both served as directors
during the fiscal year ended December 31, 1998, have advised the
Company of their determination to retire as directors of the Company.
Mr. Barrett is retiring effective as of the date of the Company's 1999
annual meeting of stockholders, which is tentatively scheduled to take
place on June 11, 1999, and Mr. Thompson resigned as of May 5, 1999.
There has been no disagreement between the Company and either of Messrs.
Barrett and Thompson.
The Board of Directors has elected two new outside directors, George W.
Hippisley and Edwin B. Spievack, to the Board of Directors and such
two new directors have been nominated for re-election, together with
two existing directors, at the Company's 1999 annual meeting of
stockholders tentatively scheduled to take place on June 11, 1999.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
4.1 Certificate of Designations of Series B Convertible
Preferred Stock, Filed with the Secretary of State of
Delaware on April 27, 1999.
10.1 Amendment No. 1 to Securities Purchase Agreement, dated
as of April 28, 1999, between the Company and bmp
Mobility AG Venture Capital
10.2 Consulting Agreement, dated as of April 28, 1999 between
the Company and bmp Management Consultants GmbH
27 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: May 14, 1999 By:/s/ Geoffrey T Burnham
----------------------------
Geoffrey T. Burnham
Chairman of the Board, President
and Chief Executive Officer
(principal executive officer)
Date: May 14, 1999 By:/s/ Leonard E. Lundberg
----------------------------
Leonard E. Lundberg
Chief Financial Officer,
Principal Financial Officer
and Principal Accounting Officer
[TYPE] EX-4.1
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES B CONVERTIBLE
PREFERRED STOCK
OF
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION
(Pursuant to Section 151 of the
Delaware General Corporation Law)
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION, a corporation organized
and existing under the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY THAT:
Pursuant to authority conferred upon the Board of Directors (the
"Board") by the Certificate of Incorporation of the Corporation, as amended to
date (the "Certificate of Incorporation") and pursuant to the provisions of
§151 of the Delaware General Corporation Law, the Board, at a meeting
held on February 2, 1999, adopted the following resolution providing for the
voting powers, designations, preferences and rights, and the qualifications,
limitations and restrictions of the Series B Convertible Preferred Stock.
WHEREAS, the Certificate of Incorporation provides for two classes
of shares known as common stock, $.01 par value per share (the "Common
Stock"), and preferred stock, $.01 par value per share (the "Preferred
Stock"); and
WHEREAS, the Board is authorized by the Certificate of Incorporation
to provide for the issuance of the shares of Preferred Stock in one or more
series and, by filing a certificate pursuant to the applicable law of the
State of Delaware, to establish from time to time the number of shares to be
included in any such series and to fix the voting powers, designations,
preferences and rights of the shares of any such series and the
qualifications, limitations and restrictions thereof.
NOW, THEREFORE, BE IT RESOLVED, that the Board deems it advisable
to, and hereby does, designate a Series B Convertible Preferred Stock and
fixes and determines the voting powers, designations, preferences and rights,
and the qualifications, limitations and restrictions relating to the Series B
Convertible Preferred Stock as follows:
1. Designation. The shares of such series of Preferred Stock
individually and in the aggregate shall be designated "Series B Convertible
Preferred Stock" (referred to herein as the "Series B Stock").
2. Authorized Number. The number of shares constituting the Series B
Stock shall be one million (1,000,000). The number of authorized shares of
Series B Stock may be reduced by further resolution of the Board of Directors
of the Company and by the filing of a certificate pursuant to the provisions
of the Section 151(g) of the General Corporation Law of the State of Delaware
stating that such reduction has been so authorized (but not below the number
of shares of Series B Stock then outstanding) but the number of authorized
shares of Series B Stock shall not be increased.
3. Ranking. The Series B Stock shall rank as to dividends pari passu
with the Common Stock of the Corporation. The Series B Stock shall rank as to
liquidation, dissolution or winding up, senior and prior to the Common Stock
of the Corporation and to all other classes or series of stock issued by the
Corporation, except as otherwise approved by the affirmative vote or consent
of the holders of shares of Series B Stock pursuant to Section 8(b) hereof.
(All equity securities of the Corporation with respect to which the Series B
Stock ranks senior and prior with respect to liquidation, dissolution and
winding up, including the Common Stock, are collectively referred to herein as
"Junior Securities" and all equity securities of the Corporation with which the
Series B Stock ranks on a parity, with respect to dividends, are collectively
referred to herein as "Parity Securities.")
4. Dividends. The holders of shares of Series B Stock shall be
entitled to share, equally and ratably in any dividends declared by the Board
on the Common Stock, whether payable in cash, shares of Common Stock (or
fractions thereof) or property. The pro rata entitlement to such dividends of
each share of Series B Stock shall be computed on the basis of the conversion
rate then in effect (as defined in Section 6 hereof).
5. Liquidation.
a. Liquidation Preference. Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders
of the shares of Series B Stock shall be entitled to receive and to be paid
out of the assets of the Corporation available for distribution to its
stockholders, before any distribution or payment is made upon any Junior
Securities, to be paid an amount equal to (i) $1.00 per share of Series B
Stock, representing the liquidation preference per share of the Series B Stock
(as adjusted for any combinations, divisions or similar recapitalizations
affecting the shares of Series B Stock) (the "Liquidation Payments"). If upon
any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the assets to be distributed among the holders of
Series B Stock and the Parity Securities shall be insufficient to permit
payment in full to both the holders of Series B Stock of the Liquidation
Payments and to the holders of the Parity Securities any applicable
liquidation payments, then the entire assets of the Corporation shall be
distributed ratably among such holders in proportion to the full respective
distributive amounts to which they are entitled.
b. Remaining Assets. Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, after the
holders of Series B Stock shall have been paid in full the Liquidation
Payments, the remaining assets of the Corporation shall be distributed ratably
per share to the holders of the Series B Stock and the other Parity
Securities. The pro rata entitlement of each share of Series B Stock in any
such distribution shall be computed on the basis of the conversion rate then
in effect.
c. Notice of Liquidation. Written notice of a liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, stating a payment date, the amount of the Liquidation Payments
and the place where said Liquidation Payments shall be payable, shall be given
by mail, postage prepaid, not less than 30 days prior to the payment date
stated therein, to each holder of record of Series B Stock at his post office
address as shown by the records of the Corporation.
d. Fractional Shares. The Liquidation Payments with respect to
each outstanding fractional share of Series B Stock shall be equal to a
ratably proportionate amount of the Liquidation Payments with respect to each
outstanding share of Series B Stock.
e. Certain Actions not Liquidation. Neither the sale, lease or
exchange (for cash, stock, securities or other consideration) of all or
substantially all of the property and assets of the Corporation, nor the
merger or consolidation of the Corporation with or into any other corporation,
nor the merger or consolidation of any other corporation with or into the
Corporation, shall be deemed to be a dissolution, liquidation or winding up,
voluntary or involuntary, for the purposes of this paragraph 5.
6. Conversion.
The holders of the Series B Stock shall have the following
conversion rights:
a. Conversion. Each share of Series B Stock shall be
convertible at any time, at the option of the holder of record thereof,
subject to the limitations on conversion set forth in paragraph (f) below,
into fully paid and nonassessable shares of Common Stock at the "conversion
rate" (as defined in paragraph (b) below) then in effect upon surrender to the
Corporation or its transfer agent of the certificate or certificates
representing the Series B Stock to be converted, as provided below, or if the
holder notifies the Corporation or its transfer agent that such certificate or
certificates have been lost, stolen or destroyed, upon the execution and
delivery of an agreement satisfactory to the Corporation to indemnify the
Corporation from any losses incurred by it in connection therewith.
b. Basis For Conversion; Converted Shares. The basis for any
conversion under this Section 6 shall be the "conversion rate" in effect at
the time of conversion, which for the purposes hereof shall mean the number of
shares of Common Stock issuable for each share of Series B Stock surrendered
for conversion under this Section 6. Initially, the conversion rate shall be
5.0, i.e., 5.0 shares of Common Stock for each share of Series B Stock being
converted. Such conversion rate shall be subject to adjustment as provided in
Section 7 below. If any fractional interest in a share of Common Stock would
be deliverable upon conversion of Series B Stock, then such fractional share
shall be disregarded if less than one half a share, or if more than one-half a
share, the number of shares issuable upon conversion shall be rounded out to
the next full share. Any shares of Series B Stock which have been converted
shall be canceled and the certificates representing shares of Series B Stock
so converted shall represent the right to receive such number of shares of
Common Stock into which such shares of Series B Stock are convertible. The
Board of Directors of the Corporation shall at all times reserve a sufficient
number of authorized but unissued shares of Common Stock to be issued in
satisfaction of the conversion rights and privileges aforesaid.
c. Mechanics of Conversion. In the case of a conversion, before
any holder of Series B Stock shall be entitled to convert the same into shares
of Common Stock, it shall surrender the certificate or certificates for such
shares of Series B Stock, duly endorsed, at the office of the Corporation or
its transfer agent for the Series B Stock, and shall give written notice to
the Corporation of the election to convert the same and shall state therein
the name or names in which the certificate or certificates for shares of
Common Stock are to be issued. The Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series B Stock,
or to the nominee or nominees of such holder, a certificate or certificates
for the number of shares of Common Stock to which such holder shall be
entitled as aforesaid. A certificate or certificates will be issued for the
remaining shares of Series B Stock in any case in which fewer than all of the
shares of Series B Stock represented by a certificate are converted.
d. Issue Taxes. The Corporation shall pay all issue taxes, if
any, incurred in respect of the issue of shares of Common Stock on
conversion. If a holder of shares surrendered for conversion specifies that
the shares of Common Stock to be issued on conversion are to be issued in a
name or names other than the name or names in which such surrendered shares
stand, the Corporation shall not be required to pay any transfer or other
taxes incurred by reason of the issuance of such shares of Common Stock to the
name of another, and if the appropriate transfer taxes shall not have been
paid to the Corporation or the transfer agent for the Series B Stock at the
time of surrender of the shares involved, the shares of Common Stock issued
upon conversion thereof may be registered in the name or names in which the
surrendered shares were registered, despite the instructions to the contrary.
e. Rights of Holders of Shares. Each conversion of shares of Series
B Stock shall be deemed to have been made as of the close of business on the
applicable conversion date so that the rights of the holder of shares of such
Series B Stock shall, to the extent of such conversion, cease at such time and
the person or persons entitled to receive shares of the Common Stock upon
conversion of the shares of Series B Stock shall be treated for all purposes
as having become the record holder or holders of the Common Stock at such
time.
f. Limitations on Conversions. The conversion of shares of Series B
Stock shall be subject to the following limitations (each of which limitations
shall be applied independently):
i. Nasdaq Cap Amount. Unless (x) permitted by the applicable
rules and regulations of The Nasdaq SmallCap Market on which the Common Stock
is listed or traded (whether because the Corporation has obtained requisite
shareholder approval or otherwise) or (y) the Corporation's securities are not
then listed on The Nasdaq SmallCap Market (the conditions contained in clauses
(x) and (y) of this sentence are referred to herein as the "Nasdaq
Conditions"), in no event shall the total number of shares of Common Stock
issued upon conversion of the Series B Stock purchased by the holders exceed
the maximum number of shares of Common Stock that the Corporation can so issue
without the approval of its common stockholders pursuant to Rule
4310(c)(25)(H)(i)(d) of the Nasdaq SmallCap Market; provided that prior to
such shareholder approval, the total number of shares of Common Stock issued
upon conversion of the Series B Stock, taken together with such shares of
Common Stock purchased pursuant to Section 2.2(a) of that certain Securities
Purchase Agreement, dated as of February 5, 1999, between the Corporation and
bmp Mobility AG Venture Capital, shall not exceed 18% of the Corporation's
outstanding Common Stock (the "Nasdaq Cap Amount") The Nasdaq Cap Amount shall
be allocated pro rata among the holders of Series B Stock as set forth in
subparagraph (ii) hereof. No prior inability to convert shares of Series B
Stock pursuant to this subparagraph (i) shall have any effect on the
applicability of the provisions of this subparagraph (i) with respect to any
subsequent determination of convertibility.
ii. Allocations of Initial Cap Amounts. The Nasdaq Cap Amount
(including voting restrictions, if any) shall be allocated pro rata among the
holders of Series B Stock based on the number of shares of Series B Stock
registered in the name of such holder.
iii. Non-conversion Notice. If at any time any shares of Series
B Stock are not convertible into Common Stock as a result of this Section
6(f), the Corporation shall, upon the request of any holder, provide within
three business days a certificate of the Chief Financial Officer or the
Corporation to such holder of such Series B Stock stating the number of such
holder's shares of Series B Stock that may be converted into Common Stock. In
the event that any shares of Series B Stock that were intended to be converted
into Common Stock are determined not to be convertible, the Corporation, at
the written request of the holder, will return such shares of Series B Stock
to the holder thereof.
iv. Within ten (10) days of such date upon which one of the
Nasdaq Conditions is satisfied, the Corporation shall, having obtained the
written consent of the holders of not less than a majority of the then
outstanding shares of Series B Stock in accordance with section 8 hereof, file
a Certificate of Amendment to this Certificate of Designations, Preferences
and Rights to delete the provisions relating to "Limitations on Conversions"
set forth in this Section 6(f).
7. Adjustment of Conversion Price and Conversion Rate. The number
and kind of securities issuable upon the conversion of the Series B Stock, the
conversion price and the conversion rate shall be subject to adjustment from
time to time in accordance with the following provisions:
a. Distributions Combinations and Subdivisions of Capital Stock. If
at any time the outstanding shares of Common Stock of the Corporation shall be
subdivided into a greater or combined into a lesser number of shares (whether
with the same or a different par value or without par value), including,
without limitation, through a reverse stock split, the conversion rate shall
be proportionately increased or decreased.
b. Distributions in Respect of Capital Stock. If the Corporation
shall distribute by way of dividend or otherwise upon its shares of Common
Stock any cash, securities or property (excluding cash dividends paid out of
earnings or surplus), then upon conversion of shares of Series B Stock
occurring after such distribution date, the holder of the Series B Stock will
be entitled to receive the number of shares of the Common Stock of the
Corporation then deliverable pursuant to the terms hereof, and, in addition,
the cash, securities or property which such holder would have received by way
of such dividends or other distributions if such holder had been the record
holder of the number of shares of such Common Stock, which would have been
deliverable upon the exercise of such holder's conversion right if such
conversion had been effected immediately prior to the record date for such
distribution of cash, securities or property.
c. Recapitalization, Reclassification and Succession. If any
recapitalization of the Corporation or reclassification of shares of Common
Stock of the Corporation or any merger or consolidation of the Corporation
into or with a corporation or other business entity shall be effected, then
the holder of the Series B Stock shall thereafter have the right to receive
the kind and number of shares of stock or other securities or other property
of the Corporation which the holder of Series B Stock would have been entitled
to receive if the holder had held the Common Stock issuable upon conversion of
his Series B Stock immediately prior to such recapitalization,
reclassification, merger or consolidation.
d. Fractional Shares. In the event that the application of the
provisions of this Section 7 would result in the issuance of a fraction of a
share of Common Stock of the Corporation, or a number of full shares plus a
fraction of a share of such Common Stock, then such fractional share shall be
disregarded if less than one-half a share, or, if more than one-half of a
share, the number of shares issuable upon such exchange shall be rounded out
to the next full share.
e. Issuance of Additional Shares of Capital Stock. If the
Corporation shall issue any additional shares of Common Stock or Common Stock
equivalents (other than as provided in the foregoing subsections (a) through
(d) of this Section) for no consideration or for a consideration per share
less than Fair Market Value (as defined below) (or, in the case of a Common
Stock equivalent, if the exercise price or conversion price shall be less than
Fair Market Value) in effect on the date of and immediately prior to the issue
of such additional shares of Common Stock or Common Stock equivalents, then
and in such event, the Corporation shall cause notice of such issuance to be
mailed to each holder of shares of Series B Stock at its then registered
address by first-class mail, postage prepaid, and an equitable adjustment as
determined by the Board in good faith shall be made to the conversion rate as
soon as practicable and retroactive to such issue date in order to prevent
dilution resulting from such below market issuance of the relative equity
interest in the Corporation represented by shares of Series B Stock then
outstanding compared to the total capital stock of the Corporation (including
the Series B Stock) outstanding immediately prior to such issuance; provided,
however, that this provision shall not apply to (i) the issue of up to 500,000
Warrants, convertible into 500,000 shares of Common Stock in connection with
the Corporation's contemplated amendment to its $1,000,000 secured line of
credit (the "Line of Credit") maintained by BSB Bank & Trust Company ("BSB");
(ii) the issuance of shares upon exercise or conversion of a Common Stock
equivalent, as long as the exercise price or conversion price on the date of
issuance of such Common Stock equivalent was in excess of Fair Market Value,
and (iii) the issuance of Common Stock to a person that is not an Affiliate of
the Corporation in a private placement at a discount to market not to exceed
twenty five percent (25%) to reflect an illiquidity discount.
The term "Fair Market Value" means the higher of (a) the Market
Price on the date of issuance of Common Stock or Common Stock equivalent or
(b) the average closing sales price per share of Common Stock for the ten (10)
trading days immediately preceding the date of issuance of Common Stock or
Common Stock equivalents; provided, however, that, in the case of the issuance
of shares of Common Stock or Common Stock equivalents for consideration other
than cash, the Board shall determine in good faith the value of such shares of
Common Stock or Common Stock equivalents.
The term "Market Price" means, with respect to the shares of Common
Stock issuable upon conversion of the Series B Stock, (a) if the shares are
listed or admitted for trading on any national securities exchange or included
in The Nasdaq National Market or Nasdaq SmallCap Market, the last reported
sales price as reported on such exchange or market; (b) if the shares are not
listed or admitted for trading on any national securities exchange or included
in The Nasdaq National Market or Nasdaq SmallCap Market, the average of the
last reported closing bid and asked quotation for the shares as reported on
NASDAQ or a similar service if NASDAQ is not reporting such information; (c)
if the shares are not listed or admitted for trading on any national
securities exchange or included in The Nasdaq National Market or Nasdaq
SmallCap Market or quoted by NASDAQ or a similar service, the average of the
last reported bid and asked quotation for the shares as quoted by a market
maker in the shares (or if there is more than one market maker, the bid and
asked quotation shall be obtained from two market makers and the average of
the lowest bid and highest asked quotation). In the absence of any available
public quotations for the Common Stock, the Board of Directors of the Company
shall determine in good faith the fair value of the Common Stock, which
determination shall be set forth in a certificate by the Secretary of the
Company.
The term "Affiliate" means any Person (i) which, directly or
indirectly, through one or more intermediaries controls, or is controlled by,
or is under common control with, another Person, (ii) which beneficially owns
or holds 20% or more of any class of the outstanding Voting Stock of such
other Person or (iii) which is a relative or spouse of such Person, or any
relative of such spouse, who has the same home as such Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of Voting Stock, by contract or otherwise.
The term "Person" means any individual, entity or group, including,
without limitation, any corporation, limited liability company, limited or
general partnership, joint venture, association, joint stock company, trust,
unincorporated organization, or government or any agency or political
subdivision thereof.
The term "Voting Stock" means any class or classes of capital stock
pursuant to which the holders thereof have the general voting power under
ordinary circumstances to vote for the election of directors, managers or
trustees of any Person (irrespective of whether or not at the time capital
stock of any class or classes will have, or might have, voting power by the
reason of the happening of any contingency).
f. Corporation to Prevent Dilution. If any event or condition occurs
as to which other provisions of this Section 7 are not strictly applicable or
if strictly applied would not fairly protect the exercise of conversion rights
hereunder in accordance with the essential intent and principles of such
provisions, or which might materially and adversely affect the conversion
rights of the holder of Series B Stock under any provisions hereof, then the
Board of Directors shall in good faith make an adjustment in the application
and interpretation of such provisions, in accordance with such essential
intent and principles, so as to protect such rights as aforesaid, and any
adjustment necessary with respect to the conversion rate or the nature or kind
of securities issuable upon conversion hereunder so as to preserve without
dilution the rights of such holder; provided, however, that in no event shall
any such adjustment (other than a reverse stock split or the like) have the
effect of decreasing the conversion rate as otherwise determined pursuant to
this Certificate.
g. Valid Issuance. All shares of Common Stock which may be
issued in connection with the conversion provisions set forth herein shall,
upon issuance by the Corporation, be validly issued, fully paid and
nonassessable, free from preemptive rights and free from all taxes, liens or
charges with respect thereto created or imposed by the Corporation.
h. Other Provisions Applicable to Adjustment Under this
Section. The following provisions shall be applicable to the adjustments in
Conversion Price as provided in this Section 7:
i. Treasury Shares. The number of shares of Common Stock at any
time outstanding shall not include any shares thereof then directly or
indirectly owned or held by or for the account of the Corporation.
ii. Minimum Adjustment. No adjustment of the conversion rate
shall be made if the amount of any such adjustment would be an amount less
than five percent (5%) of the conversion rate then in effect, but any such
amount shall be carried forward and an adjustment in respect thereof shall be
made at the time of and together with any subsequent adjustment which,
together with such amount and any other amount or amounts so carried forward,
shall aggregate an increase or decrease of five percent (5%) or more.
8. Voting Rights.
a. General. Holders of Series B Stock shall be entitled to
notice of all meetings of the Corporation's stockholders but shall not be
entitled to vote except in respect of such matters as to which they are
entitled to vote as a class under the Delaware General Corporation Law and
except as provided herein. In connection with the foregoing,
i. Amendment. The Corporation shall not, without the approval
by vote or written consent of the holders of not less than a majority of the
then outstanding shares of Series B Stock, voting as a separate class, amend,
alter or repeal any of the provisions of the Certificate of Incorporation or
the Certificate of Designation creating this Series B Stock which would alter
or change the powers, preferences or special rights of the shares of Series B
Stock so as to affect them adversely, including, but not limited to,
increasing or decreasing the par value of the Series B Stock.
ii. Right to Designate Directors. If the convertible feature of
the Series B Stock into Common Stock is not exercisable by July 31, 1999
because neither of the Nasdaq Conditions has been satisfied, then the number
of directors constituting the Board of Directors shall, without further
action, be increased by such number as is equal to one more than the number of
directors constituting the Board at such time (i.e., if such Board is
constituted by four (4) directors then the number of directors shall be
increased by five (5), for a total of nine directors), and the holders of a
majority of the outstanding shares of Series B Stock shall have, in addition
to the other voting rights set forth herein, the exclusive right, voting
together as a single class, to elect the directors necessary to fill the
vacancies created by such increase in the size of the Board (the "Additional
Directors"). Additional Directors shall continue as directors and such
additional voting right shall continue until such time as one of the Nasdaq
Conditions is satisfied, at which time such Additional Directors shall cease
to be directors and such additional voting right of the holders of shares of
Series B Stock shall terminate.
iii. Procedures. The foregoing rights of holders of shares of
Series B Stock to take any action as provided in this Section 8 may be
exercised at any annual meeting of stockholders or at a special meeting of
stockholders held for such purpose as hereinafter provided or at any
adjournment thereof, or by the written consent, delivered to the Secretary of
the Corporation, of the holders of the minimum number of shares of Series B
Stock required to take such action. So long as such right to vote continues
(and unless such right has been exercised by written consent of the minimum
number of shares required to take such action), the Chairman of the Board of
Directors may call, and upon the written request of holders of record of 20%
of the outstanding shares of Series B Stock, addressed to the Secretary of the
Corporation at the principal office of the Corporation, shall call, a special
meeting of the holders of shares entitled to vote as provided herein. The
Corporation shall use its best efforts to hold such meeting within 60 days
after delivery of such request to the Secretary, at the place and upon the
notice provided by law and in the Bylaws for the holding of meetings of
stockholders.
iv. Additional Director Vacancies and Removals. Each Additional
Director elected pursuant to Subsection 8c hereof shall serve until the annual
meeting for the year in which his or her term expires and until his or her
successor shall be elected and shall qualify, unless such Additional
Director's term of office shall have terminated pursuant to the provisions of
Subsection c hereof, as the case may be. In case any vacancy shall occur
among the Additional Directors elected pursuant to Subsection 8c hereof, such
vacancy may be filled for the unexpired portion of the term by vote of the
remaining Additional Director or Additional Directors theretofore elected by
such holders (or such Additional Director's or Additional Directors' successor
in office), if any. If any such vacancy is not so filled within 20 days after
the creation thereof or if all of the Additional Directors so elected shall
cease to serve as directors before their term shall expire, the holders of the
shares of Series B Stock then outstanding and entitled to vote for such
director pursuant to the provisions of Subsection 8c hereof, as the case may
be, may elect successors to hold office for the unexpired terms of any vacant
directorships, by written consent as herein provided, or at a special meeting
of such holders called as provided herein. The holders of a majority of the
shares of Series B Stock entitled to vote for Additional Directors pursuant to
Subsection 8c hereof, as the case may be, shall have the right to remove with
or without cause at any time and replace any Additional Directors such holders
have elected pursuant to such section, by written consent as herein provided,
or at a special meeting of such holders called as provided herein.
9. No Reissuance of Series B Stock. No share or shares of Series B
Stock acquired by the Corporation by reason of purchase, conversion or
otherwise shall be reissued, and all such shares of Series B Stock shall be
canceled, retired and eliminated from the shares of Series B Stock which the
Corporation shall be authorized to issue. Upon the filing of a certificate
with the Secretary of State of the State of Delaware as contemplated by
paragraph 2 hereof, any such shares of Series B Stock acquired by the
Corporation shall have the status of authorized and unissued shares of
Preferred Stock issuable in undesignated Series and may be redesignated and
reissued in any series other than as Series B Stock.
10. Exclusion of Other Rights. Except as may otherwise be required
by law, shares of Series B Stock shall not have any voting powers,
designations, preferences and rights, other than those specifically set forth
herein (as may be amended from time to time) and in the Certificate of
Incorporation.
11. Registered Holders. A holder of Series B Stock registered on the
Corporation's stock transfer books as the owner of shares of Series B Stock
shall be treated as the owner of such shares for all purposes. All notices
and all payments required to be mailed to a holder of shares of Series B Stock
shall be mailed to such holder's registered address on the Corporation's stock
transfer books, and all dividend and redemption payments to a holder of shares
of Series B Stock made hereunder shall be deemed to be paid in compliance
hereof on the date such payments are deposited into the mail addressed to such
holder at his registered address on the Corporation's stock transfer books.
12. Headings of Subdivisions. The headings of the various
subdivisions hereof are for convenience of reference only and shall not affect
the interpretation of any of the provisions hereof.
13. Severability of Provisions. If any right, preference or
limitation of the Series B Stock set forth herein (as may be amended) from
time to time is invalid, unlawful or incapable of being enforced by reason of
any rule of law or public policy, such right, preference or limitation
(including, without limitation, the dividend rate) shall be enforced to the
maximum extent permitted by law and all other rights, preferences and
limitations set forth herein (as so amended) which can be given effect without
the invalid, unlawful or unenforceable right, preference or limitation shall,
nevertheless, remain in full force and effect, and no right, preference or
limitation herein set forth shall be deemed dependent upon any other such
right, preference or limitation unless so expressed herein.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate
this 27th day of April, 1999.
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION
By: /s/Geoffrey T. Burnham
___________________
Geoffrey T. Burnham
President & Chief Executive Officer
[TYPE] EX-10.1
AMENDMENT NO. 1 TO SECURITIES PURCHASE AGREEMENT
This Amendment No. 1 to the Securities Purchase Agreement (the
"Amendment"), dated April 28, 1999, between Semiconductor Laser International
Corporation, a Delaware corporation (the "Company") and bmp Mobility AG
Venture Capital, a German stock corporation ("bmp") amends the Securities
Purchase Agreement, dated as of February 5, 1999, between the Company and bmp
(the Securities Purchase Agreement is referred to herein as the "Securities
Purchase Agreement").
R E C I T A L S:
WHEREAS, pursuant to the Securities Purchase Agreement, bmp has purchased
2,000,000 newly issued shares of the Company's common stock (the "Common
Stock"), $.01 par value per share, at a price of $0.375 per share, for an
aggregate purchase price of $750,000, and bmp has agreed, subject to the
conditions contained therein, to purchase from the Company not less than
650,000 and not more than 1,000,000 shares of the Company's Series B
Convertible Preferred Stock (the "Series B Stock"), $.01 par value per share,
each such share convertible into five shares of Common Stock, for an aggregate
purchase price of not less than $1,300,000 USD and not more than $2,000,000
USD.
WHEREAS, the Company and bmp have agreed to amend the Securities Purchase
Agreement to reflect bmp's agreement to fund the second stage of the
investment contemplated therein by purchasing the full 1,000,000 shares of
Series B Stock for an aggregate purchase price of $2,000,000 USD, the
Company's agreement to retain an affiliate of bmp, namely bmp Management
Consultants GmbH ("bmp Consultants"), as a consultant following the closing of
the second stage of bmp's investment and certain other matters.
NOW, THEREFORE, for good and valuable consideration, the receipt and adequa
cy of which are hereby acknowledged, the parties hereto agree as follows:
1. Pursuant to Section 2.2(b) of the Securities Purchase Agreement,
bmp agrees to purchase 1,000,000 shares of the Series B Stock from the
Company for an aggregate purchase price of $2,000,000 USD (the "$2,000,000
Purchase"), such purchase to occur in monthly installments as follows:
(i)bmp shall purchase 232,500 shares of Series B Stock from the Company
on or before April 30, 1999 for a purchase price of $465,000 USD (the "April
Installment");
(ii)bmp shall purchase 192,500 shares of Series B Stock from the Company
on or before May 31, 1999 for a purchase price of $385,000 USD (the "May
Installment"); and
(iii)bmp shall purchase 575,000 shares of Series B Stock from the Company
on or before June 30, 1999 for a purchase price of $1,150,000 USD (the "June
Installment");
provided, however, that upon satisfaction of the Nasdaq Conditions (as
hereinafter defined) and the conditions contained in clauses (i), (ii) and
(iv) of Section 4 of this Amendment, the unpaid portion of the total
$2,000,000 USD aggregate purchase price shall be immediately due and payable
(the "Final Installment") upon issuance of the shares of Series B Stock yet to
be issued hereunder.
1. The purchase of 232,500 shares of Series B Stock from the Company
on or before April 30, 1999 and payment of the April Installment shall be
subject to (i) all of the conditions precedent to the Second Closing set forth
in Section 9.4 of the Securities Purchase Agreement. excluding the condition
contained in Section 9.4(f) thereof and (ii) the execution and delivery of the
Consulting Agreement referred to in Section 6 of this Amendment.
2.
3. The purchase of 192,500 shares of Series B Stock from the Company
on or before May 31, 1999 and payment of the May Installment shall be subject
to receipt of the items set forth in Section 4.3 of the Securities Purchase
Agreement.
4. The purchase of 575,000 shares of Series B Stock from the Company
on or before June 30, 1999 and payment of the June Installment shall be
subject to (i) the condition contained in Section 9.4(f) of the Securities
Purchase Agreement, (ii) receipt of the items set forth in Section 4.3 of the
Securities Purchase Agreement, (iii) satisfaction of the Nasdaq Conditions (as
defined in Section 5 of this Amendment) and (iv) the execution and delivery of
the Warrant Agreement referred to in Section 7 of this Amendment. If the
Nasdaq Conditions are not satisfied on or prior to June 30, 1999, the June
Installment shall be canceled and bmp shall only be obligated to pay the Final
Installment subject to the conditions listed in clauses (i), (ii), (iii) and
(iv) of the previous sentence of this Section 4.
5. In order to provide that the convertible feature of the Series B
Stock into Common Stock shall not be exercisable unless (x) permitted by the
applicable rules and regulations of the Nasdaq SmallCap Market on which the
Common Stock is listed or traded (whether because the Company has obtained
requisite shareholder approval or otherwise) or (y) the Company's securities
are not then listed on the Nasdaq SmallCap Market (the conditions contained in
clauses (x) and (y) of this sentence are referred to herein as the "Nasdaq
Conditions"), the definition of "Certificate of Designations" in Section 1 of
the Securities Purchase Agreement is hereby deleted in its entirety and
replaced with the following:
"Certificate of Designations" means the Certificate of Designations
of the Series B Preferred Stock, substantially in the form of Exhibit A to
Amendment No. 1 to Securities Purchase Agreement.
6. The Company hereby retains bmp Consultants as a consultant,
pursuant to the terms and conditions set forth in that certain Consulting
Agreement, dated as of the date hereof, between the Company and bmp
Consultants, annexed hereto as Exhibit B.
7. Effective as of and subject to the funding of the June Installment
or the Final Installment, as the case may be, and as consideration for bmp's
agreement to fund the full amount of the $2,000,000 Purchase, the Company
agrees to issue to bmp warrants to purchase an aggregate of 500,000 shares of
the Common Stock, at an exercise price of $0.50 per share, pursuant to the
terms and conditions set forth in that certain Warrant Agreement annexed
hereto as Exhibit C. Such warrant issuance shall be subject to the
satisfaction of the Nasdaq Conditions.
8. Effective as of and subject to the funding of the June Installment
or the Final Installment, as the case may be, if (i) the Company shall
consummate a transaction (a "Transaction") within twenty four (24) months
following payment of the June Installment or the Final Installment, as the
case may be, involving the raising of debt or equity capital in a private
placement, and (ii) the Transaction involves an institution introduced to the
Company by bmp, other than existing shareholders of the Company, then the
Company shall pay bmp, as compensation for such introduction, an amount equal
to 5% of the net proceeds of the Transaction, which amount shall be payable in
cash on the closing date of the Transaction to an account designated by bmp by
wire transfer in immediately available funds; provided, however, that the fee
specified above shall not be payable if the Company consummates the
Transaction solely with persons and entities that were identified by the
Company or another third party without any prior introduction to the Company
by bmp. bmp shall be deemed to have introduced a person or entity to the
Company if (1) the Company has no prior knowledge of the interest in the
proposed Transaction by such person or entity and (2) bmp provides an
introduction to a specific representative of such person or entity who is in a
position to effect the Transaction.
9. Except as specifically amended by this Amendment, all the
provisions of the Securities Purchase Agreement shall continue in full force
and effect. After the date hereof, any reference to the Securities Purchase
Agreement shall mean the Securities Purchase Agreement as amended hereby.
10. This Amendment is effective as of this 28th day of April, 1999.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION,
a Delaware corporation
/s/ Geoffrey T. Burnham
By: __________________________________
Name: Geoffrey T. Burnham
Title: President & Chief Executive Officer
bmp MOBILITY AG VENTURE CAPITAL,
a German stock corporation
/s/ Oliver Borrmann
By:___________________________________
Name: Oliver Borrmann
Title: CEO
EXHIBIT A
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES B CONVERTIBLE
PREFERRED STOCK
OF
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION
(Pursuant to Section 151 of the
Delaware General Corporation Law)
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION, a corporation organized
and existing under the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY THAT:
Pursuant to authority conferred upon the Board of Directors (the
"Board") by the Certificate of Incorporation of the Corporation, as amended to
date (the "Certificate of Incorporation") and pursuant to the provisions of
§151 of the Delaware General Corporation Law, the Board, at a meeting
held on February 2, 1999, adopted the following resolution providing for the
voting powers, designations, preferences and rights, and the qualifications,
limitations and restrictions of the Series B Convertible Preferred Stock.
WHEREAS, the Certificate of Incorporation provides for two classes
of shares known as common stock, $.01 par value per share (the "Common
Stock"), and preferred stock, $.01 par value per share (the "Preferred
Stock"); and
WHEREAS, the Board is authorized by the Certificate of Incorporation
to provide for the issuance of the shares of Preferred Stock in one or more
series and, by filing a certificate pursuant to the applicable law of the
State of Delaware, to establish from time to time the number of shares to be
included in any such series and to fix the voting powers, designations,
preferences and rights of the shares of any such series and the
qualifications, limitations and restrictions thereof.
NOW, THEREFORE, BE IT RESOLVED, that the Board deems it advisable
to, and hereby does, designate a Series B Convertible Preferred Stock and
fixes and determines the voting powers, designations, preferences and rights,
and the qualifications, limitations and restrictions relating to the Series B
Convertible Preferred Stock as follows:
1. Designation. The shares of such series of Preferred Stock
individually and in the aggregate shall be designated "Series B Convertible
Preferred Stock" (referred to herein as the "Series B Stock").
2. Authorized Number. The number of shares constituting the Series B
Stock shall be one million (1,000,000). The number of authorized shares of
Series B Stock may be reduced by further resolution of the Board of Directors
of the Company and by the filing of a certificate pursuant to the provisions
of the Section 151(g) of the General Corporation Law of the State of Delaware
stating that such reduction has been so authorized (but not below the number
of shares of Series B Stock then outstanding) but the number of authorized
shares of Series B Stock shall not be increased.
3. Ranking. The Series B Stock shall rank as to dividends pari passu
with the Common Stock of the Corporation. The Series B Stock shall rank as to
liquidation, dissolution or winding up, senior and prior to the Common Stock
of the Corporation and to all other classes or series of stock issued by the
Corporation, except as otherwise approved by the affirmative vote or consent
of the holders of shares of Series B Stock pursuant to Section 8(b) hereof.
(All equity securities of the Corporation with respect to which the Series B
Stock ranks senior and prior with respect to liquidation, dissolution and
winding up, including the Common Stock, are collectively referred to herein as
"Junior Securities" and all equity securities of the Corporation with which
the Series B Stock ranks on a parity, with respect to dividends, are
collectively referred to herein as "Parity Securities.")
4. Dividends. The holders of shares of Series B Stock shall be
entitled to share, equally and ratably in any dividends declared by the Board
on the Common Stock, whether payable in cash, shares of Common Stock (or
fractions thereof) or property. The pro rata entitlement to such dividends of
each share of Series B Stock shall be computed on the basis of the conversion
rate then in effect (as defined in Section 6 hereof).
5. Liquidation.
a. Liquidation Preference. Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders
of the shares of Series B Stock shall be entitled to receive and to be paid
out of the assets of the Corporation available for distribution to its
stockholders, before any distribution or payment is made upon any Junior
Securities, to be paid an amount equal to (i) $1.00 per share of Series B
Stock, representing the liquidation preference per share of the Series B Stock
(as adjusted for any combinations, divisions or similar recapitalizations
affecting the shares of Series B Stock) (the "Liquidation Payments"). If upon
any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the assets to be distributed among the holders of
Series B Stock and the Parity Securities shall be insufficient to permit
payment in full to both the holders of Series B Stock of the Liquidation
Payments and to the holders of the Parity Securities any applicable
liquidation payments, then the entire assets of the Corporation shall be
distributed ratably among such holders in proportion to the full respective
distributive amounts to which they are entitled.
b. Remaining Assets. Upon any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, after the
holders of Series B Stock shall have been paid in full the Liquidation
Payments, the remaining assets of the Corporation shall be distributed ratably
per share to the holders of the Series B Stock and the other Parity
Securities. The pro rata entitlement of each share of Series B Stock in any
such distribution shall be computed on the basis of the conversion rate then
in effect.
c. Notice of Liquidation. Written notice of a liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, stating a payment date, the amount of the Liquidation Payments
and the place where said Liquidation Payments shall be payable, shall be given
by mail, postage prepaid, not less than 30 days prior to the payment date
stated therein, to each holder of record of Series B Stock at his post office
address as shown by the records of the Corporation.
d. Fractional Shares. The Liquidation Payments with respect to
each outstanding fractional share of Series B Stock shall be equal to a
ratably proportionate amount of the Liquidation Payments with respect to each
outstanding share of Series B Stock.
e. Certain Actions not Liquidation. Neither the sale, lease or
exchange (for cash, stock, securities or other consideration) of all or
substantially all of the property and assets of the Corporation, nor the
merger or consolidation of the Corporation with or into any other corporation,
nor the merger or consolidation of any other corporation with or into the
Corporation, shall be deemed to be a dissolution, liquidation or winding up,
voluntary or involuntary, for the purposes of this paragraph 5.
6. Conversion.
The holders of the Series B Stock shall have the following
conversion rights:
a. Conversion. Each share of Series B Stock shall be
convertible at any time, at the option of the holder of record thereof,
subject to the limitations on conversion set forth in paragraph (f) below,
into fully paid and nonassessable shares of Common Stock at the "conversion
rate" (as defined in paragraph (b) below) then in effect upon surrender to the
Corporation or its transfer agent of the certificate or certificates
representing the Series B Stock to be converted, as provided below, or if the
holder notifies the Corporation or its transfer agent that such certificate or
certificates have been lost, stolen or destroyed, upon the execution and
delivery of an agreement satisfactory to the Corporation to indemnify the
Corporation from any losses incurred by it in connection therewith.
b. Basis For Conversion; Converted Shares. The basis for any
conversion under this Section 6 shall be the "conversion rate" in effect at
the time of conversion, which for the purposes hereof shall mean the number of
shares of Common Stock issuable for each share of Series B Stock surrendered
for conversion under this Section 6. Initially, the conversion rate shall be
5.0, i.e., 5.0 shares of Common Stock for each share of Series B Stock being
converted. Such conversion rate shall be subject to adjustment as provided in
Section 7 below. If any fractional interest in a share of Common Stock would
be deliverable upon conversion of Series B Stock, then such fractional share
shall be disregarded if less than one half a share, or if more than one-half a
share, the number of shares issuable upon conversion shall be rounded out to
the next full share. Any shares of Series B Stock which have been converted
shall be canceled and the certificates representing shares of Series B Stock
so converted shall represent the right to receive such number of shares of
Common Stock into which such shares of Series B Stock are convertible. The
Board of Directors of the Corporation shall at all times reserve a sufficient
number of authorized but unissued shares of Common Stock to be issued in
satisfaction of the conversion rights and privileges aforesaid.
c. Mechanics of Conversion. In the case of a conversion, before
any holder of Series B Stock shall be entitled to convert the same into shares
of Common Stock, it shall surrender the certificate or certificates for such
shares of Series B Stock, duly endorsed, at the office of the Corporation or
its transfer agent for the Series B Stock, and shall give written notice to
the Corporation of the election to convert the same and shall state therein
the name or names in which the certificate or certificates for shares of
Common Stock are to be issued. The Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series B Stock,
or to the nominee or nominees of such holder, a certificate or certificates
for the number of shares of Common Stock to which such holder shall be
entitled as aforesaid. A certificate or certificates will be issued for the
remaining shares of Series B Stock in any case in which fewer than all of the
shares of Series B Stock represented by a certificate are converted.
d. Issue Taxes. The Corporation shall pay all issue taxes, if
any, incurred in respect of the issue of shares of Common Stock on
conversion. If a holder of shares surrendered for conversion specifies that
the shares of Common Stock to be issued on conversion are to be issued in a
name or names other than the name or names in which such surrendered shares
stand, the Corporation shall not be required to pay any transfer or other
taxes incurred by reason of the issuance of such shares of Common Stock to the
name of another, and if the appropriate transfer taxes shall not have been
paid to the Corporation or the transfer agent for the Series B Stock at the
time of surrender of the shares involved, the shares of Common Stock issued
upon conversion thereof may be registered in the name or names in which the
surrendered shares were registered, despite the instructions to the contrary.
e. Rights of Holders of Shares. Each conversion of shares of Series
B Stock shall be deemed to have been made as of the close of business on the
applicable conversion date so that the rights of the holder of shares of such
Series B Stock shall, to the extent of such conversion, cease at such time and
the person or persons entitled to receive shares of the Common Stock upon
conversion of the shares of Series B Stock shall be treated for all purposes
as having become the record holder or holders of the Common Stock at such
time.
f. Limitations on Conversions. The conversion of shares of Series B
Stock shall be subject to the following limitations (each of which limitations
shall be applied independently):
i. Nasdaq Cap Amount. Unless (x) permitted by the applicable
rules and regulations of The Nasdaq SmallCap Market on which the Common Stock
is listed or traded (whether because the Corporation has obtained requisite
shareholder approval or otherwise) or (y) the Corporation's securities are not
then listed on The Nasdaq SmallCap Market (the conditions contained in clauses
(x) and (y) of this sentence are referred to herein as the "Nasdaq
Conditions"), in no event shall the total number of shares of Common Stock
issued upon conversion of the Series B Stock purchased by the holders exceed
the maximum number of shares of Common Stock that the Corporation can so issue
without the approval of its common stockholders pursuant to Rule
4310(c)(25)(H)(i)(d) of the Nasdaq SmallCap Market; provided that prior to
such shareholder approval, the total number of shares of Common Stock issued
upon conversion of the Series B Stock, taken together with such shares of
Common Stock purchased pursuant to Section 2.2(a) of that certain Securities
Purchase Agreement, dated as of February 5, 1999, between the Corporation and
bmp Mobility AG Venture Capital, shall not exceed 18% of the Corporation's
outstanding Common Stock (the "Nasdaq Cap Amount") The Nasdaq Cap Amount shall
be allocated pro rata among the holders of Series B Stock as set forth in
subparagraph (ii) hereof. No prior inability to convert shares of Series B
Stock pursuant to this subparagraph (i) shall have any effect on the
applicability of the provisions of this subparagraph (i) with respect to any
subsequent determination of convertibility.
ii. Allocations of Initial Cap Amounts. The Nasdaq Cap Amount
(including voting restrictions, if any) shall be allocated pro rata among the
holders of Series B Stock based on the number of shares of Series B Stock
registered in the name of such holder.
iii. Non-conversion Notice. If at any time any shares of Series
B Stock are not convertible into Common Stock as a result of this Section
6(f), the Corporation shall, upon the request of any holder, provide within
three business days a certificate of the Chief Financial Officer or the
Corporation to such holder of such Series B Stock stating the number of such
holder's shares of Series B Stock that may be converted into Common Stock. In
the event that any shares of Series B Stock that were intended to be converted
into Common Stock are determined not to be convertible, the Corporation, at
the written request of the holder, will return such shares of Series B Stock
to the holder thereof.
iv. Within ten (10) days of such date upon which one of the
Nasdaq Conditions is satisfied, the Corporation shall, having obtained the
written consent of the holders of not less than a majority of the then
outstanding shares of Series B Stock in accordance with section 8 hereof, file
a Certificate of Amendment to this Certificate of Designations, Preferences
and Rights to delete the provisions relating to "Limitations on Conversions"
set forth in this Section 6(f).
7. Adjustment of Conversion Price and Conversion Rate. The number
and kind of securities issuable upon the conversion of the Series B Stock, the
conversion price and the conversion rate shall be subject to adjustment from
time to time in accordance with the following provisions:
a. Distributions Combinations and Subdivisions of Capital Stock. If
at any time the outstanding shares of Common Stock of the Corporation shall be
subdivided into a greater or combined into a lesser number of shares (whether
with the same or a different par value or without par value), including,
without limitation, through a reverse stock split, the conversion rate shall
be proportionately increased or decreased.
b. Distributions in Respect of Capital Stock. If the Corporation
shall distribute by way of dividend or otherwise upon its shares of Common
Stock any cash, securities or property (excluding cash dividends paid out of
earnings or surplus), then upon conversion of shares of Series B Stock
occurring after such distribution date, the holder of the Series B Stock will
be entitled to receive the number of shares of the Common Stock of the
Corporation then deliverable pursuant to the terms hereof, and, in addition,
the cash, securities or property which such holder would have received by way
of such dividends or other distributions if such holder had been the record
holder of the number of shares of such Common Stock, which would have been
deliverable upon the exercise of such holder's conversion right if such
conversion had been effected immediately prior to the record date for such
distribution of cash, securities or property.
c. Recapitalization, Reclassification and Succession. If any
recapitalization of the Corporation or reclassification of shares of Common
Stock of the Corporation or any merger or consolidation of the Corporation
into or with a corporation or other business entity shall be effected, then
the holder of the Series B Stock shall thereafter have the right to receive
the kind and number of shares of stock or other securities or other property
of the Corporation which the holder of Series B Stock would have been entitled
to receive if the holder had held the Common Stock issuable upon conversion of
his Series B Stock immediately prior to such recapitalization,
reclassification, merger or consolidation.
d. Fractional Shares. In the event that the application of the
provisions of this Section 7 would result in the issuance of a fraction of a
share of Common Stock of the Corporation, or a number of full shares plus a
fraction of a share of such Common Stock, then such fractional share shall be
disregarded if less than one-half a share, or, if more than one-half of a
share, the number of shares issuable upon such exchange shall be rounded out
to the next full share.
e. Issuance of Additional Shares of Capital Stock. If the
Corporation shall issue any additional shares of Common Stock or Common Stock
equivalents (other than as provided in the foregoing subsections (a) through
(d) of this Section) for no consideration or for a consideration per share
less than Fair Market Value (as defined below) (or, in the case of a Common
Stock equivalent, if the exercise price or conversion price shall be less than
Fair Market Value) in effect on the date of and immediately prior to the issue
of such additional shares of Common Stock or Common Stock equivalents, then
and in such event, the Corporation shall cause notice of such issuance to be
mailed to each holder of shares of Series B Stock at its then registered
address by first-class mail, postage prepaid, and an equitable adjustment as
determined by the Board in good faith shall be made to the conversion rate as
soon as practicable and retroactive to such issue date in order to prevent
dilution resulting from such below market issuance of the relative equity
interest in the Corporation represented by shares of Series B Stock then
outstanding compared to the total capital stock of the Corporation (including
the Series B Stock) outstanding immediately prior to such issuance; provided,
however, that this provision shall not apply to (i) the issue of up to 500,000
Warrants, convertible into 500,000 shares of Common Stock in connection with
the Corporation's contemplated amendment to its $1,000,000 secured line of
credit (the "Line of Credit") maintained by BSB Bank & Trust Company ("BSB");
(ii) the issuance of shares upon exercise or conversion of a Common Stock
equivalent, as long as the exercise price or conversion price on the date of
issuance of such Common Stock equivalent was in excess of Fair Market Value,
and (iii) the issuance of Common Stock to a person that is not an Affiliate of
the Corporation in a private placement at a discount to market not to exceed
twenty five percent (25%) to reflect an illiquidity discount.
The term "Fair Market Value" means the higher of (a) the Market
Price on the date of issuance of Common Stock or Common Stock equivalent or
(b) the average closing sales price per share of Common Stock for the ten (10)
trading days immediately preceding the date of issuance of Common Stock or
Common Stock equivalents; provided, however, that, in the case of the issuance
of shares of Common Stock or Common Stock equivalents for consideration other
than cash, the Board shall determine in good faith the value of such shares of
Common Stock or Common Stock equivalents.
The term "Market Price" means, with respect to the shares of Common
Stock issuable upon conversion of the Series B Stock, (a) if the shares are
listed or admitted for trading on any national securities exchange or included
in The Nasdaq National Market or Nasdaq SmallCap Market, the last reported
sales price as reported on such exchange or market; (b) if the shares are not
listed or admitted for trading on any national securities exchange or included
in The Nasdaq National Market or Nasdaq SmallCap Market, the average of the
last reported closing bid and asked quotation for the shares as reported on
NASDAQ or a similar service if NASDAQ is not reporting such information; (c)
if the shares are not listed or admitted for trading on any national
securities exchange or included in The Nasdaq National Market or Nasdaq
SmallCap Market or quoted by NASDAQ or a similar service, the average of the
last reported bid and asked quotation for the shares as quoted by a market
maker in the shares (or if there is more than one market maker, the bid and
asked quotation shall be obtained from two market makers and the average of
the lowest bid and highest asked quotation). In the absence of any available
public quotations for the Common Stock, the Board of Directors of the Company
shall determine in good faith the fair value of the Common Stock, which
determination shall be set forth in a certificate by the Secretary of the
Company.
The term "Affiliate" means any Person (i) which, directly or
indirectly, through one or more intermediaries controls, or is controlled by,
or is under common control with, another Person, (ii) which beneficially owns
or holds 20% or more of any class of the outstanding Voting Stock of such
other Person or (iii) which is a relative or spouse of such Person, or any
relative of such spouse, who has the same home as such Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of Voting Stock, by contract or otherwise.
The term "Person" means any individual, entity or group, including,
without limitation, any corporation, limited liability company, limited or
general partnership, joint venture, association, joint stock company, trust,
unincorporated organization, or government or any agency or political
subdivision thereof.
The term "Voting Stock" means any class or classes of capital stock
pursuant to which the holders thereof have the general voting power under
ordinary circumstances to vote for the election of directors, managers or
trustees of any Person (irrespective of whether or not at the time capital
stock of any class or classes will have, or might have, voting power by the
reason of the happening of any contingency).
f. Corporation to Prevent Dilution. If any event or condition occurs
as to which other provisions of this Section 7 are not strictly applicable or
if strictly applied would not fairly protect the exercise of conversion rights
hereunder in accordance with the essential intent and principles of such
provisions, or which might materially and adversely affect the conversion
rights of the holder of Series B Stock under any provisions hereof, then the
Board of Directors shall in good faith make an adjustment in the application
and interpretation of such provisions, in accordance with such essential
intent and principles, so as to protect such rights as aforesaid, and any
adjustment necessary with respect to the conversion rate or the nature or kind
of securities issuable upon conversion hereunder so as to preserve without
dilution the rights of such holder; provided, however, that in no event shall
any such adjustment (other than a reverse stock split or the like) have the
effect of decreasing the conversion rate as otherwise determined pursuant to
this Certificate.
g. Valid Issuance. All shares of Common Stock which may be
issued in connection with the conversion provisions set forth herein shall,
upon issuance by the Corporation, be validly issued, fully paid and
nonassessable, free from preemptive rights and free from all taxes, liens or
charges with respect thereto created or imposed by the Corporation.
h. Other Provisions Applicable to Adjustment Under this
Section. The following provisions shall be applicable to the adjustments in
Conversion Price as provided in this Section 7:
i. Treasury Shares. The number of shares of Common Stock at any
time outstanding shall not include any shares thereof then directly or
indirectly owned or held by or for the account of the Corporation.
ii. Minimum Adjustment. No adjustment of the conversion rate
shall be made if the amount of any such adjustment would be an amount less
than five percent (5%) of the conversion rate then in effect, but any such
amount shall be carried forward and an adjustment in respect thereof shall be
made at the time of and together with any subsequent adjustment which,
together with such amount and any other amount or amounts so carried forward,
shall aggregate an increase or decrease of five percent (5%) or more.
8. Voting Rights.
a. General. Holders of Series B Stock shall be entitled to
notice of all meetings of the Corporation's stockholders but shall not be
entitled to vote except in respect of such matters as to which they are
entitled to vote as a class under the Delaware General Corporation Law and
except as provided herein. In connection with the foregoing,
i. Amendment. The Corporation shall not, without the approval
by vote or written consent of the holders of not less than a majority of the
then outstanding shares of Series B Stock, voting as a separate class, amend,
alter or repeal any of the provisions of the Certificate of Incorporation or
the Certificate of Designation creating this Series B Stock which would alter
or change the powers, preferences or special rights of the shares of Series B
Stock so as to affect them adversely, including, but not limited to,
increasing or decreasing the par value of the Series B Stock.
ii. Right to Designate Directors. If the convertible feature of
the Series B Stock into Common Stock is not exercisable by July 31, 1999
because neither of the Nasdaq Conditions has been satisfied, then the number
of directors constituting the Board of Directors shall, without further
action, be increased by such number as is equal to one more than the number of
directors constituting the Board at such time (i.e., if such Board is
constituted by four (4) directors then the number of directors shall be
increased by five (5), for a total of nine directors), and the holders of a
majority of the outstanding shares of Series B Stock shall have, in addition
to the other voting rights set forth herein, the exclusive right, voting
together as a single class, to elect the directors necessary to fill the
vacancies created by such increase in the size of the Board (the "Additional
Directors"). Additional Directors shall continue as directors and such
additional voting right shall continue until such time as one of the Nasdaq
Conditions is satisfied, at which time such Additional Directors shall cease
to be directors and such additional voting right of the holders of shares of
Series B Stock shall terminate.
iii. Procedures. The foregoing rights of holders of shares of
Series B Stock to take any action as provided in this Section 8 may be
exercised at any annual meeting of stockholders or at a special meeting of
stockholders held for such purpose as hereinafter provided or at any
adjournment thereof, or by the written consent, delivered to the Secretary of
the Corporation, of the holders of the minimum number of shares of Series B
Stock required to take such action. So long as such right to vote continues
(and unless such right has been exercised by written consent of the minimum
number of shares required to take such action), the Chairman of the Board of
Directors may call, and upon the written request of holders of record of 20%
of the outstanding shares of Series B Stock, addressed to the Secretary of the
Corporation at the principal office of the Corporation, shall call, a special
meeting of the holders of shares entitled to vote as provided herein. The
Corporation shall use its best efforts to hold such meeting within 60 days
after delivery of such request to the Secretary, at the place and upon the
notice provided by law and in the Bylaws for the holding of meetings of
stockholders.
iv. Additional Director Vacancies and Removals. Each Additional
Director elected pursuant to Subsection 8c hereof shall serve until the annual
meeting for the year in which his or her term expires and until his or her
successor shall be elected and shall qualify, unless such Additional
Director's term of office shall have terminated pursuant to the provisions of
Subsection c hereof, as the case may be. In case any vacancy shall occur
among the Additional Directors elected pursuant to Subsection 8c hereof, such
vacancy may be filled for the unexpired portion of the term by vote of the
remaining Additional Director or Additional Directors theretofore elected by
such holders (or such Additional Director's or Additional Directors' successor
in office), if any. If any such vacancy is not so filled within 20 days after
the creation thereof or if all of the Additional Directors so elected shall
cease to serve as directors before their term shall expire, the holders of the
shares of Series B Stock then outstanding and entitled to vote for such
director pursuant to the provisions of Subsection 8c hereof, as the case may
be, may elect successors to hold office for the unexpired terms of any vacant
directorships, by written consent as herein provided, or at a special meeting
of such holders called as provided herein. The holders of a majority of the
shares of Series B Stock entitled to vote for Additional Directors pursuant to
Subsection 8c hereof, as the case may be, shall have the right to remove with
or without cause at any time and replace any Additional Directors such holders
have elected pursuant to such section, by written consent as herein provided,
or at a special meeting of such holders called as provided herein.
9. No Reissuance of Series B Stock. No share or shares of Series B
Stock acquired by the Corporation by reason of purchase, conversion or
otherwise shall be reissued, and all such shares of Series B Stock shall be
canceled, retired and eliminated from the shares of Series B Stock which the
Corporation shall be authorized to issue. Upon the filing of a certificate
with the Secretary of State of the State of Delaware as contemplated by
paragraph 2 hereof, any such shares of Series B Stock acquired by the
Corporation shall have the status of authorized and unissued shares of
Preferred Stock issuable in undesignated Series and may be redesignated and
reissued in any series other than as Series B Stock.
10. Exclusion of Other Rights. Except as may otherwise be required
by law, shares of Series B Stock shall not have any voting powers,
designations, preferences and rights, other than those specifically set forth
herein (as may be amended from time to time) and in the Certificate of
Incorporation.
11. Registered Holders. A holder of Series B Stock registered on the
Corporation's stock transfer books as the owner of shares of Series B Stock
shall be treated as the owner of such shares for all purposes. All notices
and all payments required to be mailed to a holder of shares of Series B Stock
shall be mailed to such holder's registered address on the Corporation's stock
transfer books, and all dividend and redemption payments to a holder of shares
of Series B Stock made hereunder shall be deemed to be paid in compliance
hereof on the date such payments are deposited into the mail addressed to such
holder at his registered address on the Corporation's stock transfer books.
12. Headings of Subdivisions. The headings of the various
subdivisions hereof are for convenience of reference only and shall not affect
the interpretation of any of the provisions hereof.
13. Severability of Provisions. If any right, preference or
limitation of the Series B Stock set forth herein (as may be amended) from
time to time is invalid, unlawful or incapable of being enforced by reason of
any rule of law or public policy, such right, preference or limitation
(including, without limitation, the dividend rate) shall be enforced to the
maximum extent permitted by law and all other rights, preferences and
limitations set forth herein (as so amended) which can be given effect without
the invalid, unlawful or unenforceable right, preference or limitation shall,
nevertheless, remain in full force and effect, and no right, preference or
limitation herein set forth shall be deemed dependent upon any other such
right, preference or limitation unless so expressed herein.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate
this 27th day of April, 1999.
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION
By: __________________________
Geoffrey T. Burnham
President & Chief Executive Officer
Exhibit B
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is made and entered into as
of April 28, 1999, by and between Semiconductor Laser International
Corporation, a Delaware corporation (the "Company"), and bmp Management
Consultants GmbH, a German limited liability corporation ("bmp Consultants").
WHEREAS, in connection with certain financial and strategic planning to
be undertaken by the Company, including the creation of a strategic business
plan and the identification of appropriate sources of capital for the Company,
the Company agrees to retain bmp Consultants as a consultant, and bmp
Consultants agrees to become a consultant to the Company, on the terms and
subject to the conditions hereinafter contained;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the parties hereto, each intending to be legally bound, do hereby agree as
follows:
1. Duties; Compensation.
1.1 Duties. The Company hereby retains bmp Consultants, effective May
3, 1999, as a consultant to assist the Company, from time to time as shall be
mutually agreed to by the Company and bmp Consultants, with its financial and
strategic planning. The services to be provided by bmp Consultants in this
regard shall include, but are not limited to, the following:
(a) the identification and description of production and
management processes of the Company focusing primarily on supplier,
distribution, and sales management;
(b) creation and development of a detailed strategic business
plan and catalogue to improve the Company's management, focusing primarily on
supplier, distribution, and sales management;
(c) implementation and control of the strategic business plan
and catalogue;
(d) enhancement of the Company's reputation in the laser
industry and the financial community;
(e) identification and introduction of the Company to strategic
partners and investors in Europe;
(f) development and improvement of the Company's relationship
with strategic partners in Europe; and
(g) identification and facilitation of investments in the
Company on the Berliner Freiverkehr.
1.2 Compensation. As compensation for bmp Consultants' consulting
services hereunder, the Company hereby agrees to pay bmp Consultants an amount
equal to a maximum of $200,000 USD in the aggregate, based upon per diem
consulting rate of $1,500 USD for a regular consultant and $2,000 USD for a
senior consultant or partner of bmp Consultants or any of its affiliates.
Such $200,000 USD maximum consulting fee shall be inclusive of any travel or
other related expenses. bmp Consultants shall provide the Company with a
monthly report regarding the status of bmp Consultants' consulting services,
the days billed and any additional related expenses. Each payment by the
Company for bmp Consultants' consulting services shall be counted against the
$200,000 USD maximum and shall be payable as follows:
(a) Six monthly installments of $15,000 USD commencing
immediately following the funding of the April Installment (as defined in
Amendment No. 1 to Securities Purchase Agreement, dated as of the date hereof,
between the Company and bmp Mobility AG Venture Capital ("bmp")) and ending
five months following such funding date;
(b) $50,000 USD payable at the closing of the Final Installment;
and
(c) Six monthly installments of $10,000 USD commencing six
months following the funding of the April Installment and ending twelve months
following such funding date.
1.3 Relationship to the Company. bmp Consultants shall have no power
or authority, express or implied, to enter into any contract or commitment,
including any agreement with respect to any transaction to raise debt or
equity ("Transaction") on behalf of the Company. In addition, nothing
contained herein shall be construed in any manner that would deem bmp
Consultants or any of its employees to be an employee of the Company.
2. Confidentiality. bmp Consultants shall not disclose to any third
party, other than its representatives, agents, advisors, counsel, accountants
or potential participants in any Transaction (collectively,
"Representatives"), any non-public information about the Company or any
Transaction, including, but not limited to, any strategic business plan,
except (i) as may be required by court order, subpoena or governmental
authority or (ii) with the prior written consent of the other party hereto.
The parties hereto agree that the remedy at law for any breach of the
requirements of this Section 2 will be inadequate and that any breach would
cause such immediate and permanent damage as would be impossible to ascertain,
and, therefore, the parties hereto agree and consent that in the event of any
breach of this subsection, in addition to any and all other legal and
equitable remedies available for such breach, including a recovery of damages,
the non-breaching parties shall be entitled to obtain preliminary or permanent
injunctive relief without the necessity of proving actual damage by reason of
such breach and, to the extent permissible under applicable law, a temporary
restraining order may be granted immediately on commencement of such action.
3. Termination. This Agreement shall be terminated, (i) without further
obligation of the Company, upon any breach by bmp of its installment payment
obligations under Section 1 of Amendment No. 1 to Securities Purchase
Agreement, dated as of the date hereof, between the Company and bmp and (ii)
at any time at the option of bmp Consultants. This Agreement may also be
terminated at any time by mutual consent of bmp Consultants and the Company.
Upon the termination of this Agreement, this Agreement shall forthwith become
null and void, other than the agreements set forth in Sections 2, 3 and 4
hereof.
4. Miscellaneous.
4.2 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. None of the parties hereto shall assign any rights or delegate any
duties hereunder without the prior written consent of the other party.
4.3 Governing Law. This Agreement shall be construed in accordance
with, and governed by, the internal laws of the Republic of Germany, without
giving effect to the principles of conflict of laws thereof.
4.4 Entire Agreement. This Agreement sets forth the entire
understanding and agreement of the parties with respect to this subject matter
and supersedes any and all prior understandings, negotiations or agreements
among the parties hereto, both written and oral, with respect to such subject
matter.
4.5 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, and all of which together shall
constitute a single agreement.
4.6 Severability. In the event that any one or more of the
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, in whole or in part, the
validity of the remaining provisions shall not be affected and the remaining
portion of any provision held to be invalid, illegal or unenforceable shall in
no way be affected, prejudiced or disturbed thereby.
4.7 No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person or entity other than the parties hereto
and their respective successors and permitted assigns.
4.8 Amendment and Modification. This Agreement may be amended or
modified only by written agreement executed by the parties hereto.
4.9 Waiver. At any time prior to the termination of this
Agreement, each of the parties hereto may (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto, or (iii) waive compliance
with any of the covenants, agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in a written instrument signed by the party
granting such waiver. Such waiver or failure to insist upon strict compliance
with such obligation, covenant, agreement or condition shall not operate as a
waiver of, or estoppel with respect to, any subsequent or future failure.<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
SEMICONDUCTOR LASER INTERNATIONAL
CORPORATION
By:
Name: Geoffrey T. Burnham
Title: President, Chief Executive Officer
and Chairman of the Board
bmp MANAGEMENT CONSULTANTS GmbH
By:
Name:
Title:
Exhibit C
FORM OF COMMON STOCK PURCHASE WARRANT
Void after [Final Installment Date] __, 2004
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THIS WARRANT AND
SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN EXEMPTION THEREFROM UNDER SAID ACT. THIS WARRANT AND SUCH SHARES MAY
NOT BE TRANSFERRED EXCEPT UPON CONDITIONS SPECIFIED IN THIS WARRANT, AND NO
TRANSFER OF THIS WARRANT OR SUCH SHARES SHALL BE VALID OR EFFECTIVE UNLESS AND
UNTIL SUCH CONDITIONS SHALL HAVE BEEN COMPLIED WITH.
_________________
COMMON STOCK PURCHASE WARRANT
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION, a Delaware corporation
(the "Company"), having its principal office at 15 Link Drive, Binghamton, New
York 13904, hereby certifies that, for value received, bmp MOBILITY AG VENTURE
CAPITAL ("bmp"), or assigns, is entitled, subject to the terms set forth
below, to purchase from the Company at any time on or from time to time after
[Final Installment Date] __, 1999 and before 5:00 P.M., New York City time, on
[Final Installment Date] __, 2004, Five Hundred Thousand (500,000) fully paid
and non-assessable shares of Common Stock of the Company, at the price per
share (the "Purchase Price") of Fifty Cents ($0.50 USD). The number and
character of such shares of Common Stock and the Purchase Price are subject to
adjustment as provided herein.
This Warrant is one of the Common Stock Purchase Warrants (the
"Warrants") originally issued as of the Original Issue Date (as defined below)
and evidencing the right to purchase an aggregate of Five Hundred Thousand
(500,000) shares of Common Stock of the Company, subject to adjustment as
provided herein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a)The term "Company" includes the Company and any corporation which shall
succeed to or assume the obligations of the Company hereunder.
(b)The term "Common Stock" includes all stock of any class or classes (however
designated) of the Company, authorized upon the Original Issue Date or
thereafter, the holders of which shall have the right, without limitation as
to amount, either to all or to a share of the balance of current dividends and
liquidating dividends after the payment of dividends and distributions on any
shares entitled to preference, and the holders of which shall ordinarily, in
the absence of contingencies, be entitled to vote for the election of a
majority of directors of the Company (even though the right so to vote has
been suspended by the happening of such a contingency).
(c)The term "Series B Convertible Preferred Stock" shall mean the Company's
"Series B Convertible Preferred Stock" as authorized by the Company's
Certificate of Incorporation as amended through the Original Issue Date.
(d)The "Original Issue Date" is [Final Installment Date] __, 1999, the date as
of which this Warrant was first issued.
(e)The term "Other Securities" refers to any stock (other than Common Stock)
and other securities of the Company or any other person (corporate or
otherwise) which the holder of this Warrant at any time shall be entitled to
receive, or shall have received, upon the exercise of this Warrant, in lieu of
or in addition to Common Stock, or which at any time shall be issuable or
shall have been issued in exchange for or in replacement of Common Stock or
Other Securities pursuant to section 6 or otherwise.
(f)The term "Purchase Price per share" shall be the then applicable exercise
price for one share of Common Stock.
(g)The terms "registered" and "registration" refer to a registration effected
by filing a registration statement in accordance with the Securities Act, to
permit the disposition of Common Stock (or Other Securities) issued or
issuable upon the exercise of this Warrant, and any post-effective amendments
and supplements filed or required to be filed to permit any such disposition.
(h)The term "Securities Act" means the Securities of Act of 1933 as the same
shall be in effect at the time.
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 [Final Installment Date] __, 2004.
20. Assignability. This Warrant is fully assignable, in whole but
not in part, at any time, subject to applicable securities laws.
Dated:[Final Installment Date] __, 1999 SEMICONDUCTOR LASER INTERNATIONAL
CORPORATION
By:
Geoffrey T. Burnham
President
[Corporate Seal]
Witness:
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 [Final Installment Date] , 1999.
Dated:
(Signature must conform in all respects to name of record owner as specified
on the face of the Warrant)
(Address)
Signature guaranteed by a Bank or
Trust Company having its principal
office in New York City or by a Member
Firm of the New York or American
Stock Exchange
[TYPE] EX-10.2
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is made and entered into as
of April 28, 1999, by and between Semiconductor Laser International
Corporation, a Delaware corporation (the "Company"), and bmp Management
Consultants GmbH, a German limited liability corporation ("bmp Consultants").
WHEREAS, in connection with certain financial and strategic planning to
be undertaken by the Company, including the creation of a strategic business
plan and the identification of appropriate sources of capital for the Company,
the Company agrees to retain bmp Consultants as a consultant, and bmp
Consultants agrees to become a consultant to the Company, on the terms and
subject to the conditions hereinafter contained;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
the parties hereto, each intending to be legally bound, do hereby agree as
follows:
1. Duties; Compensation.
1.1 Duties. The Company hereby retains bmp Consultants, effective May
3, 1999, as a consultant to assist the Company, from time to time as shall be
mutually agreed to by the Company and bmp Consultants, with its financial and
strategic planning. The services to be provided by bmp Consultants in this
regard shall include, but are not limited to, the following:
(a) the identification and description of production and
management processes of the Company focusing primarily on supplier,
distribution, and sales management;
(b) creation and development of a detailed strategic business
plan and catalogue to improve the Company's management, focusing primarily on
supplier, distribution, and sales management;
(c) implementation and control of the strategic business plan
and catalogue;
(d) enhancement of the Company's reputation in the laser
industry and the financial community;
(e) identification and introduction of the Company to strategic
partners and investors in Europe;
(f) development and improvement of the Company's relationship
with strategic partners in Europe; and
(g) identification and facilitation of investments in the
Company on the Berliner Freiverkehr.
1.2 Compensation. As compensation for bmp Consultants' consulting
services hereunder, the Company hereby agrees to pay bmp Consultants an amount
equal to a maximum of $200,000 USD in the aggregate, based upon per diem
consulting rate of $1,500 USD for a regular consultant and $2,000 USD for a
senior consultant or partner of bmp Consultants or any of its affiliates.
Such $200,000 USD maximum consulting fee shall be inclusive of any travel or
other related expenses. bmp Consultants shall provide the Company with a
monthly report regarding the status of bmp Consultants' consulting services,
the days billed and any additional related expenses. Each payment by the
Company for bmp Consultants' consulting services shall be counted against the
$200,000 USD maximum and shall be payable as follows:
(a) Six monthly installments of $15,000 USD commencing
immediately following the funding of the April Installment (as defined in
Amendment No. 1 to Securities Purchase Agreement, dated as of the date hereof,
between the Company and bmp Mobility AG Venture Capital ("bmp")) and ending
five months following such funding date;
(b) $50,000 USD payable at the closing of the Final Installment;
and
(c) Six monthly installments of $10,000 USD commencing six
months following the funding of the April Installment and ending twelve months
following such funding date.
1.3 Relationship to the Company. bmp Consultants shall have no power
or authority, express or implied, to enter into any contract or commitment,
including any agreement with respect to any transaction to raise debt or
equity ("Transaction") on behalf of the Company. In addition, nothing
contained herein shall be construed in any manner that would deem bmp
Consultants or any of its employees to be an employee of the Company.
2. Confidentiality. bmp Consultants shall not disclose to any third
party, other than its representatives, agents, advisors, counsel, accountants
or potential participants in any Transaction (collectively,
"Representatives"), any non-public information about the Company or any
Transaction, including, but not limited to, any strategic business plan,
except (i) as may be required by court order, subpoena or governmental
authority or (ii) with the prior written consent of the other party hereto.
The parties hereto agree that the remedy at law for any breach of the
requirements of this Section 2 will be inadequate and that any breach would
cause such immediate and permanent damage as would be impossible to ascertain,
and, therefore, the parties hereto agree and consent that in the event of any
breach of this subsection, in addition to any and all other legal and
equitable remedies available for such breach, including a recovery of damages,
the non-breaching parties shall be entitled to obtain preliminary or permanent
injunctive relief without the necessity of proving actual damage by reason of
such breach and, to the extent permissible under applicable law, a temporary
restraining order may be granted immediately on commencement of such action.
3. Termination. This Agreement shall be terminated, (i) without further
obligation of the Company, upon any breach by bmp of its installment payment
obligations under Section 1 of Amendment No. 1 to Securities Purchase
Agreement, dated as of the date hereof, between the Company and bmp and (ii)
at any time at the option of bmp Consultants. This Agreement may also be
terminated at any time by mutual consent of bmp Consultants and the Company.
Upon the termination of this Agreement, this Agreement shall forthwith become
null and void, other than the agreements set forth in Sections 2, 3 and 4
hereof.
4. Miscellaneous.
4.2 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. None of the parties hereto shall assign any rights or delegate any
duties hereunder without the prior written consent of the other party.
4.3 Governing Law. This Agreement shall be construed in accordance
with, and governed by, the internal laws of the Republic of Germany, without
giving effect to the principles of conflict of laws thereof.
4.4 Entire Agreement. This Agreement sets forth the entire
understanding and agreement of the parties with respect to this subject matter
and supersedes any and all prior understandings, negotiations or agreements
among the parties hereto, both written and oral, with respect to such subject
matter.
4.5 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, and all of which together shall
constitute a single agreement.
4.6 Severability. In the event that any one or more of the
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, in whole or in part, the
validity of the remaining provisions shall not be affected and the remaining
portion of any provision held to be invalid, illegal or unenforceable shall in
no way be affected, prejudiced or disturbed thereby.
4.7 No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person or entity other than the parties hereto
and their respective successors and permitted assigns.
4.8 Amendment and Modification. This Agreement may be amended or
modified only by written agreement executed by the parties hereto.
4.9 Waiver. At any time prior to the termination of this
Agreement, each of the parties hereto may (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto, or (iii) waive compliance
with any of the covenants, agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in a written instrument signed by the party
granting such waiver. Such waiver or failure to insist upon strict compliance
with such obligation, covenant, agreement or condition shall not operate as a
waiver of, or estoppel with respect to, any subsequent or future failure.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
SEMICONDUCTOR LASER INTERNATIONAL CORPORATION
/s/ Geoffrey T. Burnham
By: _________________________
Name: Geoffrey T. Burnham
Title: President, Chief Executive Officer
and Chairman of the Board
bmp MANAGEMENT CONSULTANTS GmbH
/s/ Oliver Borrmann
By:__________________________
Name: Oliver Borrmann
Title: CEO
<TABLE> <S> <C>
<ARTICLE> 5
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 313,846
<SECURITIES> 0
<RECEIVABLES> 712,093
<ALLOWANCES> 560,645
<INVENTORY> 323,416
<CURRENT-ASSETS> 964,832
<PP&E> 3,097,752
<DEPRECIATION> 457,963
<TOTAL-ASSETS> 3,756,211
<CURRENT-LIABILITIES> 2,170,968
<BONDS> 0
0
0
<COMMON> 121,508
<OTHER-SE> 611,907
<TOTAL-LIABILITY-AND-EQUITY> 3,756,211
<SALES> 298,545
<TOTAL-REVENUES> 298,545
<CGS> 663,886
<TOTAL-COSTS> 635,762
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,065
<INCOME-PRETAX> (1,000,798)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,000,798)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> (1,000,798)
<EPS-PRIMARY> (.09)
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