EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of September
30, 1997, by and among PALOMAR MEDICAL TECHNOLOGIES, INC., a corporation
organized under the laws of the State of Delaware (the "COMPANY"), with
headquarters located at 00 Xxxxxx Xxxx Xxxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000 and
each of the purchasers (the "PURCHASERS") set forth on the execution pages
hereof (the "EXECUTION PAGES").
WHEREAS:
A. The Company and each Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the "SECURITIES
ACT");
B. Each Purchaser desires to purchase, upon the terms and conditions
stated in this Agreement; (i) 6%, 7% and 8% Convertible Debenture Due September
30, 2002 of the Company (each a "DEBENTURE" and, collectively, the "DEBENTURES")
convertible into its common stock, par value $.01 per share, of the Company (the
"COMMON STOCK") and (ii) shares of Common Stock (the "COMMON SHARES"). The form
of the Debenture, including the terms upon which such Debenture are convertible
into shares of Common Stock, is attached hereto as Exhibit A. The shares of
Common Stock issuable upon conversion of the Debenture or otherwise pursuant to
the Debentures are referred to herein as the "CONVERSION SHARES". The
Debentures, the Common Shares and the Conversion Shares are collectively
referred to herein as the "SECURITIES."
C. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
in the form attached hereto as Exhibit B (the "REGISTRATION RIGHTS AGREEMENT"),
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated thereunder,
and applicable state securities laws;
NOW, THEREFORE, the Company and the Purchasers hereby agree as follows:
1. PURCHASE AND SALE OF DEBENTURES AND COMMON SHARES
a. Purchase of Debentures and Common Shares. On the Closing Date
(as defined below), subject to the satisfaction (or waiver) of the
conditions set forth in Sections 6 and 7 below, the Company shall issue
and sell to each Purchaser and each Purchaser severally agrees to
purchase from the Company, (i) a Debenture in such original principal
amount as is set forth on such Purchaser's signature page hereto and
(ii) a number of Common Shares equal to (A) fifteen percent (15%) of the
original principal amount of the Debenture referred to in clause (i)
divided by (B) the average of the closing bid prices of the Common Stock
on the Nasdaq SmallCap Market for the three (3) trading days commencing
on the first trading day after Closing Date. Each Investor represents
and agrees that neither it nor its affiliates has entered or will enter
into any transactions with respect to any securities of the Company
(other than the transactions contemplated by this Agreement) on the
Closing Date or the three trading days thereafter. The purchase price
(the "PURCHASE PRICE") for such Debenture and Common Shares to be issued
and sold to each Purchaser at such closing shall be as set forth on such
Purchaser's Execution Page hereto.
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b. Form of Payment. On the Closing Date, each Purchaser shall
pay the aggregate Purchase Price for the Debentures and Common Shares
being purchased by such Purchaser hereunder by wire transfer to the
Company, in accordance with the Company's written wiring instructions,
against delivery of the duly executed Debenture being purchased by such
Purchaser hereunder and the Company shall deliver such Debenture against
delivery of such aggregate Purchase Price. Within twenty (20) days after
the second trading day following the Closing Date, the Company shall
deliver to each Purchaser a duly executed certificate representing the
Common Shares purchased by such Purchaser.
c. Closing Date. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date
and time of the issuance and sale of the Debentures and Common Shares
pursuant to this Agreement (the "CLOSING DATE") shall be 12:00 noon
eastern time on September 30, 1997, or such other time as may be
mutually agreed upon by the Company and the Purchasers. The closing
shall occur at the offices of Xxxxx, Xxxx & Xxxxx LLP, Xxx Xxxx Xxxxxx
Xxxxxx, Xxxxxx, XX 00000.
2. PURCHASERS' REPRESENTATIONS AND WARRANTIES
Each Purchaser severally represents and warrants to the Company that:
a. Investment Purpose. Purchaser is purchasing the Debentures
and Common Shares for Purchaser's own account for investment only and
not with a present view towards the public sale or distribution thereof,
except pursuant to sales that are exempt from the registration
requirements of the Securities Act and/or sales registered under the
Securities Act. Purchaser understands that Purchaser must bear the
economic risk of this investment indefinitely, unless the Securities are
registered pursuant to the Securities Act and any applicable state
securities or blue sky laws or an exemption from such registration is
available, and that the Company has no present intention of registering
any such Securities other than as contemplated by the Registration
Rights Agreement. Notwithstanding anything in this Section 2(a) to the
contrary, by making the representations herein, the Purchaser does not
agree to hold the Securities for any minimum or other specific term and
reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption
under the Securities Act.
b. Accredited Investor Status. Purchaser is an "Accredited
Investor" as defined in Rule 501(a) promulgated under the Securities
Act.
c. Reliance on Exemptions. Purchaser understands that the
Debentures and Common Shares are being offered and sold to Purchaser in
reliance upon specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is
relying upon the truth and accuracy of, and Purchaser's compliance with,
the representations, warranties, agreements, acknowledgments and
understandings of Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of Purchaser to
acquire the Debentures and Common Shares.
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d. Information. Purchaser and its counsel or representative, if
any, have been furnished all materials relating to the business,
finances and operations of the Company and materials relating to the
offer and sale of the Debentures and Common Shares which have been
specifically requested by Purchaser or its counsel or representative.
Purchaser and its counsel, if any, have been afforded the opportunity to
ask questions of the Company and have received what Purchaser believes
to be complete and satisfactory answers to any such inquiries. Neither
such inquiries nor any other due diligence investigation conducted by
Purchaser or its counsel or any of its representatives shall modify,
amend or affect Purchaser's right to rely on the Company's
representations and warranties contained in Section 3 below. Purchaser
understands that Purchaser's investment in the Securities involves a
high degree of risk.
e. Governmental Review. Purchaser understands that no United
States federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of the
Securities.
f. Transfer or Resale. Purchaser understands that (i) except as
provided in the Registration Rights Agreement, the Securities have not
been and are not being registered under the Securities Act or any state
securities laws, and may not be transferred unless (a) subsequently
registered thereunder, or (b) Purchaser shall have delivered to the
Company an opinion of counsel (which opinion shall be in form, substance
and scope customary for opinions of counsel in comparable transactions)
to the effect that the Securities to be sold or transferred may be sold
or transferred pursuant to an exemption from such registration,
including without limitation Rule 144 promulgated under the Securities
Act (or a successor rule) ("RULE 144"), or (c) transferred without
consideration to an affiliate of Purchaser; (ii) any sale of such
Securities made in reliance on Rule 144 may be made only in accordance
with the terms of said Rule and further, if said Rule is not applicable,
any resale of such Securities under circumstances in which the seller
(or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the
rules and regulations of the Securities and Exchange Commission (the
"SEC") thereunder; and (iii) neither the Company nor any other person is
under any obligation to register such Securities under the Securities
Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder (in each case, other than
pursuant to the Registration Rights Agreement).
g. Legends. Purchaser understands that the Debentures and Common
Shares and, until such time as the Conversion Shares have been
registered under the Securities Act as contemplated by the Registration
Rights Agreement or otherwise may be sold by Purchaser pursuant to Rule
144 without any restriction as to the public resale thereof, the
certificates for the Conversion Shares may bear a restrictive legend in
substantially the following form (and a stop-transfer order may be
placed against transfer of the certificates for such Securities):
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The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
securities have been acquired for investment and may not be
sold, transferred or assigned in the absence of an effective
registration statement for the securities under said Act, or an
opinion of counsel, in form, substance and scope customary for
opinions of counsel in comparable transactions, that
registration is not required under said Act or unless the
Company is provided with reasonable assurances that the
securities were sold pursuant to Rule 144 under said Act.
The legend set forth above shall be removed and the Company
shall issue a certificate without such legend upon conversion of the
Debentures to the holder of any Security upon which it is stamped, if
(a) the resale of such Security is registered under the Securities Act,
or (b) such holder provides the Company with an opinion of counsel, in
form, substance and scope customary for opinions of counsel in
comparable transactions, to the effect that a public sale or transfer of
such Security may be made without registration under the Securities Act
or (c) such holder provides the Company with reasonable assurances that
such Security has been sold pursuant to Rule 144 or can be sold pursuant
to Rule 144 without any restriction as to the number of Securities
acquired as of a particular date that can then be immediately sold.
Purchaser agrees to sell all Securities, including those represented by
a certificate(s) from which the legend has been removed, pursuant to an
effective registration statement and to deliver a prospectus in
connection with such sale (if and to the extent such delivery is
required) or in compliance with an exemption from the registration
requirements of the Securities Act. In the event the above legend is
removed from any Security and thereafter the effectiveness of a
registration statement covering such Security is suspended or the
Company determines that a supplement or amendment thereto is required by
applicable securities laws, then upon reasonable advance notice to
Purchaser the Company may require that the above legend be placed on any
such Security that cannot then be sold pursuant to an effective
registration statement or Rule 144 without any restriction as to the
number of Securities acquired as of a particular date that can then be
immediately sold, which legend shall be removed when such Security has
been sold pursuant to Rule 144 or may be sold pursuant to an effective
registration statement or Rule 144 without any restriction as to the
number of Securities acquired as of a particular date that can then be
immediately sold.
h. Authorization; Enforcement. This Agreement and the
Registration Rights Agreement have been duly and validly authorized,
executed and delivered on behalf of Purchaser and are valid and binding
agreements of Purchaser enforceable in accordance with their respective
terms.
i. Location of Purchaser. Each of the Purchasers has advised the
Company in writing with respect to the jurisdictions wherein the
investment decision regarding Purchaser's acquisition of the Debentures
and the Common Shares has been made.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Purchaser that:
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a. Organization and Qualification. The Company and each of its
subsidiaries is a corporation duly organized and existing in good
standing under the laws of the jurisdiction in which it is incorporated,
and has the requisite corporate power to own its properties and to carry
on its business as now being conducted. The Company and each of its
subsidiaries is duly qualified as a foreign corporation to do business
and is in good standing in every jurisdiction where the failure so to
qualify would have a Material Adverse Effect. "MATERIAL ADVERSE EFFECT"
means any material adverse effect on the operations, properties,
condition (financial or otherwise) or prospects of the Company and its
subsidiaries, taken as a whole on a consolidated basis or on the ability
of the Company to perform its obligations in connection with the
transactions contemplated hereby on a timely basis. The Company does not
have any significant subsidiaries (as defined in Rule 1-02 of Regulation
S-X under the Securities Act) other than those subsidiaries set forth on
Schedule 3(a).
b. Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform this Agreement
and the Registration Rights Agreement, to issue and sell the Debentures
and Common Shares in accordance with the terms hereof, and to issue the
Conversion Shares upon conversion of the Debentures in accordance with
their terms; (ii) the execution, delivery and performance of this
Agreement, the Registration Rights Agreement and the Debentures by the
Company and the consummation by it of the transactions contemplated
hereby and thereby (including without limitation the issuance of the
Debentures and Common Shares and the issuance and reservation for
issuance of the Conversion Shares) have been duly authorized by the
Company's Board of Directors and no further consent or authorization of
the Company, its Board or Directors, or its stockholders is required
(under Rules promulgated by the National Association of Securities
Dealers or otherwise); (iii) this Agreement has been duly executed and
delivered by the Company; and (iv) this Agreement constitutes, and, upon
execution and delivery by the Company of the Registration Rights
Agreement and the Debentures, such agreement and such instrument will
constitute, valid and binding obligations of the Company enforceable
against the Company in accordance with their respective terms.
c. Capitalization. The capitalization of the Company as of the
date hereof, including the authorized capital stock, the number of
shares issued and outstanding, the number of shares reserved for
issuance pursuant to the Company's stock option plans, the number of
shares reserved for issuance pursuant to securities (other than the
Debentures) exercisable for, or convertible into or exchangeable for any
shares of Common Stock and the number of shares to be reserved for
issuance upon conversion of the Debentures is set forth on Schedule
3(c). All of such outstanding shares of capital stock have been, or upon
issuance will be, validly issued, fully paid and nonassessable. No
shares of capital stock of the Company (including the Debentures, the
Common Shares and the Conversion Shares) are subject to preemptive
rights or any other similar rights of the stockholders of the Company or
any liens or encumbrances. Except as disclosed in Schedule 3(c) or as
contemplated herein, as of the date of this Agreement, (i) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or
rights convertible into or exercisable or exchangeable for, any shares
of capital stock of the Company or any of its subsidiaries, or
arrangements by which the Company or any of its subsidiaries is or may
become bound to issue additional shares of capital stock of the Company
or any of its subsidiaries, and (ii) there are no agreements or
arrangements under which the Company or any of its subsidiaries is
obligated to register the sale of any of the Company's securities under
the Securities Act (except the Registration Rights Agreement). The
Company has made available to each Purchaser true and correct copies of
the Company's Certificate of Incorporation as in effect on the date
hereof ("CERTIFICATE OF INCORPORATION"), the Company's By-laws as in
effect on the date hereof (the "BY-LAWS"), and all other instruments and
agreements governing securities convertible into or exercisable or
exchangeable for Common Stock of the Company. The Company shall provide
each Purchaser with a written update of this representation signed by
the Company's Chief Executive Officer or Chief Financial Officer on
behalf of the Company as of the Closing Date.
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d. Issuance of Securities. The Debentures are duly authorized
and, upon issuance in accordance with the terms of this Agreement, will
be validly issued and free from all taxes, liens, claims and
encumbrances and will not be subject to preemptive rights or other
similar rights of stockholders of the Company. The Common Shares are
duly authorized and, upon issuance in accordance with the terms of this
Agreement, will be validly issued, fully paid and non-assessable, and
free from all taxes, liens, claims and encumbrances and will not be
subject to preemptive rights or other similar rights of stockholders of
the Company. The Conversion Shares are duly authorized and reserved for
issuance, and, upon conversion of the Debentures in accordance with the
terms thereof, will be validly issued, fully paid and non-assessable,
and free from all taxes, liens, claims and encumbrances and will not be
subject to preemptive rights or other similar rights of stockholders of
the Company.
e. No Conflicts. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement and the Debentures by the
Company, the performance by the Company of its obligations hereunder and
thereunder, and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the
issuance and reservation for issuance, as applicable, of the Debentures
and Common Shares and the Conversion Shares) will not (i) result in a
violation of the Certificate of Incorporation or By-laws or (ii)
conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any of
its subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including U.S. federal and state
securities laws and regulations) applicable to the Company or any of its
subsidiaries or by which any property or asset of the Company or any of
its subsidiaries is bound or affected (except for such conflicts,
defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect). Neither
the Company nor any of its subsidiaries is in violation of its
Certificate of Incorporation or other organizational documents and
neither the Company nor any of its subsidiaries is in default (and no
event has occurred which, with notice or lapse of time or both, would
put the Company or any of its subsidiaries in default) under, nor has
there occurred any event giving others (with notice or lapse of time or
both) any rights of termination, amendment, acceleration or cancellation
of, any agreement, indenture or instrument to which the Company or any
of its subsidiaries is a party, except for possible defaults or rights
as would not, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect. The businesses of the
Company and its subsidiaries are not being conducted, and shall not be
conducted so long as a Purchaser owns any of the Securities, in
violation of any law, ordinance or regulation of any governmental
entity, except for possible violations the sanctions for which either
singly or in the aggregate would not have or reasonably be expected to
result in a Material Adverse Effect. Except as specifically contemplated
by this Agreement and except for the filing of a Form D with the
Securities and Exchange Commission, the filing of the registration
statement contemplated by the Registration Rights Agreement under the
Securities Act, any filings required by applicable state securities laws
and the filing of an application with NASDAQ (as defined below) to list
or approve for quotation the Conversion Shares and the Common Shares,
the Company is not required to obtain any consent, authorization or
order of, or make any filing or registration with, any court or
governmental agency or any regulatory or self regulatory agency in order
for it to execute, deliver or perform any of its obligations under this
Agreement, the Registration Rights Agreement or the Debentures, in each
case in accordance with the terms hereof or thereof. The Company is not
in violation of the listing requirements of the NASDAQ SmallCap Market
("NASDAQ") and does not reasonably anticipate (nor has it received any
notices to such effect from NASDAQ) that the Common Stock will be
delisted by NASDAQ in the foreseeable future.
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f. SEC Documents, Financial Statements. Since December 31, 1993,
the Company has timely filed all reports, schedules, forms, statements
and other documents required to be filed by it with the SEC pursuant to
the reporting requirements of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT") (all of the foregoing, filed prior to the
date hereof and after December 31, 1993, and all exhibits included
therein and financial statements and schedules thereto and documents
(other than exhibits) incorporated by reference therein together with
any registration statements or other documents filed by the Company
pursuant to the Securities Act prior to the date hereof and those
certain news releases attached hereto as Schedule 3(f), being
hereinafter referred to herein as the "SEC DOCUMENTS"). The Company has
made available to each Purchaser true and complete copies of the SEC
Documents, except for such exhibits, schedules and incorporated
documents. As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Exchange Act or the
Securities Act, as the case may be, and the rules and regulations of the
SEC promulgated thereunder applicable to the SEC Documents, and none of
the SEC Documents, at the time they were filed with the SEC, contained
any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading. As of their respective dates, the financial
statements of the Company included in the SEC Documents complied in all
material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such
financial statements have been prepared in accordance with U.S.
generally accepted accounting principles, consistently applied, during
the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of
unaudited interim statements, to the extent they may include footnotes
or may not be condensed or summary statements) and fairly present in all
material respects the consolidated financial position of the Company and
its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). Except as set forth in the financial
statements of the Company included in the SEC Documents, the Company has
no liabilities, contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business subsequent to the date of
the most recent financial statements included in the SEC Documents and
(ii) obligations under contracts and commitments incurred in the
ordinary course of business and not required under generally accepted
accounting principles to be reflected in such financial statements,
which, individually or in the aggregate, are not material to the
financial condition or operating results of the Company.
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g. Absence of Litigation. Except as disclosed in the SEC
Documents or in Schedule 3(g), there is no action, suit, proceeding,
inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to
the knowledge of the Company or any of its subsidiaries, threatened
against or affecting the Company, any of its subsidiaries, or any of
their respective directors or officers in their capacities as such,
wherein an unfavorable decision, ruling or finding would or could
reasonably be expected to result in a Material Adverse Effect.
h. Disclosure. All information relating to or concerning the
Company set forth in this Agreement or provided to the Purchasers
pursuant to Section 2(d) hereof and otherwise in connection with the
transactions contemplated hereby is true and correct in all material
respects and the Company has not omitted to state any material fact
necessary in order to make the statements made herein or therein, in
light of the circumstances under which they were made, not misleading.
No event or circumstance has occurred or exists with respect to the
Company or its subsidiaries or their respective businesses, properties,
prospects, operations or financial conditions, which, under applicable
law, rule or regulation, requires public disclosure or announcement by
the Company but which has not been so publicly announced or disclosed
(assuming for this purpose that the Company's Exchange Act Reports are
being incorporated into an effective registration statement filed by the
Company under the Securities Act).
i. Current Public Information. The Company is currently eligible
to register the resale of its Common Stock on a registration statement
on Form S-3 under the Securities Act.
j. No General Solicitation. Neither the Company nor any person
acting for the Company has conducted any "GENERAL SOLICITATION," as such
term is defined in Regulation D, with respect to any of the Securities
being offered hereby.
k. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly
or indirectly made any offers or sales of any security or solicited any
offers to buy any security under circumstances that would require
registration of the Securities being offered hereby under the Securities
Act.
l. No Brokers. The Company has taken no action which would give
rise to any claim by any person for brokerage commissions, finder's fees
or similar payments by any Purchaser relating to this Agreement or the
transactions contemplated hereby, except for dealings with Xxxxxxx
Arnouse whose commissions and fees will be paid for by the Company.
m. Acknowledgment of Dilution. The number of Conversion Shares
issuable upon conversion of the Debentures may increase substantially in
certain circumstances, including the circumstance wherein the trading
price of the Common Stock declines. The Company acknowledges that its
obligation to issue Conversion Shares upon conversion of the Debentures
in accordance with their terms is absolute and unconditional, regardless
of the dilution that such issuance may have on the ownership interests
of other stockholders.
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n. Intellectual Property. Each of the Company and its
subsidiaries owns or possesses adequate and enforceable rights to use
all patents, patent applications, trademarks, trademark applications,
trade names, service marks, copyrights, copyright applications,
licenses, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures) and other similar rights and proprietary knowledge
(collectively, "INTANGIBLES") necessary for the conduct of its business
as now being conducted and as described in the Company's Annual Report
on Form 10-KSB for the fiscal year ended December 31, 1996, as amended.
Neither the Company nor any subsidiary of the Company infringes or is in
conflict with any right of any other person with respect to any
Intangibles which, individually or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, would have or could
reasonably be expected to result in a Material Adverse Effect.
o. Foreign Corrupt Practices. Neither the Company, nor any of
its subsidiaries, nor any director, officer, agent, employee or other
person acting on behalf of the Company or any subsidiary has, in the
course of acting for, or on behalf of, the Company, used any corporate
funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; made any direct or
indirect unlawful payment to any foreign or domestic government official
or employee from corporate funds; violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977; or made any
bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.
4. COVENANTS.
a. Best Efforts. The parties shall use their best efforts timely
to satisfy each of the conditions described in Section 6 and 7 of this
Agreement.
b. Blue Sky Laws. The Company shall take such action as the
Company or the Purchasers shall reasonably determine is necessary to
qualify the Securities for sale to the Purchasers pursuant to this
Agreement under applicable securities or "blue sky" laws of the states
of the United States or obtain exemption therefrom, and shall provide
evidence of any such action so taken to the Purchasers.
c. Reporting Status. So long as any Purchaser beneficially owns
any of the Securities, the Company shall timely file all reports
required to be filed with the SEC pursuant to the Exchange Act.
d. Use of Proceeds. The Company shall use the proceeds from the
sale of the Debentures and Common Shares for internal working capital
purposes, mergers and acquisitions, investments and general corporate
purposes.
e. Financial Information. Upon the written request of any
Purchaser holding any Securities, the Company shall send the following
reports to such Purchaser: a copy of its Annual Report on Form 10-KSB,
its Quarterly Reports on Form 10-QSB, any proxy statements, any Current
Reports on Form 8-K and any press releases issued by the Company or any
of its subsidiaries.
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f. Reservation of Shares. The Company shall at all times have
authorized and reserved for the purpose of issuance a sufficient number
of shares of Common Stock to provide for the full conversion of the
outstanding Debentures and issuance of the Conversion Shares in
connection therewith and as otherwise required by the Debentures.
g. Listing. Promptly (and in no event more than ten (10) days)
following the Closing Date, the Company shall secure the listing or
approval for quotation of all of the Common Shares and 3,500,000 shares
of Common Stock issuable upon conversion of the Debentures upon each
national securities exchange or automated quotation system, if any, upon
which shares of Common Stock are then listed (subject to official notice
of issuance) and thereafter shall maintain, so long as any other shares
of Common Stock shall be so listed, such listing of all Common Shares
and all Conversion Shares from time to time issuable upon conversion of
the Debentures. The Company shall also file such additional listing
applications as may be necessary to cover the issuance of all of the
Common Shares and the Conversion Shares as provided in the immediately
preceding sentence. The Company will take all action necessary to
continue the listing and trading of its Common Stock on the NASDAQ, the
NASDAQ National Market ("NNM"), the New York Stock Exchange ("NYSE") or
the American Stock Exchange ("AMEX") and will comply in all respects
with the Company's reporting, filing and other obligations under the
bylaws or rules of the National Association of Securities Dealers
("NASD") and such exchanges, as applicable.
h. Corporate Existence. So long as a Purchaser beneficially owns
any Debentures, the Company shall maintain its corporate existence,
except in the event of a merger, consolidation or sale of all or
substantially all of the Company's assets, as long as the surviving or
successor entity in such transaction (i) assumes the Company's
obligations hereunder and under the agreements and instruments entered
into in connection herewith regardless of whether or not the Company
would have had a sufficient number of shares of Common Stock authorized
and available for issuance in order to effect the conversion of all
Debentures outstanding as of the date of such transaction and (ii) is a
publicly traded corporation whose common stock is listed for trading on
the NASDAQ, NNM, NYSE or AMEX.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall instruct its transfer agent to issue certificates,
registered in the name of each Purchaser or its nominee, for the Conversion
Shares in such amounts as specified from time to time by such Purchaser to the
Company upon conversion of the Debentures. Prior to registration of the
Conversion Shares under the Securities Act or resale of such Securities under
Rule 144, all such certificates shall bear the restrictive legend specified in
Section 2(g) of this Agreement. The Company warrants that no instruction other
than such instructions referred to in this Section 5, and stop transfer
instructions to give effect to Section 2(f) hereof in the case of the Conversion
Shares prior to registration of the Conversion Shares under the Securities Act,
will be given by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement, the Registration Rights Agreement and
10
the Debentures. Nothing in this Section shall affect in any way each Purchaser's
obligations and agreement set forth in Section 2(f) hereof not to resell the
Securities except pursuant to an effective registration statement (and to
deliver a prospectus in connection with such a sale) or in compliance with an
exemption from the registration requirements of applicable securities law. If a
Purchaser provides the Company with an opinion of counsel, which opinion of
counsel shall be in form, substance and scope customary for opinions of counsel
in comparable transactions, to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from
registration, the Company shall permit the transfer, and, in the case of the
Conversion Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by a Purchaser.
The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to a Purchaser by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that a Purchaser shall be entitled,
in addition to all other available remedies, to an injunction restraining any
breach and requiring immediate issuance and transfer, without the necessity of
showing economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Debentures
and the Common Shares to a Purchaser at the closing is subject to the
satisfaction, at or before the Closing Date, of each of the following conditions
thereto, provided that these conditions are for the Company's sole benefit and
may be waived by the Company at any time in its sole discretion.
(a) The applicable Purchaser shall have executed the Execution
Page to this Agreement and the Registration Rights Agreement, and
delivered the same to the Company.
(b) The applicable Purchaser shall have delivered the Purchase
Price for the Debentures and the Common Shares purchased in accordance
with Section 1(b) above and the aggregate purchase price for the
Debentures and Common Shares purchased by all Purchasers hereunder shall
not be less than $5,000,000.
(c) The representations and warranties of the applicable
Purchaser shall be true and correct as of the date when made and as of
the Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date), and the applicable
Purchaser shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the applicable
Purchaser at or prior to the Closing Date.
(d) No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any
of the transactions contemplated by this Agreement.
11
7. CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE.
The obligation of each Purchaser hereunder to purchase the Debentures
and the Common Shares to be purchased by it on the Closing Date is subject to
the satisfaction of each of the following conditions, provided that these
conditions are for such Purchaser's sole benefit and may be waived by such
Purchaser at any time in the Purchaser's sole discretion:
(a) The Company shall have executed the signature page to this
Agreement and the Registration Rights Agreement, and delivered the same
to such Purchaser.
(b) The Company shall have delivered to such Purchaser a duly
executed Debenture in the principal amount being purchased by such
Purchaser in accordance with Section 1(b) above.
(c) The aggregate purchase price for the Debentures and Common
Shares purchased by all Purchasers hereunder shall be $5,000,000.
(d) The Common Stock shall be authorized for quotation on NASDAQ
and trading in the Common Stock (or NASDAQ generally) shall not have
been suspended by the SEC or NASD.
(e) The representations and warranties of the Company shall be
true and correct as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that
speak as of a specific date) and the Company shall have performed,
satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Company at or prior to the Closing
date. Such Purchaser shall have received a certificate, executed by the
chief executive officer of the Company, dated as of the Closing Date to
the foregoing effect and as to such other matters as may be reasonably
requested by such Purchaser.
(f) No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any
of the transactions contemplated by this Agreement.
(g) Such Purchaser shall have received the officer's certificate
described in Section 3(c) above, dated as of the Closing Date.
(h) Such Purchaser shall have received an opinion of the
Company's counsel, dated as of the Closing Date, in form, scope and
substance reasonably satisfactory to the Purchaser and in substantially
the form of Exhibit C attached hereto.
(i) The Company shall have executed, and shall have delivered
evidence reasonably satisfactory to the Purchasers that the Company's
transfer agent has agreed to act in accordance with the irrevocable
instructions in the form attached hereto as Exhibit D; PROVIDED,
HOWEVER, if such evidence is not delivered on or prior to the Closing
Date, the Company shall use its best efforts to deliver such evidence as
soon as practicable thereafter.
12
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware
applicable to contracts made and to be performed in the State of
Delaware. The Company irrevocably consents to the jurisdiction of the
United States federal courts located in the County of Kent in the State
of Delaware in any suit or proceeding based on or arising under this
Agreement and irrevocably agrees that all claims in respect of such suit
or proceeding may be determined in such courts. The Company irrevocably
waives the defense of an inconvenient forum to the maintenance of such
suit or proceeding. The Company further agrees that service of process
upon the Company mailed by first class mail shall be deemed in every
respect effective service of process upon the Company in any suit or
proceeding arising hereunder. Nothing herein shall affect a Purchaser's
right to serve process in any other manner permitted by law. The Company
agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on such judgment or in any other lawful manner.
b. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed
by each party and delivered to the other party.
c. Headings. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation
of, this Agreement.
d. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this
Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the
instruments referenced herein contain the entire understanding of the
parties with respect to the matters covered herein and therein and,
except as specifically set forth herein or therein, neither the Company
nor the Purchasers make any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement
may be waived other than by an instrument in writing signed by the party
to be charged with enforcement and no provision of this Agreement may be
amended other than by an instrument in writing signed by the Company and
the Purchasers.
f. Notices. Any notices required or permitted to be given under
the terms of this Agreement shall be sent by certified or registered
mail (return receipt requested) or delivered personally or by courier,
overnight delivery service or by confirmed telecopy, and shall be
effective five days after being placed in the mail, if mailed, or upon
receipt or refusal of receipt, if delivered personally or by courier,
overnight delivery service or confirmed telecopy, in each case addressed
to a party. The addresses for such communications shall be:
If to the Company:
13
Palomar Medical Technologies, Inc.
00 Xxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxx Xxxxxx, Director of Finance
with a copy to each of the Company's General Counsel at the same address
and to:
Xxxxx, Xxxx & Xxxxx LLP
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxx X. Xxxxxx, Esq.
If to any Purchaser, to such address set forth under such Purchaser's
name on the signature page hereto executed by such Purchaser.
Each party shall provide notice to the other parties of any change in
address.
g. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and
assigns. Neither the Company nor any Purchaser shall assign this
Agreement or any rights or obligations hereunder without the prior
written consent of the other. This provision shall not limit a
Purchaser's right to transfer the Securities pursuant to the terms of
the Debentures, the Registration Rights Agreement and this Agreement or
to assign such Purchaser's rights hereunder to any such transferee, nor
shall this provision limit the right of a Purchaser to transfer or
assign its rights under such agreements and instruments to an affiliate
(provided that each Purchaser makes no more than two (2) such transfers)
or a managed account, provided that the representations and warranties
set forth in Section 2 are true and correct with respect to such
affiliate or managed account.
h. Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof
be enforced by, any other person.
i. Survival. The representations and warranties of the Company
and the agreements and covenants set forth in Sections 3, 4, 5 and 8
shall survive the closing hereunder and any conversion of the
Debentures, notwithstanding any due diligence investigation conducted by
or on behalf of any Purchasers. The Company agrees to indemnify and hold
harmless each Purchaser and each of such Purchaser's officers,
directors, employees, partners, agents and affiliates for loss or damage
arising as a result of or related to any breach or alleged breach by the
Company of any of its representations, warranties or covenants set forth
herein, including advancement of expenses as they are incurred.
j. Publicity. The Company and each Purchaser shall have the
right to approve before issuance any press releases, SEC, NASDAQ or NASD
filings, or any other public statements with respect to the transactions
contemplated hereby; PROVIDED, HOWEVER, that the Company shall be
entitled, without the prior approval of the Purchasers, to describe the
transactions contemplated hereby in any Form 10-Q or Form 10-K filed by
it.
14
k. Further Assurances. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments
and documents, as the other party may reasonably request in order to
carry out the intent and accomplish the purposes of this Agreement and
the consummation of the transactions contemplated hereby.
l. Termination. In the event that the closing shall not have
occurred on or before September 30, 1997, unless the parties agree
otherwise, this Agreement shall terminate at the close of business on
such date.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
15
IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Agreement to be duly executed as of the date first above written.
PURCHASER:
Name: JNC OPPORTUNITY FUND LTD..
OLYMPIA CAPITAL (CAYMAN) LTD.
c/o Olympia Capital (Bermuda) Ltd.
Xxxxxxxx House
00 Xxxx Xxxxxx
Xxxxxxxx XX00, Xxxxxxx
Fax: 000-000-0000
Attn: Xxxxxx Xxxxx
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
AGGREGATE SUBSCRIPTION AMOUNT
Principal Amount of Debenture:
----------
Purchase Price: $
----------
PALOMAR MEDICAL TECHNOLOGIES, INC.
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Chief Executive Officer
and President
16
IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Agreement to be duly executed as of the date first above written.
PURCHASER:
Name: DIVERSIFIED STRATEGIES FUND, L.P.
By: /s/ Xxxx X. Xxxx
---------------------------
Name: Xxxx X. Xxxx
-------------------------
Title:
------------------------
ADDRESS: Diversified Strategies Fund, L.P.
c/o Encore Capital Management, L.L.C.
00000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Facsimle No.: 000-000-0000
Attn: Xxxx X. Xxxx
with a copy to:
Bobinson Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxxxx and
Xxxx X. Xxxxx
AGGREGATE SUBSCRIPTION AMOUNT
Principal Amount of Debenture: $1,500,000
----------
Purchase Price: $1,500,000
----------
PALOMAR MEDICAL TECHNOLOGIES, INC.
By:
-----------------------------
Name:
-----------------------------
Title:
----------------------------
IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Agreement to be duly executed as of the date first above written.
PURCHASER:
Name: SOUTHBROOK INTERNATIONAL INVESTMENTS, LTD.
By: /s/ Xxxxxxx X. Xxxxxxxxx
--------------------------
Name: Xxxxxxx X. Xxxxxxxxx
--------------------------
Title: Attorney in Fact
--------------------------
ADDRESS: Southbrook INternational Investments, Ltd.
c/o Trippoak Advisors, Inc.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Fax: 000-000-0000
Attn: Xxxxxx X. Xxxxxx
with a copy to:
Bobinson Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxxxx and
Xxxx X. Xxxxx
AGGREGATE SUBSCRIPTION AMOUNT
Principal Amount of Debenture: $2,000,000
Purchase Price: $2,000,000
PALOMAR MEDICAL TECHNOLOGIES, INC.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Agreement to be duly executed as of the date first above written.
PURCHASER:
Name: JNC OPPORTUNITY FUND, LTD.
By: /s/ Xxxxxx X. Xxxxx
--------------------------
Name: Xxxxxx X. Xxxxx
--------------------------
Title: Director
--------------------------
ADDRESS: JNC Opportunity Fund, Ltd.
Olympia Capital (Cayman) Ltd.
c/o Olympia Capital (Bermuda) Ltd.
Xxxxxxxx Xxxxx
00 Xxxx Xxxxxx
Xxxxxxxx XX00 XXXXXXX
Fax: (000)000-0000
Attn: Xxxxxx Xxxxx
with a copy to:
Bobinson Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxxxx and
Xxxx X. Xxxxx
with a copy to:
Encore Capital Management, L.L.C.
00000 Xxxxxxx Xxxxxx Xxxxx, Xxx. 000
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxx X. Xxxx
AGGREGATE SUBSCRIPTION AMOUNT
Principal Amount of Debenture: $3,500,000
Purchase Price: $3,500,000
PALOMAR MEDICAL TECHNOLOGIES, INC.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
EXECUTION COPY
EXHIBIT A
TO
SECURITIES PURCHASE
AGREEMENT
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (AND ANY SECURITIES ISSUED OR
ISSUABLE IN RESPECT HEREOF, BY CONVERSION OR OTHERWISE) HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES HAVE BEEN ACQUIRED
FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN
OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF
COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED UNDER SAID
ACT OR UNLESS THE CORPORATION IS PROVIDED WITH REASONABLE ASSURANCES THAT THE
SECURITIES WERE SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
NO. $
------ -----------
6%, 7% AND 8% CONVERTIBLE DEBENTURE DUE SEPTEMBER 30, 2002
THIS CONVERTIBLE DEBENTURE (this "DEBENTURE") is one of a duly
authorized issue of Debentures of Palomar Medical Technologies, Inc. a
corporation duly organized and existing under the laws of the State of Delaware
and having its principal address at 00 Xxxxxx Xxxx Xxxxx, Xxxxxxx, Xxxxxxxxxxxxx
00000 (the "CORPORATION"), designated as its 6%, 7% and 8% Convertible
Debentures Due September 30, 2002 in an aggregate principal amount not exceeding
Seven Million U.S. Dollars (U.S. $7,000,000) (the "DEBENTURES").
FOR VALUE RECEIVED, the Corporation promises to pay to
______________________, at the address specified in the Debenture Register (as
hereinafter defined), the holder hereof, or its order (the "Holder"), the
principal sum of ______________________ United States Dollars (U.S. $_______),
or such lesser principal sum as is then outstanding hereunder, on September 30,
2002 (the "MATURITY DATE") and to pay interest on the principal sum outstanding
under this Debenture (i) at the rate of 6% per annum during the period beginning
on the Closing Date (as hereinafter defined) and ending on the date which is one
hundred seventy nine (179) days after the Closing Date, (ii) at the rate of 7%
per annum during the period beginning on the date which is one hundred eighty
(180) days after the Closing Date and ending on the date which is two hundred
sixty nine (269) days after the Closing Date and (iii) at the rate of 8% per
annum thereafter. Interest shall be due and payable in arrears on the Maturity
Date or, if earlier, on the Conversion Date (as hereinafter defined) and shall
be calculated based on a 360 day year of twelve equal months. Accrual of
interest shall commence
1
on the date hereof and shall continue daily until payment in full of the
principal sum has been made. The interest so payable will be paid to the person
in whose name this Debenture is registered on the records of the Corporation
regarding registration and transfers of the Debentures (the "DEBENTURE
REGISTER"); PROVIDED, HOWEVER, that the Corporation's obligation to a transferee
of this Debenture arises only if the transfer, sale or other disposition is made
in accordance with the terms and conditions of the Securities Purchase
Agreement, dated as of September 30, 1997, between the Corporation and the
original Holder (as amended from time to time and in effect, the "SECURITIES
PURCHASE AGREEMENT"). The Corporation shall be entitled to withhold from all
payments of interest on this Debenture any amounts required to be withheld under
the applicable provisions of the United States income tax laws as evidenced by
an opinion of counsel of the Corporation to the reasonable satisfaction of the
Holder. The principal of and interest on this Debenture are payable only in
United States Dollars at the address last appearing on the Debenture Register of
the Corporation as designated in writing by the Holder hereof from time to time.
Subject to the conversion hereof, in whole or in part, on or before the Maturity
Date pursuant to Article II hereof, the Corporation will pay the principal of
and all accrued and unpaid interest due upon this Debenture on the Maturity
Date, to the Holder of this Debenture as of the tenth (10th) day prior to the
Maturity Date, and addressed to such Holder at the last address appearing on the
Debenture Register.
This Debenture is subject to the following additional provisions:
I. CERTAIN DEFINITIONS
For purposes of this Debenture, the following terms shall have the
following meanings:
A. "CLOSING BID PRICE" means, for any security as of any date, the
closing bid price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg
Financial Markets or a comparable reporting service of national reputation
selected by the Corporation and reasonably acceptable to holders of a majority
of the then outstanding Debentures if Bloomberg Financial Markets is not then
reporting closing bid prices of such security (collectively, "BLOOMBERG"), or if
the foregoing does not apply, the last reported sale price of such security in
the over-the-counter market on the electronic bulletin board for such security
as reported by Bloomberg, or, if no sale price is reported for such security by
Bloomberg, the average of the bid prices of any market makers chosen by the
Holder for such security as reported in the "pink sheets" by the National
Quotation Bureau, Inc. If the Closing Bid Price cannot be calculated for such
security on such date on any of the foregoing bases, the Closing Bid Price of
such security on such date shall be the fair market value as reasonably
determined by an investment banking firm selected by the Corporation and
reasonably acceptable to holders of a majority of the then outstanding
Debentures, with the costs of such appraisal to be borne by the Corporation.
B. "CLOSING DATE" means the Closing Date under that certain Securities
Purchase Agreement dated September 30, 1997 by and among the Corporation and the
initial purchasers of the Debentures (the "SECURITIES PURCHASE AGREEMENT").
2
C. "COMMON STOCK" shall mean the Common Stock, par value $.01 per
share, of the Corporation.
D. "CONVERSION DATE" means, for any Optional Conversion, the date
specified in the notice of optional conversion in the form attached hereto (the
"NOTICE OF OPTIONAL CONVERSION"), so long as the copy of the Notice of Optional
Conversion is faxed (or delivered by other means resulting in notice) to the
Corporation before Midnight, New York City time, on the Conversion Date
indicated in the Notice of Optional Conversion. If the Notice of Optional
Conversion is not so delivered before such time, then the Conversion Date shall
be the date the Holder delivers the Notice of Optional Conversion to the
Corporation. In the case of any Mandatory Conversion, the "Conversion Date"
shall mean the date specified in a written notice (the "NOTICE OF MANDATORY
CONVERSION") delivered by the Corporation to the Holder, so long as the Notice
of Mandatory Conversion is faxed (or delivered by other means resulting in
notice) to the Holder before Midnight, New York City time, not later than the
20th trading day preceding such specified date. If the Notice of Mandatory
Conversion is not so delivered before such time, then the Conversion Date shall
be the 20th trading day following the date the Corporation delivers the Notice
of Mandatory Conversion to the Holder. As used herein, a "TRADING DAY" shall
mean any day on which the Nasdaq Stock Market (or the national securities
exchange or automated quotation system on which the Common Stock is then traded)
is open for business, whether or not shares of Common Stock are traded on such
day.
E. "CONVERSION PRICE" means, as of any date of determination, the
average of the Closing Bid Prices for the Common Stock for ten (10) consecutive
trading days ending on the trading day immediately preceding such date of
determination (subject to equitable adjustments for any stock splits, stock
dividends, reclassifications or similar events during such ten (10) trading day
period), and shall be subject to adjustment as provided herein.
F. "OUTSTANDING AMOUNT " means, as of any date, the principal amount
then outstanding under this Debenture and all accrued but unpaid interest
thereon.
II. CONVERSION
A. CONVERSION AT THE OPTION OF THE HOLDER; CONVERSION AT THE OPTION OF
THE CORPORATION. Subject to the limitations on conversions contained in
Subparagraphs (i) and (ii) of Paragraph C of this Article II and in subparagraph
(i) of Article V.C, all or any portion of the Outstanding Amount may, at any
time and from time to time from and after the Closing Date, be converted at the
option of the Holder (an "OPTIONAL CONVERSION") into a number of fully paid and
nonassessable shares of Common Stock equal to the Outstanding Amount divided by
the Conversion Price then in effect. Subject to the limitations on conversions
contained in Subparagraph (iii) of Paragraph C of this Article II, beginning on
the date which is one (1) year after the Closing Date, all or any portion of the
Outstanding Amount may be converted at the option of the Corporation (a
"MANDATORY CONVERSION") into a number of fully paid and nonassessable shares of
Common Stock equal to the Outstanding Amount divided by the Conversion Price
then in effect, provided that the Closing Bid Price for the Common Stock on each
of the twenty (20) consecutive trading days immediately preceding the date of
the Notice of Mandatory Conversion is equal to or greater than the Closing Bid
Price for the Common Stock on the Closing Date.
3
B. MECHANICS OF CONVERSION. In order to convert this Debenture into
shares of Common Stock pursuant to an Optional Conversion, the Holder shall: (x)
deliver (by facsimile or otherwise) a copy of the fully executed Notice of
Optional Conversion to the Corporation and (y) surrender or cause to be
surrendered this Debenture along with a copy of the Notice of Optional
Conversion as soon as practicable thereafter to the Corporation. At the request
of the Holder and upon receipt by the Corporation of a facsimile copy of a
Notice of Optional Conversion from the Holder, the Corporation shall immediately
send, via facsimile, a confirmation to such holder stating that the Notice of
Optional Conversion has been received, the date upon which the Corporation
expects to deliver the Common Stock issuable upon such conversion and the name
and telephone number of a contact person at the Corporation regarding the
conversion. In order to convert this Debenture into shares of Common Stock
pursuant to a Mandatory Conversion, the Corporation shall deliver (by facsimile
or otherwise) a copy of the fully executed Notice of Mandatory Conversion to the
Holder, which notice shall specify the Outstanding Amount to be converted.
Promptly following receipt of a Notice of Mandatory Conversion, the Holder shall
surrender or cause to be surrendered this Debenture as soon as practicable to
the Corporation. The Corporation shall not be obligated to issue shares of
Common Stock issuable upon any Optional Conversion or Mandatory Conversion
unless either this Debenture is delivered to the Corporation as provided above,
or the holder notifies the Corporation that such certificates have been lost,
stolen or destroyed (subject to the requirements of Article IX.A).
(i) DELIVERY OF COMMON STOCK UPON CONVERSION. The Corporation
shall, within one trading day after the later of (a) the second trading day
following the Conversion Date in the case of DWAC deliveries and the third
trading day following the Conversion Date in all other cases and (b) the date of
surrender of this Debenture (or, in case this Debenture is lost, stolen or
destroyed, the date on which indemnity pursuant to Article IX.A is provided)
(the "DELIVERY PERIOD"), issue and deliver to or upon the order of the Holder
(x) that number of shares of Common Stock issuable upon conversion of the
Outstanding Amount being converted and (y) a new Debenture representing the
Outstanding Amount not being converted, if any.
(ii) TAXES. The Corporation shall pay any and all taxes which
may be imposed upon it with respect to the issuance and delivery of the shares
of Common Stock upon the conversion of this Debenture.
(iii) NO FRACTIONAL SHARES. If any conversion of this
Debenture would result in the issuance of either a fractional share of Common
Stock, such fractional share shall be disregarded and the number of shares of
Common Stock issuable upon conversion of this Debenture shall be the closest
whole number of shares.
(iv) STATUS AS STOCKHOLDER. Upon the Conversion Date, the
Outstanding Amount being converted shall be deemed converted into shares of
Common Stock as of the Conversion Date and the Holder's rights as a holder of
the Outstanding Amount being converted shall cease and terminate, excepting only
the right to receive certificates for such shares of Common Stock and to any
remedies provided herein or otherwise available at law or in equity to such
holder because of a failure by the Corporation to comply with the terms of this
Debenture (including its right to regain its status as a Holder pursuant to
Article IV.E).
4
(v) CONVERSION DISPUTES. In the case of any dispute with
respect to a conversion, the Corporation shall promptly issue such number of
shares of Common Stock as are not disputed in accordance with subparagraph (i)
above. If such dispute involves the calculation of the Conversion Price, the
Corporation shall submit, at its sole cost, the disputed calculations to its
outside accountant via facsimile within two (2) trading days of receipt of the
Notice of Optional Conversion. The accountant shall audit the calculations and
notify the Corporation and the Holder of the results no later than two (2)
trading days from the date it receives the disputed calculations. The
accountant's calculation shall be deemed conclusive, absent manifest error. The
Corporation shall then issue the appropriate number of shares of Common Stock in
accordance with subparagraph (i) above.
C. LIMITATIONS ON CONVERSIONS. (i) In no event shall the Holder be
entitled to receive shares of Common Stock upon an Optional Conversion to the
extent that the sum of (a) the number of shares of Common Stock beneficially
owned by the Holder and its affiliates (exclusive of shares issuable upon
conversion of the unconverted portion of this Debenture or the unexercised or
unconverted portion of any other securities of the Corporation subject to a
limitation on conversion or exercise analogous to the limitations contained
herein) and (b) the number of shares of Common Stock issuable upon the
conversion of this Debenture with respect to which the determination of this
subparagraph is being made, would result in beneficial ownership by the holder
and its affiliates of more than 4.9% of the outstanding shares of Common Stock.
For purposes of this subparagraph, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13 D-G thereunder, except as otherwise provided in
clause (i) above. The provisions of this subparagraph shall terminate upon
delivery by the Holder of a Mandatory Prepayment Notice. The Corporation shall
be entitled to rely, and shall be fully protected in relying, on any statement
or representation made by the Holder to the Corporation in connection with a
particular conversion without any obligation on the part of the Corporation to
make any inquiry or investigation or to examine its records or the records of
any transfer agent for the Common Stock.
(ii) During any thirty (30) day period ending prior to the
earlier of (a) that date which is two hundred and nine (209) days after the
Closing Date and (b) that date (if any) that the Corporation delivers an
Optional Prepayment Notice (as defined below) to the Holder pursuant to clause
(b) of subparagraph (i) of Article V.C, the Holder may not effect an Optional
Conversion with respect to more than thirty-three percent (33%) of the original
principal amount of this Debenture (and the accrued but unpaid interest
thereon); provided, however, if the Holder has already converted sixty-six
percent (66%) of such original principal amount, the Holder may convert the
remaining thirty-four percent (34%) of the original principal amount of this
Debenture (and the accrued but unpaid interest thereon) in the next succeeding
thirty (30) day period or thereafter.
5
(iii) The Corporation may not effect a Mandatory Conversion
pursuant to this Article II unless, on the date of the Notice of Mandatory
Conversion and on the date of delivery of such Conversion Shares, (a) a
registration statement under the Securities Act of 1933, as amended, covering
the resale of the Common Stock issuable upon conversion of this Debenture is in
effect which names the Holder as a selling stockholder; (b) the Corporation has
reserved the number of shares of Common Stock required by Article III; (c) the
Corporation has paid in full any liquidated damages hereunder; and (d) the
Holder has not, prior to such date, delivered a Mandatory Prepayment Notice to
the Corporation.
III. RESERVATION OF SHARES OF COMMON STOCK
The Corporation shall at all times have authorized and reserved for the
purpose of issuance a sufficient number of shares of Common Stock to provide for
the full conversion of the outstanding Debentures in accordance with their
terms.
IV. FAILURE TO SATISFY CONVERSIONS
A. CONVERSION DEFAULT PAYMENTS. If, at any time, (x) the Holder submits
a Notice of Optional Conversion and the Corporation fails for any reason to
deliver, on or prior to the first trading day following the expiration of the
Delivery Period for such conversion, the shares of Common Stock to which the
Holder is entitled upon such conversion in the manner required hereunder and
under the Purchase Agreement, or (y) the Corporation provides notice to any
holder of the Debentures at any time of its intention not to issue shares of
Common Stock upon exercise by any holder of its conversion rights in accordance
with the terms of the Debentures (each of (x) and (y) being a "CONVERSION
DEFAULT"), then the Corporation shall pay to the Holder payments for the first
ten (10) trading days following the expiration of the Delivery Period, in the
case of a Conversion Default described in clause (x), and for the first ten (10)
trading days of any other Conversion Default, an amount equal to $1,000 per day.
In the event any Conversion Default continues beyond such ten (10) trading day
period, the Holder shall be entitled to interest on the Outstanding Amount at a
rate per annum equal to the lower of twenty-four percent (24%) and the highest
rate permitted by applicable law from the expiration of the ten (10) trading day
period described above through and including the Default Cure Date. In addition,
upon the occurrence of any Conversion Default, the Holder may, by written notice
to the Corporation, elect to revoke any Optional Conversion and obtain the
return of the unconverted Debenture. As used herein, the "DEFAULT CURE DATE"
means (i) with respect to a Conversion Default described in clause (x) of its
definition, the date the Corporation effects the conversion of the full
Outstanding Amount requested to be converted and (ii) with respect to a
Conversion Default described in clause (y) of its definition, the date the
Corporation begins to honor conversions of the Debentures in accordance with
their terms.
The payments to which the Holder shall be entitled pursuant to this
Paragraph A are referred to herein as "CONVERSION DEFAULT PAYMENTS" and shall be
liquidated damages and not penalties. The Holder may elect to receive accrued
Conversion Default Payments in cash or to convert all or any portion of such
accrued Conversion Default Payments, at any time, into Common Stock at the
Conversion Price in effect at the time of such conversion. In the event the
Holder elects to receive any Conversion Default Payments in cash, it shall so
notify the Corporation in writing. Such payment shall be made in accordance with
and be subject to the provisions of Article IX.D. In the event the Holder elects
to convert all or any portion of the Conversion Default Payments, the Holder
shall indicate on a Notice of Optional Conversion such portion of the Conversion
Default Payments which the Holder elects to so convert and such conversion shall
otherwise be effected in accordance with the provisions of Article II.
6
B. ADJUSTMENT TO CONVERSION PRICE. If the Holder has not received
certificates for all shares of Common Stock prior to the tenth (10th) trading
day after the expiration of the Delivery Period with respect to a conversion of
this Debenture for any reason, then the Conversion Price in respect of this
Debenture shall thereafter be the lesser of (i) the Conversion Price on the
Conversion Date specified in the Notice of Optional Conversion which resulted in
the Conversion Default and (ii) the lowest Conversion Price in effect during the
period beginning on, and including, such Conversion Date through and including
the day such shares of Common Stock are delivered to the Holder. If there shall
occur a Conversion Default of the type described in clause (y) of Article IV.A,
then the Conversion Price with respect to any conversion thereafter shall be the
lower of (x) the lowest Conversion Price in effect at any time during the period
beginning on, and following, the date of the occurrence of such Conversion
Default through and including the Default Cure Date and (y) the Conversion Price
on the Conversion Date specified in the Notice of Optional Conversion for this
Debenture. The Conversion Price shall thereafter be subject to further
adjustment for any events described in Article VI.
C. BUY-IN CURE. If (i) the Corporation fails for any reason to deliver
during the Delivery Period shares of Common Stock to the Holder upon a
conversion of this Debenture having a Conversion Date on or prior to a date upon
which the Corporation has notified the Holder in writing that the Corporation is
unable to honor conversions and (ii) after the applicable Delivery Period with
respect to such conversion, the Holder purchases (in an open market transaction
or otherwise) shares of Common Stock to deliver in satisfaction of a sale by
such holder of the shares of Common Stock which the Holder anticipated receiving
upon such conversion (a "BUY-IN"), the Corporation shall pay the Holder (in
addition to any other remedies available to the Holder) the amount by which (x)
the Holder's total purchase price (including brokerage commissions, if any) for
the shares of Common Stock so purchased exceeds (y) the portion of the
Outstanding Amount resulting in the Buy-In. For example, if the Holder purchases
shares of Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted conversion of a total Outstanding Amount of
$10,000, the Corporation will be required to pay the Holder $1,000. The Holder
shall provide the Corporation written notification indicating any amounts
payable to the Holder pursuant to this Paragraph C. The Corporation shall make
any payments required pursuant to this Paragraph C in accordance with and
subject to the provisions of Article IX.D.
D. MANDATORY PREPAYMENT RIGHT. If the Corporation fails, and such
failure continues uncured for five (5) trading days after the Corporation has
been notified thereof in writing by the Holder, for any reason to issue shares
of Common Stock within ten (10) trading days after the expiration of the
Delivery Period with respect to any conversion of this Debenture, then the
Holder may elect at any time and from time to time prior to the Default Cure
Date for such Conversion
7
Default, by delivery of a Mandatory Prepayment Notice (as defined in Article
V.B) to the Corporation, to demand payment by the Corporation in cash of all or
any portion of the Outstanding Amount. If the Corporation fails to make such
payment within five (5) trading days after its receipt of a Mandatory Prepayment
Notice, then the Holder shall be entitled to the remedies provided in Article
V.B.
E. RETENTION OF RIGHTS AS DEBENTURE HOLDER. If the Holder has not
received certificates for all shares of Common Stock prior to the tenth (10th)
trading day after the expiration of the Delivery Period with respect to a
conversion of this Debenture for any reason, then the Corporation shall, as soon
as practicable, return this Debenture to the Holder and (unless the Holder
otherwise elects to retain its status as a holder of Common Stock) the Holder
shall regain the rights of a holder of this Debenture. In all cases, the Holder
shall retain all of its rights and remedies (including, without limitation, (i)
the right to receive Conversion Default Payments pursuant to Paragraph A above
to the extent required thereby for such Conversion Default and any subsequent
Conversion Default and (ii) the right to have the Conversion Price with respect
to subsequent conversions determined in accordance with Paragraph B above) for
the Corporation's failure to convert this Debenture.
V. PREPAYMENT DUE TO CERTAIN EVENTS
A. MANDATORY PREPAYMENT. In the event (each of the events described in
clauses (i)-(v) below after expiration of the applicable cure period (if any)
being a "MANDATORY PREPAYMENT EVENT"):
(i) the Common Stock (including all of the shares of Common
Stock issuable upon conversion of this Debenture) is suspended from trading on
any of, or is not listed or designated for quotation (and authorized) for
trading on at least one of, the New York Stock Exchange, the American Stock
Exchange, the NASDAQ National Market or the NASDAQ Small Cap Market ("NASDAQ")
for an aggregate of five (5) full trading days in any nine (9) month period,
(ii) the Registration Statement required to be filed by the
Corporation pursuant to Section 2(a) of the Registration Rights Agreement, dated
as of September 30, 1997, by and among the Corporation and the other signatories
thereto (the "REGISTRATION RIGHTS AGREEMENT"), has not been declared effective
by the 180th day following the Closing Date or such Registration Statement,
after being declared effective, cannot be utilized by the Holder for the resale
of all of their Registrable Securities (as defined in the Registration Rights
Agreement) for an aggregate of more than thirty (30) days in any consecutive
twelve month period as a result of (x) the inclusion in the prospectus contained
in such Registration Statement of an untrue statement of material fact or
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or (y) the issuance of any stop
order or other suspension of effectiveness of such Registration Statement.
(iii) the Corporation fails, and any such failure continues
uncured for five (5) trading days after the Corporation has been notified
thereof in writing by the Holder, to remove any restrictive legend on any
certificate or any shares of Common Stock issued to the Holder upon conversion
of this Debenture as and when required by this Debenture, the Securities
Purchase Agreement or the Registration Rights Agreement,
8
(iv) the Corporation provides notice to any holder of the
Debentures, including by way of public announcement, at any time, of its
intention not to issue shares of Common Stock to any holder of said Debentures
upon conversion in accordance with the terms thereof,
(v) the Corporation shall:
(a) sell, convey or dispose of all or substantially
all of its assets;
(b) merge, consolidate or engage in any other
business combination with any other entity (other than a
merger, consolidation or business combination in which the
holders of the Corporation's voting securities immediately
preceding such merger, consolidation or business combination
own, on a pro rata basis, at least 50% of the surviving
entity's voting securities); or
(c) have fifty percent (50%) or more of the voting
power of its capital stock owned beneficially by one person,
entity or "group" (as such term is used under Section 13(d) of
the Securities Exchange Act of 1934, as amended),
(vi) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings, or relief under any bankruptcy law or any law
for the relief of debt shall be instituted by or against the Company and, if
instituted against the Company, shall not be dismissed within ninety (90) days
after such institution, or the Company shall by any action or answer approve of,
consent to, or acquiesce in any such proceedings or admit to any material
allegations of, or default in answering a petition filed in, any such
proceeding,
(vii) the Corporation shall fail to comply in any material
respect with the agreements and covenants contained in the Purchase Agreement,
the Registration Rights Agreement or this Debenture (including without
limitation a failure to comply with its conversion obligations hereunder), which
failure continues uncured for a period of ten (10) days following delivery of
written notice thereof by the Holder to the Corporation,
(viii) the Corporation shall fail to pay when due any amount
due hereunder free of any claim of subordination, or
(ix) the Corporation shall be prohibited from complying with
its conversion obligations hereunder by reason of any stockholder approval
requirements of NASDAQ,
then, upon the occurrence of any such Mandatory Prepayment Event, the Holder
shall thereafter have the option, exercisable in whole or in part at any time
and from time to time by delivery of a Mandatory Prepayment Notice (as defined
in Paragraph B below) to the Corporation while such Mandatory Prepayment Event
continues, to require the Corporation to pay in cash any or all of the
Outstanding Amount. For the avoidance of doubt, the occurrence of any event
described in clauses (i), (ii), (iv), (v), (vii) and (ix) above shall
immediately constitute a Mandatory Prepayment Event and there shall be no cure
period.
9
B. MANDATORY PREPAYMENT DEFAULTS. If, within five (5) trading days of
the Corporation's receipt of a notice from the Holder identifying a Mandatory
Prepayment Event that has occurred and requiring the Corporation to pay any or
all of the Outstanding Amount (a "MANDATORY PREPAYMENT NOTICE"), the Corporation
fails to pay to the Holder the Outstanding Amount specified in the Mandatory
Prepayment Notice, the Holder (i) shall be entitled to interest on such
Outstanding Amount at a per annum rate equal to the lower of twenty-four percent
(24%) and the highest rate permitted by applicable law from the date of the
Mandatory Prepayment Notice until the date of payment hereunder, and (ii) shall
have the right, at any time and from time to time, to require the Corporation,
upon written notice, to immediately convert (in accordance with the terms of
Paragraph A of Article II) all or any portion of such Outstanding Amount into
shares of Common Stock at the lowest Conversion Price in effect during the
period beginning on the date of the Mandatory Prepayment Notice and ending on
the Conversion Date with respect to the conversion of such Outstanding Amount.
In the event the Corporation is not able to pay all of the Debentures subject to
Mandatory Prepayment Notices, the Corporation shall pay the Debentures pro rata,
based on the total Outstanding Amount under the Debentures included by each
holder in the Mandatory Prepayment Notice relative to the total Outstanding
Amount under the Debentures in all of the Mandatory Prepayment Notices.
C. OPTIONAL PREPAYMENT.
(i) At any time (a) on or before that date which is six (6)
months after the Closing Date or (b) on or after that date which is one (1) year
after the Closing Date, the Corporation shall have the right to prepay
("OPTIONAL PREPAYMENT") all or any portion of the Outstanding Amount, provided,
however, that any such prepayment shall be subject to concurrent payment of a
premium (the "OPTIONAL PREPAYMENT PREMIUM") and all other amounts owing
hereunder. An Optional Prepayment shall be made by the Corporation in its sole
discretion by delivery of an Optional Prepayment Notice (as defined below). In
the case of an Optional Prepayment during the period described in clause (a) of
this subparagraph, the Optional Prepayment Premium shall be in an amount equal
to seven and one half percent (7 1/2%) of the principal amount being prepaid and
the Holder's right to effect an Optional Conversion shalL terminate upon receipt
of an Optional Prepayment Notice. In the case of an Optional Prepayment during
the period described in clause (b) of this subparagraph, the Optional Prepayment
Premium shall be in an amount equal to ten percent (10%) of the principal amount
being prepaid and the Holder may convert all or any part of the Outstanding
Amount into Common Stock by delivering a Notice of Optional Conversion to the
Corporation at any time prior to that date which is ten (10) trading days after
receipt of an Optional Prepayment Notice.
(ii) The Corporation shall effect each prepayment under this
Section VIII.B by giving at least twenty (20) trading days' prior written notice
(the "OPTIONAL PREPAYMENT NOTICE") of the date on which such prepayment is to be
made (the "OPTIONAL PREPAYMENT DATE") and the Outstanding Amount to be prepaid
to the Holder at the address and facsimile number of the Holder appearing in the
Debenture Register, which Optional Prepayment Notice shall be deemed to have
10
been delivered on the trading day after the Corporation's fax (with a copy sent
by overnight courier) of such notice to the Holder. The Corporation shall pay
the Outstanding Amount specified in the Optional Prepayment Notice, together
with the applicable Optional Prepayment Premium, to the Holder on the Optional
Prepayment Date. The Corporation may not attempt to deliver an Optional
Prepayment Notice if it has previously received a Mandatory Prepayment Notice.
(iii) If the Corporation fails to pay, when due and owing, any
portion of the Outstanding Amount or the Optional Prepayment Premium in
accordance with an Optional Prepayment Notice, then the Holder shall have the
right, at any time and from time to time, to require the Corporation, upon
written notice, to immediately convert (in accordance with the terms of
paragraph A of Article II) any or all of the Outstanding Amount which is the
subject of such prepayment into shares of Common Stock at the lowest Conversion
Price in effect during the period beginning on the date of the Optional
Prepayment Notice and ending on the earlier of the date the Corporation effects
such prepayment in full and the date of the Holder's notice of conversion.
VI. ADJUSTMENTS TO THE CONVERSION PRICE
The Conversion Price shall be subject to adjustment from time to time
as follows:
A. ADJUSTMENT DUE TO MAJOR ANNOUNCEMENT. In the event the Corporation
(i) makes a public announcement that it intends to consolidate or merge with any
other entity (other than a merger in which the Corporation is the surviving or
continuing entity and its capital stock is unchanged) or to sell or transfer all
or substantially all of the assets of the Corporation or (ii) any person, group
or entity (including the Corporation) publicly announces a tender offer to
purchase 50% or more of the Corporation's Common Stock (the date of the
announcement referred to in clause (i) or (ii) of this Paragraph A is
hereinafter referred to as the "ANNOUNCEMENT DATE"), then the Conversion Price
shall, effective upon the Announcement Date and continuing through the
Abandonment Date (as defined below), be equal to the lesser of (x) the
Conversion Price which would have been applicable for an Optional Conversion
occurring on the Announcement Date and (y) the Conversion Price which would have
been applicable for an Optional Conversion occurring on the Conversion Date.
From and after the Abandonment Date, the Conversion Price shall be determined as
set forth in Article I.E. "ABANDONMENT DATE" means with respect to any proposed
transaction or tender offer for which a public announcement as contemplated by
this Paragraph A has been made, the date upon which the Corporation (in the case
of clause (i) above) or the person, group or entity (in the case of clause (ii)
above) publicly announces the termination or abandonment of the proposed
transaction or tender offer which caused this Paragraph A to become operative.
B. ADJUSTMENT DUE TO MERGER, CONSOLIDATION, ETC. If, at any time when
this Debenture is outstanding, there shall be (i) any reclassification or change
of the outstanding shares of Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), (ii) any consolidation or merger of the
Corporation with any other entity (other than a merger in which the Corporation
is the surviving or continuing entity and its capital stock is unchanged), (iii)
any sale or transfer of all or substantially all of the assets of the
Corporation or (iv) any share exchange pursuant to which all of the outstanding
11
shares of Common Stock are converted into other securities or property, then the
Holder shall thereafter have the right to receive upon conversion, in lieu of
the shares of Common Stock immediately theretofore issuable (without giving
effect to any limitations upon conversion imposed by Article II.C), such shares
of stock, securities and/or other property as may be issued or payable with
respect to or in exchange for the number of shares of Common Stock immediately
theretofore issuable upon conversion (without giving effect to any limitations
upon conversion imposed by Article II.C) had such merger, consolidation,
exchange of shares, recapitalization, reorganization or other similar event not
taken place, and in any such case, appropriate provisions shall be made with
respect to the rights and interests of the Holder to the end that the provisions
hereof (including, without limitation, provisions for adjustment of the
Conversion Price and of the number of shares of Common Stock issuable upon
conversion of this Debenture) shall thereafter be applicable, as nearly as may
be practicable in relation to any shares of stock or securities thereafter
deliverable upon the conversion thereof. The Corporation shall not effect any
transaction described in this Paragraph B unless (i) the Holder has received
written notice of such transaction at least ten (10) days prior thereto, but in
any event on or before the record date for the determination of shareholders
entitled to vote with respect thereto, and (ii) the resulting successor or
acquiring entity (if not the Corporation) assumes by written instrument the
obligations of this Paragraph B. The above provisions shall apply regardless of
whether or not there would have been a sufficient number of shares of Common
Stock authorized and available for issuance upon conversion of the Debentures
outstanding as of the date of such transaction, and shall similarly apply to
successive reclassifications, consolidations, mergers, sales, transfers or share
exchanges.
C. PURCHASE RIGHTS. If at any time when this Debenture is outstanding,
the Corporation issues any Convertible Securities or rights to purchase stock,
warrants, securities or other property (the "PURCHASE RIGHTS") pro rata to the
record holders of any class of Common Stock, then the Holder will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder had held the
number of shares of Common Stock acquirable upon complete conversion of this
Debenture (without giving effect to any limitations upon conversion imposed by
Article II.C) immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such record is taken,
the date as of which the record holders of Common Stock are to be determined for
the grant, issue or sale of such Purchase Rights.
D. NOTICE OF ADJUSTMENTS. Upon the occurrence of each adjustment or
readjustment of the Conversion Price pursuant to this Article VI, the
Corporation, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to the Holder a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of the Holder, furnish to the Holder a like certificate
setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at
the time in effect and (iii) the number of shares of Common Stock and the
amount, if any, of other securities or property which at the time would be
received upon conversion of this Debenture.
12
VII. NOTICE RIGHTS
The Corporation shall provide the Holder, at its request, with copies
of proxy materials and other information sent to shareholders. If the
Corporation takes a record of its shareholders for the purpose of determining
shareholders entitled to (a) receive payment of any dividend or other
distribution, any right to subscribe for, purchase or otherwise acquire
(including by way of merger, consolidation or recapitalization) any share of any
class or any other securities or property, or to receive any other right, or (b)
to vote in connection with any proposed sale, lease or conveyance of all or
substantially all of the assets of the Corporation, or any proposed merger,
consolidation, liquidation, dissolution or winding up of the Corporation, the
Corporation shall mail a notice to the Holder, on or before the record date
specified therein (or ten (10) days prior to the consummation of the transaction
or event, whichever is earlier, but in no event earlier than public announcement
of such proposed transaction), of the date on which any such record is to be
taken for the purpose of such vote, dividend, distribution, right or other
event, and a brief statement regarding the amount and character of such vote,
dividend, distribution, right or other event to the extent known at such time.
VIII. PROTECTION PROVISIONS
So long as this Debenture is outstanding, the Corporation shall not,
without first obtaining the approval (by vote or written consent) of the holders
of all of the then Outstanding Amount under all Debentures:
(a) adversely alter or change the rights, preferences or
privileges of the Debentures; or
(b) alter or change the rights, preferences or privileges of
any capital stock of the Corporation so as to affect adversely the Debentures.
IX. MISCELLANEOUS
A. LOST OR STOLEN DEBENTURES. Upon receipt by the Corporation of (i)
evidence of the loss, theft, destruction or mutilation of this Debenture and
(ii) (y) in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to the Corporation, or (z) in the case of mutilation, upon
surrender and cancellation of this Debenture, the Corporation shall execute and
deliver a new Debenture of like tenor and date. However, the Corporation shall
not be obligated to reissue this Debenture if the Holder contemporaneously
requests the Corporation to convert this Debenture.
B. [Intentionally omitted.]
C. STATEMENTS OF AVAILABLE SHARES. So long as this Debenture is
outstanding, the Corporation shall deliver to the Holder a written report
notifying it of any occurrence which prohibits the Corporation from issuing
Common Stock upon any conversion. In addition, the Corporation shall provide,
within ten (10) days after delivery to the Corporation of a written request by
the Holder, any
13
of the following information as of the date of such request: (i) the total
Outstanding Amount under all Debentures, (ii) the total number of shares of
Common Stock issued upon all prior conversions of the Debentures, and (iii) the
total number of shares of Common Stock which are reserved for issuance upon
conversion of the Debentures.
D. PAYMENT OF CASH; DEFAULTS. Whenever the Corporation is required to
make any cash payment to the Holder under this Debenture (as a Conversion
Default Payment, upon Mandatory or Optional Prepayment or otherwise), such cash
payment shall be made within five (5) trading days after delivery by the Holder
of a notice specifying that the Holder elects to receive such payment in cash
and the method (E.G., by check, wire transfer) in which such payment should be
made. If such payment is not delivered within such five (5) trading day period,
the Holder shall thereafter be entitled to interest on the unpaid amount at a
per annum rate equal to the lower of twenty-four percent (24%) and the highest
rate permitted by applicable law until such amount is paid in full to the
Holder. This provision shall not operate to add any additional grace or cure
period to any grace or cure period expressly set for in this Debenture.
E. REMEDIES CUMULATIVE. The remedies provided in this Debenture shall
be cumulative and in addition to all other remedies available under this
Debenture, at law or in equity (including a decree of specific performance
and/or other injunctive relief), and nothing herein shall limit the Holder's
right to pursue actual damages for any failure by the Corporation to comply with
the terms of this Debenture. The Corporation acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Corporation therefore
agrees, in the event of any such breach or threatened breach, the Holder shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
F. OBLIGATIONS ABSOLUTE. No provision of this Debenture, other than
conversion as provided herein, shall alter or impair the obligation of the
Corporation, which is absolute and unconditional, to pay the principal of, and
interest on, this Debenture at the time, place and rate, and in the manner,
herein prescribed.
G. WAIVERS OF DEMAND, ETC. The Corporation hereby expressly waives
demand and presentment for payment, notice of nonpayment, protest, notice of
protest, notice of dishonor, notice of intent to accelerate, prior notice of
bringing of suit and diligence in taking any action to collect amounts called
for hereunder and will be directly and primarily liable for the payments of all
sums owing and to be owing hereon, regardless of and without any notice (except
as required by law), diligence, act or omission as or with respect to the
collection of any amount called for hereunder.
H. SAVINGS CLAUSE. In case any provision of this Debenture is held by a
court of competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if possible,
so that it is enforceable to the maximum extent possible, and the validity and
enforceability of the remaining provisions of this Debenture will not in any way
be affected or impaired thereby.
14
I. ENTIRE AGREEMENT; AMENDMENTS. This Debenture and the agreements
referred to in this Debenture constitute the full and entire understanding and
agreement between the Corporation and the Holder with respect to the subject
hereof and, except as specifically set forth herein or therein, neither the
Corporation nor the Holder makes any representation, warranty, covenant or
undertaking with respect to such matters. Any provision of this Debenture may be
waived or amended only by an instrument in writing signed by the Corporation and
by all holders of the then Outstanding Amount under all of the Debentures.
J. ASSIGNMENT, ETC. The Holder may, subject to compliance with the
Securities Purchase Agreement and the Registration Rights Agreement, without
prior notice, transfer or assign this Debenture or any interest herein (but in
no event in an amount less than $100,000 in Outstanding Amount or, if less than
$100,000, the total Outstanding Amount hereof) and may mortgage, encumber or
transfer any of its rights or interest in and to this Debenture or any part
hereof, and each assignee, transferee and mortgagee (which may include any
affiliate of the Holder) shall have the right to so transfer or assign its
interest. Each such assignee, transferee and mortgagee shall have all of the
rights and obligations of the Holder under this Debenture. The Corporation
agrees that, subject to compliance with the Securities Purchase Agreement and
the Registration Rights Agreement, after receipt by the Corporation of written
notice of assignment from the Holder or from the Holders' assignee, all
principal, interest, and other amounts which are then due and thereafter become
due under this Debenture shall be paid to such assignee at the place of payment
designated in such notice. This Debenture shall be binding upon the Corporation
and its successors and shall inure to the benefit of the Holder and its
successors and assigns. The Corporation may not transfer or assign its
obligation under this Debenture without the consent of the Holder; provided,
however, that a merger, consolidation or similar business combination of the
Corporation or the sale of all or substantially all of the assets of the
Corporation shall not constitute a transfer or assignment.
K. NO WAIVER. No failure on the part of the Holder to exercise, and no
delay in exercising, any right, remedy or power hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by the Holder of any
right, remedy or power hereunder preclude any other or future exercise of any
other right, remedy or power. Each and every right, remedy or power hereby
granted to the Holder or allowed it by law or other agreement shall be
cumulative and not exclusive of any other, and may be exercised by the Holder
from time to time.
L. MISCELLANEOUS. Unless otherwise provided herein, any notice or other
communication to a party hereunder shall be deemed to have been duly given if
personally delivered or sent by registered or certified mail, return receipt
requested, postage prepaid with a copy in each case sent on the same day to the
party by facsimile, Federal Express or other such expedited means to said party
at its address set forth herein or such other address as either may designate
for itself in such notice to the other and communications shall be deemed to
have been received when delivered personally or, if sent by mail, when actually
received by the party to whom it is addressed. Copies of all notices to the
Corporation shall be sent to Xxxx X. Xxxxxx, Director of Finance of the
Corporation, and to the attention of the General Counsel of the Corporation.
Whenever the sense of this Debenture requires, words in the singular shall be
deemed to include the plural and words in the plural shall be deemed to include
the singular. Paragraph headings are for convenience only and shall not affect
the meaning of this document.
15
M. CHOICE OF LAW AND VENUE. This Debenture shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware. The Corporation
irrevocably consents to the jurisdiction of the United States federal courts
located in the County of Kent in the State of Delaware in any suit or proceeding
based on or arising under this Debenture and irrevocably agrees that all claims
in respect of such suit or proceeding may be determined in such courts. The
Corporation irrevocably waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding. The Corporation further agrees that
service of process upon the Corporation mailed by first class mail shall be
deemed in every respect effective service of process upon the Corporation in any
suit or proceeding arising hereunder. Nothing herein shall affect the Holder's
right to serve process in any other manner permitted by law. The Corporation
agrees that a final non-appealable judgment in any such suit or proceeding shall
be conclusive and may be enforced in other jurisdictions by suit on such
judgment or in any other lawful manner.
N. USURY LAWS. In no event shall any provision of this Debenture be
deemed to permit the Holder to receive any payment, whether of interest or
otherwise, to the extent that such payment would be prohibited under any
applicable usury law or similar law regarding the rates of interest legally
chargeable or collectible hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
16
IN WITNESS WHEREOF, this Debenture is executed on behalf of the
Corporation as of the 30th day of September, 1997.
PALOMAR MEDICAL TECHNOLOGIES, INC.
By:
-------------------------------
17
NOTICE OF OPTIONAL CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby elects to convert $____________ in Outstanding Amount
(the "CONVERSION"), under that certain 6%, 7% and 8% Convertible Debenture Due
September 30, 2002 the ("DEBENTURE") into shares of common stock ("COMMON
STOCK") of Palomar Medical Technologies, Inc. (the "CORPORATION") according to
the conditions of the Debenture, as of the date written below. If securities are
to be issued in the name of a person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto and is delivering
herewith such certificates. No fee will be charged to the holder for any
conversion, except for transfer taxes, if any. The Debenture (or evidence of
loss, theft or destruction thereof) is attached hereto.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable to the undersigned upon conversion of the
Debenture shall be made pursuant to registration of the Common Stock under the
Securities Act of 1933, as amended (the "ACT"), or pursuant to an exemption from
registration under the Act.
Date of Conversion:
--------------------------
Applicable Conversion Price:
--------------------------
Amount of Conversion Default
Payments to be Converted, if any:
--------------------------
Number of Shares of
Common Stock to be Issued:
--------------------------
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
(Must be exactly as appears on the Debenture)
Name:
-------------------------------
Address:
----------------------------
----------------------------
Social Security or
Federal Tax I.D. Number:
---------------------
EXECUTION COPY
EXHIBIT B
TO
SECURITIES PURCHASE
AGREEMENT
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of September
30, 1997 by and among PALOMAR MEDICAL TECHNOLOGIES, INC., a corporation
organized under the laws of the State of Delaware, with headquarters located at
00 Xxxxxx Xxxx Xxxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000 (the "COMPANY"), and the
undersigned purchasers of Debentures and Common Shares under the Securities
Purchase Agreement (together with affiliates, the "INITIAL INVESTORS").
WHEREAS:
A. In connection with the Securities Purchase Agreement of even date
herewith by and between the Company and the Initial Investors (the "SECURITIES
PURCHASE AGREEMENT"), the Company has agreed, upon the terms and subject to the
conditions contained therein, to issue and sell to the Initial Investors (i) 6%,
7% and 8% Convertible Debentures Due September 30, 2002 (the "DEBENTURES") that
are convertible into shares (the "CONVERSION SHARES") of the Company's common
stock, par value $.01 per share (the "COMMON STOCK"), upon the terms and subject
to the limitations and conditions set forth in the Debentures and (ii) shares of
Common Stock (the "COMMON SHARES"); and
B. To induce the Initial Investors to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"SECURITIES ACT"), and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investors hereby agree as follows:
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have
the following meanings:
(i) "INVESTORS" means the Initial Investors and any
transferees or assignees who agree to become bound by the
provisions of this Agreement in accordance with Section 9
hereof.
1
(ii) "REGISTER," "REGISTERED," and "REGISTRATION"
refer to a registration effected by preparing and filing a
Registration Statement or Statements in compliance with the
Securities Act and pursuant to Rule 415 under the Securities
Act or any successor rule providing for offering securities on
a continuous basis ("RULE 415"), and the declaration or
ordering of effectiveness of such Registration Statement by
the United States Securities and Exchange Commission (the
"SEC").
(iii) "REGISTRABLE SECURITIES" means the Conversion
Shares (including any Conversion Shares issuable with respect
to Conversion Default Payments under the Debentures or in
redemption of any Debentures) issued or issuable with respect
to the Debentures, the Common Shares and any shares of capital
stock issued or issuable, from time to time (with any
adjustments), on or in exchange for or otherwise with respect
to any of the foregoing.
(iv) "REGISTRATION STATEMENT" means a registration
statement of the Company under the Securities Act.
b. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
a. MANDATORY REGISTRATION. The Company shall prepare, and, on
or prior to the sixtieth (60th) day after the Closing Date (the "FILING DATE"),
file with the SEC a Registration Statement on Form S-3 (or, if Form S-3 is not
then available, on such form of Registration Statement as is then available to
effect a registration of all of the Registrable Securities, subject to the
reasonable consent of the Investors) covering the resale of a number of
Registrable Shares equal to at least 3,500,000 shares plus the amount of Common
Shares (provided that such number may be proportionally reduced if less than
$7,000,000 in principal amount of Debentures are issued under the Securities
Purchase Agreement), which Registration Statement, to the extent allowable under
the Securities Act and the Rules promulgated thereunder (including Rule 416),
shall state that such Registration Statement also covers such indeterminate
number of additional shares of Common Stock as may become issuable upon
conversion of the Debentures to prevent dilution resulting from stock splits,
stock dividends or similar transactions or as a result of fluctuations in the
market price of the Common Stock. The Registrable Securities included on the
Registration Statement shall be allocated to the Investors as set forth in
Section 11(k) hereof. The Registration Statement (and each amendment or
supplement thereto, and each request for acceleration of effectiveness thereof)
shall be provided to (and subject to the reasonable approval of) the Initial
Investors and their counsel prior to its filing or other submission.
b. UNDERWRITTEN OFFERING. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, the Investors who hold a majority in interest of the Registrable
Securities subject to such underwritten offering, with the consent of the
Initial Investors, shall have the right to select a total of one legal counsel
to represent the Investors and an investment banker or bankers and manager or
managers to administer the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the Company. In the
event the Company determines such banker or manager to be unsatisfactory, the
Company shall bear the difference, if any, in costs of the banker or manager
ultimately accepted and such rejected underwriter or manager.
2
c. PAYMENTS BY THE COMPANY. The Company shall cause the
registration statement to become effective as soon as practicable after filing,
but in no event later than the one hundred twentieth (120th) day following the
Closing Date (the "REGISTRATION DEADLINE"). If (i) the registration statement(s)
covering the Registrable Securities required to be filed by the Company pursuant
to Section 2(a) hereof is not declared effective by the SEC on or before the
Registration Deadline or if, after the registration statement has been declared
effective by the SEC, sales of Registrable Securities (including any Registrable
Securities required to be registered pursuant to Section 3(b) hereof) are not
permitted pursuant to the registration statement (including by reason of a stop
order or the Company's failure to update the registration statement) or (ii) the
Common Stock is not listed or included for quotation on the NASDAQ SmallCap
Market ("NASDAQ"), the NASDAQ National Market (the "NNM"), the New York Stock
Exchange (the "NYSE") or the American Stock Exchange (the "AMEX") at any time
after the Registration Deadline, then the Company will make payments to the
Investors in such amounts and at such times as shall be determined pursuant to
this Section 2(c) as partial relief for the damages to the Investors by reason
of any such delay in or reduction of their ability to sell the Registrable
Securities (which remedy shall not be exclusive of any other remedies available
at law or in equity). The Company shall pay to each Investor an amount equal to
the sum of (i) the aggregate principal amount of the Debentures held by such
Investor (including, without limitation, Debentures that have been converted
into Conversion Shares then held by such Investor) (the "AGGREGATE PURCHASE
PRICE") multiplied by two hundredths (.02) if the Registration Statement filed
pursuant to Section 2(a) is not declared effective on or prior to the
Registration Deadline plus (ii) an amount equal to the Aggregate Purchase Price
multiplied by two hundredths (.02) for each full thirty (30) day period
thereafter that the Registration Statement has not been declared effective or
that sales are not permitted pursuant to the Registration Statement after it has
been declared effective (including by reason of a stop order or the Company's
failure to update the registration statement) or that the Common Stock is not
listed or included for quotation on NASDAQ, the NYSE or AMEX (which amount shall
not be pro rated for periods of less than thirty (30) days); PROVIDED, HOWEVER
that there shall be excluded from each such period any delays which are solely
attributable to changes (other than corrections of Company mistakes with respect
to information previously provided by the Investors) required by the Investors
in the Registration Statement with respect to information relating to the
Investors, including, without limitation, changes to the plan of distribution
and PROVIDED, FURTHER, that the aggregate amount payable to any Investor under
this Section 2(c) shall not exceed ten percent (10%) of such Investor's
Aggregate Purchase Price. (For example, if the Registration Statement is not
effective by the Registration Deadline, the Company would pay $20,000 for each
$1,000,000 of Aggregate Purchase Price and the Company would pay an additional
$20,000 for each $1,000,000 of Aggregate Purchase Price thereafter for each
additional thirty (30) days the Registration Statement is not effective (up to a
maximum of $100,000 for each $1,000,000 Aggregate Purchase Price)). Such amounts
shall be paid in cash or, at each Investor's option, may be convertible into
Common Stock at the "CONVERSION PRICE" (as defined in the Debentures). Any
shares of Common Stock issued upon conversion of such amounts shall be
Registrable Securities. If the Investor desires to convert the amounts due
hereunder into Registrable Securities it shall so notify the Company in writing
within two (2) business days of the date on which such amounts are first payable
in cash and such amounts shall be so convertible (pursuant to the mechanics set
forth under Article II of the Debentures), beginning on the last day upon which
the cash amount would otherwise be due in accordance with the following
sentence. Payments of cash pursuant hereto shall be made within five (5) days
after the end of each period that gives rise to such obligation.
3
d. ELIGIBILITY FOR FORM S-3. The Company represents and
warrants that it meets the requirements for the use of Form S-3 for registration
of the sale by the Initial Investors and any other Investor of the Registrable
Securities and the Company shall file all reports required to be filed by the
Company with the SEC in a timely manner so as to maintain such eligibility for
the use of Form S-3.
3. OBLIGATIONS OF THE COMPANY. In connection with the registration of
the Registrable Securities, the Company shall have the following obligations:
a. The Company shall prepare promptly and file with the SEC
the Registration Statement required by Section 2(a), and cause such Registration
Statement relating to Registrable Securities to become effective as soon as
practicable after such filing, but in no event later than the Registration
Deadline, and keep the Registration Statement effective pursuant to Rule 415 at
all times until such date as is the earlier of (i) the date on which all of the
Registrable Securities have been sold and (ii) the date on which all Registrable
Securities (in the reasonable opinion of counsel to the Initial Investors) may
be immediately sold by the Investors to the public without registration
(including, in accordance with Rule 144(k) promulgated under the Securities Act)
(the "Registration Period"), which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein and all
documents incorporated by reference therein) shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein not misleading.
b. The Company shall prepare and file with the SEC such
additional Registration Statements and such amendments (including post-effective
amendments) and supplements to any Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to keep
the Registration Statement or Statements effective as to all Registrable
Securities at all times during the Registration Period, and, during such period,
comply with the provisions of the Securities Act with respect to the disposition
of all Registrable Securities of the Company covered by the Registration
Statement or Statements until such time as all of such Registrable Securities
have been disposed of in accordance with the intended methods of disposition by
the seller or sellers thereof as set forth in the Registration Statement. In the
event an Investor notifies the Company that the number of shares available
(including, if permissible, shares available by reason of Rule 416 under the
Securities Act) under a Registration Statement filed pursuant to this Agreement
was, for any three (3) consecutive trading days (the date the Investor notifies
the Company of such occurrence being the "REGISTRATION TRIGGER DATE"),
insufficient to cover a number of shares equal to the applicable Registration
Percentage (as defined below) multiplied by all of the Registrable Securities
issued or issuable upon conversion of the Debentures held by such Investor
(without giving effect to any limitations on conversion contained in Article
II.C of the Debentures),
4
the Company shall amend the Registration Statement, or file a new Registration
Statement (on the short form available therefor, if applicable), or both, so as
to cover one hundred fifty percent (150%) of the Registrable Securities issued
or issuable to such Investor (without giving effect to any limitations on
conversion contained in Article II.C of the Debentures), in each case, as soon
as practicable, but in any event within fifteen (15) days after the Registration
Trigger Date (based on the market price of the Common Stock and other relevant
factors on which the Company reasonably elects to rely). The Company shall cause
such amendment and/or new Registration Statement to become effective as soon as
practicable following the filing thereof. In the event the Company fails to
obtain the effectiveness of any such Registration Statement within ninety (90)
days after a Registration Trigger Date, each Investor shall thereafter have the
option, exercisable in whole or in part at any time and from time to time by
delivery of a written notice to the Company (a "REGISTRATION TRIGGER PREPAYMENT
NOTICE"), to require the Company to pay a portion of such Investor's Outstanding
Amount (as defined in Article I of the Debentures), such that the total number
of shares of Common Stock issuable to such Investor upon conversion of its
Debentures (without giving effect to any limitations on conversion contained in
Article II.C of the Debentures) does not exceed the number of shares then
registered under an effective Registration Statement. If the Corporation fails
to pay any portion of such Outstanding Amount within five (5) business days
after its receipt of a Registration Trigger Prepayment Notice, then such failure
shall be deemed a Mandatory Prepayment Event as defined in the Debentures, and
the Investor shall be entitled to the remedies provided in Article V.B of the
Debentures. As used herein, "REGISTRATION PERCENTAGE" means one hundred percent
(100%) for the period ending on the 150th day following the Closing Date and
means one hundred and thirty-five percent (135%) thereafter.
c. The Company shall furnish to each Investor whose
Registrable Securities are included in the Registration Statement and its legal
counsel (i) promptly after the same is prepared and publicly distributed, filed
with the SEC, or received by the Company, one copy of the Registration Statement
and any amendment thereto, each preliminary prospectus and prospectus and each
amendment or supplement thereto and, in the case of the Registration Statement
referred to in Section 2(a), to counsel to the Investors only, each letter
written by or on behalf of the Company to the SEC or the staff of the SEC, and
each item of correspondence from the SEC or the staff of the SEC, in each case
relating to such Registration Statement (other than the portion, if any, thereof
which contains information for which the Company has sought confidential
treatment) and (ii) such number of copies of a prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and such
other documents as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor.
d. The Company shall use reasonable efforts to (i) register
and qualify the Registrable Securities covered by the Registration Statement
under such other securities or "blue sky" laws of such jurisdictions in the
United States as each Investor who holds Registrable Securities being offered
reasonably requests, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; PROVIDED, HOWEVER, that the Company shall not be
5
required in connection therewith or as a condition thereto to (a) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause the Company undue expense
or burden, or (e) make any change in its charter or bylaws, which in each case
the Board of Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders.
e. In the event the Investors who hold a majority in interest
of the Registrable Securities being offered in an offering select underwriters
for the offering, the Company shall enter into and perform its obligations under
an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.
f. As promptly as practicable after becoming aware of such
event, the Company shall notify each Investor of the happening of any event, of
which the Company has knowledge, as a result of which the prospectus included in
the Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request.
g. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest practicable moment and to notify each
Investor who holds Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance of such order
and the resolution thereof.
h. The Company shall permit a single firm of counsel
designated by the Initial Investors to review the Registration Statement, all
amendments and supplements thereto and all written responses by the Company to
the SEC regarding the Registration Statement which relate to the Investors a
reasonable period of time (and in no event less than three (3) business days)
prior to their filing with the SEC, and not file any document in a form to which
such counsel reasonably objects. In the event such counsel fails to convey to
the Company all of its comments (or that it has no comments) to such
Registration Statement prior to the scheduled filing date of such Registration
Statement (which date shall comply with the requirements set forth in this
Section 3(h)), the sixty (60) and the one hundred and twenty (120) day periods
referred to in Section 2(a) and 2(c) shall be extended by such number of
business days after such scheduled filing date that such counsel so conveys such
comments (or that it has no comments).
i. The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the Securities Act) covering a
twelve-month period beginning not later than the first day of the Company's
fiscal quarter next following the effective date of the Registration Statement.
6
j. At the request of any Investor, if the Registration
Statement pertains to an underwritten public offering, the Company shall
furnish, on the date of effectiveness of the Registration Statement (i) an
opinion, dated as of such date, from counsel representing the Company addressed
to the Investors and in form, scope and substance as is customarily given in an
underwritten public offering and (ii) a letter, dated such date, from the
Company's independent certified public accountants in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and the
Investors.
k. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to the
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Investors, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "INSPECTORS") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; PROVIDED, HOWEVER, that each Inspector shall
hold in confidence and shall not make any disclosure (except to an Investor) of
any Record or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(a) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (b) the release of such
Records is ordered pursuant to a subpoena or other order from a court or
government body of competent jurisdiction, or (c) the information in such
Records has been made generally available to the public other than by disclosure
in violation of this or any other agreement. The Company shall not be required
to disclose any confidential information in such Records to any Inspector until
and unless such Inspector shall have entered into confidentiality agreements (in
form and substance satisfactory to the Company) with the Company with respect
thereto, substantially as set forth in this Section 3(k). Each Investor agrees
that it shall, upon learning that disclosure of such Records is sought in or by
a court or governmental body of competent jurisdiction or through other means,
give prompt notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the Records deemed confidential. Nothing herein shall be deemed to
limit the Investor's ability to sell Registrable Securities in a manner which is
otherwise consistent with applicable laws and regulations.
l. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement, or (v) such Investor
consents to the form and content of any such disclosure. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure, and allow the Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
7
m. The Company shall use its best efforts to promptly either
(i) cause all the Registrable Securities covered by the Registration Statement
to be listed on the NYSE or the AMEX or another national securities exchange and
on each additional national securities exchange on which securities of the same
class or series issued by the Company are then listed, if any, if the listing of
such Registrable Securities is then permitted under the rules of such exchange,
or (ii) secure the designation and quotation, of all the Registrable Securities
covered by the Registration Statement on the NASDAQ Small Cap Market or the NNM
and, without limiting the generality of the foregoing, to arrange for or
maintain at least two market makers to register with the National Association of
Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities.
n. The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
o. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Investors may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Investors may request, and, within three (3)
business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall cause legal
counsel selected by the Company to deliver, to the transfer agent for the
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) an opinion of such
counsel in the form attached hereto as EXHIBIT 1.
p. At the request of any Investor, the Company shall prepare
and file with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary in order to change the plan
of distribution set forth in such Registration Statement.
4. OBLIGATIONS OF THE INVESTORS. In connection with the registration of
the Registrable Securities, the Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least ten (10)
business days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor in writing of the information
the Company reasonably requires from each such Investor and each such Investor
shall provide such information no later than five (5) business days prior to
such anticipated filing date.
8
b. Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
c. Each Investor whose Registrable Securities are included in
a Registration Statement understands that the Securities Act may require
delivery of a prospectus relating thereto in connection with any sale thereof
pursuant to such Registration Statement and each such Investor shall deliver a
prospectus in connection with any such sale.
d. Each Investor agrees to notify the Company promptly, but in
any event within 72 hours after the date on which all Registrable Securities,
Debentures and Common Shares owned by such Investor have been sold by such
Investor, if such date is prior to the expiration of the Registration Period, so
that the Company may comply with its obligation to terminate the Registration
Statement in accordance with Item 512 of Regulation S-K or Regulation S-B, as
the case may be.
e. In the event Investors holding a majority in interest of
the Registrable Securities being offered determine to engage the services of an
underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
f. Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(f)
or 3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
g. No Investor may participate in any underwritten offering of
Registrable Securities hereunder unless such Investor (i) agrees to sell such
Investor's Registrable Securities on the basis provided in any underwriting
arrangements in usual and customary form entered into by the Company, (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements, and (iii) agrees to pay its pro rata share of
all underwriting discounts and commissions and any expenses in excess of those
payable by the Company pursuant to Section 5 below.
9
5. EXPENSES OF REGISTRATION. All expenses incurred by the Company in
connection with registrations, filings or qualifications pursuant to Sections 2
and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, the fees and disbursements of
counsel for the Company and the fees and disbursements contemplated by Section
3(j) hereof shall be borne by the Company. The Investors shall be responsible
for any underwriting discounts and commissions attributable to the Registrable
Securities to be sold by them and the legal fees and disbursements contemplated
by Section 2(b) hereof, except to the extent otherwise set forth in Section
2(b).
6. INDEMNIFICATION. In the event any Registrable Securities are
included in a Registration Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify,
hold harmless and defend (i) each Investor who holds such Registrable
Securities, and (ii) the directors, officers, partners, members, employees,
agents and each person who controls any Investor within the meaning of Section
15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT"), if any, (each, an "INDEMNIFIED PERSON"),
against any joint or several losses, claims, damages, liabilities or expenses
(collectively, together with actions, proceedings or inquiries by any regulatory
or self-regulatory organization, whether commenced or threatened, in respect
thereof, "CLAIMS") to which any of them may become subject insofar as such
Claims arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of a material fact in a Registration Statement or the omission
or alleged omission to state therein a material fact required to be stated or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities (the matters in the foregoing clauses (i) through (iii) being,
collectively, "VIOLATIONS"). Subject to the restrictions set forth in Section
6(c) with respect to the number of legal counsel, the Company shall reimburse
the Investors and each such underwriter or controlling person, promptly as such
expenses are incurred and are due and payable, for any reasonable legal fees or
other reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by such Indemnified Person expressly for use in the Registration
Statement or any such amendment thereof or supplement thereto; (ii) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
10
unreasonably withheld; and (iii) with respect to any preliminary prospectus,
shall not inure to the benefit of any Indemnified Person if the untrue statement
or omission of material fact contained in the preliminary prospectus was
corrected on a timely basis in the prospectus, as then amended or supplemented,
if such corrected prospectus was timely made available by the Company pursuant
to Section 3(c) hereof, and the Indemnified Person was promptly advised in
writing not to use the incorrect prospectus prior to the use giving rise to a
Violation and such Indemnified Person, notwithstanding such advice, used it.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not jointly
to indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 6(a), the Company, each of its directors, each of
its officers who signs the Registration Statement, its employees, agents and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the Securities Act or the Exchange Act (each
an "INDEMNIFIED PARTY"), against any Claim to which any of them may become
subject, under the Securities Act, the Exchange Act or otherwise, insofar as
such Claim arises out of or is based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and subject to
Section 6(c) such Investor will reimburse any legal or other expenses (promptly
as such expenses are incurred and are due and payable) reasonably incurred by
them in connection with investigating or defending any such Claim; PROVIDED,
HOWEVER, that the indemnity agreement contained in this Section 6(b) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent shall not be
unreasonably withheld; PROVIDED, FURTHER, HOWEVER, that the Investor shall be
liable under this Agreement (including this Section 6(b) and Section 7) for only
that amount as does not exceed the net proceeds actually received by such
Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented, and the Indemnified Party failed to utilize
such corrected prospectus.
c. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed,
11
to assume control of the defense thereof with counsel mutually satisfactory to
the indemnifying party and the Indemnified Person or the Indemnified Party, as
the case may be; PROVIDED, HOWEVER, that such indemnifying party shall not be
entitled to assume such defense and an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential conflicts of interest between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding or the actual or potential defendants in, or targets
of, any such action include both the Indemnified Person or the Indemnified Party
and the indemnifying party and any such Indemnified Person or Indemnified Party
reasonably determines that there may be legal defenses available to such
Indemnified Person or Indemnified Party which are different from or in addition
to those available to such indemnifying party. The indemnifying party shall pay
for only one separate legal counsel for the Indemnified Persons or the
Indemnified Parties, as applicable, and such legal counsel shall be selected by
Investors holding a majority-in-interest of the Registrable Securities included
in the Registration Statement to which the Claim relates (with the approval of
the Initial Investors if they holds Registrable Securities included in such
Registration Statement), if the Investors are entitled to indemnification
hereunder, or by the Company, if the Company is entitled to indemnification
hereunder, as applicable. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is actually prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION. To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; PROVIDED,
HOWEVER, that (i) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6, (ii) no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
such fraudulent misrepresentation, and (iii) contribution (together with any
indemnification or other obligations under this Agreement) by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE EXCHANGE ACT. With a view to making available to
the Investors the benefits of Rule 144 promulgated under the Securities Act or
any other similar rule or regulation of the SEC that may at any time permit the
Investors to sell securities of the Company to the public without registration
("RULE 144"), the Company agrees to:
a. file with the SEC in a timely manner and make and keep
available all reports and other documents required of the Company under the
Securities Act and the Exchange Act so long
12
as the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing and availability of such reports
and other documents is required for the applicable provisions of Rule 144; and
b. furnish to each Investor so long as such Investor owns
Debentures, Common Shares or Registrable Securities, promptly upon request, (i)
a written statement by the Company that it has complied with the reporting
requirements of Rule 144, the Securities Act and the Exchange Act, (ii) a copy
of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably requested to permit the Investors to sell such securities
pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS. The rights of the Investors
hereunder, including the right to have the Company register Registrable
Securities pursuant to this Agreement, shall be automatically assignable by each
Investor to any transferee of all or any portion of the Debentures, Common
Shares or the Registrable Securities if: (i) the Investor agrees in writing with
the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company within a reasonable time after such assignment, (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned, (iii) following such transfer or assignment,
the further disposition of such securities by the transferee or assignee is
restricted under the Securities Act and applicable state securities laws, (iv)
at or before the time the Company receives the written notice contemplated by
clause (ii) of this sentence, the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions contained herein, and (v) such
transfer shall have been made in accordance with the applicable requirements of
the Securities Purchase Agreement.
10. AMENDMENT OF REGISTRATION RIGHTS. Provisions of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with
written consent of the Company, the Initial Investors (to the extent the Initial
Investors still own Debentures, Common Shares or Registrable Securities) and
Investors who hold a majority in interest of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered
13
personally or by courier or by confirmed telecopy, and shall be effective five
days after being placed in the mail, if mailed, or upon receipt or refusal of
receipt, if delivered personally or by courier or confirmed telecopy, in each
case addressed to a party. The addresses for such communications shall be:
If to the Company:
Palomar Medical Technologies, Inc.
00 Xxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxx Xxxxxx, Director of Finance
with a copy to each of the Company's General Counsel at the
same address and to:
Xxxxx, Xxxx & Xxxxx LLP
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxx X. Xxxxxx, Esq.
and if to any Investor, at such address as such Investor shall have provided in
writing to the Company, or at such other address as each such party furnishes by
notice given in accordance with this Section 11(b).
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts made
and to be performed in the State of Delaware. The Company irrevocably consents
to the jurisdiction of the United States federal courts located in the County of
Kent in the State of Delaware in any suit or proceeding based on or arising
under this Agreement and irrevocably agrees that all claims in respect of such
suit or proceeding may be determined in such courts. The Company irrevocably
waives the defense of an inconvenient forum to the maintenance of such suit or
proceeding. The Company further agrees that service of process upon the Company,
mailed by first class mail shall be deemed in every respect effective service of
process upon the Company in any such suit or proceeding. Nothing herein shall
affect the Investors' right to serve process in any other manner permitted by
law. The Company agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
e. This Agreement and the Securities Purchase Agreement
(including all schedules and exhibits thereto) constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or
14
undertakings, other than those set forth or referred to herein and therein. This
Agreement and the Securities Purchase Agreement supersede all prior agreements
and understandings among the parties hereto with respect to the subject matter
hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
j. All consents and other determinations to be made by the
Investors or the Initial Investors pursuant to this Agreement shall be made by
the Investors or the Initial Investors holding a majority of the Registrable
Securities (determined as if all Debentures then outstanding had been converted
into or exercised for Registrable Securities) held by all Investors or Initial
Investors, as the case may be.
k. The initial number of Registrable Securities included on
any Registration Statement and each increase to the number of Registrable
Securities included thereon shall be allocated pro rata among the Investors
based on the number of Registrable Securities held by each Investor at the time
of such establishment or increase, as the case may be. In the event an Investor
shall sell or otherwise transfer any of such holder's Registrable Securities,
each transferee shall be allocated a pro rata portion of the number of
Registrable Securities included on a Registration Statement for such transferor.
Any shares of Common Stock included on a Registration Statement and which remain
allocated to any person or entity which does not hold any Registrable Securities
shall be allocated to the remaining Investors, pro rata based on the number of
shares of Registrable Securities then held by such Investors.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
15
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
PALOMAR MEDICAL TECHNOLOGIES, INC.
By:
-------------------------------
Name:
-----------------------------
Its:
------------------------------
Initial Investors:
Name:
-----------------------------
By:
-----------------------------
Name:
-----------------------------
Its:
-----------------------------
Exhibi1
To Exhibit B
REGISTRATION RIGHTS AGREEMENT
[Date]
VIA FACSIMILE: (000) 000-0000
Xxxxxxx Xxxxxx, Esq.
AMERICAN STOCK TRANSFER & TRUST COMPANY
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
RE: PALOMAR MEDICAL TECHNOLOGIES, INC.
Dear Xx. Xxxxxx:
We are counsel to PALOMAR MEDICAL TECHNOLOGIES, INC., a corporation organized
under the laws of the State of Delaware (the "COMPANY"), and we understand that
[Name of Investor] (the "HOLDER") has purchased from the Company (i) 6%, 7% and
8% Convertible Debentures Due September 30, 2002 (the "DEBENTURES") that are
convertible into shares of the Company's Common Stock, par value $.01 per share
(the "COMMON STOCK") and (ii) shares of Common Stock (the "COMMON SHARES"). The
Debentures and Common Shares were purchased by the Holder pursuant to a
Securities Purchase Agreement, dated as of September 30, 1997, by and among the
Company and the signatories thereto (the "AGREEMENT"). Pursuant to a
Registration Rights Agreement, dated as of September 30, 1997, by and among the
Company and the signatories thereto (the "REGISTRATION RIGHTS AGREEMENT"), the
Company agreed with the Holder, among other things, to register the Registrable
Securities (as that term is defined in the Registration Rights Agreement) under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), upon the terms
provided in the Registration Rights Agreement. In connection with the Company's
obligations under the Registration Rights Agreement, on ________, 1997, the
Company filed a Registration Statement on Form S-___ (File No. 333-
_____________) (the "REGISTRATION STATEMENT") with the Securities and Exchange
Commission (the "SEC") relating to the Registrable Securities, which names the
Holder as a selling stockholder thereunder.
[Customary introductory and scope of examination language to be inserted]
Based on the foregoing, we are of the opinion that the Registrable Securities
have been registered under the Securities Act.
[Other customary language to be included.]
Very truly yours,
cc: [Name of Investor]
EXHIBIT C
As of September 30, 1997
JNC Opportunity Fund Ltd.
Olympia Capital (Cayman) Ltd.
c/o Olympia Capital (Bermuda) Ltd.
Xxxxxxxx Xxxxx
00 Xxxx Xxxxxx
Xxxxxxxx XX00, Xxxxxxx
Attn: Xxxxxx Xxxxx
Diversified Strategies Fund, L.P.
c/o Encore Capital Management, L.L.C.
00000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxx X. Xxxx
Southbrook International Investments, Ltd.
c/o Trippoak Advisors, Inc.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx
Re: PALOMAR MEDICAL TECHNOLOGIES, INC.
Ladies and Gentlemen:
We have acted as special counsel to Palomar Medical Technologies, Inc.,
a Delaware corporation (the "Company"), in connection with the sale of (a) $7
million principal amount of the Company's 6%, 7% and 8% Convertible Debentures
(the "Debentures"), which are convertible into shares of the Company's Common
Stock, par value $.01 per share (the "Common Stock"), and (b) certain other
shares of Common Stock (the "Common Shares") pursuant to the terms and
conditions of that certain Securities Purchase Agreement dated as of September
30, 1997 (the "Purchase Agreement") by and between the Company and you (the
"Purchasers").
1
Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings assigned to such terms in the Purchase
Agreement.
In connection with our rendering of the opinions expressed below, we
reviewed
(a) the Certificate of Incorporation (the "Charter") and By-Laws (the
"By-Laws") of the Company, each as amended to date;
(b) certificates issued by the Secretary of State of the State of
Delaware dated September 26, 1997, with respect to the legal existence and good
standing of the Company, Palomar Medical Products, Inc., Nexar Technologies,
Inc., Cosmetic Technology International, Inc., Spectrum Medical Technologies,
Inc., Palomar Electronics Corporation and Dynaco Corp. in Delaware, and a
certificate issued by the Secretary of State of the State of California dated
September 26, 1997, with respect to the legal existence and good standing of
Comtel Electronics in California (such entities, other than the Company,
hereinafter referred to as the "Subsidiaries");
(c) a certificate issued by the Secretary of State of The Commonwealth
of Massachusetts dated September 29, 1997, as to the qualification of the
Company to conduct business as a foreign corporation;
(d) a certified copy of certain resolutions of the Board of Directors
of the Company;
(e) the Purchase Agreement, the Registration Rights Agreement and the
form of Debenture;
(f) the other documents delivered at the closing of the transactions
contemplated by the Purchase Agreement;
(g) certificates of the Company with respect to certain factual
matters;
(h) the agreements, instruments and documents listed on EXHIBIT A
attached hereto (the "Listed Agreements"); and
(i) such other documents and certificates as we have deemed necessary
to enable us to render the opinions expressed below.
In rendering the opinions expressed in paragraph 1 below with respect
to the legal existence and good standing of the Company in Delaware and of the
Subsidiaries in their respective jurisdictions of organization, and with respect
to qualification and good standing of the Company as a foreign corporation in
The Commonwealth of Massachusetts, we have relied solely upon the certificates
referred to in clauses (b) and (c) of the preceding paragraph, and such
2
opinions are given as of the date of such certificates. We express no opinion as
to the tax good standing of the Company or any Subsidiary.
With respect to the opinion expressed in paragraph 6 below, we note
that we did not observe or supervise the activities of the Company or its
representatives in connection with the offering and sale of the Debentures. In
rendering such opinion we have assumed based solely upon the factual
representation of the Company made or delivered to us and without other
investigation that in connection with such offering and sale there has been no
general solicitation or general advertising by the Company or its
representatives. We have also assumed that no person subject to 950 C.M.R.
14.402(b)(9)(F) has engaged in any activity prohibited thereby and that no
subsequent offer or sale of securities of the Company will adversely affect the
availability of the exemptions from registration referred to in paragraph 6 of
this opinion with respect to the offer or sale of the Debentures, the Conversion
Shares or the Common Shares.
In rendering the opinions expressed herein, we have also examined and
have relied completely upon all of the representations and warranties as to
matters of fact contained in the Purchase Agreement and contained in the related
instruments and other documents delivered by the Company to you in connection
with the issuance and sale of the Debentures, and we have assumed the
completeness and accuracy of all factual matters described in such
representations and warranties.
We have not, except as specifically noted above, made any independent
review or investigation of facts relating to the Company, including, without
limiting the generality of the foregoing, any investigation as to the existence
of any actions, suits or proceedings pending or threatened against the Company
or agreements, judgments, injunctions, orders or decrees binding upon the
Company or which might result in the imposition of any lien or other encumbrance
on any assets of the Company.
We have assumed the authenticity and completeness of all documents
furnished to us as originals, the genuineness of all signatures (other than on
behalf of the Company), the legal capacity of natural persons, the conformity to
the originals of all documents furnished to us as copies, and the accuracy and
completeness of all corporate records made available to us by the Company.
When an opinion set forth below is given to our knowledge, the
knowledge is limited to the conscious awareness of facts or other information of
Xxxxxx X. Xxxxx, Esquire, Xxxx X. Xxxxxx, Esquire, and Xxxxxxxxx X. Xxxx,
Esquire, who are the individual lawyers in our firm who were actively involved
in representation of the Company with respect to the transactions contemplated
by the Purchase Agreement and, except as expressly stated herein, without any
special or additional investigation undertaken for the purposes of this opinion.
3
You have not asked us to pass upon your power and authority to enter
into the Purchase Agreement or the Registration Rights Agreement. Accordingly,
for the purposes of this opinion, we have assumed that each of you has all
requisite power and authority to enter into the Purchase Agreement and the
Registration Rights Agreement and to effect all of the transactions thereunder,
and that the Purchase Agreement, the Registration Rights Agreement and each
other agreement or instrument we have reviewed constitutes the legal, valid and
binding obligation of all parties thereto other than the Company.
We have made such examination of Massachusetts law, Federal law and the
corporation law of the State of Delaware as we deem necessary for the purposes
of this opinion. We do not purport to pass herein on the laws of any state or
jurisdiction other than the federal law of the United States of America, the law
of The Commonwealth of Massachusetts and the corporation law of the State of
Delaware. Our opinions are given only as of the date hereof, and we expressly
disclaim any continuing obligation or undertaking to supplement or update any of
our statements herein. We have assumed that no Purchaser is an "interested
stockholder" within the meaning of Section 203 of the Delaware General
Corporation Law.
We note that the Purchase Agreement, the Registration Rights Agreement
and the Debentures are governed by the law of the State of Delaware. We have
assumed, with your permission, that the substantive law of the State of
Delaware, other than the corporation law of the State of Delaware, is identical
in all respects material to our opinions to the substantive law of The
Commonwealth of Massachusetts.
The opinions herein expressed are qualified to the extent that (a) the
validity or enforceability of any provisions of any agreement or instrument may
be subject to or affected by any bankruptcy, reorganization, insolvency,
moratorium, fraudulent conveyance, fraudulent transfer or similar law of general
application from time to time in effect and relating to or affecting the rights
or remedies of creditors generally, (b) the remedy of specific performance or
any other equitable remedy may be unavailable in any jurisdiction or may be
withheld as a matter of judicial discretion, and (c) the enforcement of any
rights or remedies is or may be subject to an implied duty on the part of the
party seeking to enforce such rights to take action and make determinations on a
reasonable basis and in good faith. In addition, we express no opinion herein as
to: prospective waivers of rights to notice or a hearing or of other rights
granted by constitution or statute; powers of attorney; provisions purporting to
relieve parties of the consequences of their own negligence or misconduct;
provisions purporting to establish evidentiary standards; or provisions to the
effect that rights or remedies are not exclusive, that every right or remedy is
cumulative and may be exercised in addition to any other right or remedy, or
that failure to exercise or delay in exercising rights and remedies will not
operate as a waiver of any such right or remedy. With your permission, we have
assumed for all purposes under this opinion that the Company is not, and
following completion of the transactions contemplated by the Purchase Agreement
will not be, insolvent, left with unreasonably small capital, or unable to pay
4
its debts as they mature. We express no opinion as to the effect of the laws of
any jurisdiction wherein the Company or you may be located, or wherein
enforcement of the Purchase Agreement or the Debentures may be limited, with
respect to the rates of interest legally chargeable or collectible thereunder.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own its properties and to conduct its business
as currently conducted. The Company has power and authority to enter into and
perform each of the Purchase Agreement and the Registration Rights Agreement and
to issue the Debentures and the Common Shares and to issue the Conversion Shares
upon conversion of the Debentures. Each of the Subsidiaries is a corporation
validly existing and in good standing under the laws of its state of
incorporation. We have advised you that Tissue Technologies, Inc., a subsidiary
of the Company, is not in good standing in the State of Arizona. The Company is
duly qualified as a foreign corporation and is in good standing in The
Commonwealth of Massachusetts, and, based on factual representations by the
Company to us, there is no other state or jurisdiction in which the failure to
be so qualified would have a material adverse effect on the Company.
2. The Purchase Agreement, the Registration Rights Agreement and the
Debentures have been duly and validly executed and delivered by the Company and
constitute the legal, valid and binding obligations of the Company enforceable
against the Company in accordance with their respective terms, except that we do
not express any opinion as to the validity or enforceability of the
indemnification and contribution provisions of the Registration Rights
Agreement.
3. The authorized capital stock of the Company consists of (a)
100,000,000 shares of Common Stock and (b) 5,000,000 shares of Preferred Stock,
par value $.01 per share.
4. The Common Shares and the Conversion Shares are duly authorized and,
when issued in accordance with the Purchase Agreement and the Debentures,
respectively, will be validly issued, fully paid and non-assessable. The Company
has reserved for issuance upon conversion of the Debentures 3,500,000 shares of
the Company's authorized but unissued Common Stock, as well as such additional
shares of Common Stock as may be required to be issued upon conversion as a
result of the antidilution provisions of the Debentures or as a result of
changes in the market price of the Common Stock.
5. Except for certain contractual rights in favor of the holders of the
Company's Series H Convertible Preferred Stock (the "Series H Preemptive
Rights"), to our knowledge there are no preemptive rights or other similar
rights of stockholders of the Company to acquire the Debentures, the Common
Shares or the Conversion Shares or any other securities of the
5
Company upon issuance of the Debentures, the Common Shares or the Conversion
Shares contained in the Charter, the By-Laws or the Listed Agreements. We have
been provided you with such documentation as has been furnished to us by the
Company regarding the Company's compliance with its obligations with respect to
the Series H Preemptive Rights, and, with your permission, we express no opinion
with respect to such matters.
6. Assuming the accuracy of the respective representations and
warranties of the Company and the Purchasers set forth in the Purchase
Agreement, the offer, issuance, sale and delivery of the Debentures, the Common
Shares and the Conversion Shares in accordance with the terms of the Purchase
Agreement and the Debentures constitute exempt transactions under the Securities
Act of 1933, as amended.
7. The execution, delivery and performance of the Purchase Agreement
and Registration Rights Agreement by the Company, the performance of its
obligations under the Debentures, and the consummation by the Company of the
transactions contemplated by the Purchase Agreement and the Registration Rights
Agreement, including, without limitation, the issuance of the Debentures and the
issuance and reservation for issuance of the Conversion Shares in accordance
with the terms of the Debentures, do not and will not result in a violation of
the Charter or By-Laws or conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any of the Listed Agreements except for such conflicts,
defaults, terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a Material Adverse Effect
or a material adverse effect on the Company's ability to perform its obligations
under the Purchase Agreement or the Registration Rights Agreement or the
Purchasers' rights as holders of Debentures.
8. The execution, delivery and performance of the Purchase Agreement,
the Registration Rights Agreement and the Debentures by the Company and the
consummation by the Company of the transactions contemplated by the Purchase
Agreement and the Registration Rights Agreement, including, without limitation,
the issuance of the Debentures and the Common Shares, the issuance and the
reservation for issuance of the Conversion Shares in accordance with the terms
of the Debentures (a) do not and will not result in a violation of the
corporation law of the State of Delaware or any federal or Massachusetts law,
rule, or regulation, or by which, to our knowledge, any property or asset of the
Company is bound or affected, and (b) except as set forth in paragraph 5 hereof
and except with respect to a breach of certain financial covenants under
$100,000 outstanding principal amount of the Company's 4.5% Convertible
Subordinated Promissory Note dated October 24, 1996, will not require the
Company to obtain any approval, consent, authorization, waiver, exemption or
order of, or make any filing or registration with, any court or governmental or
regulatory agency, self regulatory organization or stock market or exchange or,
to our knowledge, any third party, in order for it to execute, deliver or
perform any of its obligations under the Purchase Agreement or the Registration
Rights Agreement or to issue and deliver the Debentures and the Common Shares or
to issue and deliver the Conversion Shares
6
in accordance with the terms of the Debentures or for you to exercise your
rights and remedies under any of the Purchase Agreement or the Registration
Rights Agreement (other than any SEC, NASD, NASDAQ or state securities filings
which may be required to be made by the Company subsequent to the consummation
of the transactions contemplated by the Purchase Agreement and other than with
respect to any registration statement which may be filed or may be required to
be filed pursuant to the Registration Rights Agreement). We express no opinion
with respect to any provision of the securities or "blue sky" laws of any state
or other jurisdiction other than, with respect to its securities or "blue sky"
laws, The Commonwealth of Massachusetts.
9. To our knowledge, the Company currently meets the registrant
eligibility requirements to register the resale of the Common Shares on form S-3
under the Securities Act.
These opinions are limited to the matters expressly stated herein and
are rendered solely for your benefit and may not be quoted or relied upon for
any other purpose or by any other person.
Very truly yours,
XXXXX, XXXX & XXXXX LLP
By: Xxxxx X. Xxxxxxxx
-------------------
A Partner
EXHIBIT A
TO
EXHIBIT C
Agreement and Plan of Reorganization dated March 9, 1996 by and among the
Company, TTI Acquisition Corp.,
Tissue Technologies, Inc. and Xxxxx Xxxxxx
Amendment to the Merger Agreement dated April 29,1996 by and among the Company,
TTI Acquisition Corp.,
Tissue Technologies, Inc. and Xxxxx Xxxxxx
Letter from the Company to Tissue Technologies, Inc. waiving the Company's right
to receive indemnification under Section 6 of the Merger Agreement in certain
circumstances
Plan of Merger dated May 3, 1996 by and between the Company, TTI Acquisition
Corp. and Tissue Technologies, Inc.
List of exhibits and schedules omitted from the Tissue Technologies, Inc. Merger
Agreement
Stock Purchase Agreement dated March 19, 1996, by and between Dynaco Acquisition
Corp., Comtel Electronics, Inc., Xxxxx X. Xxxxx, Xxxxx Xxxxx and Palomar
Electronics Corp.
Agreement for Purchase of Stock dated July 12,1996, by and between the Company,
Xxxxxxx Xxxxxxx Xxxxxxx
and Xxxxxxx Xxxxxxx
Restated Certificate of Incorporation, as amended
Certificate of Amendment to Certificate of Incorporation, as filed with the
Delaware Secretary of State on December 16, 1996
Certificate of Designation of Series G Convertible Preferred Stock as filed with
the Delaware Secretary of State on September 26, 1996
Certificate of Designation of Series H Convertible Preferred Stock as filed with
the Delaware Secretary of State on Xxxxx 00, 0000
Xxxxxx, as amended
Form of Common Stock Certificate
Patent License Agreement by and between the Company and Patlex Corporation,
effective as of January 1, 1992
1996 Stock Option Plan
1996 Employee Stock Purchase Plan
Form of Stock Option Agreement under the 1996 Stock Option Plan
Securities Purchase Agreement between the Company and The Travelers Insurance
Company dated July 12, 1996
Warrant to purchase Common Stock of the Company, dated July 12, 1996
Subscription Agreement between the Company and Genesee Fund Limited, dated
September 26, 1996
Registration Rights Agreement between the Company and Genesee Fund Limited,
dated September 26, 1996
Warrant to purchase Common Stock of the Company, dated September 27, 1996
Warrant Agreement between the Company and American Stock Transfer & Trust Co. as
warrant agent, dated June 24, 1996
Palomar Medical Technologies, Inc. and American Stock Transfer & Trust Company
as trustee, Indenture dated as of June 24, 1996, SF 25,000,000, 4.5% Convertible
Subordinated Debentures due 2003
Form of Offshore Securities Subscription Agreement, dated July 3, 1996
Form of Registration Rights Agreement, dated July 3, 1996
Form of Debenture, dated July 3, 1996
Form of Warrant, dated July 3, 1996
Berckeley Subscription Agreement, dated December 31, 1996 and Amendment thereto
dated January 10, 0000
Xxxxxxxxx Xxxxxxxxx, dated December 31, 1996
High Risk Opportunities Hub Fund, Ltd. Subscription Agreement, dated January 14,
1997
High Risk Opportunities Hub Fund, Ltd. Debenture, dated January 13, 1997
Securities Purchase Agreement between Palomar Electronics Corporation and
Clearwater Fund IV, LLC, dated December 31, 1996
Securities Purchase Agreement between Palomar Electronics Corporation, the
Company and The Travelers Insurance Company, dated as of December 18, 1996
Securities Purchase Agreement between Palomar Electronics Corporation and GFL
Advantage Fund Limited dated December 31, 1996
Option Agreement between the Company and GFL Advantage Fund Limited dated
December 31, 1996
Common Stock Purchase Warrant dated December 31, 1996
Form of Net Warrant to Purchase Common Stock
Subscription Agreement between the Company and Finmanagement, Inc. dated
December 27, 1996
Subscription Agreement dated as of April 12, 1996, between the Company and GFL
Advantage Fund Limited
Registration Rights Agreement dated as of April 17, 1996 by and between the
Company and GFL Advantage Fund Limited
Warrant dated as of April 16, 1996
Form of Wan-ant to purchase Common Stock dated February 1, 1996
Form of Offshore Stock Subscription Agreement dated February 1, 1996
Form of Subscription Agreement dated as of March 10, 1997
Form Registration Rights Agreement dated as of March 10, 1997
Form of 5% Convertible Debenture due March 10, 2002
Subscription Agreement between the Company and Soginvest Bank dated as of Xxxxx
00, 0000
Xxxxx Purchase and Settlement Agreement by and among the Company, Nexar
Technologies, Inc., Technovation Computer Labs, Inc. and Xxxxx X. Xxxxxxxx dated
February 28, 1997
List of exhibits omitted from the Asset Purchase and Settlement Agreement
Employment Agreement dated as of January 1, 1997, between the Company and Xxxxxx
Xxxxxxxx
Employment Agreement dated as of January 1, 1997, between the Company and
Xxxxxxx X. Xxxxxxxx
Employment Agreement dated as of January 1, 1997, between the Company and Xxxxxx
X. Xxxxxx
Employment Agreement dated as of January 1, 1997, between the Company and
Xxxxxxx Xxxxxxxx
Securities Purchase Agreement between the Company and RGC International
Investors, LDC, dated March 27, 1997
Registration Rights Agreement between the Company and RGC International
Investors, LDC, dated March 27, 1997
Form of Promissory Note dated October 17,1996
Form of Subscription Agreement dated October 16, 1996
Supplement to Securities Purchase Agreement dated May 5, 1997
Supplement to Registration Rights Agreement dated May 5, 1997
Supplement to Securities Purchase Agreement dated May 23, 1997
Supplement to Registration Rights Agreement dated May 23, 1997
Consent of Xxxxxx Xxxxxxxx UP
Agreement, dated December 30, 1993, by and between the Company, Dynaco
Corporation and Dynaco West Corporation
First Amendment to Purchase and Sale Agreement, by and between the Company,
Dynaco Corporation and Dynaco, West Corporation, dated January 24, 1994
Purchase and Sale Agreement dated March 14, 1995, by and between the Company and
SPMT Acquisition Corp., Spectrum Medical Technologies, Inc., Xxxxxxx X Xxxx and
CSF Investments Ltd.
Purchase and Sale Agreement dated June 5, 1995, by and between Dynaco
Acquisition Corporation and Inter-Connecting Products, Inc.
1991 Stock Option Plan, as amended
1993 Stock Option Plan
1995 Stock Option Plan
Form of Stock Option Grant under the 1991, 1993 and 1995 Stock Option Plans
Form of Company Warrant to Purchase Common Stock
Lease for premises at 00 Xxxxxx Xxxx Xxxxx, Xxxxxxx, Xxxxxxxxxxxxx, dated May
25, 1993
The Company's 401(k) Plan
EXHIBIT D
October 8, 1997
VIA FACSILIME
Xxxxxxx Xxxxxx, Esq.
AMERICAN STOCK TRANSFER & TRUST COMPANY
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile (000) 000-0000
RE: PALOMAR MEDICAL TECHNOLOGIES, INC.
Dear Xx. Xxxxxx:
Reference is made to that certain Securities Purchase Agreement, dated
September 30, 1997, by and among Palomar Medical Technologies Inc., a Delaware
corporation (the "Company") and the other signatories thereto (each, a "Holder")
pursuant to which the Company is issuing to the Holders $7,000,000 6%, 7% and 8%
Debentures (the "Debentures"). The Debentures are convertible into shares of the
Company's common stock, par value $.01 per share (the "Conversion Shares"). This
letter shall serve as our irrevocable authorization and direction to you to
issue Conversion Shares to Holder from time to time upon the direction of the
Company. Certificates for the Conversion Shares shall not bear any legend
restricting their transfer and should not be subject to any stop-transfer
restriction; PROVIDED, HOWEVER that if the Conversion Shares are not registered
for resale under the Securities Act of 1933, as amended, then the certificates
for the Conversion Shares shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF
COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS
SOLD PURSUANT TO RULE 144 UNDER THE ACT."
1
Please be advised that the Holder is relying upon this letter as an
inducement to enter into the Securities Purchase Agreement and, accordingly,
Holder is a third party beneficiary to these instructions. Moreover, the Company
cannot revoke or modify these instructions without the prior written consent of
Holder.
Please execute this letter in the space indicated to acknowledge your
agreement to act in accordance with these instructions. Should you have any
questions concerning this matter, please contact me at (000) 000-0000.
Very truly yours,
PALOMAR MEDICAL TECHNOLOGIES INC.
By:
------------------------------
Name: XXXXX X. XXXXXXX
Title: PRESIDENT,
CHIEF EXECUTIVE OFFICER,
CHAIRMAN
Acknowledged:
AMERICAN STOCK TRANSFER
& TRUST COMPANY
By:
-------------------
Name:
-------------------
Title:
-------------------
Date:
-------------------
Enclosure
cc: JNC Opportunity Fund, Ltd.
Diversified Strategic Fund, L.P.
Southbrook International Investment, Ltd.
SCHEDULE 3(A)
SCHEDULE OF SIGNIFICANT SUBSIDIARIES
PALOMAR MEDICAL PRODUCTS, INC. DYNACO CORP.
00 Xxxxxx Xxxx Xxxxx 0000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, XX 00000 Xxxxx, XX 00000
Tel: 000-000-0000 Tel: 000-000-0000
Fax: 000-000-0000 Fax: 000-000-0000
COSMETIC TECHNOLOGY INTERNATIONAL, INC. COMTEL ELECTRONICS, INC.
00 Xxxxxx Xxxx Xxxxx 00000 Xxxxxx Xxxx
Xxxxxxx, XX 00000 Xxxxxx, XX 00000
Tel: 000-000-0000 Tel: 000-000-0000
Fax: 000-000-0000 Fax: 000-000-0000
NEXAR TECHNOLOGIES, INC. TISSUE TECHNOLOGIES, INC.
000 Xxxxxxxx Xxxx 0000 Xxxxxxx Xxx. XX
Xxxxxxxx, XX 00000 Xxxxxxxxxxx, XX 00000
Tel: 000-000-0000 Tel: 000-000-0000
000-000-0000 000-000-0000
Fax: 000-000-0000 Fax: 000-000-0000
PALOMAR ELECTRONICS CORPORATION SPECTRUM MEDICAL TECHNOLOGIES, INC.
00 Xxxxxx Xxxx Xxxxx 00 Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000 Xxxxxxxxx, XX 00000
Tel: 000-000-0000 Tel: 000-000-0000
Fax: 000-000-0000 000-000-0000
Fax: 000-000-0000
SCHEDULE 3(F)
NEWS RELEASE
FOR IMMEDIATE RELEASE
CONTACTS:
Xxxx X. Xxxxxxxxx Xxx Xxxxxx Xxxxxxx Xxxxxxxxxx
Director of Investor Relations Associate Chairman
Palomar Medical Technologies, Inc. Xxxxxx Xxxxxx Assoc., Inc. Consulting for Strategic Growth, Ltd.
000-000-0000 000-000-0000 000-000-0000
PALOMAR'S PREVIOUSLY FILED PATENT LAWSUIT AGAINST XXXX/BIOPHILE
PRE-DATES XXXX/BIOPHILE'S LEGAL ACTION ANNOUNCED TWO DAYS AGO
BEVERLY, Mass., March 12, 1997 -- Palomar Medical Technologies, Inc. (NASDAQ:
PMTI) today announced that it filed a declaratory judgment several months ago
against XXXX/Biophile International Corp. (NASDAQ: XXXX) seeking a declaration
that Palomar's Epilaser(TM) laser-based hair removal system does not infringe on
XXXX/Biophile's laser hair removal method, and, furthermore, that
XXXX/Biophile's patent is both invalid and unenforceable. Palomar's suit was
filed in United States District Court in Boston, Mass.
Palomar's declaratory judgment action was filed substantially before
XXXX/Biophile's announcement two days ago that its Selvac Acquisition Corp. unit
had filed a lawsuit against Palomar for patent infringement and unfair
competition, essentially the same claims made previously by Palomar in its suit
against XXXX/Biophile. Selvac licenses the patented laser hair removal method
owned by Xx. Xxxxx Zaias.
"We filed this declaratory judgment months ago after learning that XXXX/Biophile
was misrepresenting to our customers that our product might infringe on their
patent," said Xxxxxx Xxxxxxxx, chairman and chief executive officer of Palomar.
"We are announcing our lawsuit today since our patent has only issued recently
and, therefore, all of the information is now in the public domain, allowing for
resolution of these issues."
(more)
PALOMAR / 2
XXXX/Biophile's lawsuit was announced hours after Palomar announced it had
received U.S. Food and Drug Administration (FDA) to sell and market its Epilaser
system. Palomar announced yesterday the issuance of a U.S. patent that discloses
and protects the laser-based hair removal technology developed by Dr. R. Rox
Xxxxxxxx at Massachusetts General Hospital's Xxxxxxx Laboratories, the
technology used in Epilaser and for which Palomar is the exclusive licensee.
Palomar Medical Technologies, Inc. is a leading supplier of proprietary laser
systems for dermatological and cosmetic laser treatment, and also engages in the
development and sale of specialty electronic products.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
With the exception of the historical information contained in this release, the
matters described herein contain forward-looking statements that involve risk
and uncertainties that may individually or mutually impact the matters herein
described, including but not limited to product demand and market acceptance,
the effect of economic conditions, the impact of competitive products and
pricing, governmental regulations, results of litigation, technological
difficulties and/or other factors outside the control of the company, which are
detailed from time to time in the company's SEC reports, including the report on
Form 10-Q for the quarter ended September 30, 1996.
####
Palomar news releases are available through PR
Newswire Company News on-Call by fax at
000-000-0000, Extension 107555, or
xxxx://xxx.xxxxxxxxxx.xxx/(XXXX).
Palomar's home page address is xxxx://xxx.xxxxxx.xxx
####
NEWS RELEASE
FOR IMMEDIATE RELEASE
CONTACTS:
Xxxx X. Xxxxxxxxx Xxx Xxxxxx Xxxxxxx Xxxxxxxxxx
Director of Investor Relations Associate Chairman
Palomar Medical Technologies, Inc. Xxxxxx Xxxxxx Assoc., Inc. Consulting for Strategic Growth, Ltd.
000-000-0000 000-000-0000 000-000-0000
PALOMAR REPORTS FINANCIAL RESULTS; ELECTRONIC BUSINESS SPIN-OUT
IN PROCESS, SOLE FOCUS IS NOW ON COSMETIC LASER INDUSTRY
BEVERLY, Mass., March 18, 1997 -- Palomar Medical Technologies, Inc. (NASDAQ:
PMTI) today announced that revenues for the fourth quarter ended December 31,
1996, increased 235 percent to $20,944,453, compared with the fourth quarter of
1995. Palomar also reported a loss for the quarter ended December 31, 1996 of
($18,650,578), or ($0.69) per share, of which ($11,500,000), or ($0.40) per
share, is attributable to non-recurring write-offs.
For the year ended December 31, 1996, revenues increased 220 percent to
$70,098,443, compared with the previous year. Palomar also reported a loss for
the year ended December 31, 1996, of ($37,863,792), or ($1.49) per share, of
which ($11,500,000), or ($0.44) per share, is attributable to non-recurring
write-offs.
"Our fourth quarter net loss includes approximately $7.2 million of operating
losses attributed to the following four factors," said Xxxxxx Xxxxxxxx, chairman
and chief executive officer of Palomar, "They are: the delay in receiving FDA
hair removal clearance for our EpiLaser(TM) system, which was only obtained this
month; start-up costs associated with our new cosmetic laser center services
division; reduced sales volume in our Nexar subsidiary due to unavoidable parts
shortages; and interruption in production caused by the relocation to larger
facilities of our Nexar and Comtel manufacturing plants.
(more)
PALOMAR / 2
"The majority of the non-recurring losses are a result of the assessment of our
technology and assets related to our electronic businesses. We reserved $8.5
million against technology assets and other costs in the fourth quarter,"
continued Georgiev. "In addition, Nexar settled claims with a former executive
for $1.4 million, which was charged to operations, and under which Nexar is
purchasing previously-licensed core technology and eliminating future royalty
payments on the use of this core technology. As part of our strategy to maximize
shareholder value, we are in the process of spinning out our electronic
businesses, preferably as majority-owned, publicly traded companies."
"The company also assessed its goodwill and joint ventures in related cosmetic
laser businesses and took a charge of $1.6 million," continued Georgiev. "This
write-down, combined with the previously mentioned, non-recurring costs in the
electronics segment, brings the total one-time charges for the year to
approximately ($11,500,000), or ($0.44) per share."
Georgiev added, "The public spin-out of Nexar is anticipated to close by
mid-April. That offering registers 2,500,000 shares of Nexar common stock in an
anticipated range of $11 to $13 per share."
Georgiev also said, "A spin-out of the remainder of our electronics group is
planned for later in 1997. The investments made in our electronics businesses
over the past two years are expected to yield high returns and could provide
liquid assets which can be used to fund our core cosmetic laser business in the
future.
"We are prepared to rapidly expand our cosmetic laser business," stated
Georgiev, "since we believe that all important elements are now in place. We
accomplished a major strategic alliance for the establishment of laser centers
with Columbia/HCA, a $20 billion company and one of the world's largest owners
and operators of medical facilities; we have FDA clearance for our complete
suite of laser systems, including EpiLaser for hair removal; we have a very
strong proprietary position in laser hair removal due to the recent issuance of
the Massachusetts General Hospital patent, for which we are the exclusive
licensee; we have major laser production capacity in place; we have expanded and
strengthened our management team; we are broadening our research and
development, as well as clinical, relationships with the highest-quality
institutions in the world; and we have established a subsidiary in the United
Kingdom to rapidly penetrate European markets.
(more)
PALOMAR / 3
Georgiev concluded, "With freed-up resources from the electronics segment, we
intend to devote resources from the electronics segment to solely focus on
achieving the largest possible market share in 1997 in our core business --
cosmetic laser products and services. We believe that we are strongly positioned
to capitalize on these multi-billion dollar markets and achieve a dominant
position within the next two years."
Palomar Medical Technologies, Inc. is a leading supplier of proprietary laser
systems for dermatological and cosmetic laser treatment, such as hair removal
and the treatment of wrinkles, spider veins, tattoos, age spots, warts, scars,
and xxxxx. Palomar also engages in the development and sale of specialty
electronic products.
The condensed consolidated statement of operations for the company follows:
PALOMAR MEDICAL TECHNOLOGIES, INC.
(Amounts in thousands, except per share data)
Three Months Ended Year Ended
December 31 December 31
1996 1995 1996 1995
Revenues $20,944 $6,241 $70,098 $21,907
Net loss ($18,651)* ($6,589) ($37,864)* ($12,621)
Net loss per share ($0.69)* ($0.39) ($1.49)* ($0.89)
Weighted-average number
of shares used in computation
of per-share net loss 28,996 17,082 26,167 14,165
* INCLUDES LOSS OF ($11,500,000), OR ($0.40) AND ($0.44) PER SHARE, FOR THE
THREE MONTHS AND YEAR ENDED DECEMBER 31, 1996 RESPECTIVELY, OF NON-RECURRING
WRITE-OFFS.
A REGISTRATION STATEMENT RELATING TO THE NEXAR SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME
THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS COMMUNICATION DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO THE REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
(more)
PALOMAR / 4
A copy of the Nexar prospectus may be obtained from Xxxx Xxxxxxxxx, Director of
Investor Relations, Palomar Medical Technologies, Inc., 00 Xxxxxx Xxxx Xxxxx,
Xxxxxxx, XX 00000.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
With the exception of the historical information contained in this release, the
matters described herein contain forward-looking statements that involve risk
and uncertainties that may individually or mutually impact the matters herein
described, including but not limited to product demand and market acceptance,
the effect of economic conditions, the impact of competitive products and
pricing, governmental regulations, results of litigation, technological
difficulties and/or other factors outside the control of the company, which are
detailed from time to time in the company's SEC reports, including the report on
Form 10-Q for the quarter ended September 30, 1996.
####
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