EXHIBIT 99.2
SECURED LOAN AGREEMENT
THIS SECURED LOAN AGREEMENT (this "Agreement"), dated as April 22, 2003, is
entered into by and among Diomed Holdings, Inc., a Delaware corporation, with
headquarters located at Xxx Xxxxxx Xxxx, Xxxxxxx, XX 00000 (the "Company"),
Diomed, Inc., a Delaware corporation and a wholly-owned subsidiary of the
Company ("Diomed"), each entity named on the signature page hereto as a Lender
(each, a "Lender") and Gibralt US, Inc., a Colorado corporation (the "Designated
Lender") (each agreement with a Lender being deemed a separate agreement between
the Company and such Lender, except that each Lender acknowledges and consents
to the rights granted to each other Lender under this Agreement and the other
Documents). Capitalized terms used but not defined herein shall have their
respective meanings set forth in the Exchange Agreement dated as of April 22,
2003 by and among the Company, Diomed, the Note Purchasers (as defined therein)
and the Designated Note Purchaser (as defined therein) (the "Exchange
Agreement"), unless the context clearly indicates otherwise.
W I T N E S S E T H:
WHEREAS, the Company, Diomed, the Lenders and the Designated Lender are
executing and delivering this Agreement in accordance with and in reliance upon
the exemption from securities registration afforded, inter alia, by Rule 506
under Regulation D ("Regulation D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 Act"), and Section 4(2) of the 1933 Act; and
WHEREAS, the Lenders severally, and not jointly, wish to lend, upon the
terms and subject to the conditions of this Agreement and the other Documents,
$1,200,000 to the Company (the "Loans"), in exchange for which Diomed will issue
to the Lenders $1,200,000 aggregate principal amount of the Class D Secured
Notes due April 22, 2004 of Diomed, substantially in the form attached to this
Agreement as Exhibit A (the "Class D Notes"); and
WHEREAS, in consideration for the commitment of the Lenders to make the
Loans on the terms and conditions set forth in this Agreement, the Company has
agreed to issue to the Lenders twenty four (24) shares of its Class D
Convertible Preferred Stock (the "Commitment Shares"), which shares are
convertible into an aggregate of Three Million Twenty One Thousand Five Hundred
Fifty Two (3,021,552) shares of the Company's Common Stock (the "Common Shares")
on the terms and conditions set forth in the Certificate of Designations
attached as Exhibit B to this Agreement; and
WHEREAS, it is a condition precedent to the consummation of the Exchange
Transaction that the Lenders shall have made the Loans to the Company at the
Initial Closing as provided for in this Agreement contemporaneously with the
Exchange Transaction, and it is condition precedent to the Loans to be made
under this Agreement at the Initial Closing that the Exchange Transaction shall
have occurred contemporaneously with the making of such Loans.
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 parties agree as follows:
1. AGREEMENT TO LEND
(a) Obligation of Lenders.
(i) The undersigned Lenders hereby severally agree to loan to the
Company and Diomed the amounts set forth below and corresponding to the Lender's
name on the signature page of this Agreement, on the terms and conditions set
forth below in this Agreement and the other Documents. Each such amount is
referred to herein as the "Lender's Commitment."
(ii) Subject to the terms and conditions of this Agreement and the
other Documents, (x) the Lenders that are obligated to make Loans at the Initial
Closing (as defined below) will purchase the principal amount of Notes at the
initial closing (the "Initial Closing") to be held on the date (the "Initial
Closing Date") on which the Exchange Transaction is consummated, and (y) the
Lenders that are obligated to make Loans on dates after the Initial Closing Date
shall make such Loans and purchase such Notes in the amounts and on the dates
set forth in Schedule 1(a)(ii). Each date subsequent to the Initial Closing
indicated on Schedule 1(a)(ii) on which a Loan is to be made is referred to in
this Agreement as a "Subsequent Loan Date."
(b) Form of Payment of Loan Proceeds. Each of the Lenders shall make
its Loans by delivering immediately available good funds in United States
Dollars in the amount of the Loans to be made by it on the Initial Closing Date
or the Subequent Loan Date, as the case may be, as provided in Section 1(c).
(c) Payments of Loan Proceeds.All payments of proceeds of any Loans to
be made under this Agreement shall be made by wire transfer of funds to:
Beneficiary Account Name: Diomed, Inc.
Xxx Xxxxxx Xxxx
Xxxxxxx, XX 00000
Beneficiary Account No.: 0000000
ABA/Transit No: 000-000-000
Beneficiary Bank: Boston Private Bank
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
(d) Option to Terminate Lenders' Commitment Due to Termination of
Financial Advisor. If the Company's engagement agreement with its financial
advisor in connection with the Contemplated Equity Financing is terminated, the
Company shall immediately so notify the Designated Lender. If the Company does
not engage a substitute financial advisor to assist it in connection with the
Contemplated Equity Financing within five (5) Business Days of such termination
of the engagement agreement, then the Lenders' Commitment for Loans to be made
on Subsequent Loan Dates shall be terminable upon written notice by the
Designated Lender, provided, that if the Company certifies to the Designated
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Lender that as of the date which is five (5) days after the date of termination
of the Company's engagement of the financial advisor there are currently due and
payable certain amounts relating to the Company's obligations to employees and
employment that are imposed by law as to which the Directors of the Company or
Diomed have or may have personal liability under applicable law, the Lenders
that are otherwise obligated to make Loans on any Subsequent Loan Date shall, on
a pro rata basis, lend such further amounts to the Company within two (2)
business days after the Designated Lender's receipt of the Company's
certification. The Company shall use its reasonable best efforts to minimize the
employee and employment obligations as to which additional amounts may be
required to be furnished by the Lenders in accordance with the preceding
proviso.
(e) Option to Redeem Class D Notes upon Consummation of the
Contemplated Equity Financing. As set forth in the Class D Notes, if the Company
consummates the Contemplated Equity Financing prior to June 30, 2003, then the
Lenders shall have the option to cause the unpaid principal amount of and
accrued interest under the Class D Notes to be repaid by Diomed or the Company
in cash or by the issuance of Common Stock or other securities issued by the
Company in the Contemplated Equity Financing, at the same price and other terms
and subject to the same conditions as the Contemplated Equity Financing.
(f) No Impact on the Commitment Shares. The Commitment Shares shall
remain issued and outstanding, notwithstanding the repayment or redemption of
the Class D Notes; provided, that if any Lender willfully breaches its
obligation to make the Loans under the terms and conditions of this Agreement,
such Lender will, upon the Company's written request, return to the Company such
portion of the Commitment Shares as relate to that amount of the Lender's
Commitment that the Lender has not funded hereunder that the rate of one (1)
Commitment Share for each $50,000 of Loan not funded (or any part thereof).
2. LENDERS' REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
Each Lender represents and warrants to, and covenants and agrees with, the
Company and Diomed as follows:
(a) Without limiting any Lender's right to sell the Commitment Shares
pursuant to the Registration Statement, each Lender is acquiring Class D Notes
and the Commitment Shares for its own account for investment only and not with a
view towards the public sale or distribution thereof and not with a view to or
for sale in connection with any distribution thereof.
(b) Each Lender is (i) an "accredited investor" as that term is defined
in Rule 501 of the General Rules and Regulations under the 1933 Act by reason of
Rule 501(a)(3), (ii) experienced in making investments of the kind described in
this Agreement and the related documents, (iii) able, by reason of the business
and financial experience of its officers (if an entity) and professional
advisors (who are not affiliated with or compensated in any way by the Company
or any of its affiliates or selling agents), to protect its own interests in
connection with the transactions described in this Agreement, and the Documents,
and (iv) able to afford the entire loss of its investment in the Securities.
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(c) All subsequent offers and sales of the Securities by each Lender
shall be made only pursuant to registration of the Shares under the 1933 Act or
pursuant to an exemption from registration and compliance with applicable
states' securities laws.
(d) Each Lender understands that the Securities are being offered and
sold to it in reliance on specific exemptions from the registration requirements
of federal and state securities laws and that the Company is relying upon the
truth and accuracy of, and the Lender's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Lenders set
forth herein in order to determine the availability of such exemptions and the
eligibility of the Lenders to acquire the Securities.
(e) Each Lender and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Securities which have been
requested by the Lender. Each Lender and its advisors, if any, have been
afforded the opportunity to ask questions of the Company and have received
complete and satisfactory answers to any such inquiries. Without limiting the
generality of the foregoing, each Lender has also had the opportunity to obtain
and to review the Company's (1) Annual Report on Form 10-KSB for the fiscal year
ended December 31, 2002, (2) Quarterly Report on Form 10-QSB for the fiscal
quarters ended March 31, 2002, June 30, 2002 and September 30, 2002, the notices
on Form 8-K filed with the SEC on October 22, 2002 and December 30, 2002, (4)
the Company's Registration Statement on Form SB-2 which became effective on
October 24, 2002, (5) the Company's prospectus on Form 424B3 filed with the SEC
on October 30, 2002, and (6) the Company's Registration Statement on Form SB-2
MEF filed with the SEC on November 1, 2002 (collectively, the "SEC Documents").
(f) Each Lender understands that its investment in the Securities
involves a high degree of risk.
(g) Each Lender understands that no United States federal or state
agency or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities.
(h) Each Lender is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization. This Agreement
and the Documents have been duly and validly authorized, executed and delivered
on behalf of the Lender and create a valid and binding agreement of the Lender
enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and other
similar laws affecting the enforcement of creditors' rights generally.
(i) Such Lender has not employed any broker or finder in connection
with the transactions contemplated by this Agreement.
(j) The jurisdiction in which any offer to purchase shares hereunder
was made to or accepted by such Lender is the jurisdiction shown as the Lender's
address on the signature page hereto.
(k) Each Lender was not formed for the purpose of investing solely in
the Securities which may be acquired hereunder.
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(l) Each Lender is able to bear the complete loss of such Lender's
investment in the Securities.
(m) Each Lender acknowledges and agrees that the information contained
in the Documents, including the fact of the Lender's purchase of the Notes,
acquisition of the Warrants and the personal information of the Lenders
contained herein, may be disclosed by the Company in its discretion, including
without limitation by way of a press release, the filing with the SEC of a Form
8-K which may contain counterparts of all or certain of the Documents, and
hereby grants the Company permission to make any such public disclosure of said
information.
(n) If any Lender is an "affiliate" of the Company (as defined in
Section 16 of the Exchange Act), then such Lender shall timely comply with all
SEC filings required of it under said Section 16, including without limitation
the filing with the SEC of a statement of change in beneficial ownership of
securities on Form 4, reflecting the acquisition of beneficial ownership of the
Shares pursuant to such Lender's purchase of the Notes and the Warrants at the
Closing.
3. COMPANY REPRESENTATIONS, ETC. Each of the Company and Diomed, on behalf
of itself and its respective subsidiaries, jointly and severally, represents and
warrants to the Lenders that, except as otherwise disclosed in the Company's SEC
Documents:
(a) Concerning the Class D Notes and the Shares. There are no
preemptive rights of any stockholder of the Company or Diomed to acquire the
Class D Notes or the Commitment Shares.
(b) Reporting Company Status. Each of the Company and Diomed is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power to own its
properties and to carry on its business as now being conducted. The Company and
Diomed are each duly qualified as a foreign corporation to do business and is in
good standing in each jurisdiction where the nature of the business conducted or
property owned by it makes such qualification necessary, other than those
jurisdictions in which the failure to so qualify would not have a material
adverse effect on the business, operations or condition (financial or otherwise)
or results of operation of the Company and its subsidiaries taken as a whole (a
"Material Adverse Effect"). The Company has registered its Common Stock pursuant
to Section 12 of the 1934 Act, and the Common Stock is listed and traded on the
American Stock Exchange (the "AMEX"). The Company has received no notice, either
oral or written, with respect to the continued eligibility of the Common Stock
for such listing.
(c) Authorized Shares. The authorized capital stock of the Company
consists of 100,000,000 shares, of which 80,000,000 are shares of Common Stock,
of which 29,711,749 shares are issued and outstanding as of the date of this
Agreement and 20,000,000 are shares Preferred Stock, par value $0.001 per share
(the "Preferred Stock"), of which zero shares are issued and outstanding as of
the date of this Agreement (prior to the issuance of the Exchange Shares to the
Note Purchasers and the Commitment Shares to the Lenders at the Closing). All
issued and outstanding shares of Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable. The Commitment Shares have
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been duly authorized and when issued hereunder to the Lenders will be duly and
validly issued, fully paid and non-assessable and will not subject the holder
thereof to personal liability by reason of being such holder. The shares of
Common Stock issuable on conversions of the Commitment Shares have been duly
authorized and have been reserved for the issuance thereof.
(d) Agreement and Other Documents and Transactions Contemplated Duly
Authorized. This Agreement and the other Documents, and the transactions
contemplated hereby thereby, have been duly and validly authorized by the
Company and Diomed, and this Agreement and the other Documents will be executed
and delivered at the Closing by the duly authorized officer(s) of the Company
and Diomed. This Agreement and each of the other Documents, when executed and
delivered by the Company, are and will be, valid, legal and binding agreements
of the Company enforceable in accordance with their respective terms, subject as
to enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium, and other similar laws affecting the enforcement of creditors'
rights generally.
(e) Non-contravention. The execution and delivery of this Agreement and
the other Documents by the Company and Diomed, the issuance of the Securities,
and the consummation by the Company of the other transactions contemplated by
the Documents do not and will not conflict with or result in a breach by the
Company or Diomed of any of the terms or provisions of, or constitute a default
under (i) the certificate of incorporation or by-laws of the Company or Diomed,
each as currently in effect, (ii) any indenture, mortgage, deed of trust, or
other material agreement or instrument to which the Company or Diomed is a party
or by which it or any of its properties or assets are bound, or an event which
results in the creation of any lien, charge or encumbrance upon any assets of
the Company or Diomed or of any of its respective subsidiaries or the triggering
of any preemptive or anti-dilution rights or rights of first refusal or first
offer on the part of holders of the Company's securities, (iii) any existing
applicable law, rule, or regulation or any applicable decree, judgment, or order
of any court, United States federal or state regulatory body, administrative
agency, or other governmental body having jurisdiction over the Company or any
of its properties or assets, or (iv) the Company's listing agreement for its
Common Stock, except in the case of clauses (i) through (iv) such conflict,
breach or default which would not have a Material Adverse Effect.
(f) Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the stockholders of the Company or Diomed is required to
be obtained by the Company or Diomed for the issuance and sale of the Securities
to the Lenders as contemplated by this Agreement, except (i) such
authorizations, approvals and consents that have been obtained, or such
authorizations, approvals and consents, the failure of which to obtain would not
have a Material Adverse Affect and (ii) the listing of the Exchange Shares
and/or the Commitment Shares on the AMEX may require the affirmative vote of the
Company's stockholders.
(g) SEC Filings. None of the Company's SEC Documents filed with respect
to periods ending on or after February 14, 2002 contained, and to the best of
the Company's knowledge, none of the Company's SEC Documents filed with respect
to periods prior to February 14, 2002 contained, in either event at the time
they were filed, any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
made therein in light of the circumstances under which they were made, not
misleading. The Company has since February 14, 2002 timely filed all requisite
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forms, reports and exhibits thereto with the SEC. The Company is not aware of
any event occurring on or prior to the Closing Date or the Delivery Date (other
than the transactions effected hereby) that would require the filing of, or with
respect to which the Company intends to file, a Form 8-K after such date.
(h) Absence of Certain Changes. Since December 31, 2002, there has been
no material adverse change and no material adverse development in the business,
properties, operations, condition (financial or otherwise), or results of
operations of the Company, Diomed, or any of their respective subsidiaries.
Since December 31, 2002, except as contemplated by the Documents, neither the
Company nor any of its subsidiaries has (i) incurred or become subject to any
material liabilities (absolute or contingent) except liabilities incurred in the
ordinary course of business consistent with past practices; (ii) discharged or
satisfied any material lien or encumbrance or paid any material obligation or
liability (absolute or contingent), other than current liabilities paid in the
ordinary course of business consistent with past practices; (iii) declared or
made any payment or distribution of cash or other property to stockholders with
respect to its capital stock, or purchased or redeemed, or made any agreements
to purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other tangible assets, or canceled any debts or claims, except
in the ordinary course of business consistent with past practices; (v) suffered
any material losses or waived any rights of material value, whether or not in
the ordinary course of business, or suffered the loss of any material amount of
existing business; (vi) made any changes in employee compensation, except in the
ordinary course of business consistent with past practices; or (vii) experienced
any material problems with labor or management in connection with the terms and
conditions of their employment.
(i) Full Disclosure. No representation or warranty by the Company in
this Agreement, nor in any Document delivered or to be delivered in connection
with this Agreement contains or will contain any untrue statement of material
fact or omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading. To the knowledge of the
Company, there is no information concerning the Company and its subsidiaries or
their respective businesses which has not heretofore been disclosed to the
Lenders which could reasonably be expected to have a Material Adverse Effect.
(j) Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board or body pending or
threatened against or affecting the Company or any of its subsidiaries, wherein
an unfavorable decision, ruling or finding would have a Material Adverse Effect
or which would adversely affect the validity or enforceability of, or the
authority or ability of the Company and its subsidiaries taken as a whole to
perform its obligations under, any of the Documents. Neither the Company nor any
of its subsidiaries is a party to or subject to the provisions of, any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality which could reasonably be expected to have a Material Adverse
Effect.
(k) Absence of Events of Default. No event of default (or its
equivalent term), as defined in the respective agreement to which the Company or
any of its subsidiaries is a party, and no event which, with the giving of
notice or the passage of time or both, would become an event of default (or its
equivalent term) (as so defined in such agreement), has occurred and is
continuing, which would have a Material Adverse Effect.
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(l) Prior Issues; Prior Security Interests. Since December 27, 2002,
the Company has not issued any convertible securities or any shares of the
Common Stock. Since December 27, 2002, neither the Company, Diomed nor any of
their respective subsidiaries has entered into any transactions or agreements or
otherwise incurred any indebtedness that would create a security interest in the
personal property of the Company or Diomed, or any of their respective
subsidiaries.
(m) No Undisclosed Liabilities or Events. Each of the Company and
Diomed has no liabilities or obligations other than those set forth in the SEC
Documents or incurred in the ordinary course of the Company's business since
December 31, 2002, and which individually or in the aggregate, do not or would
not have a Material Adverse Effect. No event or circumstances has occurred or
exists with respect to the Company or Diomed or their respective properties,
business, condition (financial or otherwise), or results of operations, which,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company or Diomed but which has not
been so publicly announced or disclosed. Except for the transactions
contemplated by the Documents, there are no proposals currently under
consideration or currently anticipated to be under consideration by the board of
directors or the executive officers of the Company or Diomed which proposal
would (x) change the articles of incorporation, by-laws or any other charter
document of the Company or Diomed, each as currently in effect, with or without
shareholder approval, or (y) materially or substantially change the business,
assets or capital of the Company, including its interests in subsidiaries.
(n) No Default. Neither the Company nor Diomed or any of the Company's
other subsidiaries is in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in any material
indenture, mortgage, deed of trust or other material instrument or agreement to
which it is a party or by which it or its property is bound.
(o) No Integrated Offering. Neither the Company or Diomed nor any of
their respective affiliates nor any person acting on its or their behalf has,
directly or indirectly, at any time since February 14, 2002, made any offer or
sales of any security or solicited any offers to buy any security under
circumstances that would eliminate the availability of the exemption from
registration under Rule 506 of Regulation D in connection with the offer and
sale of the Securities as contemplated hereby.
(p) Dilution. The number of Commitment Shares and Exchange Conversion
Shares contemplated to be issued under this Agreement and the other Documents
will, upon conversion thereof into Common Shares and Exchange Shares,
respectively, increase substantially the number of shares of Common Stock
outstanding. The Company's executive officers and directors have studied and
fully understand the nature of the Securities being sold hereby under the other
Documents and recognize that they have a dilutive effect and further that the
issuance of the Common Shares and the Exchange Shares may have an adverse effect
on the market price of the Common Stock. Additionally, the Common Stock or other
equity securities to be issued by the Company in the Contemplated Equity
Financing will cause additional, substantial dilution. The board of directors of
the Company has concluded, in its good faith business judgment, that such
issuances are in the best interests of the Company.
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(q) Regulatory Permits. Each of the Company and Diomed has all such
permits, easements, consents, licenses, franchises and other governmental and
regulatory authorizations from all appropriate federal, state, local or other
public authorities ("Permits") as are necessary to own and lease its respective
properties and conduct its respective businesses in all material respects in the
manner described in the SEC Documents and Diomed as currently being conducted.
All such Permits are in full force and each of effect and the Company has
fulfilled and performed all of its material obligations with respect to such
Permits, and no event has occurred that allows, or after notice or lapse of time
would allow, revocation or termination thereof or will result in any other
material impairment of the rights of the holder of any such Permit, subject in
each case to such qualification as may be disclosed in the SEC Documents. Such
Permits contain no restrictions that would materially impair the ability of the
Company or Diomed to conduct businesses in the manner consistent with its past
practices. Neither the Company nor Diomed has received notice or otherwise has
knowledge of any proceeding or action relating to the revocation or modification
of any such Permit.
(r) Independent Public Accountants. The certified consolidated
financial statements of the Company, including the notes thereto, included in
the SEC Documents, were duly certified by independent public accountants with
respect to the Company, as required by the 1933 Act and the 1933 Act
Regulations.
(s) Internal Accounting Controls. Each of the Company and Diomed
maintains a system of internal accounting controls sufficient to provide
reasonable assurances that (1) transactions are executed in accordance with
management's general or specific authorization; (2) transactions are recorded as
necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain accountability for
assets; (3) access to assets is permitted only in accordance with management's
general or specific authorization; and (4) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(t) Tax Liabilities. The Company has filed all material federal, state
and local tax reports and returns required by any law or regulation to be filed
by it and such returns are accurate and complete in all material respects,
except for extensions duly obtained, and has either duly paid all taxes, duties
and charges indicated due on the basis of such returns and reports, or made
adequate provision for the payment thereof.
(u) Hazardous Materials. Each of the Company, Diomed and their
respective subsidiaries is in compliance with all applicable Environmental Laws
in all respects except where the failure to comply does not have and could not
reasonably be expected to have a Material Adverse Effect. For purposes of the
foregoing:
"Environmental Laws" means, collectively, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, the
Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation
and Recovery Act, the Toxic Substances Control Act, as amended, the Clean Air
Act, as amended, the Clean Water Act, as amended, any other "Superfund" or
"Superlien" law or any other applicable federal, state or local statute, law,
ordinance, code, rule, regulation, order or decree regulating, relating to, or
imposing liability or standards of conduct concerning, the environment or any
Hazardous Material.
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"Hazardous Material" means and includes any hazardous, toxic or
dangerous waste, substance or material, the generation, handling, storage,
disposal, treatment or emission of which is subject to any Environmental Law.
(v) Pension Related Matters. Each employee pension plan (other than a
multiemployer plan within the meaning of Section 3(37) of ERISA and to which the
Company or any ERISA Affiliate has or had any obligation to contribute (a
"Multiemployer Plan")) maintained by the Company or any of its ERISA Affiliates
to which Section 4021(a) of ERISA applies and (a) which is maintained for
employees of the Company or any of its ERISA Affiliates or (b) to which the
Company or any of its ERISA Affiliates made, or was required to make,
contributions at any time within the preceding five (5) years (a "Plan"),
complies in all material respects, and is administered in accordance, with its
terms and all material applicable requirements of ERISA and of the Internal
Revenue Code of 1986 as amended (the "Tax Code") and with all material
applicable rulings and regulations issued under the provisions of ERISA and the
Tax Code setting forth those requirements. No "Reportable Event" or "Prohibited
Transaction" (as each is defined in ERISA) or withdrawal from a Multiemployer
Plan caused by the Company has occurred and no funding deficiency described in
Section 302 of ERISA caused by the Company exists with respect to any Plan or
Multiemployer Plan which could have a Material Adverse Effect. The Company and
each ERISA Affiliate has satisfied all of their respective funding standards
applicable to such Plans and Multiemployer Plans under Section 302 of ERISA and
Section 412 of the Tax Code and the Pension Benefit Guaranty Corporation
("PBGC") has not instituted any proceedings, and there exists no event or
condition caused by the Company which would constitute grounds for the
institution of proceedings by PBGC, to terminate any Plan or Multiemployer Plan
under Section 4042 of ERISA which could have a material adverse effect on the
assets, financial condition, results of operation or business of a Company or
any ERISA Affiliate. For purposes of the foregoing:
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, together with the regulations thereunder.
"ERISA Affiliate" means any corporation, trade or business, which
together with the Borrower would be treated as a single employer under Section
4001 of ERISA.
(w) Intellectual Property. The Company and its subsidiaries own or have
the right to use, under valid license agreements or otherwise, all material
patents, licenses, franchises, trademarks, trademark rights, trade names, trade
name rights, trade secrets and copyrights necessary to the conduct of its
respective businesses as now conducted, without known conflict with any patent,
license, franchise, trademark, trade secrets and confidential commercial or
proprietary information, trade name, copyright, rights to trade secrets or other
proprietary rights of any other person.
(x) Title to Properties. The Borrower has good and marketable title to
all its personal properties, subject to no transfer restrictions or Liens of any
kind, except for Liens not prohibited by the Documents and the Axcan Lien.
"Lien" means any interest in property securing any obligation owed to, or a
claim by, a person other than the owner of the property, whether such interest
is based on the common law, statute or contract, and including but not limited
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to the lien or security interest arising from a mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt or a lease, consignment or
bailment for security purposes.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
(a) Transfer Restrictions. The Lenders acknowledge that (1) the
Securities have not been and are not being registered under the provisions of
the 1933 Act and, except as provided in the Registration Rights Agreement, the
Shares have not been and are not being registered under the 1933 Act, and may
not be transferred unless (A) subsequently registered thereunder or (B) the
Lenders shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Shares made in reliance on
Rule 144 promulgated under the 1933 Act may be made only in accordance with the
terms of said Rule and further, if said Rule is not applicable, any resale of
such Shares 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 used in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither the
Company or Diomed nor any other person is under any obligation to register the
Securities (other than pursuant to the Registration Rights Agreement) under the
1933 Act or to comply with the terms and conditions of any exemption thereunder.
Furthermore, the Lenders agree that the Lenders may not sell, transfer, convey,
pledge, grant any security interest in or assign, by operation of law or
otherwise, any Securities to any Person that is engaged, or proposes to become
engaged, in the business of developing, offering for sale or commercializing any
products or services that (i) as of the date of this Agreement or as of the date
of a proposed transfer, directly competes (or is reasonably anticipated by the
Company to compete in the future) with any of the Company's or its subsidiaries'
existing or proposed products or services, or (ii) provide alternative clinical
treatments for any of the medical procedures that utilize the Company's existing
or proposed products or services, or (iii) substitute for or would tend to cause
the obsolescence of any of the Company's existing or proposed products or
services, or otherwise directly competes (or is reasonably anticipated to
compete in the future) with the Company in any material respect.
(b) Restrictive Legend. The Lenders acknowledge and agree that the
Class D Notes and the Commitment Shares (together with the Common Shares
issuable upon conversion of the Commitment Shares), until such time as the
shares of Common Stock issuable upon conversion of the Commitment Shares have
been registered under the 1933 Act as contemplated by the Registration Rights
Agreement and sold in accordance with an effective Registration Statement, the
Certificates and other instruments representing any of the Securities shall bear
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of any such Securities or Shares):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
11
SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO
THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT.
(c) Registration Rights Agreement. The parties hereto agree to enter
into the Registration Rights Agreement on or before the Closing Date.
(d) Filings. The Company undertakes and agrees to make all necessary
filings in connection with the sale of the Securities to the Lenders required
under any United States laws and regulations applicable to the Company or
Diomed, or by any domestic securities exchange or trading market, and to provide
a copy thereof to the Lenders promptly after such filing if so requested by the
Lenders.
(e) Reporting Status. So long as the any of the Lenders beneficially
own any of the Securities, the Company shall file all reports required to be
filed with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, and the
Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would permit such termination. Except as otherwise set forth in this Agreement
and the Documents, the Company will take all reasonable action under its control
to obtain and to continue the listing and trading of its Common Stock
(including, without limitation, all Registrable Securities) on the AMEX and will
comply in all material respects with the Company's reporting, filing and other
obligations under the by-laws or rules of the AMEX.
(f) Use of Proceeds. Prior to or at the Initial Closing, the Company
shall deliver to the Secured Lender an operating budget for the Company's
activities for May and June 2003. Such budget shall set forth the revenues and
categories of expenditures and related amounts of expenditures, that the Company
in good faith anticipates for this period. The Company shall use the proceeds of
the Loans for working capital purposes in connection with the operation of its
business, in accordance with the operating budget. During May and June 2003, the
Company shall not apply any of its working capital to any categories of
expenditures other than those set forth on the operating budget without the
prior written approval of the Designated Lender, which approval shall not be
unreasonably withheld. During May and June 2003, on a weekly basis or such other
period as the Company and the Designated Lender may agree, the Company shall
deliver to the Designated Lender a report certifying the application of the
Company's working capital for the period commencing May 1, 2003 through the end
of the week immediately preceding the date of the report.
(g) AMEX Listing of Common Shares. The Company shall seek approval at
its 2003 annual meeting of stockholders of the issuance of the Common Shares
upon conversion of the Commitment Shares, pursuant to the rules and regulations
of the AMEX (specifically, Section 713 of the Listing Standards, Policies and
Requirements of the AMEX).
(h) Appearance and Voting at 2003 Annual Stockholders' Meeting. The
Lenders each covenants and agrees to appear (in person or by proxy) at the
Company's 2003 annual stockholders' meeting and to vote thereat all of the
12
Commitment Shares and all shares of Common Stock (if any) held by such Lender in
favor of the proposals made by the Company at such stockholders' meeting,
including without limitation proposals to increase the number of authorized
shares of Common Stock and to effect a reverse stock split of the Common Stock.
(i) Indemnification of Lenders for Breach by the Company or Diomed. If
the Company or Diomed breaches any of their respective representations,
warranties and covenants contained herein, then the Company and Diomed will,
jointly and severally, indemnify, defend and hold the Lenders harmless from and
against any actions, suits, proceedings, hearings, investigations, charges,
complaints, claims, demands, injunctions, judgments, orders, decrees, rulings,
damages, dues, penalties, fines, costs, amounts paid in settlement, liabilities,
obligations, taxes, liens, losses, expenses and fees, including court costs and
reasonable attorneys' fees and expenses, that the Lenders (or any of them) may
suffer resulting from, arising out of, relating to, in the nature of or caused
by such breach.
5. TRANSFER AGENT INSTRUCTIONS.
(a) Promptly following the Initial Closing, the Company will
irrevocably instruct its transfer agent to record the issuance of the Commitment
Shares issued thereat, bearing the restrictive legend specified in Section 4(b)
prior to registration of the Shares under the 1933 Act, registered in the name
of the respective Lender. The Company warrants to the Lenders that if the Lender
is not in breach of the representations and warranties contained in this
Agreement, no instruction other than (i) such instructions referred to in this
Section 5, and (ii) stop transfer instructions to give effect to Section 4(a)
prior to registration and sale of the Commitment Shares under the 1933 Act will
be given by the Company to the transfer agent and that, subject to the transfer
restrictions set forth in the last sentence of Section 4(a), the Commitment
Shares that have been issued to the Lenders 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 applicable
law. Nothing in this Section shall affect in any way the Lenders' obligations
and agreement to comply with all applicable securities laws upon resale of the
Securities. If any Lender provides the Company with an opinion of counsel
reasonably satisfactory to the Company that registration of a resale by such
Lender of any of the Securities in accordance with clause (1)(B) of Section 4(a)
is not required under the 1933 Act, the Company shall (except to the extent
provided in clause (2) of Section 4(a)) permit the transfer of the Securities
and, in the case of the Commitment Shares, instruct the Company's transfer agent
to issue one or more certificates for Common Stock without legend in such name
and in such denominations as specified by the Lender, provided, however, that no
such transfer shall be permitted unless it complies with the transfer
restrictions set forth in the last sentence of Section 4(a).
6. INITIAL CLOSING DATE; SUBSEQUENT LOANS.
(a) Each Lender that is obligated to make its Loans on the Initial
Closing Date will make the Loans to be made by it at the Initial Closing on the
date hereof or as soon thereafter as the conditions contemplated by Section 8
shall have either been satisfied or been waived by the party in whose favor such
conditions run.
13
(b) Each Lender that is obligated to make Loans on a Subsequent Loan
Date will make the Loans to be made on each Subsequent Loan Date on each of the
respective Subsequent Loan Dates as set forth in Schedule 1(a)(ii), or as soon
thereafter as the conditions contemplated by Section 8 shall have either been
satisfied or been waived by the party in whose favor such conditions run.
(c) The Initial shall occur on the Initial Closing Date at the offices
of the Company's counsel, McGuireWoods LLP, 0 Xxxx 00xx Xxxxxx, Xxxxx 0000, Xxx
Xxxx, XX and shall take place no later than 3:00 P.M., New York time, on such
day or such other time as is mutually agreed upon by the Company and the
Lenders.
7. [RESERVED].
8. CONDITIONS TO THE LENDERS' OBLIGATION TO LEND.
The Lenders' obligation to make the Loan at the Initial Closing is
conditioned upon:
(a) The issuance by the Company to the Lenders, in proportion to the
respective principal amounts of the Notes to be purchased by them under this
Agreement of the Commitment Shares.
(b) The execution and delivery of the Documents by the Company and
Diomed, as the case may be;
(c) The consummation of the Exchange Transaction pursuant to the
Exchange Agreement contemporaneously with the Initial Closing; and
(d) The filing of an amended UCC financing statement in respect of the
Diomed Assets at the office of the Secretary of State of Delaware and, if
requested by the Note Purchasers, an amended UCC fixture filing with the
Secretary of State of Massachusetts, and, if so requested by the Note
Purchasers, with the United States Patent and Trademark Office, the purpose of
which amended filings is (i) to reflect the increased secured amount of the
indebtedness of Diomed to the Note Purchasers represented by the Class C Notes,
and (ii) to reflect the secured indebtedness to the Lenders represented by the
Class D Notes
(e) Delivery by the Company to the Lenders of an opinion of legal
counsel of the Company substantially in the form of Exhibit C.
(f) Delivery by the Company and Diomed to the Lenders of the Class D
Notes;
(g) The accuracy in all material respects of the representations and
warranties of the Company and Diomed contained in this Agreement, each as if
made on such date, and the performance by the Company and Diomed on or before
such date of all covenants and agreements of the Company required to be
performed on or before such date;
(h) There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained;
14
(i) The trading of the Common Stock shall not have been suspended by
the SEC or the NASD and trading in securities generally on the AMEX shall not
have been suspended or limited; and
(j) The Lenders' obligation to make the Loans on each Subsequent Loan
Date is further conditioned upon the Lenders' not having provided to the Company
a notice of termination pursuant to Section 1(d).
9. GOVERNING LAW: MISCELLANEOUS.
(a) With respect to governing law, jurisdiction and waiver of jury
trial, the parties agree as follows:
(i) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND PERFORMED ENTIRELY WITHIN SUCH STATE, EXCEPT TO THE EXTENT THAT THE VALIDITY
OR PERFECTION OF THE SECURITY INTEREST GRANTED TO THE SECURED PARTIES UNDER THE
SECURITY AGREEMENT OR THE PLEDGE AGREEMENT, OR REMEDIES THEREUNDER, IN RESPECT
OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF NEW YORK.
(ii) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
MAY BE BROUGHT IN XXX XXXXXX XX XXX XXXXX XX XXX XXXX SITTING IN NEW YORK COUNTY
OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE; PROVIDED,
HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER
PROPERTY SHALL BE BROUGHT, AT THE DESIGNATED LENDER'S OPTION, IN THE COURTS OF
ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY AND THE LENDERS
CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY AND THE LENDERS IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS
AGREEMENT OR OTHER DOCUMENT RELATED THERETO. EACH OF THE COMPANY AND THE LENDERS
WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE
MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE.
(iii) EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING
UNDER ANY TRANSACTION DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO
ANY TRANSACTION DOCUMENT OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE
15
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR
TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR
A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(b) 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.
(c) This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of each of the parties hereto.
(d) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(e) A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto.
(f) This Agreement may be signed in one or more counterparts, each of
which shall be deemed an original.
(g) The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.
(h) 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.
(i) This Agreement may be amended only by the written consent of a
majority in interest of the holders of the Notes and an instrument in writing
signed by the Company.
(j) This agreement and the other Transaction Documents represent the
final Agreement among the parties and may not be contradicted by evidence of
prior, contemporaneous, or subsequent oral agreements of the parties or by prior
or contemporaneous written agreements. There are no unwritten agreements among
the parties.
10. DESIGNATED LENDER.
(a) Appointment and Authorization of Designated Lender. Each Lender
hereby irrevocably appoints, designates and authorizes the Designated Lender to
take such action on its behalf under the provisions of this Agreement and each
other Document and to exercise such powers and perform such duties as are
expressly delegated to it by the terms of this Agreement or any other Document,
together with such powers as are reasonably incidental thereto. Notwithstanding
any provision to the contrary contained elsewhere herein or in any other
16
Document, the Designated Lender shall not have any duties or responsibilities,
except those expressly set forth herein, nor shall the Designated Lender have or
be deemed to have any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or any other Document or otherwise exist against the
Designated Lender.
(b) Delegation of Duties. The Designated Lender may execute any of its
duties under this Agreement or any other Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel and
other consultants or experts concerning all matters pertaining to such duties.
The Designated Lender shall not be responsible for the negligence or misconduct
of any agent or attorney-in-fact that it selects in the absence of gross
negligence or willful misconduct.
(c) Liability of Designated Lender. The Designated Lender shall not (a)
be liable for any action taken or omitted to be taken by it under or in
connection with this Agreement or any other Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct
in connection with its duties expressly set forth herein), or (b) be responsible
in any manner to any Lender for any recital, statement, representation or
warranty made by the Company or any officer thereof, contained herein or in any
other Document, or in any certificate, report, statement or other document
referred to or provided for in, or received by the Designated Lender under or in
connection with, this Agreement or any other Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Document, or for any failure of the Company or any other party to any
Document to perform its obligations hereunder or thereunder.
(d) Reliance by Designated Lender. The Designated Lender shall be
entitled to rely, and shall be fully protected in relying, upon any writing,
communication, signature, resolution, representation, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
electronic mail message, statement or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons, and upon advice and statements of legal counsel (including
counsel to the Company), independent accountants and other experts selected by
the Designated Lender. The Designated Lender shall be fully justified in failing
or refusing to take any action under any Document unless it shall first receive
such advice or concurrence of the Lenders as it deems appropriate and, if it so
requests, it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Designated Lender shall in
all cases be fully protected in acting, or in refraining from acting, under this
Agreement or any other Document in accordance with a request or consent of the
Lenders and such request and any action taken or failure to act pursuant thereto
shall be binding upon all the Lenders.
(e) Credit Decision; Disclosure of Information by Designated Lender.
Each Lender acknowledges that the Designated Lender has not made any
representation or warranty to it, and that no act by the Designated Lender
hereafter taken, including any consent to and acceptance of any assignment or
review of the affairs of the Company or any Affiliate thereof, shall be deemed
to constitute any representation or warranty by the Designated Lender to any
Lender as to any matter, including whether the Designated Lender have disclosed
17
material information in their possession. Each Lender represents to the
Designated Lender that it has, independently and without reliance upon the
Designated Lender and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
prospects, operations, property, financial and other condition and
creditworthiness of the Company and its subsidiaries, and all applicable laws
relating to the transactions contemplated hereby, and made its own decision to
enter into this Agreement.
(f) Indemnification of Designated Lender. Whether or not the
transactions contemplated hereby are consummated, the Lenders shall indemnify
upon demand the Designated Lender (to the extent not reimbursed by or on behalf
of the Company and without limiting the obligation of the Company to do so), pro
rata, and hold harmless the Designated Lender from and against any and all
Indemnified Liabilities incurred by it; provided, however, that no Lender shall
be liable for the payment to the Designated Lender of any portion of such
Indemnified Liabilities to the extent determined in a final, nonappealable
judgment by a court of competent jurisdiction to have resulted from the
Designated Lender's own gross negligence or willful misconduct; provided,
however, that no action taken in accordance with the directions of the Lenders
shall be deemed to constitute gross negligence or willful misconduct for
purposes of this Section 10. Without limitation of the foregoing, each Lender
shall reimburse the Designated Lender upon demand for its ratable share of any
costs or out-of-pocket expenses incurred by the Designated Lender in connection
with the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement, any other Document, or any document contemplated by or referred
to herein, to the extent that the Designated Lender is not reimbursed for such
expenses by or on behalf of the Company.
(g) Successor Designated Lender. The Designated Lender may resign as
Designated Lender upon thirty (30) days notice to the Lenders and to the
Company. If the Designated Lender resigns under this Agreement, within fifteen
(15) days after the delivery by the Designated Lender of its notice of
resignation, the Lenders shall appoint a successor Designated Lender from any of
the other Lenders, and shall notify the Company of the identity of and contact
information for such successor Designated Lender within five (5) days of such
successor Designated Lender's appointment.
11. NOTICES. Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be deemed effectively
given on the earliest of:
(a) the date delivered, if delivered by personal delivery as against
written receipt therefor or by confirmed facsimile transmission,
(b) the seventh business day after deposit, postage prepaid, in the
United States Postal Service by registered or certified mail, or
(c) the third business day after mailing by next-day express courier,
with delivery costs and fees prepaid, in each case, addressed to each of the
other parties thereunto entitled at the following addresses (or at such other
addresses as such party may designate by ten (10) days' advance written notice
similarly given to each of the other parties hereto):
18
COMPANY: Diomed Holdings, Inc.
Xxx Xxxxxx Xxxx
Xxxxxxx, XX 00000
ATTN: President and Chief Executive Officer
Telecopier No. 000-000-0000
With a copy to:
McGuireWoods LLP
0 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
ATTN: Xxxxxxx X. Xxxxxx, Esq.
(000) 000-0000 (Telephone)
(000) 000-0000 (Facsimile)
LENDERS: To the Designated Lender at the following address:
Gibralt US, Inc.
0000-0000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, X.X. X0X 0X0
With a copy to:
Xxxxxxxx Xxxxx & Deutsch, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
ATTN: Xxxx X. Deutsch, Esq.
(000) 000-0000 (Telephone)
(000) 000-0000 (Facsimile)
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's and the
Lenders' representations and warranties herein shall survive for a period of
fifteen (15) months after the execution and delivery of this Agreement and shall
inure to the benefit of the Lenders and the Company and their respective
successors and assigns.
[Signature page follows.]
19
\\COR\158905.10
IN WITNESS WHEREOF, this Agreement has been duly executed by the Lenders,
the Designated Lender, Diomed and the Company as of the date set forth below.
Date: April 22, 2003
COMPANY:
Diomed Holdings, Inc.
/s/ XXXXX X. XXXXX, XX.
By: _____________________________
Name: Xxxxx X. Xxxxx, Xx.
Title: Chief Executive Officer
DIOMED:
Diomed, Inc.
/s/ XXXXX X. XXXXX, XX.
By: ______________________________
Name: Xxxxx X. Xxxxx, Xx.
Title: Chief Executive Officer
DESIGNATED LENDER
Gibralt US, Inc.
/s/ XXXXXX XXXXXX
By: _______________________________
Name: Xxxxxx Xxxxxx
Title: Authorized Person
LENDER
Gibralt US, Inc.
/s/ XXXXXX XXXXXX
By: ________________________________
Name: Xxxxxx Xxxxxx
Title: Authorized Person
Address: 0000-0000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, X.X. X0X 0X0
Xxxxxx
Loans to be Made at the
Initial Closing: $ 150,000
Loans to be Made on Subsequent Loan Dates:
Up to an aggregate of $ 950,000
Total Lender's Commitment: $1,100,000
Number of Commitment Shares Issued: 22
Number of Common Shares to be Issued: 2,769,756
LENDER
Xxxxx X. Xxxxx, Xx.
/s/ XXXXX X. XXXXX, XX.
--------------------------------
Address: c/o Diomed, Inc.
Xxx Xxxxxx Xxxx
Xxxxxxx, XX 00000
Loans to be Made at the Initial Closing: $50,000
Loans to be Made on Subsequent Loan Dates:$ zero
Total Lender's Commitment: $50,000
Number of Comitment shares Issued: 1
Number of Common Shares to be Issued: 125,898
LENDER
Xxxxx Xxxxxx
/s/ XXXXX XXXXXX
--------------------------------
Address: c/o Diomed, Inc.
Xxx Xxxxxx Xxxx
Xxxxxxx, XX 00000
Loans to be Made at the Initial Closing: $50,000
Loans to be Made on Subsequent Loan Dates: $ zero
Total Lender's Commitment: $50,000
Number of Comitment shares Issued: 1
Number of Common Shares to be Issued: 125,898
Schedules and Exhibits
Exhibit A FORM OF CLASS D NOTE
---------
Schedule 1(a)(ii) SCHEDULE OF LOANS AND SUBSEQUENT LOAN DATES
----------------- [OMITTED]
Exhibit B CERTIFICATE OF DESIGNATIONS OF CLASS D STOCK
---------
Exhibit C FORM OF LEGAL OPINION
---------
EXHIBIT A TO SECURED LOAN AGREEMENT
CLASS D NOTE
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION
HEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES ARE RESTRICTED
AND MAY NOT BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS
PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION REQUIREMENTS THEREOF
OR EXEMPTION THEREFROM.
No. ____ Up to $__________
Issuance Date: May 6, 2003
DIOMED, INC.
CLASS D SECURED NOTE DUE MAY 6, 2004
FOR VALUE RECEIVED, DIOMED, INC., a corporation organized and
existing under the laws of the State of Delaware ("Diomed"), a wholly-owned
subsidiary of Diomed Holdings, Inc. (the "Company") hereby promises to pay to
____________________________, having its address at
__________________________________________, or its assigns (the "Holder" and
together with the other holders of Class D Secured Notes due May 6, 2004 (each,
a "Class D Note" or a "Note" and together with the other Notes, the "Class D
Notes" or the "Notes") issued pursuant to the Secured Loan Agreement (as defined
below, the "Holders"), the principal sum of ____________________ and ____/100
Dollars ($________________) or such lesser amount equal to the aggregate of the
Loans made by the initial Holder of this Note pursuant to the Secured Loan
Agreement (as defined below) on May 6, 2004 (as such date may be extended or
modified by the Company with the Lenders' Approval, (the "Maturity Date") and to
pay simple interest on the principal sum outstanding from time to time as
provided for herein in arrears at the rate of 8% per annum, calculated on the
basis of a 360 day year and the number of days elapsed (but in no event in
excess of the maximum rate permitted by applicable law) upon the Maturity Date
or the date when Holder redeems or demands repayment of this Note pursuant to
Section 2 or the Company elects to prepay this Note in full prior to the
Maturity Date pursuant to Section 3. Interest shall be deemed to accrue on this
Note commencing on the issuance date hereof and shall continue to accrue on a
daily basis until payment in full of the principal sum has been made or duly
provided for in accordance with the provisions hereof.
Capitalized terms not defined herein shall have their
respective meanings in the Exchange Agreement dated as of April 22, 2003 by and
among the Company, Diomed, the Note Purchasers (as defined therein) and the
Designated Note Purchaser (as defined therein) (the "Exchange Agreement"),
unless the context clearly indicates otherwise.
This Note is the Class D Note referred to in the Secured Loan
Agreement dated April 22, 2003, among the Company, Diomed, the Lenders listed
therein and the Designated
Lender (as defined therein) (the "Secured Loan Agreement"). By acceptance of
this Note, the Holder accepts the terms and conditions set forth in the Secured
Loan Agreement and irrevocably agrees to be bound thereby, including without
limitation the appointment and authorization of the Designated Lender pursuant
to Section 10 of the Secured Loan Agreement. In addition to the provisions of
the Secured Loan Agreement, this Note is subject to the following additional
provisions:
1. Restricted Transferability, etc. This Note has been issued subject to
investment representations of the original purchaser hereof and may be
transferred or exchanged only (a) in compliance with the transfer restrictions
prohibiting the transfer of Securities to certain Persons, as provided in
Section 4(a) of the Secured Loan Agreement, and (b) in compliance with the
Securities Act and other applicable state and foreign securities laws. In the
event of any proposed transfer of this Note to which the Company has granted its
consent, the Company may require, prior to issuance of a new Note in the name of
such other person, that it receive reasonable transfer documentation including
legal opinions that the issuance of the Note in such other name does not and
will not cause a violation of the Securities Act or any applicable state or
foreign securities laws. Prior to due presentment for transfer of this Note to
which the Company has consented, the Company, Diomed and any agent of the
Company or Diomed may treat the person in whose name this Note is duly
registered on Diomed's Note Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Note be overdue, and neither the Company, Diomed nor any such agent shall
be affected by notice to the contrary.
2. Holder's Option to Redeem Note or Demand Repayment Upon Consummation or
Non-Occurrence of Contemplated Equity Financing.
(a) Upon the consummation of the Contemplated Equity Financing, the
Company shall provide written notice to the Designated Lender in accordance
with the notice provisions set forth in Section 11 of the Secured Loan
Agreement, which Notice shall include the terms and conditions of the
Contemplated Equity Financing. Within ten (10) Business Days of the
Designated Lender's receipt of such notice, the Holder may, at its option
and in its sole discretion, by providing written notice to the Company,
either:
(i) cause the full redemption (but not a partial redemption) of
this Class D Note and any other Class D Notes owned by the Holder to
be automatically converted into Common Stock or other equity
securities issued by the Company in the Contemplated Equity Financing
at the price and other terms and subject to the same conditions as the
Contemplated Equity Financing, such that such indebtedness will be
treated as proceeds from the Contemplated Equity Financing on the same
basis as the proceeds provided by the other investors in the
Contemplated Equity Financing, whereupon the Company shall to issue an
amount of Common Stock or other equity securities issued in the
Contemplated Equity Financing equal to the amount of indebtedness
represented by the Holder's Notes (including all accrued and unpaid
interest) as of the date of redemption divided by the purchase price
per share of the Common Stock or
other equity securities issued in the Contemplated Equity Financing
(the "Redemption Price"); or
(ii) declare this Note, together with all accrued and unpaid
interest herein, to be immediately due and payable, whereupon the
Holder may immediately enforce any and all of the Holder's rights and
remedies provided herein or any other rights or remedies afforded by
law.
At the time of redemption or repayment of this Note pursuant to the Holder's
notice demanding redemption or repayment of this Note after the consummation of
the Contemplated Equity Financing as aforesaid, (x) in the case of a redemption,
the Company shall record the issuance of the securities representing the
Redemption Price on the Company's records as of the time of the redemption, and
shall provide Certificates evidencing such issuance to the Designated Lender as
soon as practicably after the redemption, and (y) in the case of a repayment,
Diomed shall, simultaneously with the payment in cash of the principal amount of
this Note and all accrued and unpaid interest on this Note, whereupon the
indebtedness represented by this Note (including all accrued and unpaid
interest) shall be considered paid in full for all purposes, and the Note shall
be cancelled and promptly returned by the Holder to the Company. The Holder's
failure to return this Note to the Company after the satisfaction by the Company
or Diomed of its obligations under clause (x) or (y) above, as the case may be,
shall not cause the Company or Diomed to have any indebtedness or obligation to
the Holder or any other Person.
(b) If the Contemplated Equity Financing is not consummated prior to
July 1, 2003, then the Holder may, at its option and in its sole
discretion, by providing written notice to the Company, declare this Note,
together with all accrued and unpaid interest herein, to be immediately due
and payable, whereupon the Holder may immediately enforce any and all of
the Holder's rights and remedies provided herein or any other rights or
remedies afforded by law. Upon receipt of such Notice, Diomed shall pay to
the Holder in cash the entire principal amount and accrued and unpaid
interest on this Note, whereupon the indebtedness represented by this Note
(including all accrued and unpaid interest) shall be considered paid in
full for all purposes, and the Note shall be cancelled and promptly
returned by the Holder to the Company. The Holder's failure to return this
Note to the Company after payment is made as aforesaid shall not cause the
Company to have any indebtedness or obligation to the Holder or any other
Person.
3. Prepayment of Notes. Diomed may at its option call for prepayment all or
part of the Class D Notes prior to the Maturity Date, as follows:
(i) The Notes called for prepayment shall be redeemable for an
amount (the "Prepayment Price") equal to (x) 100% of the principal
amount called for prepayment, plus (y) interest accrued through the
day immediately preceding the date of prepayment (the "Prepayment
Date").
(ii) If fewer than all outstanding Class D Notes are to be
prepaid, then all Class D Notes shall be partially prepaid on a pro
rata basis.
(iii) Prior to the Prepayment Date, Diomed shall deposit into
escrow an amount sufficient for the payment of the aggregate
Prepayment Price of the Class D Notes being called for prepayment and
shall make such funds available on and after the Prepayment Date for
payment to the Holders who present their Class D Notes and otherwise
comply with Diomed's instructions contained in the Prepayment Notice
(as defined below).
(iv) On the Prepayment Date, Diomed shall cause the Holders whose
Class D Notes have been presented for prepayment to be issued payment
of the Prepayment Price. In the case of a partial prepayment, Diomed
shall also issue new Class D Notes to the Holders for the principal
amount remaining outstanding after the Prepayment Date promptly after
the Holders' presentation of the Class D Notes called for prepayment.
(v) Not less than five (5) business days prior to the Prepayment
Date, Diomed shall issue a notice (the "Prepayment Notice") to each
Holder setting forth the following:
1. the Prepayment Date;
2. the Prepayment Price;
3. the aggregate principal amount of the Class D Notes being called
for prepayment;
4. a statement instructing the Holders to surrender their Class D
Notes for prepayment and payment of the Prepayment Price,
including the name and address of Diomed or, if applicable, the
paying agent of Diomed, where Class D Notes are to be surrendered
for prepayment;
5. a statement advising the Holders that interest will cease to
accrue on the Class D Notes (or, in the case of a partial
prepayment, that portion of the Class D Notes being called for
prepayment) as of the Prepayment Date; and
6. in the case of a partial prepayment, a statement advising the
Holders that after the Prepayment Date a substitute Class D Note
will be issued by Diomed after deduction the portion thereof
called for prepayment, at no cost to the Holder.
4. Payments. That portion of the principal amount of the Class D Notes
which is outstanding on the Maturity Date shall be payable, together with
accrued interest thereon as provided herein, on the Maturity Date by payment
accordance with Section 8. All payments made hereon shall be applied first
towards accrued interest and second to the principal amount hereof.
5. Direct Obligation of Diomed. This Note is a direct obligation of
Diomed.
6. Security Agreement. The Holder of this Class D Note has the
benefit of certain security provided to it as a Secured Party
under the Security Agreement and the Pledge Agreement as provided
therein.
7. Intentionally Omitted.
8. Payments. All payments contemplated hereby to be made "in cash"
shall be made by wire transfer of immediately available funds in
such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private
debts. All payments of cash and each delivery of shares of Common
Stock issuable to the Holder as contemplated hereby shall be made
to the Holder to an account designated by the Holder to Diomed
and if the Holder has not designated any such accounts at the
address last appearing on the Note Register of Diomed as
designated in writing by the Holder from time to time; except
that the Holder may designate, by notice to Diomed, a different
delivery address for any one or more specific payments or
deliveries.
9. Acquired for Investment Purposes Only. The Holder of this Note,
by acceptance hereof, agrees that this Note is being acquired for
investment and that such Holder will not offer, sell or otherwise
dispose of this Note except in compliance with the terms of the
the Secured Loan Agreement and under circumstances which will not
result in a violation of the Securities Act or any applicable
state Blue Sky or foreign laws or similar laws relating to the
sale of securities.
10. Miscellaneous. With respect to governing law, jurisdiction and
waiver of Jury trial:
(a) THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND PERFORMED ENTIRELY WITHIN SUCH STATE.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS NOTE MAY
BE BROUGHT IN XXX XXXXXX XX XXX XXXXX XX XXX XXXX SITTING IN NEW YORK
COUNTYOR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE.
BY THE COMPANY'S EXECUTION AND DELIVERY OF THIS NOTE AND BY THE
HOLDER'S ACCEPTANCE OF THIS NOTE, EACH OF THE COMPANY AND THE HOLDER
CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS, AND IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION
IN RESPECT OF THIS NOTE OR OTHER DOCUMENT RELATED THERETO. FURTHER, BY
THE COMPANY'S EXECUTION AND DELIVERY OF THIS NOTE AND BY THE HOLDER'S
ACCEPTANCE OF THIS NOTE, EACH OF THE COMPANY AND THE HOLDER WAIVES
PERSONAL SERVICE
OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY
OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE.
(c) BY THE COMPANY'S EXECUTION AND DELIVERY OF THIS NOTE AND BY
THE HOLDER'S ACCEPTANCE OF THIS NOTE, EACH OF THE COMPANY AND THE
HOLDER HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY DOCUMENT OR
IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF
THE COMPANY AND THE HOLDER OR ANY OTHER HOLDER OF NOTES OR ANY OF THEM
WITH RESPECT TO ANY TRANSACTION DOCUMENT OR THE TRANSACTIONS RELATED
THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH OF THE
COMPANY AND THE HOLDER HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY, AND THAT THE COMPANY, THE HOLDER AND ANY PARTY TO THE
OTHER TRANSACTION DOCUMENTS MAY FILE AN ORIGINAL COUNTERPART OR A COPY
OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
THE COMPANY, THE HOLDER OR ANY OTHER HOLDER OF NOTES TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.
11. Events of Default. The following shall constitute an "Event of
Default":
(a) Diomed fails to pay principal or interest on this Note as required
hereunder and the same shall continue for a period of two (2) days; or
(b) Any of the representations or warranties made by Diomed or the
Company in this Note or in the Secured Loan Agreement, the Security
Agreement, the Pledge Agreement or the Registration Rights Agreement, or in
any certificate or other material written statement heretofore or hereafter
furnished by Diomed or the Company in connection with the execution and
delivery of this Note or the other Documents shall have been or shall be
false or misleading in any material respect at the time made; or
(c) Diomed or the Company shall fail to perform or observe, in any
material respect, any covenant, term, provision, condition, agreement or
obligation under this Note, the Secured Loan Agreement, the Security
Agreement, the Pledge Agreement, or the Registration Rights Agreement and
such failure shall continue uncured for a period of thirty (30) days after
written notice of such failure from the Holder; or
(d) The voluntary or judicial dissolution or termination of the
Company or Diomed, Inc.; or
(e) The Company or Diomed, Inc. shall (i) admit in writing its
inability to pay its debts as they become due; (ii) file a petition in
bankruptcy or for reorganization or for the adoption of an agreement under
the Bankruptcy Code; (iii) make an assignment for the benefit of its
creditors; (iv) have commenced against it a proceeding for the appointing
of a receiver or trustee for all or a substantial part of its property
which is not dismissed or stayed for a period of
30 days; (v) allow the assumption of custody or sequestration by a court of
competent jurisdiction of all or a substantial part of its property; (vi)
suffer an attachment on all or a substantial part of his property or (vii)
take any action in furtherance of the foregoing; inability to pay its debts
generally as they mature; or
(f) Any declared default of the Company or Diomed under any
Institutional Indebtedness that gives the holder thereof the right to
accelerate such Institutional Indebtedness, and such Institutional
Indebtedness is in fact accelerated by the holder. The term "Institutional
Indebtedness" means the principal of and unpaid accrued interest on: (i)
all indebtedness to banks, commercial finance lenders, insurance companies
or other financial institutions regularly engaged in the business of
lending money, which is for money borrowed by the Company or Diomed, as the
case may be, (whether or not secured), (ii) any such indebtedness or any
debentures, notes or other evidence of indebtedness issued in exchange for
or to refinance such Institutional Indebtedness, and (iii) any indebtedness
arising from the satisfaction of such Institutional Indebtedness by a
guarantor;
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by a majority in interest of
the Holders of the Notes (which waiver shall not be deemed to be a waiver of any
subsequent default) at the option and in the discretion of Holders holding
sixty-six and two-thirds percent (66-2/3%) of the principal amount of the Class
D Notes, the Holders may declare this Note, together with all accrued and unpaid
interest herein, to be immediately due and payable, without presentment, demand,
protest or notice of any kinds, all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to the contrary
notwithstanding, and the Holders of sixty-six and two-thirds percent (66-2/3%)
of the Class D Notes, with the Lenders' Approval, may immediately enforce any
and all of the Holder's rights and remedies provided herein or any other rights
or remedies afforded by law.
12. No Rights as a Stockholder. Nothing contained in this Note shall be
construed as conferring upon the Holder the right to vote or to receive
dividends or to consent or receive notice as a shareholder in respect of any
meeting of shareholders or any rights whatsoever as a shareholder of the
Company.
13. Amendments. This Note may be amended only by the written consent of the
parties hereto. In the absence of manifest error, the outstanding principal
amount of the Note on the Company's books and records shall be the correct
amount.
14. Waivers. No waivers or consents in regard to any provision of this Note
may be given other than by an instrument in writing signed by the Holder.
[Signature Page Follows]
IN WITNESS WHEREOF, the Company has caused this Class D Note to be
duly executed by an officer thereunto duly authorized.
Dated as of the Issuance Date set forth above.
DIOMED, INC.
By: _______________________________
Xxxxx X. Xxxxx, Xx.
------------------------------------
(Print Name)
Chief Executive Officer
(Title)
Acknowledged and Agreed: DIOMED HOLDINGS, INC.
By: _______________________________
Xxxxx X. Xxxxx, Xx.
------------------------------------
(Print Name)
Chief Executive Officer
(Title)
EXHIBIT B TO SECURED LOAN AGREEMENT
DIOMED HOLDINGS, INC.
---------------------------
CERTIFICATE OF DESIGNATIONS OF
CLASS D CONVERTIBLE PREFERRED STOCK,
PAR VALUE $0.001 PER SHARE
---------------------------
Pursuant to Section 151(g) of the Delaware General Corporation Law
---------------------------
IT IS HEREBY CERTIFIED that:
1. The name of the company (hereinafter called the "Corporation") is Diomed
Holdings, Inc., a corporation organized and now existing under the Delaware
General Corporation Law ("DGCL").
2. The Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation") authorizes the issuance of Twenty Million (20,000,000) shares of
preferred stock, par value $0.001 per share (the "Preferred Stock"), and
expressly vests in the Board of Directors of the Corporation the authority to
issue any or all of said shares by resolution or resolutions and to establish
the designation and number of shares to be issued.
3. The Board of Directors of the Corporation, pursuant to the authority
expressly vested in it as aforesaid, and pursuant to the provisions of Section
151 of the DGCL, has adopted the resolution set forth below to create a series
of Preferred Stock designated as Class D Stock. Pursuant to said Section 151,
the approval of the Corporation's shareholders was not required.
RESOLVED, That Twenty Four (24) shares of the One Million Nine Hundred
Ninety Nine Thousand Eighty (1,999,080) shares of Preferred Stock of the
Corporation which are authorized but unissued shares as of the date of this
certificate shall hereby be designated Class D Convertible Preferred Stock, par
value $0.001 per share (the "Class D Stock"), and shall possess the rights and
preferences set forth below:
1. DIVIDENDS. The holders of the Corporation's Class D Stock shall be
entitled, when and if declared by the board of directors of the corporation (the
"Board of Directors"), to cash dividends and distributions out of funds of the
corporation legally available for that purpose (collectively, "Distributions")
pro rata and pari passu with the holders of the Corporation's common stock, par
value $0.001 per share (the "Common Stock"), such that the Distributions payable
on each issued and outstanding share of the Class D Stock shall be equal to the
amount paid on that number of shares of shares of Common Stock into which such
Class D Stock is convertible, and all Distributions shall be declared, paid and
Page 1
set aside ratably on the foregoing basis among the holders of the Class D Stock
and the holders of the Common Stock in proportion to the issued and outstanding
shares of the Class D Stock and the Common Stock held by them.
2. VOTING.
(a) The holders of the Class D Stock shall each be entitled to
vote the number of votes equal to the number of shares of the Common Stock into
which such shares are to be converted pursuant to Section 4 of this Certificate.
Except as expressly set forth in Section 2(b) of this Certificate, any matter as
to which the holders of Common Stock are entitled to vote shall require the
affirmative vote of the holders of a majority of the issued and outstanding
shares of the Corporation's capital stock entitled to vote thereon, including
the Class D Stock (and any other outstanding capital stock of the of the
Corporation convertible into Common Stock), with the holders of the shares of
the Class D Stock (and any other outstanding capital stock of the of the
Corporation convertible into Common Stock) and the holders of the shares of the
Common Stock voting as one class.
(b) The affirmative vote of the holders of a majority of the
issued and outstanding shares of the Class D Stock, voting as a separate class,
shall be required to change the powers, preferences or special rights of the
shares of the Class D Stock in relation to the shares of the Common Stock.
3. LIQUIDATION.
(a) Upon the occurrence of a Liquidating Event (as defined below
in Section 3(c) of this Certificate), whether voluntary or involuntary, the
holders of the Class D Stock and the Common Stock of all classes shall be
entitled to receive, pro rata and pari passu out of the assets of the
Corporation available for distribution to its stockholders or from the net
proceeds from a sale, lease, exchange or other disposition of the assets of the
Corporation (in any such case, the "Proceeds"), as applicable, the following:
all issued and outstanding shares of Class D Stock shall be automatically
converted into shares of Common Stock pursuant to Section 4 and then and
thereafter the entire assets and funds of the Corporation legally available for
distribution shall be distributed ratably among the holders of the Common Stock
(after giving effect to full conversion of the Class D Stock) in proportion to
the issued and outstanding shares of the Common Stock held by them.
(b) Liquidating Event. Any of the following shall be considered a
"Liquidating Event" and shall entitle the holders of the Class D Stock and the
Common Stock to receive promptly after the Corporation's realization thereof, in
cash, securities or other property, those amounts specified in Section 3(a) of
this Certificate:
(i) any liquidation, dissolution or winding up of the
Corporation; or
(ii) any sale, lease, exchange or other disposition of all
or substantially all the Corporation's assets.
Page 2
4. CONVERSION OF SHARES OF THE CLASS D STOCK. Shares of the Class D
Stock shall automatically convert into shares of the Common Stock on the basis
set forth in, and subject to the limitations of, this Section 4 of this
Certificate:
(a) Conversion Ratio.
----------------
(i) Subject to and in compliance with the provisions of this
Section 4, each one (1) share of the Class D Stock (or any
fraction thereof) shall be converted into One Hundred Twenty Five
Thousand Eight Hundred Ninety Eight (125,898) fully paid and
nonassessable shares (calculated as to each conversion to the
nearest one-thousandth of a share) of the Common Stock. The ratio
of 1:125,898, as adjusted pursuant to the Section 4(a)(ii) of
this Certificate, is referred to as the "Class D Conversion
Ratio."
(ii) Subdivision or Combination of the Common Stock. If the
Corporation at any time or from time to time shall declare or pay
any dividend on the shares of the Common Stock payable in shares
of the Common Stock or in any right to acquire shares of the
Common Stock, or shall effect a subdivision of the outstanding
shares of the Common Stock into a greater number of shares of the
shares of any class of the Common Stock (by stock split,
reclassification or otherwise), or if the outstanding shares of
the Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of
the Common Stock, then the Class D Conversion Ratio in effect
immediately prior to such event shall, concurrently with the
effectiveness of such event, be proportionately decreased or
increased, as appropriate, such that each share of the Class D
Stock is converted into those shares of the Common Stock that
represent the economic equivalent of the shares of the Common
Stock into which each share of the Class D Stock was convertible
immediately prior to such dividend, subdivision, combination or
reclassification.
(b) Conversion. All of the outstanding shares of the Class D Stock
----------
shall automatically convert into shares of the Common Stock on the date on which
the holders of the Corporation's capital stock approve the issuance of the
Common Stock into which the Class D Stock is convertible, if and to the extent
such approval is required by the DGCL or the rules and regulations of the
American Stock Exchange.
(c) Determinations by the Corporation. In determining Conversion
---------------------------------
Share Amounts, the determination of the Corporation shall be final, absent
manifest error. All Conversion Share Amounts shall be rounded to the nearest
one-thousandth of a share.
(d) Conversion Procedure.
--------------------
(i) The conversion of shares of Class D Stock shall be
deemed to have been effected as of the close of business on the
date on which such shares of the Class D Stock are converted
Page 3
pursuant to the terms of Section (b) of this Certificate. At the
time any such conversion has occurred, the rights of the holder
of the shares converted as a holder of shares of the Class D
Stock shall cease, and the person or persons such shares of the
Class D Stock shall become the holder or holders of record of the
shares of the Common Stock into which such shares of the Class D
Stock were converted.
(ii) The issuance of certificates for shares of the Common
Stock upon conversion of shares of the Class D Stock shall be
made without charge to the holders of such shares of the Class D
Stock for any issuance tax in respect thereof (so long as such
certificates are issued in the name of the record holder of such
shares of the Class D Stock) or other cost incurred by the
Corporation in connection with such conversion and the related
issuance of shares of the Common Stock. Upon conversion of each
share of the Class D Stock, the Corporation shall take all such
actions as are necessary in order to ensure that the shares of
the Common Stock issuable with respect to such conversion shall
be validly issued, fully paid and nonassessable, free and clear
of all taxes (other than any taxes relating to any dividends paid
with respect thereto), liens, charges and encumbrances with
respect to the issuance thereof.
(iii) The Corporation shall not close its books against the
transfer of Common Stock of any class issued or issuable upon
conversion of shares of the Class D Stock in any manner which
interferes with the timely conversion of Stock. The Corporation
shall assist and cooperate with any holder of such shares
required to make any governmental filings or obtain any
governmental approval prior to or in connection with any
conversion of such shares hereunder (including, without
limitation, making any filings required to be made by the
Corporation). Shares of the Class D Stock that have been
converted shall be cancelled and shall not be held in treasury or
otherwise be available for reissuance.
(e) Extraordinary Event. Prior to the consummation of any
---------------------
Extraordinary Event (as defined below), the Corporation shall make appropriate
provisions to ensure that each of the holders of the shares of the Class D Stock
shall thereafter have the right to acquire and receive, in lieu of or in
addition to (as the case may be) the shares of Common Stock immediately
theretofore receivable upon the conversion of such holder's Class D Stock, such
shares of stock, securities or assets as such holder would have received in
connection with such Extraordinary Event if such holder had converted its shares
of Class D Stock immediately prior to such Extraordinary Event. In each such
case, the Corporation shall also make appropriate provisions to ensure that the
provisions of this Section 4(e) shall thereafter be applicable to the shares of
the Class D Stock (including, in the case of any such consolidation, merger or
sale in which the successor entity or purchasing entity is other than the
Corporation, an immediate adjustment of the Class D Conversion Ratio reflecting
the terms of such consolidation, merger or sale, and a corresponding immediate
adjustment in the number of shares of the Common Stock acquirable and receivable
upon conversion of shares of the Class D Stock). The Corporation shall not
Page 4
effect any Extraordinary Event, unless prior to the consummation thereof, the
successor entity (if other than the Corporation) resulting from such
consolidation or merger or the entity purchasing such assets assumes in writing
the obligation to deliver to each such holder such shares of stock, securities
or assets as, in accordance with the foregoing provisions, such holder may be
entitled to acquire. As used herein, "Extraordinary Event" means the occurrence
or consummation of a transaction or series of related transactions resulting in:
(i) a merger, consolidation, sale or reorganization in which the Corporation or
any of its subsidiaries is not the surviving corporation; or (ii) a sale, lease
or exchange, directly or indirectly, of all or substantially all of the property
and assets of the Corporation, whether or not in the ordinary course of
business.
(f) No Impairment. The Corporation will not, by amendment of this
-------------
Certificate or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action
(other than actions taken in good faith), avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation but
will at all times in good faith assist in carrying out all the provisions of
this Section 4 and in taking all such action as may be necessary or appropriate
in order to protect the conversion rights of the holders of the shares of the
Class D Stock against impairment.
(g) Reservation of Common Stock. The Corporation shall, at all
---------------------------
times when shares of the Class D Stock shall be outstanding, reserve and keep
available out of its authorized but unissued stock, for the purpose of effecting
the conversion of shares of the Class D Stock, such number of its duly
authorized shares of the Common Stock as shall from time to time be sufficient
to effect the conversion of all outstanding shares of the Class D Stock. Before
taking any action which would cause the effective purchase price for the shares
of the Class D Stock to be less than the par value of the shares of the Class D
Stock, the Corporation shall take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Corporation may validly and
legally issue fully paid and nonassessable shares of such Common Stock at such
effective purchase price.
5. UNCERTIFICATED SHARES. The shares of the Class D Stock shall be
uncertificated shares; provided, that in accordance with Section 158 of the DGCL
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of, the Corporation representing the number of shares
owned of record by such holder in certificate form.
Page 5
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Designations as the act and deed of the corporation referenced above.
/s/ Xxxx X. Xxxxxxx
--------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Secretary
Page 6
EXHIBIT C TO SECURED LOAN AGREEMENT
[Letterhead of McGuireWoods LLP]
May 7, 2003
To each of the Note Purchasers, party to the Exchange Agreement referred to
below, and To each of the Lenders, party to the Secured Loan Agreement referred
to below
Diomed Holdings, Inc.
Ladies and Gentlemen:
We have acted as special New York counsel to Diomed Holdings,
Inc., a Delaware corporation (the "Company"), and Diomed, Inc., a Delaware
corporation and wholly-owned subsidiary of the Company ("Diomed"), in connection
with the transactions contemplated by (i) the Exchange Agreement, dated as of
the date hereof (the "Exchange Agreement"), among the Company, Diomed, the Note
Purchasers signatory thereto (the "Note Purchasers") and Gibralt US, Inc., as
designated purchaser for the Note Purchasers (the "Designated Note Purchaser"),
and (ii) the Secured Loan Agreement, dated as of the date hereof (the "Secured
Loan Agreement"), among the Company, Diomed, the Lenders signatory thereto (the
"Lenders") and Gibralt US, Inc., as designated lender for the Lenders (the
"Designated Lender"). This opinion letter is furnished to you pursuant to
Section 8(c) of the Exchange Agreement and Section 8(e) of the Secured Loan
Agreement. Unless otherwise defined herein, terms used herein have the meanings
provided in the Exchange Agreement. As used herein, "New York UCC" means the
Uniform Commercial Code as in effect on the date hereof in the State of New York
and "Delaware UCC" means the Uniform Commercial Code as in effect on the date
hereof in the State of Delaware.
I. Documents Reviewed
In connection with this opinion letter, we have examined the
following documents, each of which is dated on or as of the date of the Exchange
Agreement and the Secured Loan Agreement unless otherwise indicated:
(a) the Exchange Agreement
(b) the Secured Loan Agreement;
(c) the Notes;
(d) the Certificate of Designations for the Exchange Conversion Shares;
(e) the Certificate of Designations for the Commitment Shares;
(f) the Security Agreement;
(g) the Pledge Agreement; and
(h) the Registration Rights Agreement.
The documents referred to in clauses (a) through (h) above are referred to
collectively as the "Subject Documents".
In addition we have examined the following:
(i) originals, or copies identified to our satisfaction as being
true copies, of such records, documents and other instruments as we
have deemed necessary for the purposes of this opinion letter; and
(ii) a copy of the UCC-1 Financing Statement (the "UCC Financing
Statement") naming Diomed as debtor and Gibralt US, Inc. as secured
party, filed on December 30, 2002 with the Office of the Secretary of
State of Delaware (the "UCC Filing Office").
II. Assumptions Underlying Our Opinions
For all purposes of the opinions expressed herein, we have assumed,
without independent investigation, that:
(a) Factual Matters. With regard to factual matters, to the extent
that we have reviewed and relied upon representations of the Company and
Diomed set forth in the Subject Documents, such representations are true
and correct;
(b) Contrary Knowledge of Addressee. No addressee of this opinion
letter has any actual knowledge that any of our factual assumptions or
opinions is inaccurate;
(c) Signatures. The signatures of individuals (other than individuals
signing on behalf of the Company and Diomed) signing the Subject Documents
are genuine and authorized;
(d) Authentic and Conforming Documents. All documents submitted to us
as originals are authentic, complete and accurate and all documents
submitted to us as copies conform to authentic original documents;
(e) Capacity of Certain Parties. All parties to the Subject Documents
have the (i) capacity and (ii), except in the case of the Company and
Diomed, full power and authority to execute, deliver and perform the
Subject Documents and the documents required or permitted to be delivered
and performed thereunder;
(f) Subject Documents Binding on Certain Parties. Except with respect
to the Company and Diomed, all of the Subject Documents and the documents
required or permitted to
be delivered thereunder have been duly authorized by all necessary
corporate or other action on the part of the parties thereto, have been
duly executed and delivered by such parties and, except with respect to the
Company and Diomed, are legal, valid and binding obligations enforceable
against such parties in accordance with their terms;
(g) Consents for Certain Parties. All necessary consents,
authorizations (other than in the case of the Company and Diomed),
approvals, permits or certificates (governmental and otherwise) which are
required as a condition to the execution and delivery of the Subject
Documents by the parties thereto and to the consummation by such parties of
the transactions contemplated thereby have been obtained; and
(h) Accurate Description of Parties' Understanding. The Subject
Documents accurately describe and contain the mutual understanding of the
parties, and there are no oral or written statements or agreements that
modify, amend or vary, or purport to modify, amend or vary, any of the
terms thereof.
III. Our Opinions
Based on and subject to the foregoing and the other limitations,
assumptions, qualifications and exclusions set forth in this opinion
letter, we are of the opinion that:
1. Execution, Validity and Enforceability. The Company and Diomed each
has (i) the corporate power and authority to execute, deliver and perform
the provisions of each Subject document to which it is a party, (ii) taken
all corporate action necessary to authorize the execution and delivery
thereof and (iii) duly executed and delivered each Subject Document to
which it is party, and each such Subject Document constitutes its valid,
binding and enforceable obligation.
2. Capitalization of the Company. The authorized capital stock of the
Parent consists of 100,000,000 shares, of which 80,000,000 shares are
shares of Common Stock, par value $0.001 per share, and of which 20,000,000
shares are shares of preferred stock, par value $0.001 per share, of which
20 shares are designated as Class C Convertible Preferred Stock (the "Class
C Stock") and 24 shares are designated as Class D Convertible Preferred
Stock (the "Class D Stock"). The Company has duly reserved 27,117,240
shares of Common Stock for issuance upon the conversion of the Class C
Stock in accordance with its terms, and has duly reserved 3,021,552 shares
of Common Stock for issuance upon the conversion of the Class D Stock. Upon
conversion of the Class C Stock and the Class D Stock in accordance with
their respective terms, the Common Stock so issued will be validly issued,
fully paid and non-assessable.
3. UCC Matters. (a) The Pledge Agreement is effective to create a
valid security interest in favor of the Designated Note Purchaser and the
Designated Lender (for the benefit of the Secured Parties), to secure the
indebtedness described therein, in all right, title and interest of Diomed
in and to all certificated securities (as defined in Section 8-102(a)(4) of
the UCC, the "Pledged Securities") and all other personal property included
within the term "Collateral" (as defined in the Pledge Agreement) in which
a security interest can be granted under Article 9 of the UCC
(collectively, the "Pledged Collateral"). The Designated Note Purchaser and
the Designated Lender, for the benefit of the Secured Parties, will have a
perfected security interest in the Pledged Securities upon delivery to the
Designated Note Purchaser and the Designated Lender, for the benefit of the
Secured Parties, in the State of New York of the certificates representing
such Pledged Securities in registered form, issued or indorsed in the name
of the Designated Note Purchaser and the
Designated Lender or in blank by an effective indorsement, or accompanied
by undated stock powers with respect thereto duly indorsed in blank by an
effective indorsement. We understand that the certificates representing the
Pledged Securities have previously been delivered to the Designated Note
Purchaser and the Designated Lender, so indorsed.
(b) The Security Agreement is effective to create a valid security
interest in favor of the Secured Parties to secure the Secured Obligations
in all right, title and interest of Diomed in and to all personal property
included within the term "Collateral" (as defined in the Security
Agreement) in which a security interest can be granted under Article 9 of
the New York UCC (collectively, the "Article 9 Collateral"; and together
with the Pledged Collateral, being the "Subject Collateral").
(c) The Secured Parties have a perfected security interest in those
items of the Article 9 Collateral in which a security interest may be
perfected under Article 9 of the Delaware UCC by the filing of a financing
statement in the UCC Filing Office.
IV. Exclusions
1. General Exclusions. We call your attention to the following matters
as to which we express no opinion:
(a) Indemnification. Any agreement of the Company or Diomed in a
Subject Document relating to indemnification, contribution or exculpation
from costs, expenses or other liabilities that is contrary to public policy
or applicable law;
(b) Fraudulent Transfer. The effect, if applicable, of fraudulent
conveyance, fraudulent transfer and preferential transfer laws and
principles of equitable subordination;
(c) Jurisdiction; Venue, etc. Any agreement of the Company or Diomed
in a Subject Document to submit to the jurisdiction of federal courts
located in the State of New York, to waive any objection to the laying of
the venue, to waive the defense of forum non conveniens in any action or
proceeding referred to therein, to waive trial by jury, to effect service
of process in any particular manner or to establish evidentiary standards;
(d) Trust Relationship. The creation of any trust relationship by the
Company or Diomed on behalf of any Note Purchaser;
(e) Certain Laws. Federal securities laws or regulations, state
securities and Blue Sky laws or regulations, federal and state banking laws
and regulations, pension and employee benefit laws and regulations, federal
and state environmental laws and regulations, federal and state tax laws
and regulations, federal and state health and occupational safety laws and
regulations, building code, zoning, subdivision and other laws and
regulations governing the development, use and occupancy of real property,
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976 and other federal and state antitrust and unfair competition
laws and regulations, the Assignment of Claims Act, and the effect of any
of the foregoing on any of the opinions expressed;
(f) Local Ordinances. The ordinances, statutes, administrative
decisions, orders, rules and regulations of any municipality, county,
special district or other political subdivision of the State of New York;
(g) Certain Agreements of Company. Any agreement of the Company or
Diomed in a Subject Document providing for:
(i) specific performance of the Company's or Diomed's
obligations;
(ii) establishment of a contractual rate of interest payable
after judgment;
(iii) rights of set off;
(iv) the granting of any power of attorney;
(v) survival of liabilities and obligations of any party under
any of the Subject Documents arising after the effective date of
termination of the Secured Loan Agreement; or
(vi) obligations to make an agreement in the future;
(h) Remedies. Any provision in any Subject Document 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,
that the election of some particular remedy does not preclude recourse to
one or more others or that failure to exercise or delay in exercising
rights or remedies will not operate as a waiver of any such right or
remedy;
(i) UCC Choice of Law. Any provision in any Subject Document with
respect to governing law to the extent that such provision purports to
affect the choice of law governing perfection and non-perfection of the
security interests;
(j) Sale of Collateral. Any provision in any Subject Document relating
to the sale or other disposition of Collateral except in compliance with
the New York UCC;
(k) Custody of Collateral. Any provisions in any Subject Document
providing for the care of collateral in the possession of the Designated
Note Purchaser and the Designated Lender to the extent inconsistent with
Section 9-207 of the New York UCC; and
(l) Waivers. Any purported waiver, release, variation, disclaimer,
consent or other agreement to similar effect (collectively, a "Waiver") by
the Company or Diomed under any Subject Document to the extent limited by
Sections 1-102(3) or 9-602 of the New York UCC or other provisions of
applicable law (including judicial decisions), except to the extent that
such
Waiver is effective under and is not prohibited by or void or invalid under
Section 9-602 of the New York UCC or other provisions of applicable law
(including judicial decisions).
2. Exclusions as to UCC Security Interests. We also express no opinion
as to the following matters:
(a) Title or Priority. Any person's ownership rights in or title to,
or priority of any security interest or lien on or with respect to, any
property or assets forming any part of the Subject Collateral;
(b) Security Interest in Certain Types of Collateral. The creation of
any security interest purported to be granted in or in respect of the
following: (a) any real property or fixtures, equipment used in farming
operations, farm products, crops, timber to be cut or as extracted
collateral; or (b) policies of insurance, receivables due from any
government or agency thereof, inventory which is subject to any negotiable
documents of title (such as negotiable bills of lading or warehouse
receipts), consumer goods, beneficial interests in a trust, letters of
credit or accounts resulting from the sale of any of the foregoing; or (c)
any other property or assets, the creation of a security interest in which
is excluded from the coverage of Article 9 of the New York UCC (in the case
of our opinion in paragraphs III-2(a), (b) and (c)) or Articles 8 and 9 of
the New York UCC (in the case of our opinion in paragraph III-2(a),
including such property or assets the creation, perfection or priority of a
security in which are subject to (i) a statute or treaty of the United
States which provides for a national or international registration or a
national or international certificate of title for the perfection or
recordation of a security interest therein or which specifies a place of
filing different from that specified in the New York UCC for filing to
perfect or record such security interest, (ii) a certificate of title
statute or (iii) the laws of any jurisdiction other than the State of New
York, Article 9 of the Delaware UCC or the United States; and
(c) Enforceability of Lien on Certain Types of Collateral. The
enforceability of any lien on or security interest in any Subject
Collateral:
(i) consisting of goods of a consignor who has delivered such
goods to the Company under a true consignment (as distinguished from a
consignment intended as security);
(ii) as against a "buyer in the ordinary course of business"
(within the meaning of Article 9 of the New York UCC) of the Subject
Collateral; and
(iii) consisting of inventory of Diomed in the event of any
failure by Diomed to have fully complied with the Fair Labor Standards
Act of 1932, as amended, including Sections 206 and 207 thereof; and
(d) Security Interests. The creation, validity, perfection or
enforceability of any security interest or lien purported to be granted in or in
respect of any of the Article 9 Collateral, other than as expressly provided in
paragraph III-2 above.
V. Qualifications and Limitations
1. General Qualifications and Limitations. The opinions set forth
above are subject to the following qualifications and limitations:
(a) Applicable Law. Our opinions are limited to the federal law of the
United States, Article 9 of the Delaware UCC, the General Corporate Law of
the State of Delaware and the laws of the State of New York, and we do not
express any opinion concerning any other law.
(b) Bankruptcy. Our opinions are subject to the effect of any
applicable bankruptcy, insolvency (including, without limitation, laws
relating to preferences), reorganization, moratorium and other similar laws
affecting creditors' rights generally.
(c) Equitable Principles. Our opinions are subject to the effect of
general principles of equity (regardless of whether considered in a
proceeding in equity or at law), including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing. In applying such
principles, a court, among other things, might limit the availability of
specific equitable remedies (such as injunctive relief and the remedy of
specific performance), might not allow a creditor to accelerate maturity of
debt or exercise other remedies upon the occurrence of a default deemed
immaterial or for non-credit reasons or might decline to order a debtor to
perform covenants in a Subject Document. Further, a court may refuse to
enforce a covenant if and to the extent that it deems such covenant to be
violative of applicable public policy, including, for example, provisions
requiring indemnification of any Note Purchaser against liability for its
own wrongful or negligent acts.
(d) Unenforceability of Certain Provisions. Certain of the provisions
contained in the Subject Documents may be unenforceable or ineffective, in
whole or in part, but the inclusion of such provisions does not render any
Subject Document invalid as a whole, and each of the Subject Documents
contains, in our opinion, adequate remedial provisions for the ultimate
practical realization of the principal benefits purported to be afforded by
such Subject Document, subject to the other qualifications contained in
this opinion letter. We note, however, that the unenforceability of such
provisions may result in delays in enforcement of the rights and remedies
of the Designated Note Purchaser and the Designated Lender under the
Subject Documents, and we express no opinion as to the economic
consequences, if any, of such delays.
(e) Material Changes to Terms. Provisions in the Subject Documents
which provide that any obligations of the Company or Diomed thereunder will
not be affected by the action or failure to act on the part of any Note
Purchaser or by an amendment or waiver of the provisions contained in the
other Subject Documents might not be enforceable under circumstances in
which such action, failure to act, amendment or waiver so materially
changes the essential terms of the obligations that, in effect, a new
contract has arisen between the Note Purchasers on the one hand and the
Company and/or Diomed on the other hand.
(f) Incorporated Documents. This opinion does not relate to (and we
have not reviewed) any documents or instruments other than the Subject
Documents, and we express no opinion as to such other documents or
instruments (including, without limitation, any documents or instruments
referenced or incorporated in any of the Subject Documents) or as to the
interplay between the Subject Documents and any such other documents and
instruments.
2. Qualifications and Limitations as to UCC Security Interests. Our
opinions in paragraph III-2 above are subject to the following:
(a) Security Interest in Proceeds. The continuation and perfection of
the Secured Parties' security interest in the proceeds of the Subject
Collateral are limited to the extent set forth in Section 9-315 of the New
York UCC; and Section 9-315 of the UCC, as applicable.
(b) Actions to Continue Effectiveness. We express no opinion as to any
actions that may be required to be taken periodically under the New York
UCC, the Delaware UCC or any other applicable law for the effectiveness of
any financing statements, or the validity or perfection of any security
interest, to be maintained.
(c) After-Acquired Property. A security interest in any Article 9
Collateral that constitutes after-acquired collateral does not attach until
Diomed has rights in such after-acquired collateral.
(d) Property Acquired after Commencement of Bankruptcy Case. In the
case of property which becomes part of the Subject Collateral after the
date hereof, Section 552 of the Bankruptcy Reform Act of 1978, as amended
(the "Bankruptcy Code") limits the extent to which property acquired by a
debtor after the commencement of a case under the Bankruptcy Code may be
subject to a security interest arising from a security agreement entered
into by the debtor before the commencement of such case.
(e) After-acquired Property as Voidable Preference. In the case of
property which becomes part of the Subject Collateral after the date
hereof, Section 547 of the Bankruptcy Code provides that a transfer is not
made until the debtor has rights in the property transferred, so a security
interest in after-acquired property which is security for other than a
contemporaneous advance may be treated as a voidable preference under the
conditions (and subject to the exceptions) provided by Section 547 of the
Bankruptcy Code.
(f) Rights of Third Parties in Certain Collateral. The rights of the
Secured Parties with respect to Subject Collateral consisting of accounts,
instruments, licenses, leases, contracts or other agreements will be
subject to the claims, rights and defenses of the other parties thereto
against the Company or Diomed.
(g) Licenses or Permits as Collateral. In the case of any Subject
Collateral consisting of licenses or permits issued by governmental
authorities or other persons or entities, Diomed may not have sufficient
rights therein for the security interest of the Secured Parties to attach
and, even if Diomed has sufficient rights for the security interest of the
Secured Parties to attach, the exercise of remedies may be limited by the
terms of the license or permit or require the consent of the governmental
authority issuing such license or permit.
(h) Collateral Evidenced by Instruments. We note that, if any of the
Article 9 Collateral is evidenced by instruments or tangible chattel paper
or any other property in which a security interest may be perfected by
taking possession (in each case as defined, and as provided for, in the New
York UCC), the local law of the jurisdiction where such property is located
will govern the priority of a possessory security interest in such property
and the effect of perfection or non-perfection of a non-possessory security
interest in such property.
(i) Other UCC Limitations. Such opinions may also be limited by
Sections 9-320, 9-323, 9-335 and 9-336 of the New York UCC and the Delaware
UCC.
(j) Pledged Securities. In the case of Pledged Securities:
(i) we express no opinion as to the perfection of the security
interest of the Secured Parties in any portion of the Pledged Securities,
the continuous possession of which is not maintained by the Designated Note
Purchaser and the Designated Lender for the benefit of the Secured Parties
in the State of New York and, in addition, we call to your attention that
perfection (and the effect of perfection and non-perfection) of the
security interest of the Designated Note Purchaser and the Designated
Lender in the Pledged Securities may be governed by laws other than those
of the UCC to the extent the Pledged Securities become located in a
jurisdiction other than the State of New York; and
(ii) we call to your attention that in the case of the issuance
of additional shares or other distributions in respect of the Pledged
Securities, the security interests of the Secured Parties therein will
be perfected only if possession thereof is obtained or other action
appropriate to the nature of the distribution is taken, in either
case, in accordance with the provisions of the UCC and other
applicable law.
VI. Reliance on Opinions
The foregoing opinions are being furnished to the Note Purchasers and the
Lenders for the purpose referred to in the first paragraph of this opinion
letter, and this opinion letter is not to be furnished to any other person or
entity or used or relied upon for any other purpose without our prior written
consent. The opinions set forth herein are made as of the date hereof, and we
assume no obligation to supplement this opinion letter if any applicable laws
change after the date hereof or if we become aware after the date hereof of any
facts that might change the opinions expressed herein.
Very truly yours,
/s/ McGuireWoods LLP
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (this "AGREEMENT"), dated as of April 22, 2003,
is entered into by and among Diomed Holdings, Inc., a Delaware corporation, with
headquarters located at Xxx Xxxxxx Xxxx, Xxxxxxx, XX 00000 (the "COMPANY"),
Diomed, Inc., a Delaware corporation and a wholly-owned subsidiary of the
Company ("DIOMED"), each entity named on the signature page hereto as a Note
Purchaser (each, a "NOTE PURCHASER") and Gibralt US, Inc., a Colorado
corporation (the "DESIGNATED NOTE PURCHASER"). Capitalized terms used herein
shall have their respective meanings set forth in SCHEDULE I attached hereto,
unless the context clearly indicates otherwise.
W I T N E S S E T H:
WHEREAS, the Company, Diomed, the Note Purchasers and the Designated
Note Purchaser are executing and delivering this Agreement and the other
Documents in accordance with and in reliance upon the exemption from securities
registration afforded, INTER ALIA, by Rule 506 under Regulation D ("REGULATION
D") as promulgated by the United States Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "1933 ACT"), and
Section 4(2) of the 1933 Act; and
WHEREAS, in a bridge financing transaction (the "DECEMBER 2002
FINANCING"), pursuant to the Note Purchase Agreement, dated as of December 27,
2002 (THE "NOTE AGREEMENT"), by and among the Company, Diomed, the Note
Purchasers and the Designated Note Purchaser, the Company sold to the Note
Purchasers (i) an aggregate principal amount of $1,000,000 of Class A Secured
Notes due January 1, 2004 of Diomed (the "CLASS A NOTES"), and (ii) an aggregate
principal amount of $1,000,000 of Class B Unsecured Notes due January 1, 2004 of
Diomed (the "CLASS B NOTES," and, together with the Class A Notes, the "DECEMBER
2002 NOTES"), which December 2002 Notes by their terms are convertible at the
option of the Note Purchasers upon the occurrence of a Financing Transaction or
a Liquidity Event, as described in the December 2002 Notes, into shares of
Common Stock, upon the terms and subject to the conditions of the December 2002
Notes and the Note Agreement; and
WHEREAS, pursuant to the December 2002 Financing, in consideration for
the purchase of the December 2002 Notes by the Note Purchasers, the Company
issued to the Note Purchasers warrants to purchase an aggregate of 8,333,333
shares of Common Stock (the "WARRANTS"), upon the terms and subject to the
conditions of the Warrants and the Note Agreement; and
WHEREAS, pursuant to the Note Agreement, the Company agreed that it
would not consummate any Financing Transaction while any of the December 2002
Notes are outstanding without obtaining the Lenders' Approval (the "APPROVAL
RIGHTS"); and
WHEREAS, the Company and Diomed have proposed to the Note Purchasers
that the terms of the December 2002 Financing be modified pursuant to this
Agreement (the "EXCHANGE TRANSACTION"), such that (i) in exchange for shares of
the Company's Class C Convertible Preferred Stock (the "EXCHANGE CONVERSION
SHARES") convertible, on the terms and conditions set forth in the Certificate
of Designations for the Exchange Conversion Shares attached as EXHIBIT B to this
Agreement (the "EXCHANGE SHARE CERTIFICATE OF DESIGNATIONS"), into an aggregate
of Eighteen Million Ninety Two Thousand Eight Hundred Forty Nine (18,092,849)
Page 1
shares of Common Stock to be issued by the Company to the Note Purchasers (the
"NOTE EXCHANGE SHARES"), the Class A Notes and Class B Notes shall be exchanged
for an equal principal amount of Class C Secured Notes due January 1, 2005 of
Diomed, substantially in the form attached hereto as EXHIBIT A (the "CLASS C
NOTES"), which Class C Notes shall not be convertible into Common Stock, and
which Class C Notes shall not have Approval Rights, (ii) in exchange for
Exchange Conversion Shares convertible, on the terms and conditions set forth in
the Exchange Share Certificate of Designations into an aggregate of Nine Million
Twenty Four Thousand Three Hundred Ninety One (9,024,391) shares of Common Stock
(the "WARRANT EXCHANGE SHARES", and, together with the Note Exchange Shares, the
"EXCHANGE SHARES"), the Warrants shall be surrendered to the Company for
cancellation in accordance with the terms and conditions of this Agreement, and
(iii) the Note Purchasers shall vote all Exchange Shares and any other shares of
Common Stock held by them in favor of all proposals that the Company submits to
the stockholders of the Company at its 2003 annual meeting of stockholders; and
WHEREAS, as a condition to their acceptance of the Exchange
Transaction, the Note Purchasers require that they retain the right to rescind
the Exchange Transaction if (i) the issuance of the Exchange Shares pursuant to
this Agreement and the issuance of the Commitment Shares pursuant to the Secured
Loan Agreement is not approved at the Company' s 2003 Annual Meeting of
Stockholders, or (ii) the Company does not consummate a Financing Transaction
which is an equity capital financing transaction Financing Transaction with
aggregate gross proceeds to the Company of at least $5,000,000 prior to June 30,
2003 (the "CONTEMPLATED EQUITY FINANCING"), in the case of which rescission the
Exchange Transaction shall be unwound, whereby (i) the Company shall cancel the
Exchange Conversion Shares, (ii) the Class C Notes shall be exchanged for a like
principal amount of reissued Class A Notes having the same provisions regarding
conversion into Common Stock and Approval Rights as the Class A Notes had when
initially issued under the Note Agreement, and (iii) the Warrants shall be
redelivered to the Note Purchasers who had conditionally surrendered such
Warrants; and
WHEREAS, simultaneously with the consummation of the Exchange
Transaction, pursuant to the Secured Loan Agreement, the Company and Diomed wish
to borrow the principal amount of the Loans from the Lenders, and
WHEREAS, the Lenders severally, and not jointly, wish to make the
Loans, upon the terms and subject to the conditions of the Secured Loan
Agreement, in the aggregate principal amount of $1,200,000, in exchange for
which (i) Diomed shall issue to the Lenders an aggregate of $1,200,000 principal
amount of Class D Notes (as defined in the Secured Loan Agreement), and (ii) the
Company shall issue to the Lenders an aggregate of twenty four (24) Commitment
Shares; and
WHEREAS, it is a condition precedent to the consummation of the
Exchange Transaction that the Lenders shall have made the Loans to the Company
to be made at the Initial Installment under the Secured Loan Agreement
contemporaneously with the Exchange Transaction, and it is condition precedent
to Loans being made at the Initial Closing that the Exchange Transaction shall
have occurred contemporaneously with the making of such Loans.
Page 2
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 parties agree as
follows:
1. AGREEMENT TO CONSUMMATE EXCHANGE TRANSACTION; RESCISSION RIGHTS OF THE NOTE
PURCHASERS; REINTSTATEMENT OF NOTE AGREEMENT.
(A) EXCHANGE TRANSACTION.
(i) The Note Purchasers hereby severally agree to consummate the transaction
described in Section 1(a) (the "Exchange Transaction"), and the Company and
Diomed hereby jointly and severally agree to consummate the Exchange
Transaction, each on the terms and subject to the conditions set forth below in
this Agreement and the other Documents.
(ii) At the Closing, each Note Purchaser shall deliver to the Company originals
of all of the (a) Class A Notes, (b) Class B Notes and (c) Warrants held by it
under the Note Agreement, which Class A Notes and Class B Notes shall be
surrendered for cancellation and which Warrants shall be conditionally
surrendered, subject to redelivery by the Company pursuant to Section 1(c).
(iii) In exchange therefor, the Company and Diomed shall issue to each Note
Purchaser (a) Class C Notes in an aggregate principal amount equal to the
aggregate principal amount of the Class A Notes and Class B Notes surrendered by
such Note Purchaser, and (b) Exchange Conversion Shares convertible into One
Million Three Hundred Fifty Five Thousand Eight Hundred Sixty Two (1,355,862)
Exchange Shares for each One Hundred Thousand Dollars ($100,000) in principal
amount of the Class C Notes issued pursuant to clause (a), above, (and, if
issued in certificated form, Certificates representing same), all as set forth
on SCHEDULE 1(A)(III).
(iv) After the consummation of the Exchange Transaction, the terms and
conditions of the December 2002 Financing shall be governed by this Agreement
and the Documents, and not by the Note Agreement, unless and until the Note
Purchasers rescind the Exchange Transaction pursuant to Section 1(b) and,
accordingly, the Note Agreement is reinstated pursuant to Section 1(c).
(v) After the consummation of the Exchange Transaction and prior to the
consummation of the Contemplated Equity Financing, the Company shall hold the
Warrants delivered by the Note Purchasers until the Note Purchasers' rescission
rights set forth in Section 1(b) are terminated.
(B) RESCISSION RIGHTS. The Note Purchasers may rescind the Exchange Transaction
by providing written notice with the Lenders' Approval to the Company (the
"Rescission Notice") and surrendering therewith to the Company for cancellation
the originally executed Class C Notes and the Exchange Conversion Shares within
five (5) days, in the case of clause (i) below, or ten (10) days, in the case of
clause (ii) below, after either of the following events occurs:
Page 3
(i) the issuance of the Exchange Shares underlying the Exchange Conversion
Shares and the Common Shares underlying the Commitment Shares shall not have
been approved by the Company's stockholders at the Company's 2003 annual meeting
of stockholders; or
(ii) the Company shall not have consummated the Contemplated Equity Financing on
or prior to June 30, 2003.
(C) REINSTATEMENT OF NOTE AGREEMENT UPON RESCISSION. As of the date of the
Company's receipt of a Rescission Notice, the Company and Diomed shall cancel
the Exchange Conversion Shares and the Class C Notes, which shall thereafter no
longer be outstanding and shall be null and void, and in lieu thereof the
Company and Diomed shall deem the respective Note Purchasers to be the owner of
a principal amount of Class A Notes and that number of Warrants equal to the
aggregate principal amount of Class A Notes and Class B Notes and the number of
Warrants held by such Note Purchaser immediately prior to the Closing, and shall
afford to the Note Purchasers all rights (including without limitation the
Approval Rights and the conversion feature of the Class A Notes and Class B
Notes) as set forth in the Note Agreement. Within three (3) Business Days after
the Company's receipt of the Rescission Notice and all outstanding Class C Notes
and Exchange Conversion Shares, the Company shall (i) issue to each Note
Purchaser a Class A Note in the aggregate principal amount of the Class C Notes
surrendered by such Note Purchaser, substantially in the form of the Class A
Notes initially issued under the Note Agreement pursuant to the December 2002
Financing (except for such changes thereto as are necessary to reflect there
being only Class A Notes outstanding and no Class B Notes outstanding and
similar changes to reflect the Exchange Transaction, the rescission thereof, the
making of the Loans by the Lenders and similar interim events), (ii) redeliver
the Warrants conditionally surrendered by the Note Purchaser upon the
consummation of the Exchange Transaction and (iii) provide and deliver such
additional documentation and/or certifications as the Designated Note Purchaser
may reasonably request. The Note Purchasers shall execute and deliver to the
Company such documentation and/or certifications as the Company may reasonably
request to evidence the reissuance of the Class A Notes and redelivery of the
Warrants as aforesaid, and shall timely comply with any SEC filings required as
a result of the rescission of the Exchange Transaction, including without
limitation the filing of SEC Form 4 and/or Schedule 13D/A, if required.
2. NOTE PURCHASERS' REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
Each Note Purchaser represents and warrants to, and covenants and
agrees with, the Company and Diomed as follows:
(A) Without limiting any Note Purchaser's right to sell the Exchange Shares
pursuant to the Registration Statement, each Note Purchaser is acquiring Class C
Notes and the Exchange Shares for its own account for investment only and not
with a view towards the public sale or distribution thereof and not with a view
to or for sale in connection with any distribution thereof.
Page 4
(B) Each Note Purchaser is (i) an "accredited investor" as that term is defined
in Rule 501 of the General Rules and Regulations under the 1933 Act by reason of
Rule 501(a)(3), (ii) experienced in making investments of the kind described in
this Agreement and the related documents, (iii) able, by reason of the business
and financial experience of its officers (if an entity) and professional
advisors (who are not affiliated with or compensated in any way by the Company
or any of its affiliates or selling agents), to protect its own interests in
connection with the transactions described in this Agreement, and the Documents,
and (iv) able to afford the entire loss of its investment in the Securities.
(C) All subsequent offers and sales of the Securities by each Note Purchaser
shall be made only pursuant to registration of the Shares under the 1933 Act or
pursuant to an exemption from registration and compliance with applicable
states' securities laws.
(D) Each Note Purchaser understands that the Securities are being offered and
sold to it in reliance on 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 the Note Purchaser's compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of the Note Purchasers set forth herein in order to determine the
availability of such exemptions and the eligibility of the Note Purchasers to
acquire the Securities.
(E) Each Note Purchaser and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Securities which have been
requested by the Note Purchaser. Each Note Purchaser and its advisors, if any,
have been afforded the opportunity to ask questions of the Company and have
received complete and satisfactory answers to any such inquiries. Without
limiting the generality of the foregoing, each Note Purchaser has also had the
opportunity to obtain and to review the Company's (1) Annual Report on Form
10-KSB for the fiscal year ended December 31, 2002, (2) Quarterly Report on Form
10-QSB for the fiscal quarters ended March 31, 2002, June 30, 2002 and September
30, 2002, the notices on Form 8-K filed with the SEC on October 22, 2002 and
December 30, 2002, (4) the Company's Registration Statement on Form SB-2 which
became effective on October 24, 2002, (5) the Company's prospectus on Form 424B3
filed with the SEC on October 30, 2002, and (6) the Company's Registration
Statement on Form SB-2 MEF filed with the SEC on November 1, 2002 (collectively,
the "SEC DOCUMENTS").
(F) Each Note Purchaser understands that its investment in the Securities
involves a high degree of risk.
(G) Each Note Purchaser understands that no federal or state agency or any other
government or governmental agency has passed on or made any recommendation or
endorsement of the Securities.
Page 5
(H) Each Note Purchaser is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization. This Agreement and the
Documents have been duly and validly authorized, executed and delivered on
behalf of the Note Purchaser and create a valid and binding agreement of the
Note Purchaser enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.
(I) Such Note Purchaser has not employed any broker or finder in connection with
the transactions contemplated by this Agreement.
(J) The jurisdiction in which any offer to purchase shares hereunder was made to
or accepted by such Note Purchaser is the jurisdiction shown as the Note
Purchaser's address on the signature pages hereof.
(K) Each Note Purchaser was not formed for the purpose of investing solely in
the Securities which may be acquired hereunder.
(L) Each Note Purchaser is able to bear the complete loss of such Note
Purchaser's investment in the Securities.
(M) Each Note Purchaser acknowledges and agrees that the information contained
in the Documents, including the Exchange Transaction and the personal
information of the Note Purchasers contained herein, may be disclosed by the
Company in its discretion, including without limitation by way of a press
release, the filing with the SEC of a Form 8-K which may contain counterparts of
all or certain of the Documents, and hereby grants the Company permission to
make any such public disclosure of said information.
(N) If any Note Purchaser is an "affiliate" of the Company (as defined in
Section 16 of the Exchange Act), then such Note Purchaser shall timely comply
with all SEC filings required of it under said Section 16, including without
limitation the filing with the SEC of a statement of change in beneficial
ownership of securities on Form 4, reflecting the acquisition of beneficial
ownership of the Shares pursuant to such Note Purchaser's acquisition of the
Notes at the Closing.
3. COMPANY REPRESENTATIONS, ETC.
Each of the Company and Diomed, on behalf of itself and its respective
subsidiaries, jointly and severally, represents and warrants to the Note
Purchasers that, except as otherwise disclosed in the Company's SEC Documents:
(A) CONCERNING THE NOTES AND THE SHARES. There are no preemptive rights of any
stockholder of the Company or Diomed to acquire the Class C Notes, the Exchange
Conversion Shares or the Exchange Shares.
(B) REPORTING COMPANY STATUS. Each of the Company and Diomed is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power to own its properties
and to carry on its business as now being conducted. The Company and Diomed are
Page 6
each duly qualified as a foreign corporation to do business and is in good
standing in each jurisdiction where the nature of the business conducted or
property owned by it makes such qualification necessary, other than those
jurisdictions in which the failure to so qualify would not have a material
adverse effect on the business, operations or condition (financial or otherwise)
or results of operation of the Company and its subsidiaries taken as a whole (a
"MATERIAL ADVERSE EFFECT"). The Company has registered its Common Stock pursuant
to Section 12 of the 1934 Act, and the Common Stock is listed and traded on the
American Stock Exchange (the "AMEX"). The Company has received no notice, either
oral or written, with respect to the continued eligibility of the Common Stock
for such listing.
(C) AUTHORIZED SHARES. The authorized capital stock of the Company consists of
100,000,000 shares, of which 80,000,000 are shares of Common Stock, of which
29,711,749 shares are issued and outstanding as of the date of this Agreement
(prior to the taking effect of the Exchange Transaction hereunder and the
issuance of the Commitment Shares to the Lenders) and 20,000,000 are shares
Preferred Stock, par value $0.001 per share (the "PREFERRED STOCK"), of which
zero shares are issued and outstanding as of the date of this Agreement. All
issued and outstanding shares of Common Stock and Preferred Stock have been duly
authorized and validly issued and are fully paid and nonassessable. The Exchange
Conversion Shares have been duly authorized and, when issued upon consummation
of the Exchange Transaction will be duly and validly issued, fully paid and
non-assessable and will not subject the holder thereof to personal liability by
reason of being such holder. The Exchange Shares issuable on conversions of the
Exchange Conversion Shares have been duly authorized and have been reserved for
issuance thereof.
(D) EXCHANGE AGREEMENT AND OTHER DOCUMENTS. This Agreement and the other
Documents, and the transactions contemplated hereby and thereby, have been duly
and validly authorized by the Company and Diomed by action of their respective
Boards of Directors, and this Agreement and the other Documents will be executed
and delivered at the Closing by the duly authorized officer(s) of the Company
and Diomed. Each of the Documents, when executed and delivered by the Company,
are and will be, valid, legal and binding agreements of the Company enforceable
in accordance with their respective terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium, and
other similar laws affecting the enforcement of creditors' rights generally.
(E) NON-CONTRAVENTION. The execution and delivery of the Documents by the
Company and Diomed, the issuance of the Securities, and the consummation by the
Company of the Exchange Transaction and the other transactions contemplated by
the Documents do not and will not conflict with or result in a breach by the
Company or Diomed of any of the terms or provisions of, or constitute a default
under (i) the certificate of incorporation or by-laws of the Company or Diomed,
each as currently in effect, (ii) any indenture, mortgage, deed of trust, or
other material agreement or instrument to which the Company or Diomed is a party
or by which it or any of its properties or assets are bound, or an event which
results in the creation of any lien, charge or encumbrance upon any assets of
the Company or Diomed or of any of its respective subsidiaries or the triggering
of any preemptive or anti-dilution rights or rights of first refusal or first
Page 7
offer on the part of holders of the Company's securities, (iii) any existing
applicable law, rule, or regulation or any applicable decree, judgment, or order
of any court, United States federal or state regulatory body, administrative
agency, or other governmental body having jurisdiction over the Company or any
of its properties or assets, or (iv) the Company's listing agreement for its
Common Stock, except in the case of clauses (i) through (iv) such conflict,
breach or default which would not have a Material Adverse Effect.
(F) APPROVALS. No authorization, approval or consent of any court, governmental
body, regulatory agency, self-regulatory organization, or stock exchange or
market or the stockholders of the Company or Diomed is required to be obtained
by the Company or Diomed for the issuance and sale of the Securities to the Note
Purchasers as contemplated by this Agreement, except (i) such authorizations,
approvals and consents that have been obtained, or such authorizations,
approvals and consents, the failure of which to obtain would not have a Material
Adverse Affect and (ii) the listing of the Exchange Shares and/or the Commitment
Shares on the AMEX may require the affirmative vote of the Company's
stockholders.
(G) SEC FILINGS. None of the Company's SEC Documents filed with respect to
periods ending on or after February 14, 2002 contained, and to the best of the
Company's knowledge, none of the Company's SEC Documents filed with respect to
periods prior to February 14, 2002 contained, in either event at the time they
were filed, any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
made therein in light of the circumstances under which they were made, not
misleading. The Company has since February 14, 2002 timely filed all requisite
forms, reports and exhibits thereto with the SEC. The Company is not aware of
any event occurring on or prior to the Closing Date or the Delivery Date (other
than the transactions effected hereby) that would require the filing of, or with
respect to which the Company intends to file, a Form 8-K after such date.
(H) ABSENCE OF CERTAIN CHANGES. Since December 31, 2002, there has been no
material adverse change and no material adverse development in the business,
properties, operations, condition (financial or otherwise), or results of
operations of the Company, Diomed, or any of their respective subsidiaries.
Since December 31, 2002, except as contemplated by the Documents, neither the
Company nor any of its subsidiaries has (i) incurred or become subject to any
material liabilities (absolute or contingent) except liabilities incurred in the
ordinary course of business consistent with past practices; (ii) discharged or
satisfied any material lien or encumbrance or paid any material obligation or
liability (absolute or contingent), other than current liabilities paid in the
ordinary course of business consistent with past practices; (iii) declared or
made any payment or distribution of cash or other property to stockholders with
respect to its capital stock, or purchased or redeemed, or made any agreements
to purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other tangible assets, or canceled any debts or claims, except
in the ordinary course of business consistent with past practices; (v) suffered
any material losses or waived any rights of material value, whether or not in
the ordinary course of business, or suffered the loss of any material amount of
existing business; (vi) made any changes in employee compensation, except in the
ordinary course of business consistent with past practices; or (vii) experienced
any material problems with labor or management in connection with the terms and
conditions of their employment.
(I) FULL DISCLOSURE. No representation or warranty by the Company in this
Agreement, nor in any Document delivered or to be delivered in connection with
this Agreement contains or will contain any untrue statement of material fact or
Page 8
omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading. To the knowledge of the Company,
there is no information concerning the Company and its subsidiaries or their
respective businesses which has not heretofore been disclosed to the Note
Purchasers which could reasonably be expected to have a Material Adverse Effect.
(J) ABSENCE OF LITIGATION. There is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body pending or threatened
against or affecting the Company or any of its subsidiaries, wherein an
unfavorable decision, ruling or finding would have a Material Adverse Effect or
which would adversely affect the validity or enforceability of, or the authority
or ability of the Company and its subsidiaries taken as a whole to perform its
obligations under, any of the Documents. Neither the Company nor any of its
subsidiaries is a party to or subject to the provisions of, any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality which could reasonably be expected to have a Material Adverse
Effect.
(K) ABSENCE OF EVENTS OF DEFAULT. No event of default (or its equivalent term),
as defined in the respective agreement to which the Company or any of its
subsidiaries is a party, and no event which, with the giving of notice or the
passage of time or both, would become an event of default (or its equivalent
term) (as so defined in such agreement), has occurred and is continuing, which
would have a Material Adverse Effect.
(L) PRIOR ISSUES; PRIOR SECURITY INTERESTS. Since December 27, 2002, the Company
has not issued any convertible securities or any shares of the Common Stock.
Since December 27, 2002, neither the Company, Diomed nor any of their respective
subsidiaries has entered into any transactions or agreements or otherwise
incurred any indebtedness that would create a security interest in the personal
property of the Company or Diomed, or any of their respective subsidiaries.
(M) NO UNDISCLOSED LIABILITIES OR EVENTS. Each of the Company and Diomed has no
liabilities or obligations other than those set forth in the SEC Documents or
incurred in the ordinary course of the Company's business since December 31,
2002, and which individually or in the aggregate, do not or would not have a
Material Adverse Effect. No event or circumstances has occurred or exists with
respect to the Company or Diomed or their respective properties, business,
condition (financial or otherwise), or results of operations, which, under
applicable law, rule or regulation, requires public disclosure or announcement
prior to the date hereof by the Company or Diomed but which has not been so
publicly announced or disclosed. Except for the transactions contemplated by the
Documents, there are no proposals currently under consideration or currently
anticipated to be under consideration by the board of directors or the executive
officers of the Company or Diomed which proposal would (x) change the articles
of incorporation, by-laws or any other charter document of the Company or
Diomed, each as currently in effect, with or without shareholder approval, or
(y) materially or substantially change the business, assets or capital of the
Company, including its interests in subsidiaries.
(N) NO DEFAULT. Neither the Company nor Diomed or any of the Company's other
subsidiaries is in default in the performance or observance of any material
Page 9
obligation, agreement, covenant or condition contained in any material
indenture, mortgage, deed of trust or other material instrument or agreement to
which it is a party or by which it or its property is bound.
(O) NO INTEGRATED OFFERING. Neither the Company or Diomed nor any of their
respective affiliates nor any person acting on its or their behalf has, directly
or indirectly, at any time since February 14, 2002, made any offer or sales of
any security or solicited any offers to buy any security under circumstances
that would eliminate the availability of the exemption from registration under
Rule 506 of Regulation D in connection with the offer and sale of the Securities
as contemplated hereby.
(P) DILUTION. The number of Exchange Conversion Shares to be issued by the
Company to the Note Purchasers under this Agreement and the number of Commitment
Shares to be issued by the Company to the Lenders pursuant to the Secured Loan
Agreement will, upon conversion thereof into Exchange Shares and Common Shares,
respectively, increase substantially the number of shares of Common Stock
outstanding, which may substantially dilute the market price of the Common
Stock. The Company's executive officers and directors have studied and fully
understand the nature of the Securities being issued under this Agreement and
the other Documents and recognize that they have a dilutive effect and further
that the issuance of the Securities may have an adverse effect on the market
price of the Common Stock. Additionally, the Common Stock or other equity
securities to be issued by the Company in the Contemplated Equity Financing will
cause additional, substantial dilution. The board of directors of the Company
has concluded, in its good faith business judgment, that such issuances are in
the best interests of the Company.
(Q) REGULATORY PERMITS. Each of the Company and Diomed has all such permits,
easements, consents, licenses, franchises and other governmental and regulatory
authorizations from all appropriate federal, state, local or other public
authorities ("PERMITS") as are necessary to own and lease its respective
properties and conduct its respective businesses in all material respects in the
manner described in the SEC Documents and Diomed as currently being conducted.
All such Permits are in full force and each of effect and the Company has
fulfilled and performed all of its material obligations with respect to such
Permits, and no event has occurred that allows, or after notice or lapse of time
would allow, revocation or termination thereof or will result in any other
material impairment of the rights of the holder of any such Permit, subject in
each case to such qualification as may be disclosed in the SEC Documents. Such
Permits contain no restrictions that would materially impair the ability of the
Company or Diomed to conduct businesses in the manner consistent with its past
practices. Neither the Company nor Diomed has received notice or otherwise has
knowledge of any proceeding or action relating to the revocation or modification
of any such Permit.
(R) INDEPENDENT PUBLIC ACCOUNTANTS. The audited consolidated financial
statements of the Company, including the notes thereto, included in the SEC
Documents, were duly certified by independent public accountants with respect to
the Company, as required by the 1933 Act and the 1933 Act Regulations.
(S) INTERNAL ACCOUNTING CONTROLS. Each of the Company and Diomed maintains a
system of internal accounting controls sufficient to provide reasonable
assurances that (1) transactions are executed in accordance with management's
Page 10
general or specific authorization; (2) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets; (3) access to
assets is permitted only in accordance with management's general or specific
authorization; and (4) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(T) TAX LIABILITIES. The Company has filed all material federal, state and local
tax reports and returns required by any law or regulation to be filed by it and
such returns are accurate and complete in all material respects, except for
extensions duly obtained, and has either duly paid all taxes, duties and charges
indicated due on the basis of such returns and reports, or made adequate
provision for the payment thereof.
(U) HAZARDOUS MATERIALS. Each of the Company, Diomed and their respective
subsidiaries is in compliance with all applicable Environmental Laws in all
respects except where the failure to comply does not have and could not
reasonably be expected to have a Material Adverse Effect. For purposes of the
foregoing:
"ENVIRONMENTAL LAWS" means, collectively, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, the
Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation
and Recovery Act, the Toxic Substances Control Act, as amended, the Clean Air
Act, as amended, the Clean Water Act, as amended, any other "Superfund" or
"Superlien" law or any other applicable federal, state or local statute, law,
ordinance, code, rule, regulation, order or decree regulating, relating to, or
imposing liability or standards of conduct concerning, the environment or any
Hazardous Material.
"HAZARDOUS MATERIAL" means and includes any hazardous, toxic
or dangerous waste, substance or material, the generation, handling, storage,
disposal, treatment or emission of which is subject to any Environmental Law.
(V) PENSION RELATED MATTERS. Each employee pension plan (other than a
multiemployer plan within the meaning of Section 3(37) of ERISA and to which the
Company or any ERISA Affiliate has or had any obligation to contribute (a
"MULTIEMPLOYER PLAN")) maintained by the Company or any of its ERISA Affiliates
to which Section 4021(a) of ERISA applies and (a) which is maintained for
employees of the Company or any of its ERISA Affiliates or (b) to which the
Company or any of its ERISA Affiliates made, or was required to make,
contributions at any time within the preceding five (5) years (a "PLAN"),
complies in all material respects, and is administered in accordance, with its
terms and all material applicable requirements of ERISA and of the Internal
Revenue Code of 1986 as amended (the "TAX CODE") and with all material
applicable rulings and regulations issued under the provisions of ERISA and the
Tax Code setting forth those requirements. No "Reportable Event" or "Prohibited
Transaction" (as each is defined in ERISA) or withdrawal from a Multiemployer
Plan caused by the Company has occurred and no funding deficiency described in
Section 302 of ERISA caused by the Company exists with respect to any Plan or
Multiemployer Plan which could have a Material Adverse Effect. The Company and
Page 11
each ERISA Affiliate has satisfied all of their respective funding standards
applicable to such Plans and Multiemployer Plans under Section 302 of ERISA and
Section 412 of the Tax Code and the Pension Benefit Guaranty Corporation
("PBGC") has not instituted any proceedings, and there exists no event or
condition caused by the Company which would constitute grounds for the
institution of proceedings by PBGC, to terminate any Plan or Multiemployer Plan
under Section 4042 of ERISA which could have a material adverse effect on the
assets, financial condition, results of operation or business of a Company or
any ERISA Affiliate. For purposes of the foregoing:
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, together with the regulations thereunder.
"ERISA AFFILIATE" means any corporation, trade or business,
which together with the Borrower would be treated as a single employer under
Section 4001 of ERISA.
(W) INTELLECTUAL PROPERTY. The Company and its subsidiaries own or have the
right to use, under valid license agreements or otherwise, all material patents,
licenses, franchises, trademarks, trademark rights, trade names, trade name
rights, trade secrets and copyrights necessary to the conduct of its respective
businesses as now conducted, without known conflict with any patent, license,
franchise, trademark, trade secrets and confidential commercial or proprietary
information, trade name, copyright, rights to trade secrets or other proprietary
rights of any other person.
(X) TITLE TO PROPERTIES. Each of the Company and Diomed has good and marketable
title to all its personal properties, subject to no transfer restrictions or
Liens of any kind, except for Liens not prohibited by the Documents and the
Axcan Lien. "Lien" means any interest in property securing any obligation owed
to, or a claim by, a person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the lien or security interest arising from a mortgage, encumbrance,
pledge, security agreement, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
(A) TRANSFER RESTRICTIONS. The Note Purchasers acknowledge that (1) the
Securities have not been and are not being registered under the provisions of
the 1933 Act and, except as provided in the Registration Rights Agreement, the
Exchange Conversion Shares have not been and are not being registered under the
1933 Act, and may not be transferred unless (A) subsequently registered
thereunder or (B) the Note Purchasers shall have delivered to the Company an
opinion of counsel, reasonably satisfactory in form, scope and substance to the
Company, to the effect that the Securities to be sold or transferred may be sold
or transferred pursuant to an exemption from such registration; (2) any sale of
the Exchange Conversion Shares or Exchange Shares made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any resale of such
Exchange Shares 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 used
in the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither the
Company or Diomed nor any other person is under any obligation to register the
Securities (other than pursuant to the Registration Rights Agreement) under the
1933 Act or to comply with the terms and conditions of any exemption thereunder.
Page 12
Furthermore, the Note Purchasers agree that the Note Purchasers may not sell,
transfer, convey, pledge, grant any security interest in or assign, by operation
of law or otherwise, any Securities to any Person that is engaged, or proposes
to become engaged, in the business of developing, offering for sale or
commercializing any products or services that (i) as of the date of this
Agreement or as of the date of a proposed transfer, directly competes (or is
reasonably anticipated by the Company to compete in the future) with any of the
Company's or its subsidiaries' existing or proposed products or services, or
(ii) provide alternative clinical treatments for any of the medical procedures
that utilize the Company's existing or proposed products or services, or (iii)
substitute for or would tend to cause the obsolescence of any of the Company's
existing or proposed products or services, or otherwise directly competes (or is
reasonably anticipated to compete in the future) with the Company in any
material respect.
(B) RESTRICTIVE LEGEND. The Note Purchasers acknowledge and agree that the
Certificates or other instruments or documents representing the Class C Notes
and the Exchange Conversion Shares Shares (together with the Common Shares
issuable upon conversion of the Commitment Shares) until such time as the
Exchange Shares have been registered under the 1933 Act as contemplated by the
Registration Rights Agreement and sold in accordance with an effective
Registration Statement) shall bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of any
such Securities or Exchange Shares):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR
OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT.
(C) REGISTRATION RIGHTS AGREEMENT. The parties hereto agree to enter into the
Registration Rights Agreement on or before the Closing Date.
(D) FILINGS. The Company undertakes and agrees to make all necessary filings in
connection with the sale of the Securities to the Note Purchasers required under
any United States laws and regulations applicable to the Company or Diomed, or
by any domestic securities exchange or trading market on which the Company's
shares of capital stock are listed or eligible for trading, and to provide a
copy thereof to the Note Purchasers promptly after such filing if so requested
by the Note Purchasers.
(E) REPORTING STATUS. So long as the any of the Note Purchasers beneficially own
any of the Securities, the Company shall file all reports required to be filed
with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, and the Company
shall not terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
permit such termination. Except as otherwise set forth in this Agreement and the
Documents, the Company will take all reasonable action under its control to
obtain and to continue the listing and trading of its Common Stock (including,
without limitation, all Registrable Securities) on the AMEX and will comply in
Page 13
all material respects with the Company's reporting, filing and other obligations
under the by-laws or rules of the AMEX.
(F) DESIGNATION OF DIRECTOR. If from time to time while any Class C Notes remain
outstanding the Designated Note Purchaser delivers to the Company a notice
issued with the Lenders' Approval designating any individual Person to act as a
director of the Company, then the Company's board of directors shall nominate
such Person as a director, to be elected as a director in accordance with the
Company's certificate of incorporation and by-laws as then in effect.
(G) AMEX LISTING OF EXCHANGE SHARES. The Company shall seek approval at its 2003
annual meeting of stockholders of the issuance of the Exchange Shares in the
Exchange Transaction pursuant to the rules and regulations of the AMEX
(specifically, Section 713 of the Listing Standards, Policies and Requirements
of the AMEX).
(H) APPEARANCE AND VOTING AT 2003 ANNUAL STOCKHOLDERS' MEETING. The Note
Purchasers each covenants and agrees to appear (in person or by proxy) at the
Company's 2003 annual stockholders' meeting and to vote thereat all of the
Exchange Shares and all other shares of Common Stock (if any) held by such Note
Purchaser in favor of the proposals made by the Company at such stockholders'
meeting, including without limitation proposals to increase the number of
authorized shares of Common Stock and to effect a reverse stock split of the
Common Stock.
(I) LENDERS' APPROVAL OF FINANCING TRANSACTIONS NOT REQUIRED. The Note
Purchasers expressly acknowledge and agree that the Approval Rights originally
granted to them under the Note Agreement are hereby terminated, and accordingly
the Company may at any time after the Closing consummate any Financing
Transaction without obtaining the Lenders' Approval of such Financing
Transaction. Notwithstanding the foregoing, the Company and Diomed agree that
prior to June 30, 2003, they shall not consummate any Financing Transaction
other than the Contemplated Equity Financing and the transactions contemplated
hereby and by the Secured Loan Agreement and the other Documents.
(J) TAX ELECTION. Upon the request of the Designated Note Purchaser, Diomed and
the Company agree to join with the Note Purchasers (or any of them) in making
the election provided for in Section 1247A(c) of the Internal Revenue Code and
Treas. Reg. ss.1274A-1(c) to account for interest attributable to the Class C
Notes held by such Note Purchaser(s) under the cash method.
(K) INDEMNIFICATION OF NOTE PURCHASERS FOR BREACH BY THE COMPANY OR DIOMED. If
the Company or Diomed breaches any of their respective representations,
warranties and covenants contained herein, then the Company and Diomed will,
jointly and severally, indemnify, defend and hold the Note Purchasers harmless
from and against any actions, suits, proceedings, hearings, investigations,
charges, complaints, claims, demands, injunctions, judgments, orders, decrees,
rulings, damages, dues, penalties, fines, costs, amounts paid in settlement,
liabilities, obligations, taxes, liens, losses, expenses and fees, including
court costs and reasonable attorneys' fees and expenses, that the Note
Purchasers (or any of them) may suffer resulting from, arising out of, relating
to, in the nature of or caused by such breach.
Page 14
5. TRANSFER AGENT INSTRUCTIONS.
(A) Promptly following the Closing, the Company will irrevocably
instruct its transfer agent to record the issuance of the Exchange Conversion
Shares, bearing the restrictive legend specified in Section 4(b) prior to
registration of the Shares under the 1933 Act, registered in the name of the
respective Note Purchaser. The Company warrants to the Note Purchasers that if
the Note Purchaser is not in breach of the representations and warranties
contained in this Agreement or the Master Agreement, no instruction other than
(i) such instructions referred to in this Section 5, and (ii) stop transfer
instructions to give effect to Section 4(a) prior to registration and sale of
the Exchange Shares under the 1933 Act will be given by the Company to the
transfer agent and that, subject to the transfer restrictions set forth in the
last sentence of Section 4(a), the Exchange Shares 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 applicable
law. Nothing in this Section shall affect in any way the Note Purchasers'
obligations and agreement to comply with all applicable securities laws upon
resale of the Securities. If any Note Purchaser provides the Company with an
opinion of counsel reasonably satisfactory to the Company that registration of a
resale by such Note Purchaser of any of the Securities in accordance with clause
(1)(B) of Section 4(a) is not required under the 1933 Act, the Company shall
(except to the extent provided in clause (2) of Section 4(a) of this Agreement)
permit the transfer of the Securities and, in the case of the Shares, instruct
the Company's transfer agent to issue one or more certificates for Common Stock
without legend in such name and in such denominations as specified by the Note
Purchaser; PROVIDED, HOWEVER, that no such transfer shall be permitted unless it
complies with the transfer restrictions set forth in the last sentence of
Section 4(a).
6. CLOSING; CLOSING DATE.
(A) The Exchange Transaction shall be consummated on the date hereof or as soon
thereafter as the conditions contemplated by Sections 7 and 8 shall have either
been satisfied or been waived by the party in whose favor such conditions run.
(B) The Closing of the Exchange Transaction (together with the making of the
Loans by the Lenders at the Initial Closing pursuant to the Secured Loan
Agreement) shall occur on the Closing Date at the offices of the Company's
counsel, McGuireWoods LLP, 0 Xxxx 00xx Xxxxxx, Xxxxx 0000, Xxx Xxxx, XX and
shall take place no later than 3:00 P.M., New York time, on such day or such
other time as is mutually agreed upon by the Company, the Note Purchasers and
the Lenders.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO CONSUMMATE EXCHANGE TRANSACTION.
Diomed's and the Company's obligation consummate the Exchange
Transaction pursuant to this Agreement and the Exchange Agreement on the Closing
Date are conditioned upon:
(A) The execution and delivery of the Documents by the Note Purchasers.
Page 15
(B) Delivery to the Company for cancellation of the originally executed December
2002 Notes and of the Warrants for the Company to hold pending cancellation or
redelivery, as the case may be, pursuant to Section 1(a)(v);
(C) The accuracy on the Closing Date of the representations and warranties of
the Note Purchasers contained in this Agreement, each as if made on such date,
and the performance by the Note Purchasers on or before such date of all
covenants and agreements of the Note Purchasers required to be performed
hereunder on or before such date;
(D) The contemporaneous making of the Loan by the Lenders at the Initial Closing
pursuant to the Secured Loan Agreement shall have occurred; and
(E) There shall not be in effect any law, rule or regulation prohibiting or
restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained.
8. CONDITIONS TO THE NOTE PURCHASERS' OBLIGATION TO CONSUMMATE EXCHANGE
TRANSACTION.
The obligations of the December 2003 Note Purchasers to consummate the
Exchange Transaction is conditioned upon:
(A) The execution and delivery of the Documents by the Company and Diomed, as
the case may be;
(B) The filing contemporaneously with the Closing of an amended UCC financing
statement in respect of the Diomed Assets at the office of the Secretary of
State of Delaware and, if requested by the Note Purchasers, an amended UCC
fixture filing with the Secretary of State of Massachusetts, and, if so
requested by the Note Purchasers, with the United States Patent and Trademark
Office, the purpose of which amended filings is (i) to reflect the increased
secured amount of the indebtedness of Diomed to the Note Purchasers represented
by the Class C Notes, and (ii) to reflect the secured indebtedness to the
Lenders represented by the Class D Notes;
(C) Delivery by the Company to the Note Purchasers of an opinion of legal
counsel of the Company substantially in the form of EXHIBIT C.
(D) Delivery by the Company and Diomed to the Note Purchasers of the Class C
Notes and, if not represented in electronic or "book entry" form, the
Certificates representing the Exchange Shares;
(E) The contemporaneous making of the Loan by the Lenders at the Initial Closing
pursuant to the Secured Loan Agreement shall have occurred;
(F) The accuracy in all material respects on the Closing Date of the
representations and warranties of the Company and Diomed contained in this
Agreement, each as if made on such date, and the performance by the Company and
Diomed on or before such date of all covenants and agreements of the Company
required to be performed on or before such date;
Page 16
(G) There shall not be in effect any law, rule or regulation prohibiting or
restricting the transactions contemplated hereby, or requiring any consent or
approval which shall not have been obtained; and
(H) The trading of the Common Stock shall not have been suspended by the SEC or
the NASD and trading in securities generally on the AMEX shall not have been
suspended or limited.
9. GOVERNING LAW: MISCELLANEOUS.
(A) With respect to governing law, jurisdiction and waiver of jury trial, the
parties agree as follows:
(i) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND PERFORMED
ENTIRELY WITHIN SUCH STATE, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION
OF THE SECURITY INTEREST GRANTED TO THE SECURED PARTIES UNDER THE SECURITY
AGREEMENT OR THE PLEDGE AGREEMENT, OR REMEDIES THEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK.
(ii) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE
BROUGHT IN XXX XXXXXX XX XXX XXXXX XX XXX XXXX SITTING IN NEW YORK COUNTY OR OF
THE UNITED STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE; PROVIDED, HOWEVER,
THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY SHALL
BE BROUGHT, AT THE DESIGNATED NOTE PURCHASER'S OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY AND THE NOTE PURCHASERS
CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY AND THE NOTE PURCHASERS
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT
OF THIS AGREEMENT OR OTHER DOCUMENT RELATED THERETO. EACH OF THE COMPANY AND THE
NOTE PURCHASERS WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER
PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH
STATE.
(iii) EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY
Page 17
TRANSACTION DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO
THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY
TRANSACTION DOCUMENT OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR
OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(B) 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.
(C) This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.
(D) All pronouns and any variations thereof refer to the masculine, feminine or
neuter, singular or plural, as the context may require.
(E) A facsimile transmission of this signed Agreement shall be legal and binding
on all parties hereto.
(F) This Agreement may be signed in one or more counterparts, each of which
shall be deemed an original.
(G) The headings of this Agreement are for convenience of reference and shall
not form part of, or affect the interpretation of, this Agreement.
(H) 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.
(I) This Agreement may be amended only by the written consent of a majority in
interest of the holders of the Notes and an instrument in writing signed by the
Company.
(J) This agreement and the other Documents represent the final Agreement among
the parties and may not be contradicted by evidence of prior, contemporaneous,
or subsequent oral agreements of the parties or by prior or contemporaneous
written agreements. There are no unwritten agreements among the parties.
Page 18
10. DESIGNATED NOTE PURCHASER.
(A) APPOINTMENT AND AUTHORIZATION OF DESIGNATED NOTE PURCHASER. Each Note
Purchaser hereby irrevocably appoints, designates and authorizes the Designated
Note Purchaser to take such action on its behalf under the provisions of this
Agreement and each other Document and to exercise such powers and perform such
duties as are expressly delegated to it by the terms of this Agreement or any
other Document, together with such powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere herein or in
any other Document, the Designated Note Purchaser shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall the
Designated Note Purchaser have or be deemed to have any fiduciary relationship
with any Note Purchaser, and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into this Agreement or any
other Document or otherwise exist against the Designated Note Purchaser.
(B) DELEGATION OF DUTIES. The Designated Note Purchaser may execute any of its
duties under this Agreement or any other Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel and
other consultants or experts concerning all matters pertaining to such duties.
The Designated Note Purchaser shall not be responsible for the negligence or
misconduct of any agent or attorney-in-fact that it selects in the absence of
gross negligence or willful misconduct.
(C) LIABILITY OF DESIGNATED NOTE PURCHASER. The Designated Note Purchaser shall
not (a) be liable for any action taken or omitted to be taken by it under or in
connection with this Agreement or any other Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct
in connection with its duties expressly set forth herein), or (b) be responsible
in any manner to any Note Purchaser for any recital, statement, representation
or warranty made by the Company or any officer thereof, contained herein or in
any other Document, or in any certificate, report, statement or other document
referred to or provided for in, or received by the Designated Note Purchaser
under or in connection with, this Agreement or any other Document, or the
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Document, or for any failure of the Company or any other
party to any Document to perform its obligations hereunder or thereunder.
(D) RELIANCE BY DESIGNATED NOTE PURCHASER. The Designated Note Purchaser shall
be entitled to rely, and shall be fully protected in relying, upon any writing,
communication, signature, resolution, representation, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
electronic mail message, statement or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons, and upon advice and statements of legal counsel (including
counsel to the Company), independent accountants and other experts selected by
the Designated Note Purchaser. The Designated Note Purchaser shall be fully
justified in failing or refusing to take any action under any Document unless it
shall first receive such advice or concurrence of the Note Purchasers as it
deems appropriate and, if it so requests, it shall first be indemnified to its
satisfaction by the Note Purchasers against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
Page 19
action. The Designated Note Purchaser shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement or any other Document
in accordance with a request or consent of the Note Purchasers and such request
and any action taken or failure to act pursuant thereto shall be binding upon
all the Note Purchasers.
(E) CREDIT DECISION; DISCLOSURE OF INFORMATION BY DESIGNATED NOTE PURCHASER.
Each Note Purchaser acknowledges that the Designated Note Purchaser has not made
any representation or warranty to it, and that no act by the Designated Note
Purchaser hereafter taken, including any consent to and acceptance of any
assignment or review of the affairs of the Company or any Affiliate thereof,
shall be deemed to constitute any representation or warranty by the Designated
Note Purchaser to any Note Purchaser as to any matter, including whether the
Designated Note Purchaser have disclosed material information in their
possession. Each Note Purchaser represents to the Designated Note Purchaser that
it has, independently and without reliance upon the Designated Note Purchaser
and based on such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of the Company and
its subsidiaries, and all applicable laws relating to the transactions
contemplated hereby, and made its own decision to enter into this Agreement.
(F) INDEMNIFICATION OF DESIGNATED NOTE PURCHASER. Whether or not the
transactions contemplated hereby are consummated, the Note Purchasers shall
indemnify upon demand the Designated Note Purchaser (to the extent not
reimbursed by or on behalf of the Company and without limiting the obligation of
the Company to do so), pro rata, and hold harmless the Designated Note Purchaser
from and against any and all Indemnified Liabilities incurred by it; provided,
however, that no Note Purchaser shall be liable for the payment to the
Designated Note Purchaser of any portion of such Indemnified Liabilities to the
extent determined in a final, nonappealable judgment by a court of competent
jurisdiction to have resulted from the Designated Note Purchaser's own gross
negligence or willful misconduct; provided, however, that no action taken in
accordance with the directions of the Note Purchasers shall be deemed to
constitute gross negligence or willful misconduct for purposes of this Section
10. Without limitation of the foregoing, each Note Purchaser shall reimburse the
Designated Note Purchaser upon demand for its ratable share of any costs or
out-of-pocket expenses incurred by the Designated Note Purchaser in connection
with the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement, any other Document, or any document contemplated by or referred
to herein, to the extent that the Designated Note Purchaser is not reimbursed
for such expenses by or on behalf of the Company.
(G) SUCCESSOR DESIGNATED NOTE PURCHASER. The Designated Note Purchaser may
resign as Designated Note Purchaser upon thirty (30) days notice to the Note
Purchasers and to the Company. If the Designated Note Purchaser resigns under
this Agreement, within fifteen (15) days after the delivery by the Designated
Note Purchaser of its notice of resignation, the Note Purchasers shall appoint a
successor Designated Note Purchaser from any of the other Note Purchasers, and
shall notify the Company of the identity of and contact information for such
successor Designated Note Purchaser within five (5) days of such successor
Designated Note Purchaser's appointment.
Page 20
11. NOTICES.
Any notice required or permitted hereunder shall be given in writing
(unless otherwise specified herein) and shall be deemed effectively given on the
earliest of:
(A) the date delivered, if delivered by personal delivery as against written
receipt therefor or by confirmed facsimile transmission,
(B) the seventh business day after deposit, postage prepaid, in the United
States Postal Service by registered or certified mail, or
(C) the third business day after mailing by next-day express courier, with
delivery costs and fees prepaid, in each case, addressed to each of the other
parties thereunto entitled at the following addresses (or at such other
addresses as such party may designate by ten (10) days' advance written notice
similarly given to each of the other parties hereto):
COMPANY: Diomed Holdings, Inc.
Xxx Xxxxxx Xxxx
Xxxxxxx, XX 00000
ATTN: President and Chief Executive Officer
Telecopier No. 000-000-0000
With a copy to:
McGuireWoods LLP
0 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
ATTN: Xxxxxxx X. Xxxxxx, Esq.
(000) 000-0000 (Telephone)
(000) 000-0000 (Facsimile)
Page 21
NOTE PURCHASERS: To the Designated Note Purchaser
at the following address:
Gibralt US, Inc.
0000-0000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, X.X. X0X 0X0
With a copy to:
Xxxxxxxx Xxxxx & Deutsch, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
ATTN: Xxxx X. Deutsch, Esq.
(000) 000-0000 (Telephone)
(000) 000-0000 (Facsimile)
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The Company's and the Note Purchasers' representations and warranties
herein shall survive for a period of fifteen (15) months after the execution and
delivery of this Agreement and shall inure to the benefit of the Note Purchasers
and the Company and their respective successors and assigns.
[Signature page follows.]
Page 22
IN WITNESS WHEREOF, this Agreement has been duly executed by
the Note Purchasers, the Designated Note Purchaser, Diomed and the Company as of
the date set forth below.
Date: April 22, 2003
COMPANY:
DIOMED HOLDINGS, INC.
/S/ XXXXX X. XXXXX, XX.
By: _______________________________
Name: Xxxxx X. Xxxxx, Xx.
Title: Chief Executive Officer
DIOMED:
DIOMED, INC.
/S/ XXXXX X. XXXXX, XX.
By: _______________________________
Name: Xxxxx X. Xxxxx, Xx.
Title: Chief Executive Officer
DESIGNATED NOTE PURCHASER
GIBRALT US, INC.
/S/ XXXXXX XXXXXX
By: _________________________________
Name: Xxxxxx Xxxxxx
Title: Authorized Person
Page 23
NOTE PURCHASER
GIBRALT US, INC.
/S/ XXXXXX XXXXXX
By: _______________________________
Name: Xxxxxx Xxxxxx
Title: Authorized Person
Class A Notes to be Exchanged: $ 750,000
Class B Notes to be Exchanged: $ 750,000
Number of Warrants to be Surrendered: 6,249,999
Amount of Class C Notes to be Issued: $1,500,000
Amount of Exchange Conversion Shares to be Issued:15
Amount of Exchange Shares to be Issued: 20,337,930
NOTE PURCHASER
XXXXXX XXXXXXXX
/S/ XXXXXX XXXXXXXX
-------------------------------
Xxxxxx Xxxxxxxx
Class A Notes to be Exchanged: $ 150,000
Class B Notes to be Exchanged: $ 150,000
Number of Warrants to be Surrendered: 1,250,000
Amount of Class C Notes to be Issued: $300,000
Amount of Exchange Conversion Shares to be Issued: 3
Amount of Exchange Shares to be Issued: 4,067,586
Page 24
NOTE PURCHASER
XXXXXX XXXXXXXXX
/S/ XXXXXX XXXXXXXXX
-------------------------------
Class A Notes to be Exchanged: $ 50,000
Class B Notes to be Exchanged: $ 50,000
Number of Warrants to be Surrendered: 416,667
Amount of Class C Notes to be Issued: $100,000
Amount of Exchange Conversion Shares to be Issued: 1
Amount of Note Exchange Shares to be Issued: 1,355,862
NOTE PURCHASER
XXXXXXX XXXXXXX
/S/ XXXXXXX XXXXXXX
-------------------------------
Class A Notes to be Exchanged: $ 50,000
Class B Notes to be Exchanged: $ 50,000
Number of Warrants to be Surrendered: 416,667
Amount of Class C Notes to be Issued: $100,000
Amount of Note Exchange Shares to be Issued: 1
Amount of Exchange Shares to be Issued: 1,355,862
Page 25
EXHIBITS AND SCHEDULES
SCHEDULE I DEFINITIONS AND RULES OF CONSTRUCTION
----------
EXHIBIT A FORM OF CLASS C NOTE
---------
EXHIBIT B EXCHANGE SHARE CERTIFICATE OF DESIGNATIONS
---------
SCHEDULE 1(A)(III) SCHEDULE OF CLASS A NOTES, CLASS B NOTES
AND WARRANTS TO BE DELIVERED BY THE NOTE PURCHASERS
AND OF EXCHANGE CONVERSION SHARES AND CLASS C NOTES
TO BE ISSUED TO THE NOTE PURCHASERS
EXHIBIT C FORM OF LEGAL OPINION
---------
EXHIBIT D FORM OF SECURITY AGREEMENT
---------
EXHIBIT E FORM OF PLEDGE AGREEMENT
---------
EXHIBIT F FORM OF REGISTRATION RIGHTS AGREEMENT
---------
Page 26
SCHEDULE I TO EXCHANGE AGREEMENT -- DEFINITIONS
Each of the following terms has the meaning set forth below, unless the context
otherwise requires:
(i) "AFFILIATE" means, with respect to a specific Person referred to
in the relevant provision, another Person who or which Controls or
is Controlled by or is under common Control with such specified
Person.
(ii) "APPROVAL RIGHTS" has the meaning set forth in the fourth recital
of the Exchange Agreement.
(iii) "AXCAN" has the meaning ascribed to such term in the Security
Agreement.
(iv) "AXCAN LIEN" has the meaning ascribed to such term in the Security
Agreement.
(v) "AXCAN NOTE" has the meaning ascribed to such term in the Security
Agreement.
(vi) "CAPITAL STOCK" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however
designated, whether voting or non-voting) of such Person's
capital, whether now outstanding or issued after the Closing Date.
(vii) "CERTIFICATES" means the relevant Class C Notes, duly executed on
behalf of the Company and issued in the name of the respective
Note Purchaser at the Closing, and the relevant Class D Notes and
Commitment Shares constituting the Units, duly executed on behalf
of the Company and issued in the name of the respective Lender at
the respective Closing.
(viii) "CLASS A NOTES" has the meaning set forth in the second recital of
the Exchange Agreement.
(ix) "CLASS B NOTES" has the meaning set forth in the second recital of
the Exchange Agreement.
(x) "CLASS C NOTES" has the meaning set forth in the fifth recital of
the Exchange Agreement.
(xi) "CLASS D NOTES" has the meaning set forth in the second recital of
the Secured Loan Agreement.
(xii) "CLOSING" means, in respect of the Exchange Transaction, the
consummation of the Exchange Transaction, and, in respect of the
purchase and sale of the Units under the Secured Loan Agreement,
the Initial Closing or any Subsequent Loan Date, as the case may
be.
(xiii) "CLOSING DATE" means, in respect of any Closing, the date on which
such Closing is held.
(xiv) "COMPANY" means Diomed Holdings, Inc., a Delaware corporation.
Page 27
(xv) "COMMON STOCK" means the Company's Common Stock, par value $0.001
per share.
(xvi) "COMMITMENT SHARES" has the meaning set forth in the third recital
of the Secured Loan Agreement.
(xvii) "COMMON SHARES" has the meaning set forth in the third recital of
the Secured Loan Agreement.
(xviii) "CONTEMPLATED EQUITY FINANCING" has the meaning set forth in the
sixth recital, above.
(xix) "CONTROL" has the meaning given to such term in Rule 405
promulgated under the 1933 Act.
(xx) "DECEMBER 2002 FINANCING" has the meaning set forth in the second
recital, above.
(xxi) "DECEMBER 2002 NOTES" has the meaning set forth in the second
recital, above.
(xxii) "NOTE PURCHASER" has the meaning set forth in the introductory
paragraph, above.
(xxiii) "DESIGNATED LENDER" has the meaning set forth in the introductory
paragraph of the Secured Loan Agreement.
(xxiv) "DESIGNATED NOTE PURCHASER" has the meaning set forth in the
introductory paragraph of the Exchange Agreement.
(xxv) "DIOMED" means Diomed, Inc., a Delaware corporation.
(xxvi) "DIOMED ASSETS" means the Collateral, as defined in the Security
Agreement.
(xxvii) "DOCUMENTS" means this Agreement, the Notes, the Warrants, the
Registration Rights Agreement, the Security Agreement, the Pledge
Agreement, the Commitment Shares Certificate of Designations and
the Exchange Shares Certificate of Designations.
(xxviii) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(xxix) "EXCHANGE AGREEMENT" has the meaning set forth in the introductory
paragraph, above.
(xxx) "EXCHANGE CONVERSION SHARES" has the meaning set forth in the
fifth recital of the Exchange Agreement.
(xxxi) "EXCHANGE CONVERSION SHARE CERTIFICATE OF DESIGNATIONS" has the
meaning set forth in the fifth recital of the Exchange Agreement.
(xxxii) "EXCHANGE TRANSACTION" has the meaning set forth in the fifth
recital, above.
Page 28
(xxxiii) "EXCHANGE SHARES" has the meaning set forth in the fifth recital,
above.
(xxxiv) "EVENT OF DEFAULT" shall have the meaning ascribed to such term in
the Notes.
(xxxv) "FINANCING TRANSACTION" means any debt or equity capital
financing transaction entered into by the Company after the
Closing Date and consummated prior to January 1, 2004 consisting
of any of (i) the issuance of the Company after the Closing Date
of its equity securities in any transaction or series of
transactions (A) not consummated pursuant to the exercise or
conversion of any security of the Company which security was
either (x) outstanding on the Closing Date (including the Notes
and the Warrants) or (y) issued pursuant to any employee benefit,
stock option, stock purchase or other similar plan of the Company
of any of its subsidiaries or pursuant to an employment or
similar agreement entered into with an employee or consultant of
the Company or of its subsidiaries (in either case, whether
existing as of the date of this Agreement or subsequently adopted
or entered into) and (B) which results in gross cash proceeds to
the Company of at least $50,000 in any rolling 30-day period;
(ii) the issuance by the Company, Diomed or any of their
respective subsidiaries of any notes, bonds, debentures or other
evidences of debt (whether or not convertible into other
securities of the Company; PROVIDED, HOWEVER, that any security
issued upon conversion of any such instrument shall not
constitute a separate Financing Transaction); or (iii) the
incurrence of any indebtedness for borrowed money (other than
pursuant to credit arrangements or lines of credit in existence
and as in effect on the Closing Date) by the Company, Diomed or
any of their respective subsidiaries in any transaction or a
series of transactions resulting in gross cash proceeds to the
Company, Diomed or any such subsidiary of at least $50,000 in any
rolling 30-day period.
(xxxvi) "INITIAL CLOSING" has the meaning set forth in Section 1(a)(ii) of
the Secured Loan Agreement.
(xxxvii) "INITIAL CLOSING DATE" has the meaning set forth in Section
1(a)(ii) of the Secured Loan Agreement.
(xxxviii) "LENDERS" has the meaning set forth in the introductory paragraph
of the Secured Loan Agreement.
(xxxix) "LENDERS' APPROVAL" means, in respect of the Class C Notes, the
approval of the Note Purchasers holding at least sixty-six and
two-thirds per cent (66-2/3%) of the outstanding principal amount
of the Class C Notes, and, in respect of the Class D Notes, the
Lenders holding at least sixty-six and two-thirds per cent
(66-2/3%) of the outstanding principal amount of the Class D Notes
(xl) "LENDER'S COMMITMENT" has the meaning set forth in Section 1(a)(i)
of the Secured Loan Agreement.
(xli) "LIQUIDITY EVENT" means either one or a combination of the
following events:
(a) any Person or group (within the meaning of Sections 13(d) and
14(d) under the Exchange Act) (other than any stockholder of the
Company as of the Closing Date) shall become the ultimate
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of Capital Stock
representing 51% of the voting Control of the Company;
(b) the sale of all or substantially all of the assets of the Company
or Diomed to one or more Persons not an Affiliate; and
Page 29
(c) the sale of the stock of PDTCo or the sale of all or substantially
all of the business (whether by sale of equity, assets, property
or a combination thereof) of the Company and its subsidiaries
relating to photodynamic therapy products and services, either in
a single transaction or a series of related transactions, to one
or more Persons not an Affiliate.
(xlii) "LOANS" has the meaning set forth in the second recital of the
Secured Loan Agreement.
(xliii) "NOTE AGREEMENT" has the meaning second recital of the Exchange
Agreement.
(xliv) "NOTE EXCHANGE SHARES" has the meaning set forth in the fifth
recital of the Exchange Agreement.
(xlv) "PDT" means photodynamic therapy, as used by the Company and its
subsidiaries in certain of their products and procedures.
(xlvi) "PDTCO" means Diomed PDT, Inc., a Delaware corporation and a
wholly-owned subsidiary of Diomed.
(xlvii) "PDTCO ASSETS" means the assets transferred to and/or held by
PDTCo from time to time, which, as of the Closing Date shall
consist of (i) all or substantially all of the assets of Diomed
related to the manufacture, sale and use of PDT technology,
including non-royalty bearing license rights to all intellectual
property used or which could potentially be used in the
manufacture, use and sale of PDT products and procedures, and (ii)
all of the intellectual property rights of Diomed, Limited, a
United Kingdom limited company and a wholly-owned subsidiary of
the Company, that are used in the manufacture, use and sale of PDT
products and procedures.
(xlviii) "PDTCO STOCK" means the Pledged Equity Interest, as defined in the
Pledge Agreement.
(xlix) "PERSON" means any living person or any entity, such as, but not
necessarily limited to, a corporation, partnership, limited
liability company or trust.
(l) "PLEDGE AGREEMENT" means the Amended and Restated Pledge Agreement
dated as of the date hereof, by and among Diomed, the Designated
Purchaser and the Designated Lender, substantially in the form
attached to the Exchange Agreement as EXHIBIT E.
(li) "NOTES" means the Class C Notes and the Class D Notes, provided
that if the Note Purchase Agreement is reinstated pursuant to the
terms of the Exchange Agreement, then the the term "Notes" shall
mean the Class A Notes and the Class D Notes.
(lii) "REGISTRATION RIGHTS AGREEMENT" means the Amended and Restated
Registration Rights Agreement dated as of the date hereof by and
among the Company, the Note Purchasers, the Designated Note
Purchaser, the Lenders and the Designated Lender, substantially in
the form attached to the Exchange Agreement as EXHIBIT F.
(liii) "SECURED LOAN AGREEMENT" means the Secured Loan Agreement dated as
of April 22, 2003 by and among the Company, Diomed, the Lenders
and the Designated Lender.
Page 30
(liv) "SECURED PARTIES" has the meaning assigned to that term in the
Security Agreement.
(lv) "SECURITIES" means the Class C Notes, the Exchange Conversion
Shares, Exchange Shares, the Class D Notes, the Commitment Shares
and the Common Shares.
(lvi) "SECURITY AGREEMENT" means the Amended and Restated Security
Agreement, dated as of the date hereof, by and among Diomed, the
Designated Note Purchaser and the Designated Lender, substantially
in the form attached to the Exchange Agreement as EXHIBIT D.
(lvii) "SUBSEQUENT LOAN DATE" has the meaning set forth in Section
1(a)(ii) of the Secured Loan Agreement.
(lviii) "WARRANTS" has the meaning set forth in the third recital of the
Exchange Agreement.
(lix) "WARRANT EXCHANGE SHARES" has the meaning set forth in the fifth
recital of the Exchange Agreement.
Page 31
SCHEDULE 1(A)(III) TO EXCHANGE AGREEMENT
SCHEDULE OF CLASS A NOTES, CLASS B NOTES AND WARRANTS
TO BE DELIVERED BY THE NOTE PURCHASERS AND OF
EXCHANGE CONVERSION SHARES AND CLASS C NOTES TO BE
ISSUED TO THE NOTE PURCHASERS
NOTE PURCHASER
GIBRALT US, INC.
Class A Notes to be Exchanged: $ 750,000
Class B Notes to be Exchanged: $ 750,000
Number of Warrants to be Surrendered: 6,249,999
Amount of Class C Notes to be Issued: $1,500,000
Amount of Exchange Conversion Shares to be Issued: 15
Amount of Exchange Shares to be Issued: 20,337,930
NOTE PURCHASER
XXXXXX XXXXXXXX
Class A Notes to be Exchanged: $ 150,000
Class B Notes to be Exchanged: $ 150,000
Number of Warrants to be Surrendered: 1,250,000
Amount of Class C Notes to be Issued: $300,000
Amount of Exchange Conversion Shares to be Issued: 3
Amount of Exchange Shares to be Issued: 4,067,586
NOTE PURCHASER
XXXXXX XXXXXXXXX
Class A Notes to be Exchanged: $ 50,000
Class B Notes to be Exchanged: $ 50,000
Number of Warrants to be Surrendered: 416,667
Amount of Class C Notes to be Issued: $100,000
Amount of Exchange Conversion Shares to be Issued: 1
Amount of Note Exchange Shares to be Issued: 1,355,862
NOTE PURCHASER
XXXXXXX XXXXXXX
Class A Notes to be Exchanged: $ 50,000
Class B Notes to be Exchanged: $ 50,000
Number of Warrants to be Surrendered: 416,667
Amount of Class C Notes to be Issued: $100,000
Amount of Note Exchange Shares to be Issued: 1
Amount of Exchange Shares to be Issued: 1,355,862
Page 32
EXHIBIT A TO EXCHANGE AGREEMENT
CLASS C NOTE
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION
HEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES ARE RESTRICTED
AND MAY NOT BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS
PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION REQUIREMENTS THEREOF
OR EXEMPTION THEREFROM.
No. ____
$----------------
DIOMED, INC.
CLASS C SECURED NOTE DUE JANUARY 1, 2004
FOR VALUE RECEIVED, DIOMED, INC., a corporation organized and
existing under the laws of the State of Delaware ("DIOMED"), a wholly-owned
subsidiary of Diomed Holdings, Inc. (the "COMPANY") hereby promises to pay to
____________________________, having its address at
__________________________________________, or its assigns (the "HOLDER" and
together with the other holders of Class C Secured Notes due January 1, 2004
(each, a "CLASS C NOTE" or a "NOTE" and together with the other Notes, the
"CLASS C NOTES" or the "NOTES") issued pursuant to the Exchange Agreement (as
defined below), the "HOLDERS"), the principal sum of ____________________
Thousand and 00/100 Dollars ($____,000.00) on January 1, 2004 (as such date may
be extended or modified by the Company with the Lenders' Approval (as such term
and all other capitalized terms not otherwise defined herein shall have the
meanings assigned to such terms in the Exchange Agreement), the "MATURITY DATE")
and to pay simple interest on the principal sum outstanding from time to time as
provided for herein in arrears at the rate of 8% per annum, calculated on the
basis of a 360 day year and the number of days elapsed (but in no event in
excess of the maximum rate permitted by applicable law) upon the Maturity Date
or the date when the Company elects to prepay this Note in full prior to the
Maturity Date pursuant to Section 3. Interest shall be deemed to accrue on this
Note commencing on December 27, 2002 and shall continue to accrue on a daily
basis until payment in full of the principal sum has been made or duly provided
for in accordance with the provisions hereof.
This Note is the Class C Note referred to in the Exchange
Agreement dated April 22, 2003, among the Company, Diomed, the Designated Note
Purchaser (as defined therein) the Note Purchasers listed therein, the Lenders
listed therein and the Designated Securities Purchaser (as defined therein) (the
"EXCHANGE AGREEMENT"), and is being issued in exchange for certain Class A Notes
and Class B Notes having an aggregate principal amount equal to the principal
amount of this Note as part of the Exchange Transaction pursuant to the Exchange
Agreement. By acceptance of this Note, the Holder accepts the terms and
conditions set forth in the Exchange Agreement and irrevocably agrees to be
bound thereby, including without limitation the appointment and authorization of
the Designated Note Purchaser pursuant to Section 10 of the Exchange Agreement.
In addition to the provisions of the Exchange Agreement, this Note is subject to
the following additional provisions:
1. This Note has been issued subject to investment representations of the
original purchaser hereof and may be transferred or exchanged only (a) in
compliance with the transfer restrictions prohibiting the transfer of Securities
to certain Persons, as provided in Section 4(a) of the Exchange Agreement, and
(b) in compliance with the Securities Act and other applicable state and foreign
securities laws. In the event of any proposed transfer of this Note to which the
Company has granted its consent, the Company may require, prior to issuance of a
new Note in the name of such other person, that it receive reasonable transfer
documentation including legal opinions that the issuance of the Note in such
other name does not and will not cause a violation of the Securities Act or any
applicable state or foreign securities laws. Prior to due presentment for
transfer of this Note to which the Company has consented, the Company, Diomed
and any agent of the Company or Diomed may treat the person in whose name this
Note is duly registered on Diomed's Note Register as the owner hereof for the
purpose of receiving payment as herein provided and for all other purposes,
whether or not this Note be overdue, and neither the Company, Diomed nor any
such agent shall be affected by notice to the contrary.
2. Intentionally Omitted.
3. Prepayment of Notes. Diomed may at its option call for prepayment all or
part of the Class C Notes prior to the Maturity Date, as follows:
(i) The Notes called for prepayment shall be redeemable for an amount
(the "Prepayment Price") equal to (x) 100% of the principal amount called
for prepayment, plus (y) interest accrued through the day immediately
preceding the date of prepayment (the "Prepayment Date").
(ii) If fewer than all outstanding Class C Notes are to be prepaid,
then all Class C Notes shall be partially prepaid on a pro rata basis.
(iii) Prior to the Prepayment Date, Diomed shall deposit into escrow
an amount sufficient for the payment of the aggregate Prepayment Price of
the Class C Notes being called for prepayment and shall make such funds
available on and after the Prepayment Date for payment to the Holders who
present their Class C Notes and otherwise comply with Diomed's instructions
contained in the Prepayment Notice (as defined below).
(iv) On the Prepayment Date, Diomed shall cause the Holders whose
Class C Notes have been presented for prepayment to be issued payment of
the Prepayment Price. In the case of a partial prepayment, Diomed shall
also issue new Class C Notes to the Holders for the principal amount
remaining outstanding after the Prepayment Date promptly after the Holders'
presentation of the Class C Notes called for prepayment.
(v) Not less than five (5) business days prior to the Prepayment Date,
Diomed shall issue a notice (the "Prepayment Notice") to each Holder
setting forth the following:
1. the Prepayment Date;
2. the Prepayment Price;
3. the aggregate principal amount of the Class C Notes being
called for prepayment;
4. a statement instructing the Holders to surrender their Class C
Notes for prepayment and payment of the Prepayment Price,
including the name and address of Diomed or, if applicable,
the paying agent of Diomed, where Class C Notes are to be
surrendered for prepayment;
5. a statement advising the Holders that interest will cease to
accrue on the Class C Notes (or, in the case of a partial
prepayment, that portion of the Class C Notes being called for
prepayment) as of the Prepayment Date; and
6. in the case of a partial prepayment, a statement advising the
Holders that after the Prepayment Date a substitute Class C
Note will be issued by Diomed after deduction the portion
thereof called for prepayment, at no cost to the Holder.
4. That portion of the principal amount of the Class C Notes
which is outstanding on the Maturity Date shall be payable,
together with accrued interest thereon as provided herein, on
the Maturity Date by payment accordance with Section 8. All
payments made hereon shall be applied first towards accrued
interest and second to the principal amount hereof.
5. This Note is a direct obligation of Diomed.
6. The Holder of this Class C Note has the benefit of certain
security provided to it as a Secured Party (as defined in the
Exchange Agreement) under the Security Agreement and the
Pledge Agreement as provided therein.
7. Intentionally Omitted.
8. All payments contemplated hereby to be made "in cash" shall be
made by wire transfer of immediately available funds in such
coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and
private debts. All payments of cash and each delivery of
shares of Common Stock issuable to the Holder as contemplated
hereby shall be made to the Holder to an account designated by
the Holder to Diomed and if the Holder has not designated any
such accounts at the address last appearing on the Note
Register of Diomed as designated in writing by the Holder from
time to time; except that the Holder may designate, by notice
to Diomed, a different delivery address for any one or more
specific payments or deliveries.
9. The Holder of this Note, by acceptance hereof, agrees that
this Note is being acquired for investment and that such
Holder will not offer, sell or otherwise dispose of this Note
except in compliance with the terms of the Exchange Agreement
and under circumstances which will not result in a violation
of the Securities Act or any applicable state Blue Sky or
foreign laws or similar laws relating to the sale of
securities.
10. With respect to governing law, jurisdiction and waiver of Jury
trial:
(a) THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND PERFORMED ENTIRELY WITHIN SUCH STATE.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS NOTE MAY
BE BROUGHT IN XXX XXXXXX XX XXX XXXXX XX XXX XXXX SITTING IN NEW YORK
COUNTYOR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE.
BY THE COMPANY'S EXECUTION AND DELIVERY OF THIS NOTE AND BY THE
HOLDER'S ACCEPTANCE OF THIS NOTE, EACH OF THE COMPANY AND THE HOLDER
CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS, AND IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION
IN RESPECT OF THIS NOTE OR OTHER DOCUMENT RELATED THERETO. FURTHER, BY
THE COMPANY'S EXECUTION AND DELIVERY OF THIS NOTE AND BY THE HOLDER'S
ACCEPTANCE OF THIS NOTE, EACH OF THE COMPANY AND THE HOLDER WAIVES
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY
BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE.
(c) BY THE COMPANY'S EXECUTION AND DELIVERY OF THIS NOTE AND BY
THE HOLDER'S ACCEPTANCE OF THIS NOTE, EACH OF THE COMPANY AND THE
HOLDER HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY DOCUMENT
(AS DEFINED IN THE EXCHANGE AGREEMENT) OR IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE COMPANY AND THE HOLDER OR
ANY OTHER HOLDER OF NOTES OR ANY OF THEM WITH RESPECT TO ANY
TRANSACTION DOCUMENT OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN
CONTRACT OR TORT OR OTHERWISE; AND EACH OF THE COMPANY AND THE HOLDER
HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND
THAT THE COMPANY, THE HOLDER AND ANY PARTY TO THE OTHER TRANSACTION
DOCUMENTS MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE COMPANY, THE
HOLDER OR ANY OTHER HOLDER OF NOTES TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
11. The following shall constitute an "Event of Default":
(A) Diomed fails in the payment of principal or interest on this
Note as required hereunder and the same shall continue for a period of
two (2) days; or
(B) Any of the representations or warranties made by Diomed or
the Company in this Note or in the Exchange Agreement, the Security
Agreement, the Pledge Agreement or the Registration Rights Agreement,
or in any certificate or other material written statement heretofore
or hereafter furnished by Diomed or the Company in connection with the
execution and delivery of this Note or the other Documents shall have
been or shall be false or misleading in any material respect at the
time made; or
(C) Diomed or the Company shall fail to perform or observe, in
any material respect, any covenant, term, provision, condition,
agreement or obligation under this Note, the Exchange Agreement, the
Security Agreement, the Pledge Agreement, or the Registration Rights
Agreement and such failure shall continue uncured for a period of
thirty (30) days after written notice of such failure from the Holder.
(D) The voluntary or judicial dissolution or termination of the
Company or Diomed, Inc.;
(E) The Company or Diomed, Inc. shall (i) admit in writing its
inability to pay its debts as they become due; (ii) file a petition in
bankruptcy or for reorganization or for the adoption of an agreement
under the Bankruptcy Code; (iii) make an assignment for the benefit of
its creditors; (iv) have commenced against it a proceeding for the
appointing of a receiver or trustee for all or a substantial part of
its property which is not dismissed or stayed for a period of 30 days;
(v) allow the assumption of custody or sequestration by a court of
competent jurisdiction of all or a substantial part of its property;
(vi) suffer an attachment on all or a substantial part of his property
or (vii) take any action in furtherance of the foregoing; inability to
pay its debts generally as they mature; or
(F) Any declared default of the Company or Diomed under any
Institutional Indebtedness that gives the holder thereof the right to
accelerate such Institutional Indebtedness, and such Institutional
Indebtedness is in fact accelerated by the holder. The term
"INSTITUTIONAL INDEBTEDNESS" means the principal of and unpaid accrued
interest on: (i) all indebtedness to banks, commercial finance
lenders, insurance companies or other financial institutions regularly
engaged in the business of lending money, which is for money borrowed
by the Company or Diomed, as the case may be, (whether or not
secured), (ii) any such indebtedness or any debentures, notes or other
evidence of indebtedness issued in exchange for or to refinance such
Institutional Indebtedness, and (iii) any indebtedness arising from
the satisfaction of such Institutional Indebtedness by a guarantor.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by a majority in interest of
the Holders of the Notes (which waiver shall not be deemed to be a waiver of any
subsequent default) at the option and in the discretion of Holders holding
sixty-six and two-thirds percent (66-2/3%) of the principal amount of the Class
C Notes, the Holders may declare this Note, together with all accrued and unpaid
interest herein, to be immediately due and payable, without presentment, demand,
protest or notice of any kinds, all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to the contrary
notwithstanding, and the Holders of sixty-six and two-thirds percent (66-2/3%)
of the Class C Notes, with the Lenders' Approval, may immediately enforce any
and all of the Holder's rights and remedies provided herein or any other rights
or remedies afforded by law.
12 Nothing contained in this Note shall be construed as conferring
upon the Holder the right to vote or to receive dividends or to consent or
receive notice as a shareholder in respect of any meeting of shareholders or any
rights whatsoever as a shareholder of the Company.
13. This Note may be amended only by the written consent of the
parties hereto. In the absence of manifest error, the outstanding principal
amount of the Note on the Company's books and records shall be the correct
amount.
14. No waivers or consents in regard to any provision of this Note
may be given other than by an instrument in writing signed by the Holder.
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed by an officer thereunto duly authorized.
Dated: May _____, 2003
DIOMED, INC.
By: ________________________
XXXXX X. XXXXX, XX.
-----------------------------
(Print Name)
CHIEF EXECUTIVE OFFICER
(Title)
Acknowledged and Agreed: DIOMED HOLDINGS, INC.
By: ________________________
XXXXX X. XXXXX, XX.
-----------------------------
(Print Name)
CHIEF EXECUTIVE OFFICER
(Title)
EXHIBIT B TO EXCHANGE AGREEMENT
DIOMED HOLDINGS, INC.
---------------------------
CERTIFICATE OF DESIGNATIONS OF
CLASS C CONVERTIBLE PREFERRED STOCK,
PAR VALUE $0.001 PER SHARE
---------------------------
Pursuant to Section 151(g) of the Delaware General Corporation Law
---------------------------
IT IS HEREBY CERTIFIED that:
1. The name of the company (hereinafter called the "CORPORATION") is
Diomed Holdings, Inc., a corporation organized and now existing under the
Delaware General Corporation Law ("DGCL").
2. The Certificate of Incorporation of the Corporation (the
"CERTIFICATE OF INCORPORATION") authorizes the issuance of Twenty Million
(20,000,000) shares of preferred stock, par value $0.001 per share (the
"PREFERRED STOCK"), and expressly vests in the Board of Directors of the
Corporation the authority to issue any or all of said shares by resolution or
resolutions and to establish the designation and number of shares to be issued.
3. The Board of Directors of the Corporation, pursuant to the authority
expressly vested in it as aforesaid, and pursuant to the provisions of Section
151 of the DGCL, has adopted the resolution set forth below to create a series
of Preferred Stock designated as Class C Stock. Pursuant to said Section 151,
the approval of the Corporation's shareholders was not required.
RESOLVED, That Twenty (20) shares of the Two Million (2,000,000) shares
of Preferred Stock of the Corporation which are authorized but unissued shares
as of the date of this certificate shall hereby be designated Class C
Convertible Preferred Stock, par value $0.001 per share (the "CLASS C STOCK"),
and shall possess the rights and preferences set forth below:
1. DIVIDENDS. The holders of the Corporation's Class C Stock shall be
entitled, when and if declared by the board of directors of the corporation (the
"BOARD OF DIRECTORS"), to cash dividends and distributions out of funds of the
corporation legally available for that purpose (collectively, "DISTRIBUTIONS")
PRO RATA and PARI PASSU with the holders of the Corporation's common stock, par
value $0.001 per share (the "COMMON STOCK"), such that the Distributions payable
on each issued and outstanding share of the Class C Stock shall be equal to the
amount paid on that number of shares of shares of Common Stock into which such
Class C Stock is convertible, and all Distributions shall be declared, paid and
set aside ratably on the foregoing basis among the holders of the Class C Stock
and the holders of the Common Stock in proportion to the issued and outstanding
shares of the Class C Stock and the Common Stock held by them.
Page 1
2. VOTING.
(a) The holders of the Class C Stock shall each be entitled to vote the
number of votes equal to the number of shares of the Common Stock into which
such shares are to be converted pursuant to Section 4 of this Certificate.
Except as expressly set forth in Section 2(b) of this Certificate, any matter as
to which the holders of Common Stock are entitled to vote shall require the
affirmative vote of the holders of a majority of the issued and outstanding
shares of the Corporation's capital stock entitled to vote thereon, including
the Class C Stock (and any other outstanding capital stock of the of the
Corporation convertible into Common Stock), with the holders of the shares of
the Class C Stock (and any other outstanding capital stock of the of the
Corporation convertible into Common Stock) and the holders of the shares of the
Common Stock voting as one class.
(b) The affirmative vote of the holders of a majority of the issued and
outstanding shares of the Class C Stock, voting as a separate class, shall be
required to change the powers, preferences or special rights of the shares of
the Class C Stock in relation to the shares of the Common Stock.
3. LIQUIDATION.
(a) Upon the occurrence of a Liquidating Event (as defined below in Section
3(c) of this Certificate), whether voluntary or involuntary, the holders of the
Class C Stock and the Common Stock of all classes shall be entitled to receive,
PRO RATA and PARI PASSU out of the assets of the Corporation available for
distribution to its stockholders or from the net proceeds from a sale, lease,
exchange or other disposition of the assets of the Corporation (in any such
case, the "PROCEEDS"), as applicable, the following: all issued and outstanding
shares of Class C Stock shall be automatically converted into shares of Common
Stock pursuant to Section 4 and then and thereafter the entire assets and funds
of the Corporation legally available for distribution shall be distributed
ratably among the holders of the Common Stock (after giving effect to full
conversion of the Class C Stock) in proportion to the issued and outstanding
shares of the Common Stock held by them.
(b) LIQUIDATING EVENT. Any of the following shall be considered a
"LIQUIDATING EVENT" and shall entitle the holders of the Class C Stock and the
Common Stock to receive promptly after the Corporation's realization thereof, in
cash, securities or other property, those amounts specified in Section 3(a) of
this Certificate:
(i) any liquidation, dissolution or winding up of the Corporation; or
(ii) any sale, lease, exchange or other disposition of all or
substantially all the Corporation's assets.
4. CONVERSION OF SHARES OF THE CLASS C STOCK. Shares of the Class C Stock
shall automatically convert into shares of the Common Stock on the basis set
forth in, and subject to the limitations of, this Section 4 of this Certificate:
(a) CONVERSION RATIO.
(i) Subject to and in compliance with the provisions of this Section
4, each one (1) share of the Class C Stock (or any fraction thereof) shall
be converted into One Million Three Hundred Fifty Five Thousand Eight
Page 2
Hundred Sixty Two (1,355,862) fully paid and nonassessable shares
(calculated as to each conversion to the nearest one-thousandth of a share)
of the Common Stock. The ratio of 1:1,355,862, as adjusted pursuant to the
Section 4(a)(ii) of this Certificate, is referred to as the "CLASS C
CONVERSION RATIO."
(ii) SUBDIVISION OR COMBINATION OF THE COMMON STOCK. If the
Corporation at any time or from time to time shall declare or pay any
dividend on the shares of the Common Stock payable in shares of the
Common Stock or in any right to acquire shares of the Common Stock, or
shall effect a subdivision of the outstanding shares of the Common
Stock into a greater number of shares of the shares of any class of
the Common Stock (by stock split, reclassification or otherwise), or
if the outstanding shares of the Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser number
of shares of the Common Stock, then the Class C Conversion Ratio in
effect immediately prior to such event shall, concurrently with the
effectiveness of such event, be proportionately decreased or
increased, as appropriate, such that each share of the Class C Stock
is converted into those shares of the Common Stock that represent the
economic equivalent of the shares of the Common Stock into which each
share of the Class C Stock was convertible immediately prior to such
dividend, subdivision, combination or reclassification.
(b) CONVERSION. All of the outstanding shares of the Class C Stock
shall automatically convert into shares of the Common Stock on the date on
which the holders of the Corporation's capital stock approve the issuance
of the Common Stock into which the Class C Stock is convertible, if and to
the extent such approval is required by the DGCL or the rules and
regulations of the American Stock Exchange.
(c) DETERMINATIONS BY THE CORPORATION. In determining Conversion Share
Amounts, the determination of the Corporation shall be final, absent
manifest error. All Conversion Share Amounts shall be rounded to the
nearest one-thousandth of a share.
(d) CONVERSION PROCEDURE.
(i) The conversion of shares of Class C Stock shall be deemed to
have been effected as of the close of business on the date on which
such shares of the Class C Stock are converted pursuant to the terms
of Section (b) of this Certificate. At the time any such conversion
has occurred, the rights of the holder of the shares converted as a
holder of shares of the Class C Stock shall cease, and the person or
persons such shares of the Class C Stock shall become the holder or
holders of record of the shares of the Common Stock into which such
shares of the Class C Stock were converted.
(ii) The issuance of certificates for shares of the Common Stock
upon conversion of shares of the Class C Stock shall be made without
charge to the holders of such shares of the Class C Stock for any
issuance tax in respect thereof (so long as such certificates are
issued in the name of the record holder of such shares of the Class C
Stock) or other cost incurred by the Corporation in connection with
such conversion and the related issuance of shares of the Common
Stock. Upon conversion of each share of the Class C Stock, the
Corporation shall take all such actions as are necessary in order to
ensure that the shares of the Common Stock issuable with respect to
such conversion shall be validly issued, fully paid and nonassessable,
free and clear of all taxes (other than any taxes relating to any
dividends paid with respect thereto), liens, charges and encumbrances
with respect to the issuance thereof.
Page 3
(iii) The Corporation shall not close its books against the
transfer of Common Stock of any class issued or issuable upon
conversion of shares of the Class C Stock in any manner which
interferes with the timely conversion of Stock. The Corporation shall
assist and cooperate with any holder of such shares required to make
any governmental filings or obtain any governmental approval prior to
or in connection with any conversion of such shares hereunder
(including, without limitation, making any filings required to be made
by the Corporation). Shares of the Class C Stock that have been
converted shall be cancelled and shall not be held in treasury or
otherwise be available for reissuance.
(e) EXTRAORDINARY EVENT. Prior to the consummation of any
Extraordinary Event (as defined below), the Corporation shall make
appropriate provisions to ensure that each of the holders of the shares of
the Class C Stock shall thereafter have the right to acquire and receive,
in lieu of or in addition to (as the case may be) the shares of Common
Stock immediately theretofore receivable upon the conversion of such
holder's Class C Stock, such shares of stock, securities or assets as such
holder would have received in connection with such Extraordinary Event if
such holder had converted its shares of Class C Stock immediately prior to
such Extraordinary Event. In each such case, the Corporation shall also
make appropriate provisions to ensure that the provisions of this Section
4(e) shall thereafter be applicable to the shares of the Class C Stock
(including, in the case of any such consolidation, merger or sale in which
the successor entity or purchasing entity is other than the Corporation, an
immediate adjustment of the Class C Conversion Ratio reflecting the terms
of such consolidation, merger or sale, and a corresponding immediate
adjustment in the number of shares of the Common Stock acquirable and
receivable upon conversion of shares of the Class C Stock). The Corporation
shall not effect any Extraordinary Event, unless prior to the consummation
thereof, the successor entity (if other than the Corporation) resulting
from such consolidation or merger or the entity purchasing such assets
assumes in writing the obligation to deliver to each such holder such
shares of stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to acquire. As used herein,
"EXTRAORDINARY EVENT" means the occurrence or consummation of a transaction
or series of related transactions resulting in: (i) a merger,
consolidation, sale or reorganization in which the Corporation or any of
its subsidiaries is not the surviving corporation; or (ii) a sale, lease or
exchange, directly or indirectly, of all or substantially all of the
property and assets of the Corporation, whether or not in the ordinary
course of business.
(f) NO IMPAIRMENT. The Corporation will not, by amendment of this
Certificate or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action (other than actions taken in good faith), avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation but will at all times in good faith assist in
carrying out all the provisions of this Section 4 and in taking all such
action as may be necessary or appropriate in order to protect the
conversion rights of the holders of the shares of the Class C Stock against
impairment.
(g) RESERVATION OF COMMON STOCK. The Corporation shall, at all times
when shares of the Class C Stock shall be outstanding, reserve and keep
available out of its authorized but unissued stock, for the purpose of
effecting the conversion of shares of the Class C Stock, such number of its
duly authorized shares of the Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of the Class
C Stock. Before taking any action which would cause the effective purchase
price for the shares of the Class C Stock to be less than the par value of
Page 4
the shares of the Class C Stock, the Corporation shall take any corporate
action which may, in the opinion of its counsel, be necessary in order that
the Corporation may validly and legally issue fully paid and nonassessable
shares of such Common Stock at such effective purchase price.
5. UNCERTIFICATED SHARES. The shares of the Class C Stock shall be
uncertificated shares; PROVIDED, that in accordance with Section 158 of the
DGCL every holder of uncertificated shares shall be entitled to have a
certificate signed by, or in the name of, the Corporation representing the
number of shares owned of record by such holder in certificate form.
Page 5
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Designations as the act and deed of the corporation referenced above.
/S/ XXXX X. XXXXXXX
---------------------------
Name: Xxxx X. Xxxxxxx
Title: Secretary
Page 6
EXHIBIT C TO EXCHANGE AGREEMENT
[Letterhead of McGuireWoods LLP]
May 7, 2003
To each of the Note Purchasers, party to the Exchange Agreement referred to
below, and To each of the Lenders,
party to the Secured Loan Agreement referred to below
DIOMED HOLDINGS, INC.
Ladies and Gentlemen:
We have acted as special New York counsel to Diomed Holdings,
Inc., a Delaware corporation (the "COMPANY"), and Diomed, Inc., a Delaware
corporation and wholly-owned subsidiary of the Company ("DIOMED"), in connection
with the transactions contemplated by (i) the Exchange Agreement, dated as of
the date hereof (the "EXCHANGE AGREEMENT"), among the Company, Diomed, the Note
Purchasers signatory thereto (the "NOTE PURCHASERS") and Gibralt US, Inc., as
designated purchaser for the Note Purchasers (the "DESIGNATED NOTE PURCHASER"),
and (ii) the Secured Loan Agreement, dated as of the date hereof (the "SECURED
LOAN AGREEMENT"), among the Company, Diomed, the Lenders signatory thereto (the
"LENDERS") and Gibralt US, Inc., as designated lender for the Lenders (the
"DESIGNATED LENDER"). This opinion letter is furnished to you pursuant to
Section 8(c) of the Exchange Agreement and Section 8(e) of the Secured Loan
Agreement. Unless otherwise defined herein, terms used herein have the meanings
provided in the Exchange Agreement. As used herein, "NEW YORK UCC" means the
Uniform Commercial Code as in effect on the date hereof in the State of New York
and "DELAWARE UCC" means the Uniform Commercial Code as in effect on the date
hereof in the State of Delaware.
I. DOCUMENTS REVIEWED
In connection with this opinion letter, we have examined the following
documents, each of which is dated on or as of the date of the Exchange
Agreement and the Secured Loan Agreement unless otherwise indicated:
(a) the Exchange Agreement
(b) the Secured Loan Agreement;
(c) the Notes;
(d) the Certificate of Designations for the Exchange Conversion Shares;
(e) the Certificate of Designations for the Commitment Shares;
(f) the Security Agreement;
(g) the Pledge Agreement; and
(h) the Registration Rights Agreement.
The documents referred to in CLAUSES (A) through (H) above are referred to
collectively as the "SUBJECT Documents".
In addition we have examined the following:
(i) originals, or copies identified to our satisfaction as being
true copies, of such records, documents and other instruments as we
have deemed necessary for the purposes of this opinion letter; and
(ii) a copy of the UCC-1 Financing Statement (the "UCC FINANCING
STATEMENT") naming Diomed as debtor and Gibralt US, Inc. as secured
party, filed on December 30, 2002 with the Office of the Secretary of
State of Delaware (the "UCC FILING OFFICE").
II. ASSUMPTIONS UNDERLYING OUR OPINIONS
For all purposes of the opinions expressed herein, we have assumed, without
independent investigation, that:
(a) FACTUAL MATTERS. With regard to factual matters, to the extent that we
have reviewed and relied upon representations of the Company and Diomed set
forth in the Subject Documents, such representations are true and correct;
(b) CONTRARY KNOWLEDGE OF ADDRESSEE. No addressee of this opinion letter
has any actual knowledge that any of our factual assumptions or opinions is
inaccurate;
(c) SIGNATURES. The signatures of individuals (other than individuals
signing on behalf of the Company and Diomed) signing the Subject Documents are
genuine and authorized;
(d) AUTHENTIC AND CONFORMING DOCUMENTS. All documents submitted to us as
originals are authentic, complete and accurate and all documents submitted to us
as copies conform to authentic original documents;
(e) CAPACITY OF CERTAIN PARTIES. All parties to the Subject Documents have
the (i) capacity and (ii), except in the case of the Company and Diomed, full
power and authority to execute, deliver and perform the Subject Documents and
the documents required or permitted to be delivered and performed thereunder;
(f) SUBJECT DOCUMENTS BINDING ON CERTAIN PARTIES. Except with respect to
the Company and Diomed, all of the Subject Documents and the documents required
2
or permitted to be delivered thereunder have been duly authorized by all
necessary corporate or other action on the part of the parties thereto, have
been duly executed and delivered by such parties and, except with respect to the
Company and Diomed, are legal, valid and binding obligations enforceable against
such parties in accordance with their terms;
(g) CONSENTS FOR CERTAIN PARTIES. All necessary consents, authorizations
(other than in the case of the Company and Diomed), approvals, permits or
certificates (governmental and otherwise) which are required as a condition to
the execution and delivery of the Subject Documents by the parties thereto and
to the consummation by such parties of the transactions contemplated thereby
have been obtained; and
(h) ACCURATE DESCRIPTION OF PARTIES' UNDERSTANDING. The Subject Documents
accurately describe and contain the mutual understanding of the parties, and
there are no oral or written statements or agreements that modify, amend or
vary, or purport to modify, amend or vary, any of the terms thereof.
III. OUR OPINIONS
Based on and subject to the foregoing and the other limitations,
assumptions, qualifications and exclusions set forth in this opinion letter, we
are of the opinion that:
1. EXECUTION, VALIDITY AND ENFORCEABILITY. The Company and Diomed each has
(i) the corporate power and authority to execute, deliver and perform the
provisions of each Subject document to which it is a party, (ii) taken all
corporate action necessary to authorize the execution and delivery thereof and
(iii) duly executed and delivered each Subject Document to which it is party,
and each such Subject Document constitutes its valid, binding and enforceable
obligation.
2. CAPITALIZATION OF THE COMPANY. The authorized capital stock of the
Parent consists of 100,000,000 shares, of which 80,000,000 shares are shares of
Common Stock, par value $0.001 per share, and of which 20,000,000 shares are
shares of preferred stock, par value $0.001 per share, of which 20 shares are
designated as Class C Convertible Preferred Stock (the "Class C Stock") and 24
shares are designated as Class D Convertible Preferred Stock (the "Class D
Stock"). The Company has duly reserved 27,117,240 shares of Common Stock for
issuance upon the conversion of the Class C Stock in accordance with its terms,
and has duly reserved 3,021,552 shares of Common Stock for issuance upon the
conversion of the Class D Stock. Upon conversion of the Class C Stock and the
Class D Stock in accordance with their respective terms, the Common Stock so
issued will be validly issued, fully paid and non-assessable.
3. UCC MATTERS. (a) The Pledge Agreement is effective to create a valid
security interest in favor of the Designated Note Purchaser and the Designated
Lender (for the benefit of the Secured Parties), to secure the indebtedness
described therein, in all right, title and interest of Diomed in and to all
certificated securities (as defined in Section 8-102(a)(4) of the UCC, the
"PLEDGED SECURITIES") and all other personal property included within the term
"Collateral" (as defined in the Pledge Agreement) in which a security interest
3
can be granted under Article 9 of the UCC (collectively, the "PLEDGED
COLLATERAL"). The Designated Note Purchaser and the Designated Lender, for the
benefit of the Secured Parties, will have a perfected security interest in the
Pledged Securities upon delivery to the Designated Note Purchaser and the
Designated Lender, for the benefit of the Secured Parties, in the State of New
York of the certificates representing such Pledged Securities in registered
form, issued or indorsed in the name of the Designated Note Purchaser and the
Designated Lender or in blank by an effective indorsement, or accompanied by
undated stock powers with respect thereto duly indorsed in blank by an effective
indorsement. We understand that the certificates representing the Pledged
Securities have previously been delivered to the Designated Note Purchaser and
the Designated Lender, so indorsed.
(b) The Security Agreement is effective to create a valid security interest
in favor of the Secured Parties to secure the Secured Obligations in all right,
title and interest of Diomed in and to all personal property included within the
term "Collateral" (as defined in the Security Agreement) in which a security
interest can be granted under Article 9 of the New York UCC (collectively, the
"ARTICLE 9 COLLATERAL"; and together with the Pledged Collateral, being the
"SUBJECT COLLATERAL").
(c) The Secured Parties have a perfected security interest in those items
of the Article 9 Collateral in which a security interest may be perfected under
Article 9 of the Delaware UCC by the filing of a financing statement in the UCC
Filing Office.
IV. EXCLUSIONS
1. GENERAL EXCLUSIONS. We call your attention to the following matters as
to which we express no opinion:
(a) INDEMNIFICATION. Any agreement of the Company or Diomed in a
Subject Document relating to indemnification, contribution or exculpation
from costs, expenses or other liabilities that is contrary to public policy
or applicable law;
(b) FRAUDULENT TRANSFER. The effect, if applicable, of fraudulent
conveyance, fraudulent transfer and preferential transfer laws and
principles of equitable subordination;
(c) JURISDICTION; VENUE, ETC. Any agreement of the Company or Diomed
in a Subject Document to submit to the jurisdiction of federal courts
located in the State of New York, to waive any objection to the laying of
the venue, to waive the defense of forum non conveniens in any action or
proceeding referred to therein, to waive trial by jury, to effect service
of process in any particular manner or to establish evidentiary standards;
(d) TRUST RELATIONSHIP. The creation of any trust relationship by the
Company or Diomed on behalf of any Note Purchaser;
(e) CERTAIN LAWS. Federal securities laws or regulations, state
securities and Blue Sky laws or regulations, federal and state banking laws
and regulations, pension and employee benefit laws and regulations, federal
and state environmental laws and regulations, federal and state tax laws
and regulations, federal and state health and occupational safety laws and
regulations, building code, zoning, subdivision and other laws and
regulations governing the development, use and occupancy of real property,
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 and other federal
and state antitrust and unfair competition laws and regulations, the
Assignment of Claims Act, and the effect of any of the foregoing on any of
the opinions expressed;
4
(f) LOCAL ORDINANCES. The ordinances, statutes, administrative
decisions, orders, rules and regulations of any municipality, county,
special district or other political subdivision of the State of New York;
(g) CERTAIN AGREEMENTS OF COMPANY. Any agreement of the Company or
Diomed in a Subject Document providing for:
(i) specific performance of the Company's or Diomed's
obligations;
(ii) establishment of a contractual rate of interest payable
after judgment;
(iii) rights of set off;
(iv) the granting of any power of attorney;
(v) survival of liabilities and obligations of any party under
any of the Subject Documents arising after the effective date of
termination of the Secured Loan Agreement; or
(vi) obligations to make an agreement in the future;
(h) REMEDIES. Any provision in any Subject Document 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,
that the election of some particular remedy does not preclude recourse to
one or more others or that failure to exercise or delay in exercising
rights or remedies will not operate as a waiver of any such right or
remedy;
(i) UCC CHOICE OF LAW. Any provision in any Subject Document with
respect to governing law to the extent that such provision purports to
affect the choice of law governing perfection and non-perfection of the
security interests;
(j) SALE OF COLLATERAL. Any provision in any Subject Document relating
to the sale or other disposition of Collateral except in compliance with
the New York UCC;
(k) CUSTODY OF COLLATERAL. Any provisions in any Subject Document
providing for the care of collateral in the possession of the Designated
Note Purchaser and the Designated Lender to the extent inconsistent with
Section 9-207 of the New York UCC; and
(l) WAIVERS. Any purported waiver, release, variation, disclaimer,
consent or other agreement to similar effect (collectively, a "WAIVER") by
the Company or Diomed under any Subject Document to the extent limited by
Sections 1-102(3) or 9-602 of the New York UCC or other provisions of
5
applicable law (including judicial decisions), except to the extent that
such Waiver is effective under and is not prohibited by or void or invalid
under Section 9-602 of the New York UCC or other provisions of applicable
law (including judicial decisions).
2. EXCLUSIONS AS TO UCC SECURITY INTERESTS. We also express no opinion as
to the following matters:
(a) TITLE OR PRIORITY. Any person's ownership rights in or title to,
or priority of any security interest or lien on or with respect to, any
property or assets forming any part of the Subject Collateral;
(b) SECURITY INTEREST IN CERTAIN TYPES OF COLLATERAL. The creation of
any security interest purported to be granted in or in respect of the
following: (a) any real property or fixtures, equipment used in farming
operations, farm products, crops, timber to be cut or as extracted
collateral; or (b) policies of insurance, receivables due from any
government or agency thereof, inventory which is subject to any negotiable
documents of title (such as negotiable bills of lading or warehouse
receipts), consumer goods, beneficial interests in a trust, letters of
credit or accounts resulting from the sale of any of the foregoing; or (c)
any other property or assets, the creation of a security interest in which
is excluded from the coverage of Article 9 of the New York UCC (in the case
of our opinion in PARAGRAPHS III-2(A), (B) AND (C)) or Articles 8 and 9 of
the New York UCC (in the case of our opinion in PARAGRAPH III-2(A),
including such property or assets the creation, perfection or priority of a
security in which are subject to (i) a statute or treaty of the United
States which provides for a national or international registration or a
national or international certificate of title for the perfection or
recordation of a security interest therein or which specifies a place of
filing different from that specified in the New York UCC for filing to
perfect or record such security interest, (ii) a certificate of title
statute or (iii) the laws of any jurisdiction other than the State of New
York, Article 9 of the Delaware UCC or the United States; and
(c) ENFORCEABILITY OF LIEN ON CERTAIN TYPES OF COLLATERAL. The
enforceability of any lien on or security interest in any Subject
Collateral:
(i) consisting of goods of a consignor who has delivered such
goods to the Company under a true consignment (as distinguished from a
consignment intended as security);
(ii) as against a "buyer in the ordinary course of business"
(within the meaning of Article 9 of the New York UCC) of the Subject
Collateral; and
(iii) consisting of inventory of Diomed in the event of any
failure by Diomed to have fully complied with the Fair Labor Standards
Act of 1932, as amended, including Sections 206 and 207 thereof; and
(d) SECURITY INTERESTS. The creation, validity, perfection or
enforceability of any security interest or lien purported to be granted in
or in respect of any of the Article 9 Collateral, other than as expressly
provided in PARAGRAPH III-2 above.
V. QUALIFICATIONS AND LIMITATIONS
6
1. GENERAL QUALIFICATIONS AND LIMITATIONS. The opinions set forth above are
subject to the following qualifications and limitations:
(a) APPLICABLE LAW. Our opinions are limited to the federal law of the
United States, Article 9 of the Delaware UCC, the General Corporate Law of
the State of Delaware and the laws of the State of New York, and we do not
express any opinion concerning any other law.
(b) BANKRUPTCY. Our opinions are subject to the effect of any
applicable bankruptcy, insolvency (including, without limitation, laws
relating to preferences), reorganization, moratorium and other similar laws
affecting creditors' rights generally.
(c) EQUITABLE PRINCIPLES. Our opinions are subject to the effect of
general principles of equity (regardless of whether considered in a
proceeding in equity or at law), including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing. In applying such
principles, a court, among other things, might limit the availability of
specific equitable remedies (such as injunctive relief and the remedy of
specific performance), might not allow a creditor to accelerate maturity of
debt or exercise other remedies upon the occurrence of a default deemed
immaterial or for non-credit reasons or might decline to order a debtor to
perform covenants in a Subject Document. Further, a court may refuse to
enforce a covenant if and to the extent that it deems such covenant to be
violative of applicable public policy, including, for example, provisions
requiring indemnification of any Note Purchaser against liability for its
own wrongful or negligent acts.
(d) UNENFORCEABILITY OF CERTAIN PROVISIONS. Certain of the provisions
contained in the Subject Documents may be unenforceable or ineffective, in
whole or in part, but the inclusion of such provisions does not render any
Subject Document invalid as a whole, and each of the Subject Documents
contains, in our opinion, adequate remedial provisions for the ultimate
practical realization of the principal benefits purported to be afforded by
such Subject Document, subject to the other qualifications contained in
this opinion letter. We note, however, that the unenforceability of such
provisions may result in delays in enforcement of the rights and remedies
of the Designated Note Purchaser and the Designated Lender under the
Subject Documents, and we express no opinion as to the economic
consequences, if any, of such delays.
(e) MATERIAL CHANGES TO TERMS. Provisions in the Subject Documents
which provide that any obligations of the Company or Diomed thereunder will
not be affected by the action or failure to act on the part of any Note
Purchaser or by an amendment or waiver of the provisions contained in the
other Subject Documents might not be enforceable under circumstances in
which such action, failure to act, amendment or waiver so materially
changes the essential terms of the obligations that, in effect, a new
contract has arisen between the Note Purchasers on the one hand and the
Company and/or Diomed on the other hand.
(f) INCORPORATED DOCUMENTS. This opinion does not relate to (and we
have not reviewed) any documents or instruments other than the Subject
Documents, and we express no opinion as to such other documents or
instruments (including, without limitation, any documents or instruments
referenced or incorporated in any of the Subject Documents) or as to the
interplay between the Subject Documents and any such other documents and
instruments.
7
2. QUALIFICATIONS AND LIMITATIONS AS TO UCC SECURITY INTERESTS. Our
opinions in paragraph III-2 above are subject to the following:
(a) SECURITY INTEREST IN PROCEEDS. The continuation and perfection of
the Secured Parties' security interest in the proceeds of the Subject
Collateral are limited to the extent set forth in Section 9-315 of the New
York UCC; and Section 9-315 of the UCC, as applicable.
(b) ACTIONS TO CONTINUE EFFECTIVENESS. We express no opinion as to any
actions that may be required to be taken periodically under the New York
UCC, the Delaware UCC or any other applicable law for the effectiveness of
any financing statements, or the validity or perfection of any security
interest, to be maintained.
(c) AFTER-ACQUIRED PROPERTY. A security interest in any Article 9
Collateral that constitutes after-acquired collateral does not attach until
Diomed has rights in such after-acquired collateral.
(d) PROPERTY ACQUIRED AFTER COMMENCEMENT OF BANKRUPTCY CASE. In the
case of property which becomes part of the Subject Collateral after the
date hereof, Section 552 of the Bankruptcy Reform Act of 1978, as amended
(the "BANKRUPTCY CODE") limits the extent to which property acquired by a
debtor after the commencement of a case under the Bankruptcy Code may be
subject to a security interest arising from a security agreement entered
into by the debtor before the commencement of such case.
(e) AFTER-ACQUIRED PROPERTY AS VOIDABLE PREFERENCE. In the case of
property which becomes part of the Subject Collateral after the date
hereof, Section 547 of the Bankruptcy Code provides that a transfer is not
made until the debtor has rights in the property transferred, so a security
interest in after-acquired property which is security for other than a
contemporaneous advance may be treated as a voidable preference under the
conditions (and subject to the exceptions) provided by Section 547 of the
Bankruptcy Code.
(f) RIGHTS OF THIRD PARTIES IN CERTAIN COLLATERAL. The rights of the
Secured Parties with respect to Subject Collateral consisting of accounts,
instruments, licenses, leases, contracts or other agreements will be
subject to the claims, rights and defenses of the other parties thereto
against the Company or Diomed.
(g) LICENSES OR PERMITS AS COLLATERAL. In the case of any Subject
Collateral consisting of licenses or permits issued by governmental
authorities or other persons or entities, Diomed may not have sufficient
rights therein for the security interest of the Secured Parties to attach
and, even if Diomed has sufficient rights for the security interest of the
Secured Parties to attach, the exercise of remedies may be limited by the
terms of the license or permit or require the consent of the governmental
authority issuing such license or permit.
(h) COLLATERAL EVIDENCED BY INSTRUMENTS. We note that, if any of the
Article 9 Collateral is evidenced by instruments or tangible chattel paper
or any other property in which a security interest may be perfected by
taking possession (in each case as defined, and as provided for, in the New
York UCC), the local law of the jurisdiction where such property is located
will govern the priority of a possessory security interest in such property
and the effect of perfection or non-perfection of a non-possessory security
interest in such property.
8
(i) OTHER UCC LIMITATIONS. Such opinions may also be limited by
Sections 9-320, 9-323, 9-335 and 9-336 of the New York UCC and the Delaware
UCC.
(j) PLEDGED SECURITIES. In the case of Pledged Securities:
(i) we express no opinion as to the perfection of the security
interest of the Secured Parties in any portion of the Pledged
Securities, the continuous possession of which is not maintained by
the Designated Note Purchaser and the Designated Lender for the
benefit of the Secured Parties in the State of New York and, in
addition, we call to your attention that perfection (and the effect of
perfection and non-perfection) of the security interest of the
Designated Note Purchaser and the Designated Lender in the Pledged
Securities may be governed by laws other than those of the UCC to the
extent the Pledged Securities become located in a jurisdiction other
than the State of New York; and
(ii) we call to your attention that in the case of the issuance
of additional shares or other distributions in respect of the Pledged
Securities, the security interests of the Secured Parties therein will
be perfected only if possession thereof is obtained or other action
appropriate to the nature of the distribution is taken, in either
case, in accordance with the provisions of the UCC and other
applicable law.
VI. RELIANCE ON OPINIONS
The foregoing opinions are being furnished to the Note Purchasers and the
Lenders for the purpose referred to in the first paragraph of this opinion
letter, and this opinion letter is not to be furnished to any other person or
entity or used or relied upon for any other purpose without our prior written
consent. The opinions set forth herein are made as of the date hereof, and we
assume no obligation to supplement this opinion letter if any applicable laws
change after the date hereof or if we become aware after the date hereof of any
facts that might change the opinions expressed herein.
Very truly yours,
/s/ McGuireWoods LLP
9
EXHIBIT D TO EXCHANGE AGREEMENT
AMENDED AND RESTATED SECURITY AGREEMENT
THIS AMENDED AND RESTATED SECURITY AGREEMENT, dated as of April 22,
2003 (as amended, restated, amended and restated, supplemented or otherwise
modified from time to time, this "AGREEMENT"), is made by DIOMED, INC., a
Delaware corporation (the "Grantor"), in favor of GIBRALT US, INC., a Colorado
corporation (the "DESIGNATED NOTE PURCHASER" and the "DESIGNATED LENDER") for
the benefit of the Secured Parties (such capitalized term and all other
capitalized terms not otherwise defined herein to have the meanings provided for
in ARTICLE I) set forth on the signature pages hereto and their permitted
successors and assigns, and amends and restates in its entirety the Security
Agreement dated December 27, 2002 entered into by the Grantor.
W I T N E S S E T H:
WHEREAS, pursuant to the Note Purchase Agreement, dated as of December 27,
2002 (as amended, restated, amended and restated, supplemented or otherwise
modified from time to time, the "NOTE AGREEMENT") among the Note Purchasers
listed therein, the Designated Purchaser (as defined therein), the Grantor and
Diomed Holdings, Inc., a Delaware corporation ("HOLDINGS") (the "NOTE
AGREEMENT") Diomed issued to the Note Purchasers one or more Notes of the
Company, in an aggregate principal amount of $2,000,000, consisting of
$1,000,000 aggregate principal amount of Class A Notes and $1,000,000 aggregate
principal amount of Class B Notes; and
WHEREAS, as a condition precedent to the Exchange Transaction under the
Exchange Agreement and the making of those Loans under the Secured Loan
Agreement to be made on the Initial Closing Date (as defined in the Secured Loan
Agreement), Grantor is required to execute and deliver this Agreement in order
to effect the grant of certain security to the indebtedness under the Class C
Notes to be issued under the Exchange Agreement and the Class D Notes to be
issued under the Secured Loan Agreement; and
WHEREAS, Grantor will derive substantial benefits from the transactions
contemplated by the Exchange Agreement and the Secured Loan Agreement and has
duly authorized the execution, delivery and performance of this Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the to
Secured Parties to purchase the Notes, Grantor agrees, for the benefit of the
Designated Purchaser and the Designated Lender and each Secured Party, as
follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. The following terms (whether or not underscored) when used in
this Agreement, including its preamble and recitals, shall have the following
meanings (such definitions to be equally applicable to the singular and plural
forms thereof):
"ACCOUNT" means a right to payment of a monetary obligation, whether or
not earned by performance (and shall include invoices, contracts, rights,
accounts receivable, notes, refunds, indemnities, interest, late charges, fees,
undertakings, and all other obligations and amounts owing to Grantor from any
Person):
(a) for property that has been or is to be sold, leased, licensed, assigned or
otherwise disposed of;
(b) for services rendered or to be rendered;
(c) for a policy of insurance issued or to be issued;
(d) for a secondary obligation incurred or to be incurred;
(e) for energy provided or to be provided;
(f) for the use or hire of a vessel under a charter or other contract;
(g) arising out of the use of a credit or charge card or information contained
on or for use with the card; or
(h) as winnings in a lottery or other game of chance operated or sponsored by a
state, governmental unit of a State, or person licensed or authorized to operate
the game by a State or governmental unit of a State.
"ACCOUNT CONTROL AGREEMENT" means an account control
agreement in form and substance satisfactory to the
Designated Purchaser, entered into among Grantor, the Designated Purchaser and
the bank or Securities Intermediary where a Deposit Account or Securities
Account, respectively, of Grantor is maintained, as such agreement may be
amended, restated, amended and restated, supplemented or otherwise modified from
time to time.
"AGREEMENT" is defined in the PREAMBLE.
"ASSIGNED AGREEMENT" means each agreement more particularly
described on SCHEDULE VI hereto (as such Schedule may be supplemented from time
to time pursuant to SECTION 4.12 hereof), in each case, as such agreement may be
amended, restated, amended and restated, supplemented or otherwise modified from
time to time.
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"AUTHENTICATE" means
(a) to sign; or
(b) to execute or otherwise adopt a symbol, or encrypt or similarly process a
record in whole or in part, with the present intent of the authenticating person
to identify the person and adopt or accept a record.
"AXCAN" means Axcan Pharma, Inc., a Canadian company.
"AXCAN NOTE" means that certain promissory note, dated as of September
24, 2001, of Grantor in favor of Axcan, in the original principal amount of
$936,000.
"AXCAN LIEN" means the lien on inventory of Grantor created in favor of
Axcan pursuant to the Axcan Note.
"CHATTEL PAPER" means a record or records that evidence both a
monetary obligation and a security interest in specific goods, a security
interest in specific goods and software used in the goods, a security interest
in specific goods and license of software used in the goods, a lease of specific
goods, or a lease of specific goods and license of software used in the goods.
"COLLATERAL" is defined in SECTION 2.1.
"COLLATERAL ACCOUNT" means, for Grantor, a deposit account in
the name of the Designated Purchaser and subject to the sole dominion and
control of the Designated Purchaser.
"COMMERCIAL TORT CLAIM" means a claim arising in tort with
respect to which:
(a) the claimant is an organization; or
(b) the claimant is an individual and the claim:
(i) arose in the course of the claimant's business or profession; and
(ii) does not include damages arising out of personal injury to or the
death of an individual.
"COMMODITY ACCOUNT" means an account
maintained by a Commodity Intermediary in which a Commodity
Contract is carried out for a Commodity Customer.
"COMMODITY CONTRACT" means a commodity futures contract, an
option on a commodity futures contract, a commodity option or any other contract
that, in each case, is
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(a) traded on or subject to the rules of a board of trade that has
been designated as a contract market for such a contract pursuant to the
federal commodities laws; or
(b) traded on a foreign commodity board of trade, exchange or market,
and is carried on the books of a Commodity Intermediary for a Commodity
Customer.
"COMMODITY CUSTOMER" means a person for whom a
Commodity Intermediary carries a Commodity Contract on its
books.
"COMMODITY INTERMEDIARY" means
(a) a Person who is registered as a futures commission merchant under
the federal commodities laws; or
(b) a Person who in the ordinary course of its business provides
clearance or settlement services for a board of trade that has been
designated as a contract market pursuant to federal commodities laws.
"COMPUTER HARDWARE AND SOFTWARE COLLATERAL" means:
(a) all computer and other electronic data processing hardware,
integrated computer systems, central processing units, memory units,
display terminals, printers, features, computer elements, card readers,
tape drives, hard and soft disk drives, cables, electrical supply hardware,
generators, power equalizers, accessories and all peripheral devices and
other related computer hardware;
(b) all software programs (including both source code, object code and
all related applications and data files), whether now owned or hereafter
acquired by Grantor, designed for use on the computers and electronic data
processing hardware described in CLAUSE (A) above;
(c) all licenses and leases of software programs;
(d) all firmware associated therewith;
(e) all documentation (including flow charts, logic diagrams, manuals,
guides and specifications) with respect to such hardware, software and
firmware described in the preceding CLAUSES (A) through (D); and
(f) all rights with respect to all of the foregoing, including any and
all copyrights, licenses, options, warranties, service contracts, program
services, test rights, maintenance rights, support rights, improvement
rights, renewal rights and indemnifications and any substitutions,
replacements, additions, modifications or model conversions of any of the
foregoing.
"CONTROL" means any appropriate method of gaining
control of collateral under the U.C.C.
"COPYRIGHT COLLATERAL" means:
(a) all copyrights of Grantor, whether statutory or common law,
registered or unregistered, now or hereafter in force throughout the world
including all of Grantor's right, title and interest in and to all
copyrights registered in the United States Copyright Office or anywhere
else in the world and also including the copyrights referred to in ITEM A
of SCHEDULE IV attached hereto (as such Schedule may be supplemented from
time to time pursuant to SECTION 4.12 hereof), and all applications for
registration thereof, whether pending or in preparation;
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(b) all copyright licenses, including each copyright license referred
to in ITEM B of SCHEDULE IV attached hereto (as such Schedule may be
supplemented from time to time pursuant to SECTION 4.12 hereof); and
(c) the right to xxx for past, present and future infringements of any
thereof, all rights corresponding thereto throughout the world, all
extensions and renewals of any thereof and all proceeds of the foregoing,
including licenses, royalties, income, payments, claims, damages and
proceeds of suit.
"DEPOSIT ACCOUNT" means a demand, time, savings,
passbook, or similar account (including all bank accounts,
collection accounts and concentration accounts, together with all funds held
therein and all certificates and instruments, if any, from time to time
representing or evidencing such accounts) maintained with a bank.
"DESIGNATED PURCHASER" is defined in the PREAMBLE.
"DOCUMENTS" means a document of title or a receipt of the type
described in Section 7-201(2) of the U.C.C.
"ELECTRONIC CHATTEL PAPER" means Chattel Paper evidenced by a
record or records consisting of information stored in an electronic medium.
"ENTITLEMENT HOLDER" means a Person identified in the records
of a Securities Intermediary as the Person having a Security Entitlement against
the Securities Intermediary. If a person acquires a Security Entitlement by
virtue of Section 8-501(b)(2) or (3) of the U.C.C., such person is the
Entitlement Holder.
"EQUIPMENT" means all machinery, equipment in all its forms,
wherever located, including all computers, furniture and furnishings, all other
property similar to the foregoing (including tools, parts, rolling stock and
supplies of every kind and description), components, parts and accessories
installed thereon or affixed thereto and all parts thereof, and all Fixtures and
all accessories, additions, attachments, improvements, substitutions and
replacements thereto and therefor.
"EXCHANGE AGREEMENT" means the Exchange Agreement dated as of
April 22, 2003 by and among Holdings, Diomed, the Note Purchasers (as defined
therein) and the Designated Note Purchaser (as defined therein).
"FINANCIAL ASSET" means
(a) a Security;
(b) an obligation of a Person or a share, participation or other
interest in a Person or in property or an enterprise of a Person,
which is, or is of a type, dealt with in or traded on financial
markets, or which is recognized in any area in which it is issued or
dealt in as a medium for investment; or
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(c) any property that is held by a Securities Intermediary for
another person in a Securities Account if the Securities Intermediary
has expressly agreed with the other Person that the property is to be
treated as a Financial Asset under Article 8 of the U.C.C. As the
context requires, the term Financial Asset shall mean either the
interest itself or the means by which a Person's claim to it is
evidenced, including a certificated or uncertificated Security, a
certificate representing a Security or a Security Entitlement.
"FIXTURES" means all items of Equipment, whether now
owned or hereafter acquired, of Grantor that become so
related to particular real estate that an interest in them arises under any real
estate law applicable thereto.
"GENERAL INTANGIBLE" means any personal property, including
things in action, Payment Intangibles and software, other than Accounts, Chattel
Paper, Commercial Tort Claims, Deposit Accounts, Documents, Goods, Instruments,
Investment Property, Letter-of-Credit Rights, Letters of Credit, money, and oil,
as, or other minerals before extraction.
"GOODS" means all things that are movable when a security
interest attaches, including computer programs embedded in goods and any
supporting information provided in connection with a transaction relating to the
program if (i) the program is associated with the goods in such a manner that is
customarily is considered part of the goods, or (ii) by becoming the owner of
the goods, a person acquires a right to use the program in connection with the
goods.
"GRANTOR" is defined in the PREAMBLE.
"INTELLECTUAL PROPERTY COLLATERAL" means, collectively, the
Computer Hardware and Software Collateral, the Copyright Collateral, the Patent
Collateral, the Trademark Collateral and the Trade Secrets Collateral.
"INTELLECTUAL PROPERTY SECURITY AGREEMENT" means a memorandum
agreement with respect to the security interest granted by Grantor pursuant to
this Agreement in the Copyright Collateral, Patent Collateral or Trademark
Collateral of Grantor which is registered under the federal laws of the United
States of America or the laws of any foreign country, which agreement shall be
in form and substance satisfactory to the Designated Purchaser and in form
suitable for filing in the United States Patent and Trademark Office, the United
States Copyright Office or in the corresponding filing office under the laws of
such foreign jurisdiction, as applicable, from Grantor, as such agreement may be
amended, restated, amended and restated, supplemented or otherwise modified form
time to time.
"INSTRUMENT" means a negotiable instrument or any other
writing that evidences a right to the payment of a monetary obligation, is not
itself a security agreement or lease, and is of a type that in ordinary course
of business is transferred by delivery with any necessary endorsement or
assignment.
"INVENTORY" means Goods, other than farm products, which:
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(a) are leased by a Person as lessor;
(b) are held by a Person for sale or lease or to be furnished under a contract
of service;
(c) are furnished by a Person under a contract of service; or
(d) consist of raw materials, work in process, or materials used or consumed in
a business,
and includes, without limitation, (i) finished goods, returned goods and
materials and supplies of any kind, nature or description which are or might be
used in connection with the manufacture, packing, shipping, advertising, selling
or finishing of any of the foregoing; (ii) all goods in which Grantor has an
interest in mass or a joint or other interest or right of any kind (including
goods in which Grantor has an interest or right as consignee); (iii) all goods
which are returned to or repossessed by Grantor; and (iv) all accessions
thereto, products thereof and documents therefor, except to the extent that a
security interest therein which is deemed necessary by the Grantor or Holdings
is granted to any third party by the Grantor or Holdings pursuant to a factoring
or other asset-based financing transaction entered into from time to time by the
Grantor and/or Holdings.
"INVESTMENT PROPERTY" means all Securities (whether
certificated or uncertificated), Security Entitlements,
Securities Accounts, Financial Assets, Commodity Contracts and Commodity
Accounts of Grantor; PROVIDED, HOWEVER, that Investment Property shall not
include any certificated Securities constituting Collateral (as defined in the
Pledge Agreement).
"LETTER-OF-CREDIT RIGHT" means a right to payment or
performance under a letter of credit, whether or not the beneficiary has
demanded or is at the time entitled to demand payment or performance, but
excludes the right of a beneficiary to demand payment or performance under a
letter of credit.
"NOTE AGREEMENT" is defined in the FIRST RECITAL.
"PATENT COLLATERAL" means:
(a) all letters patent and applications for letters patent throughout the world
(including all patent applications in preparation for filing anywhere in the
world), including each patent and patent application referred to in ITEM A of
SCHEDULE II attached hereto (as such Schedule may be supplemented from time to
time pursuant to SECTION 4.12 hereof);
(b) all patent licenses, including each patent license referred to in ITEM B of
SCHEDULE II attached hereto (as such Schedule may be supplemented from time to
time pursuant to SECTION 4.12 hereof);
(c) all reissues, divisions, continuations, continuations-in-part, extensions,
renewals and reexaminations of any of the items described in CLAUSES (A) and (B)
above; and
(d) all proceeds of, and rights associated with, the foregoing (including
license royalties and proceeds of infringement suits), the right to xxx third
parties for past, present or future infringements of any patent or patent
application, including any patent or patent application referred to in ITEM A of
SCHEDULE II attached hereto (as such Schedule may be supplemented from time to
time pursuant to SECTION 4.12 hereof), and for breach or enforcement of any
patent license, including any patent license referred to in ITEM B of SCHEDULE
II attached hereto (as such Schedule may be supplemented from time to time
pursuant to SECTION 4.12 hereof), and all rights corresponding thereto
throughout the world.
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"PAYMENT INTANGIBLE" means a general intangible under
which the account debtor's principal obligation is a
monetary obligation.
"PROCEEDS" means the following property:
(a) whatever is acquired upon the sale, lease, license, exchange, or other
disposition of the Collateral;
(b) whatever is collected on, or distributed on account of, the Collateral;
(c) rights arising out of the Collateral; and
(d) to the extent of the value of the Collateral and to the extent payable to
the debtor or the secured party, insurance payable by reason of the loss or
nonconformity of, defects or infringement of rights in, or damage to, the
Collateral.
"RECEIVABLES COLLATERAL" means, collectively,
Accounts, Documents, Instruments and Chattel Paper, except to the extent that a
security interest therein is granted to any third party by the Grantor or
Holdings pursuant to a factoring or other asset-based financing transaction
entered into from time to time by the Grantor and/or Holdings.
"SECURED LOAN AGREEMENT" means the Secured Loan Agreement
dated as of April 22, 2003 by and among Holdings, Diomed, the Lenders (as
defined therein) and the Designated Lender (as defined therein).
"SECURED OBLIGATIONS" is defined in SECTION 2.2.
"SECURED PARTIES" means the holders of the Class C Notes and
the Class D Notes, provided that if the Note Purchasers rescind the Exchange
Transaction pursuant to the Exchange Agreement and, accordingly, the Note
Agreement is reinstated and the Class C Notes are cancelled and Class A Notes
issued in lieu thereof, then "Secured Parties" shall mean the holders of the
reissued Class A Notes and the Class D Notes.
"SECURITIES" means any obligations of an issuer or any shares,
participations or other interests in an issuer or in property or an enterprise
of an issuer which
(a) are represented by a certificate representing a security in
bearer or registered form, or the transfer of which may be registered
upon books maintained for that purpose by or on behalf of the issuer;
(b) are one of a class or series or by its terms is divisible
into a class or series of shares, participations, interests or
obligations; and
-8-
(c) (i) are, or are of a type, dealt with or trade on securities exchanges or
securities markets or (ii) are a medium for investment and by their terms
expressly provide that they are a security governed by Article 8 of the U.C.C.
"SECURITIES ACCOUNT" shall mean an account to which a
Financial Asset is or may be credited in accordance with an agreement under
which the Person maintaining the account undertakes to treat the Person for whom
the account is maintained as entitled to exercise rights that comprise the
Financial Asset.
"SECURITY ENTITLEMENTS" means the rights and property
interests of an Entitlement Holder with respect to a Financial Asset.
"SECURITY INTERMEDIARY" means
(a) a clearing corporation; or
(b) a Person, including a bank or broker, that in the ordinary
course of its business maintains securities accounts for others and is
acting in that capacity.
"SUPPORTING OBLIGATION" means a Letter-of-Credit
Right or secondary obligation that supports the payment or performance
of an Account, Chattel Paper, Document, General Intangible,
Instrument or Investment Property, including, without limitation, all security
agreements, guaranties, leases and other contracts securing or otherwise
relating to any such Accounts, Chattel Paper, Documents, General Intangible,
Instruments or Investment Property, including Goods represented by the sale or
lease of delivery which gave rise to any of the foregoing, returned or
repossessed merchandise and rights of stoppage in transit, replevin, reclamation
and other rights and remedies of an unpaid vendor, lienor or secured party.
"TANGIBLE CHATTEL PAPER" means Chattel Paper evidenced by a
record or records consisting of information that is inscribed on a tangible
medium.
"TERMINATION DATE" means the date on which the payment in full
in cash of the Secured Obligations is made, PROVIDED, that this Agreement shall
continue to be effective or be reinstated, as the case may be, if at any time
any payment (in whole or in part) of any of the Secured Obligations is rescinded
or must otherwise be restored by any Secured Party upon the insolvency,
bankruptcy or reorganization of the Grantor, Holdings or otherwise, all as
though such payment had not been made.
"TRADEMARK COLLATERAL" means:
(a) all trademarks, trade names, corporate names, company names,
business names, fictitious business names, trade styles, trade dress,
service marks, certification marks, collective marks, logos, other
source of business identifiers, prints and labels on which any of the
foregoing have appeared or appear, designs and general intangibles of
a like nature (all of the foregoing items in this CLAUSE (A) being
collectively called a "TRADEMARK"), now existing anywhere in the world
or hereafter adopted or acquired, whether currently in use or not, all
registrations and recordings thereof and all applications in
connection therewith, whether pending or in preparation for filing,
including registrations, recordings and applications in the United
States Patent and Trademark Office or in any office or agency of the
United States of America or any State thereof or any foreign country,
including those referred to in ITEM A of SCHEDULE III attached hereto
(as such Schedule may be supplemented from time to time pursuant to
SECTION 4.12);
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(b) all Trademark licenses, including each Trademark license
referred to in ITEM B of SCHEDULE III attached hereto (as such
Schedule may be supplemented from time to time pursuant to SECTION
4.12);
(c) all reissues, extensions or renewals of any of the items
described in CLAUSES (A) and (B) above;
(d) all of the goodwill of the business connected with the use
of, and symbolized by the items described in, CLAUSES (A) and (B)
above; and
(e) all proceeds of, and rights associated with, the foregoing,
including any claim by Grantor against third parties for past, present
or future infringement or dilution of any Trademark, Trademark
registration or Trademark license, including any Trademark, Trademark
registration or Trademark license referred to in ITEM B of SCHEDULE
III attached hereto (as such Schedule may be supplemented from time to
time pursuant to SECTION 4.12), or for any injury to the goodwill
associated with the use of any such Trademark or for breach or
enforcement of any Trademark license.
"TRADE SECRETS COLLATERAL" means common law and statutory trade secrets and
all other confidential or proprietary information and all know-how obtained by
or used in or contemplated at any time for use in the business of Grantor (all
of the foregoing being collectively called a "TRADE SECRET"), whether or not
such Trade Secret has been reduced to a writing or other tangible form
(including all documents and things embodying, incorporating or referring in any
way to such Trade Secret, all Trade Secret licenses), including each Trade
Secret license referred to in SCHEDULE V attached hereto, and including the
right to xxx for and to enjoin and to collect damages for the actual or
threatened misappropriation of any Trade Secret and for the breach or
enforcement of any such Trade Secret license.
"TRANSACTION DOCUMENT" has the meaning given to the term "Documents" in the
Exchange Agreement.
"U.C.C." means the Uniform Commercial Code as from time to time in effect
in the State of New York or, with respect to any Collateral located in any state
or jurisdiction other than the State of New York, the Uniform Commercial Code as
from time to time in effect in such state or jurisdiction.
"WAIVER AGREEMENT" means a waiver agreement with a landlord or bailee of
Grantor in form and substance satisfactory to the Designated Purchaser, entered
into among such landlord or bailee, as the case may be, Grantor and the
Designated Purchaser, as such agreement may be amended, restated, amended and
restated, supplemented or otherwise modified from time to time.
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1.2 EXCHANGE AGREEMENT DEFINITIONS. Unless otherwise defined herein or the
context otherwise requires, terms used in this Agreement, including its preamble
and recitals, have the meanings provided in the Exchange Agreement.
1.3 U.C.C. DEFINITIONS. Unless otherwise defined herein or the context otherwise
requires, terms for which meanings are provided in the U.C.C. are used in this
Agreement, including its preamble and recitals, with such meanings.
1.4 OTHER INTERPRETIVE PROVISIONS. The rules of construction in Sections 9(d) of
the Exchange Agreement shall be equally applicable to this Agreement.
ARTICLE II
SECURITY INTEREST
2.1 GRANT OF SECURITY. Grantor hereby assigns and pledges to the ratable benefit
of each of the Secured Parties, and hereby grants to the ratable benefit of each
of the Secured Parties a security interest in, all of its right, title and
interest in and to the following, whether now or hereafter existing or acquired
(collectively, the "COLLATERAL"):
(a) all Equipment in all of its forms of Grantor;
(b) all Inventory in all of its forms of Grantor, PROVIDED, HOWEVER, that
the Lien created hereby in such Inventory shall be junior and subordinate to the
Axcan Lien (and no other Liens) so long as the Axcan Note remains outstanding;
(c) all Receivables Collateral in all of its forms, including all Accounts,
Documents, Instruments and Chattel Paper, of Grantor;
(d) all General Intangibles in all of its forms, including all Payment
Intangibles, of Grantor;
(e) all Assigned Agreements to which Grantor is now or may hereafter become
a party and all Accounts thereunder, including (i) all rights of Grantor to
receive moneys due and to become due under or pursuant to the Assigned
Agreements, (ii) all rights of Grantor to receive proceeds of any insurance,
indemnity, warranty or guaranty with respect to the Assigned Agreements, (iii)
claims of Grantor for damages arising out of or for breach of or default under
the Assigned Agreements and (iv) the right of Grantor to terminate the Assigned
Agreements, to perform thereunder and to compel performance and otherwise
exercise all remedies thereunder;
(f) all Supporting Obligations of Grantor;
(g) all Intellectual Property Collateral in all of its forms of Grantor;
(h) all Investment Property in all of its forms, including all Securities
Accounts, of Grantor;
(i) all Deposit Accounts of Grantor;
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(j) all Commercial Tort Claims of Grantor described in PART E of SCHEDULE I
hereto (as such Schedule may be supplemented from time to time pursuant to
SECTION 4.12 or otherwise);
(k) all other Goods of Grantor;
(l) all of Grantor's books, records, writings, data bases, information and
other property relating to, used or useful in connection with, evidencing,
embodying, incorporating or referring to, any of the foregoing in this SECTION
2.1;
(m) all of Grantor's other property and rights of every kind and
description and interests therein, including all moneys, securities and other
property, now or hereafter held or received by, or in transit to, the Designated
Purchaser from or for Grantor, whether for safekeeping, pledge, custody,
transmission, collection or otherwise; and
(n) all Proceeds of any and all of the foregoing Collateral.
For the avoidance of doubt, the Collateral shall not be deemed for any reason to
include any real property interest of the Grantor.
2.2 SECURITY FOR SECURED OBLIGATIONS. The Collateral of Grantor under this
Agreement secures the prompt payment in full of all obligations of Holdings and
Grantor under the Exchange Agreement, the Secured Loan Agreement and the
Transaction Documents, in respect of the Class C Notes and the Class D Notes,
whether for principal, interest, costs, fees, expenses, indemnities or otherwise
and whether now or hereafter existing (all of such obligations being the
"SECURED OBLIGATIONS"). Notwithstanding the foregoing, or any other provision of
the Transaction Documents to the contrary, no obligation of Grantor or Holdings
in respect of the Class B Notes shall constitute Secured Obligations.
2.3 CONTINUING SECURITY INTEREST; TRANSFER OF CREDIT EXTENSIONS. This Agreement
shall create a continuing security interest in the Collateral and shall remain
in full force and effect until the Termination Date, be binding upon Grantor,
its successors, transferees and assigns, and inure, together with the rights and
remedies of the Designated Purchaser hereunder, for the benefit of each Secured
Party. Without limiting the generality of the foregoing, any Secured Party may
assign or otherwise transfer (in whole or in part) any Note held by it to any
other Person, and such other Person shall thereupon become vested with all the
rights and benefits in respect thereof granted to such Secured Party under any
Transaction Document (including this Agreement) or otherwise, subject, however,
to any contrary provisions in such assignment or transfer, and to the provisions
of Section 4(a) of the Note Agreement (in the case of Class A Notes), Section
4(a) of the Exchange Agreement (in the case of Class C Notes) or Section 4(a) of
the Secured Loan Agreement (in the case of Class D Notes), as the case may be.
Upon the payment in full in cash of all Secured Obligations the security
interest granted herein shall terminate and all rights to the Collateral shall
revert to Grantor.
2.4 GRANTOR REMAINS LIABLE. Anything herein to the contrary notwithstanding
(a) Grantor shall remain liable under the contracts and agreements included
in the Collateral (including the Assigned Agreements) to the extent set forth
therein, and shall perform all of its duties and obligations under such
contracts and agreements to the same extent as if this Agreement had not been
executed,
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(b) Grantor will comply in all material respects with all laws relating to the
ownership and operation of the Collateral, including all registration
requirements under applicable laws, and shall pay when due all taxes, fees and
assessments imposed on or with respect to the Collateral, except to the extent
the validity thereof is being contested in good faith by appropriate proceedings
for which adequate reserves in accordance with GAAP have been set aside by
Grantor,
(c) the exercise by the Designated Purchaser or the Secured Parties of any of
their rights hereunder shall not release Grantor from any of its duties or
obligations under any such contracts or agreements included in the Collateral
and
(d) neither the Designated Purchaser nor any Secured Party shall have any
obligation or liability under any such contracts or agreements included in the
Collateral by reason of this Agreement, nor shall any Secured Party be obligated
to perform any of the obligations or duties of Grantor thereunder or to take any
action to collect or enforce any claim for payment assigned hereunder.
2.5 SECURITY INTEREST ABSOLUTE. All rights of the Designated Purchaser and the
Secured Parties and the security interests granted to the Secured Parties
hereunder, and all obligations of Grantor hereunder, shall be absolute and
unconditional, irrespective of any of the following conditions, occurrences or
events:
(a) any lack of validity or enforceability of any Transaction Document;
(b) the failure of the Designated Purchaser or any Secured Party to assert
any claim or demand or to enforce any right or remedy against Grantor or any
other Person under the provisions of any Transaction Document or otherwise or to
exercise any right or remedy against any other guarantor of, or collateral
securing, any Secured Obligation;
(c) any change in the time, manner or place of payment of, or in any other
term of, all or any of the Secured Obligations or any other extension,
compromise or renewal of any Secured Obligation, including any increase in the
Secured Obligations resulting from the extension of additional credit to Grantor
or any other obligor or otherwise;
(d) any reduction, limitation, impairment or termination of any Secured
Obligation for any reason, including any claim of waiver, release, surrender,
alteration or compromise, and shall not be subject to (and Grantor hereby waives
any right to or claim of) any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality, nongenuineness,
irregularity, compromise, unenforceability of, or any other event or occurrence
affecting, any Secured Obligation or otherwise;
(e) any amendment to, rescission, waiver, or other modification of, or any
consent to departure from, any of the terms of any Transaction Document;
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(f) any addition, exchange, release, surrender or non-perfection of any
collateral (including the Collateral), or any amendment to or waiver or release
of or addition to or consent to departure from any guaranty, for any of the
Secured Obligations; or
(g) any other circumstances which might otherwise constitute a defense available
to, or a legal or equitable discharge of, Grantor or otherwise.
2.6 WAIVER OF SUBROGATION. Until the Termination Date, Grantor shall not
exercise any claim or other rights which it may now or hereafter acquire against
any other Person that arises from the existence, payment, performance or
enforcement of Grantor's obligations under this Agreement, including any right
of subrogation, reimbursement, exoneration or indemnification, any right to
participate in any claim or remedy against Holdings or any collateral which any
Secured Party now has or hereafter acquires, whether or not such claim, remedy
or right arises in equity or under contract, statute or common law, including
the right to take or receive from Holdings, directly or indirectly, in cash or
other property or by set-off or in any manner, payment or security on account of
such claim or other rights. If any amount shall be paid to Grantor in violation
of the preceding sentence, such amount shall be deemed to have been paid for the
benefit of the Secured Parties, and shall forthwith be paid to the Designated
Purchaser to be credited and applied upon the Secured Obligations, whether
matured or unmatured. Grantor acknowledges that it will receive direct and
indirect benefits for the financing arrangements contemplated by the Transaction
Documents and that the agreement set forth in this Section is knowingly made in
contemplation of such benefits.
2.7 RELEASE; TERMINATION.
(a) Upon any sale, transfer or other disposition of any item of Collateral of
Grantor, the Designated Purchaser on behalf of the Secured Parties will, at
Grantor's expense and without any representations, warranties or recourse of any
kind whatsoever, execute and deliver to Grantor such documents as Grantor shall
reasonably request to evidence the release of such item of Collateral from the
assignment and security interest granted hereby; PROVIDED, HOWEVER, that (i) at
the time of such request and such release no Event of Default shall have
occurred and be continuing, (ii) Grantor shall have delivered to the Designated
Purchaser, at least ten Business Days prior to the date of the proposed release,
a written request for release describing the item of Collateral and the terms of
the sale, lease, transfer or other disposition in reasonable detail, including
the price thereof and any expenses in connection therewith, together with a form
of release for execution by the Designated Purchaser (which release shall be in
form and substance satisfactory to the Designated Purchaser) and a certificate
of Grantor to the effect that the transaction is in compliance with the
Transaction Documents and as to such other matters as the Designated Purchaser
may reasonably request and (iii) the proceeds of any such sale, lease, transfer
or other disposition required to be applied, at the discretion of Grantor, to
either reinvestment in the business of Grantor or to redemption of the Notes in
accordance with the terms and conditions of the Notes. Notwithstanding the
foregoing, it is understood and agreed that all sales of goods and inventory
(including laser systems, disposables and related items) made in the ordinary
course of business shall automatically be released from the liens created by
this Agreement and shall not require any further act by or notice to the
Designated Purchaser or the Designated Purchaser.
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(b) Upon the Termination Date, the pledge, assignment and security interest
granted hereby shall terminate and all rights to the Collateral shall revert to
Grantor. Upon any such termination, the Designated Purchaser will, at Grantor's
expense and without any representations, warranties or recourse of any kind
whatsoever, execute and deliver to Grantor such documents as Grantor shall
reasonably request to evidence such termination and deliver to Grantor all
Instruments, Tangible Chattel Paper and negotiable documents representing or
evidencing the Collateral, if any, then held by the Designated Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Grantor represents and warrants unto the Designated Purchaser and each
Secured Party as set forth in this Article.
3.1 LOCATION OF GRANTOR; COLLATERAL, ETC. (a) ITEM A of SCHEDULE I hereto
identifies for Grantor (i) the state in which it is organized, (ii) the relevant
organizational identification number (or states that one does not exist), and
(iii) the principal place of business and chief executive office of Grantor and
the office where Grantor keeps its records concerning the Collateral, and where
the original copies of each Assigned Agreement and all originals of all Tangible
Chattel Paper are located.
(b) Except as disclosed in ITEM C of SCHEDULE I hereto (as such Schedule
may be supplemented from time to time pursuant to SECTION 4.12 hereof), all of
the Equipment and Inventory of Grantor are located at the places specified in
ITEM B of SCHEDULE I hereto (as such Schedule may be supplemented from time to
time pursuant to SECTION 4.12 hereof), each of which locations is owned by
Grantor.
(c) Except as disclosed in ITEM C of SCHEDULE I hereto (as such Schedule
may be supplemented from time to time pursuant to SECTION 4.12 hereof), none of
the Collateral is in the possession of any consignee, bailee, warehouseman,
agent or processor, located on any leased property or subject to the Control of
any Person, other than any Secured Party or Grantor.
(d) Except as set forth in ITEM D of SCHEDULE I hereto, Grantor has no
trade names and has not been known by any legal name different from the one set
forth on the signature page hereto.
(e) ITEM E of SCHEDULE I hereto (as such Schedule may be supplemented from
time to time pursuant to SECTION 4.12 hereof), describes all Commercial Tort
Claims owned by Grantor as of the date hereof and as of the date of each
supplement to such Schedule delivered pursuant to SECTION 4.12 hereof.
(f) Except as notified by Grantor to the Designated Purchaser in writing,
Grantor is not a party to any one or more Federal, state or local government
contracts.
3.2 OWNERSHIP. Grantor owns the Collateral.
3.3 NEGOTIABLE DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND ASSIGNED AGREEMENTS.
Grantor shall keep in its sole possession, free of the Control of any Person
other than the Secured Parties, all originals of all negotiable documents,
Instruments and Tangible Chattel Paper currently owned or held by Grantor, and
true and correct copies of each Assigned Agreement.
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3.4 INTELLECTUAL PROPERTY COLLATERAL. (a) With respect to any Intellectual
Property Collateral that is material to the operations of Grantor:
(i) Intellectual Property Collateral is subsisting and has not been
adjudged invalid or unenforceable, in whole or in part, and is valid and
enforceable;
(ii) Grantor has made all necessary filings and recordations to protect its
interest in such Intellectual Property Collateral, including recordations of all
of its interests in the Patent Collateral and Trademark Collateral in the United
States Patent and Trademark Office and in corresponding offices throughout the
world and its claims to the Copyright Collateral in the United States Copyright
Office and in corresponding offices throughout the world;
(iii) in the case of any such Intellectual Property Collateral that is
owned by Grantor, Grantor is the exclusive owner of the entire and unencumbered
right, title and interest in and to such Intellectual Property Collateral other
than licenses of such Intellectual Property Collateral in favor of Grantor's
subsidiaries and no claim has been made that the use of such Intellectual
Property Collateral does or may violate the asserted rights of any third party;
(iv) in the case of any such Intellectual Property Collateral that is
licensed by Grantor, Grantor is in compliance with all the material terms of
such license; and
(v) Grantor has performed and will continue to perform all acts and has
paid and will continue to pay all required fees and taxes to maintain each and
every item of such Intellectual Property Collateral in full force and effect
throughout the world, as applicable.
(b) Grantor owns directly or is entitled to use by license or otherwise, all
patents, Trademarks, Trade Secrets, copyrights, licenses, technology, know-how,
processes and rights with respect to any of the foregoing used in or necessary
for the conduct of Grantor's business.
3.5 VALIDITY, ETC. This Agreement creates a valid and perfected security
interest in the Collateral and all Proceeds thereof, securing the payment of the
Secured Obligations, and all filings and other actions necessary or desirable to
perfect and protect such security interest have been duly taken.
3.6 AUTHORIZATION, APPROVAL, ETC. No authorization, approval or other action by,
and no notice to or filing with, any governmental authority (other than the
filing of financing statements in the U.C.C. filing offices of each jurisdiction
referred to in SECTION 3.1(A)(I) and any local U.C.C. filing relating to
Fixtures and, if there is any Intellectual Property Collateral, the filing of
this Agreement or Intellectual Property Security Agreements with the United
States Patent and Trademark Office, the United States Copyright Office and the
comparable filing office of any foreign jurisdiction, as the case may be) is
required either (a) for the grant by Grantor of the security interest granted
hereby or for the execution, delivery and performance of this Agreement by
Grantor or (b) for the perfection of or the exercise by the Designated Purchaser
of the rights and remedies hereunder.
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3.7 DUE EXECUTION, VALIDITY, ETC. Grantor has full power and authority, and
holds all requisite governmental licenses, permits and other approvals, to enter
into and perform its obligations under this Agreement. The execution, delivery
and performance by Grantor of this Agreement does not contravene or result in a
default under Grantor's articles of incorporation or by-laws or contravene or
result in a default under any material contractual restriction, Lien or law
binding on Grantor. This Agreement has been duly executed and delivered on
behalf of Grantor and constitutes the legal, valid and binding obligation of
Grantor enforceable in accordance with its terms subject to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar law
affecting creditor's right generally, and subject to the effect of general
principles of equity (regardless of whether considered in a proceeding in equity
or at law).
3.8 ASSIGNED AGREEMENTS.
(a) SCHEDULE VI hereto accurately identifies for Grantor each agreement
which is material to Grantor to which Grantor is a party as of the date hereof
and as of the date of each supplement thereto delivered pursuant to SECTION
4.12. For purposes of this SECTION 3.8(A), any agreement pursuant to which
Grantor reasonably expects to recognize aggregate future revenues in excess of
$100,000 or to receive indemnity or other payments in excess of $100,000 shall
be deemed to be material.
(b) The Assigned Agreements of Grantor, true and complete copies of which
have been furnished to the Designated Purchaser, have been duly authorized,
executed and delivered by Grantor and (to the best knowledge of Grantor) each
other party thereto, are in full force and effect and are binding upon and
enforceable against Grantor and (to the best knowledge of Grantor) each other
party thereto, in accordance with their terms, subject to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar law
affecting creditor's right generally, and subject to the effect of general
principles of equity (regardless of whether considered in a proceeding in equity
or at law).
(c) To the knowledge of Grantor, there exists no default under any Assigned
Agreement by any party thereto.
3.9 COMMERCIAL TORT CLAIMS. Except for matters disclosed in ITEM E of SCHEDULE I
hereto (as such Schedule may be supplemented from time to time pursuant to
SECTION 4.12 hereof), Grantor does not own any Commercial Tort Claims.
3.10 DEPOSIT ACCOUNTS; SECURITIES ACCOUNTS. SCHEDULE VII hereto (as such
Schedule may be supplemented from time to time pursuant to SECTION 4.12 hereof)
accurately identifies each Deposit Account and each Securities Account of
Grantor as of the date hereof and as of the date of each supplement to such
Schedule delivered pursuant to SECTION 4.12 hereof.
ARTICLE IV
COVENANTS
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Grantor covenants and agrees that, until the Termination Date, Grantor
will, unless the Designated Purchaser shall otherwise agree in writing, perform
the obligations set forth in this Section.
4.1 AS TO EQUIPMENT AND INVENTORY. Grantor hereby agrees that it shall, except
in the ordinary course of its business or in the exercise of its reasonable
business judgment,
(a) keep all the Equipment and Inventory (other than Inventory sold in the
ordinary course of business) at the places therefor specified in SECTION 3.1
unless Grantor has given at least 30 days' prior written notice to the
Designated Purchaser of another location, whether by delivery of a supplement to
SCHEDULE I hereto delivered pursuant to SECTION 4.12 hereto or otherwise, and
all action, if any, necessary to maintain in accordance with the terms hereof
the Designated Purchaser' perfected first priority security interest therein
(including any action requested pursuant to CLAUSE (E) of this SECTION 4.1)
shall have been taken with respect to the Equipment and Inventory;
(b) cause the Equipment to be maintained and preserved in the same
condition, repair and working order as when new, ordinary wear and tear
excepted, and make or cause to be made all repairs, replacements and other
improvements in connection therewith which are necessary so that Grantor may
properly conduct its business;
(c) pay promptly when due all property and other taxes, assessments and
governmental charges or levies imposed upon, and all claims (including claims
for labor, materials and supplies) against, the Equipment and Inventory, except
to the extent the validity thereof is being contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with GAAP
have been set aside;
(d) not sell any Inventory to any customer on approval or on any other
basis which entitles the customer to return, or which may obligate Grantor to
repurchase, such Inventory; and
(e) at the request of the Designated Purchaser, cause the landlord, bailee,
warehouseman or processor at any location identified on PART C of SCHEDULE I
with Control over any Equipment or Inventory of Grantor to enter into a Waiver
Agreement with Grantor and the Designated Purchaser.
4.2 AS TO ACCOUNTS, CHATTEL PAPER, DOCUMENTS AND INSTRUMENTS.
(a) Grantor shall: (i) keep its principal place of business and chief
executive office and the office where it keeps its records concerning the
Receivables Collateral and all originals of all Tangible Chattel Paper, located
at the places therefor specified in SECTION 3.1 unless Grantor has given at
least 30 days' prior written notice to the Designated Purchaser, and all
actions, if any, necessary to maintain the Designated Purchaser's perfected
first priority security interest shall have been taken with respect to such
Collateral; (ii) not change its name or jurisdiction of organization unless
Grantor has given at least 30 days' prior written notice to the Designated
Purchaser, and all actions necessary to maintain the Designated Purchaser's
perfected first priority security interest shall have taken with respect to the
Collateral of Grantor; (iii) hold and preserve such records and Chattel Paper;
and (iv) permit representatives of the Designated Purchaser at any time during
normal business hours, upon reasonable notice, to inspect and make abstracts
from such records and such copies or originals of such Chattel Paper.
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(b) Upon written notice by the Designated Purchaser to Grantor pursuant to
this SECTION 4.2(B), all Proceeds received by Grantor shall be delivered in kind
to the Designated Purchaser for deposit to the Collateral Account, and Grantor
shall not commingle any such Proceeds, and shall hold separate and apart from
all other property, all such Proceeds in express trust for the benefit of the
Secured Parties until delivery thereof is made to the Designated Purchaser. The
Designated Purchaser will not give the notice referred to in the preceding
sentence unless there shall have occurred and be continuing any Event of
Default. No funds, other than proceeds of Collateral of Grantor, will be
deposited in the Collateral Account.
(c) The Designated Purchaser shall have the right to apply any amount in
the Collateral Account to the payment of any Secured Obligations which are due
and payable or payable upon demand, or to the payment of any Secured Obligations
at any time that any Event of Default shall exist. Subject to the rights of the
Designated Purchaser, Grantor shall have the right on each Business Day, with
respect to and to the extent of collected funds in the Collateral Account, to
require the Designated Purchaser to purchase cash equivalent investments. The
Designated Purchaser may at any time and shall promptly following Grantor's
request therefor, so long as no Event of Default has occurred and is continuing,
transfer to Grantor's general demand deposit account at its bank any or all of
the collected funds in the Collateral Account; PROVIDED, HOWEVER, that any such
transfer shall not be deemed to be a waiver or modification of any of the
Designated Purchaser's or Secured Parties' rights under this Section. Grantor
will not, after the occurrence and during the continuance of an Event of
Default, without the Designated Purchaser's prior written consent, grant any
extension of the time of payment of any Receivables Collateral, compromise,
compound or settle the same for less than the full amount thereof, release,
wholly or partly, any Person liable for the payment thereof or allow any credit
or discount whatsoever thereon, other than extensions, credits, discounts,
compromises or settlements granted or made in the ordinary course of business
and consistent with its current practices and in accordance with such prudent
and standard practices used in industries that are the same as or similar to
those in which Grantor is engaged.
4.3 AS TO COLLATERAL.
(a) Until such time as the Designated Purchaser shall notify Grantor of the
revocation of such power and authority after the occurrence and during the
continuance of any Event of Default, Grantor (i) may sell, lease or furnish
under the contracts of service any of the Inventory normally held by Grantor for
such purpose, and use and consume any raw materials, work in process or
materials normally held by Grantor for such purpose, and sell or otherwise
dispose of any other Collateral, (ii) will, at its own expense, endeavor to
collect, as and when due, all amounts due with respect to any of the Collateral,
including the taking of such action with respect to such collection as the
Designated Purchaser may reasonably request or, in the absence of such request,
as Grantor may deem advisable; and (iii) may grant to any party obligated on any
of the Collateral, any rebate, refund or allowance to which such party may be
lawfully entitled, and may accept, in connection therewith, the return of goods,
the sale or lease of which shall have given rise to such Collateral. The
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Designated Purchaser, however, may, at any time following the occurrence and
during the continuance of any Event of Default, whether before or after any
revocation of such power and authority or the maturity of any of the Secured
Obligations, notify any parties obligated on any of the Collateral to make
payment to the Designated Purchaser of any amounts due or to become due
thereunder and enforce collection of any of the Collateral by suit or otherwise
and surrender, release, or exchange all or any part thereof, or compromise or
extend or renew for any period (whether or not longer than the original period)
any indebtedness thereunder or evidenced thereby. Upon request of the Designated
Purchaser after the occurrence and during the continuance of any Event of
Default, Grantor will, at its own expense, notify any parties obligated on any
of the Collateral to make payment to the Secured Parties of any amounts due or
to become due thereunder.
(b) The Designated Purchaser is authorized to endorse, in the name of
Grantor, any item, howsoever received by the Designated Purchaser, representing
any payment on or other proceeds of any of the Collateral.
4.4 AS TO INTELLECTUAL PROPERTY COLLATERAL.
(a) Grantor shall not, unless Grantor shall either (i) reasonably and in
good faith determine that any of the Patent Collateral is of negligible economic
value to Grantor or (ii) have a valid business purpose to do otherwise, do any
act, or omit to do any act, whereby any of the Patent Collateral may lapse or
become abandoned or dedicated to the public or unenforceable.
(b) Grantor shall not, and Grantor shall not permit any of its licensees
to, unless Grantor shall either (i) reasonably and in good faith determine that
any of the Trademark Collateral is of negligible economic value to Grantor or
(ii) have a valid business purpose to do otherwise,
(A) fail to continue to use any of the Trademark Collateral in
order to maintain all of the Trademark Collateral in full
force free from any claim of abandonment for non-use;
(B) fail to maintain as in the past the quality of products and
services offered under all of the Trademark Collateral;
(C) fail to employ all of the Trademark Collateral registered with
any Federal or state or foreign authority with an appropriate
notice of such registration; or
(D) do or permit any act or knowingly omit to do any act whereby
any of the Trademark Collateral may lapse or become invalid or
unenforceable.
(c) Grantor shall not, unless Grantor shall either reasonably and in good
faith determine that any of the Copyright Collateral or any of the Trade Secrets
Collateral is of negligible economic value to Grantor or have a valid business
purpose do otherwise, do or permit any act or knowingly omit to do any act
whereby any of the Copyright Collateral or any of the Trade Secrets Collateral
may lapse or become invalid or unenforceable or placed in the public domain
except upon expiration of the end of an unrenewable term of a registration
thereof.
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(d) Grantor shall notify the Designated Purchaser immediately if it knows
that any application or registration relating to any material item of the
Intellectual Property Collateral may become abandoned or dedicated to the public
or placed in the public domain or invalid or unenforceable, or of any adverse
determination or development (including the institution of, or any such
determination or development in, any proceeding in the United States Patent and
Trademark Office, the United States Copyright Office or any foreign counterpart
thereof or any court) regarding Grantor's ownership of any of the Intellectual
Property Collateral, its right to register the same or to keep and maintain and
enforce the same.
(e) In no event shall Grantor nor any of its agents, employees, designees
or licensees file an application for the registration of any Intellectual
Property Collateral with the United States Patent and Trademark Office, the
United States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, unless it promptly informs the
Designated Purchaser and, upon request of the Designated Purchaser, executes and
delivers any and all agreements, instruments, documents and papers as the
Designated Purchaser may reasonably request to evidence the Secured Parties'
security interest in such Intellectual Property Collateral and the goodwill and
general intangibles of Grantor relating thereto or represented thereby.
(f) Grantor shall take all necessary steps, including in any proceeding
before the United States Patent and Trademark Office, the United States
Copyright Office or any similar office or agency in any other country or any
political subdivision thereof, to maintain and pursue any application (and to
obtain the relevant registration) filed with respect to, and to maintain any
registration of, the Intellectual Property Collateral, including the filing of
applications for renewal, affidavits of use, affidavits of incontestability and
opposition, interference and cancellation proceedings and the payment of fees
and taxes (except to the extent that dedication, abandonment or invalidation is
permitted under the foregoing CLAUSES (A), (B) and (C)).
4.5 INSURANCE. Grantor will maintain or cause to be maintained such insurance as
it deems necessary for the reasonable conduct of its business.
4.6 [INTENTIONALLY OMITTED].(a)
4.7 AS TO THE ASSIGNED AGREEMENTS.
(a) Grantor shall at its expense:
(i) perform and observe in all material respects all the terms and
provisions of the Assigned Agreements to be performed or observed by it,
maintain the Assigned Agreements in full force and effect, enforce the Assigned
Agreements in accordance with their terms and take all such action to such end
as may be from time to time reasonably requested by the Designated Purchaser ;
and
(ii) furnish to the Designated Purchaser promptly upon receipt thereof
copies of all material notices, requests and other documents received by Grantor
under or pursuant to the Assigned Agreements, and from time to time furnish to
the Designated Purchaser such information and reports regarding the Assigned
Agreements as the Designated Purchaser may reasonably request.
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(b) Grantor shall not, unless it has reasonably and in good faith determined
that it has a valid business purpose and upon written notification to the
Designated Purchaser:
(i) cancel or terminate any Assigned Agreement or consent to or accept any
cancellation or termination thereof;
(ii) amend or otherwise modify any Assigned Agreement or give any consent,
waiver or approval thereunder;
(iii) waive any default under or breach of any Assigned Agreement; or
(iv) take any other action in connection with any Assigned Agreement that
would impair in any material respect the value of the interest or rights of
Grantor thereunder or that would impair in any material respect the interest or
rights of any Secured Party.
4.8 INSPECTIONS AND VERIFICATION. Upon the occurrence and during the continuance
of an Event of Default, the Designated Purchaser shall have the right, at
Grantor's own cost and expense, to inspect the Collateral, all records related
thereto (and to make extracts and copies from such records) and the premises
upon which any of the other Collateral is located, to discuss Grantor's affairs
with the officers of Grantor and its independent accountants and to verify under
reasonable procedures the validity, amount, quality, quantity, value, condition
and status of, or any other matter relating to, the Collateral, including, in
the case of Accounts or other Collateral in the possession of any third Person,
by contacting Account Debtors or the third person possessing such other
Collateral for the purpose of making such a verification.
4.9 BAILEES, WAREHOUSES AND LEASED PREMISES. Except in the ordinary course of
Grantor's business, no Collateral shall at any time be in the possession or
Control of any warehouseman, bailee or Grantor's agents or processors or located
on any leased premises without the Designated Purchaser's prior written consent
and unless the Designated Purchaser, if the Designated Purchaser has so
requested, has received a Waiver Agreement, or warehouse receipts or other
bailee lien waivers satisfactory to the Designated Purchaser prior to the
commencement of such possession or Control. Grantor shall, upon the request of
the Designated Purchaser, notify any such warehouseman, bailee, agent, processor
or lessor of the Liens granted to the Secured Parties hereunder, shall instruct
such Person to hold all such Collateral for the Designated Purchaser's account
subject to the Designated Purchaser's instructions and shall obtain a Waiver
Agreement or other acknowledgement satisfactory to the Designated Purchaser from
such Person that such Person holds the Collateral for the Secured Parties'
benefit.
4.10 COMMERCIAL TORT CLAIMS. Grantor shall advise the Designated Purchaser
promptly upon Grantor becoming aware, after the date hereof, that it owns any
additional Commercial Tort Claims. With respect to any such Commercial Tort
Claims, Grantor will execute and deliver such documents as the Designated
Purchaser deems necessary to create, perfect and protect the Designated
Purchaser's first priority security interest in such Commercial Tort Claim.
4.11 BANK ACCOUNTS; SECURITIES ACCOUNTS. Upon request by the Designated
Purchaser, Grantor shall enter into an Account Control Agreement with each
financial institution with which Grantor maintains from time to time any Deposit
Account or any Securities Account. Grantor hereby grants to the Designated
Purchaser, a continuing security interest in all such Deposit Accounts and
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Securities Accounts and all funds and Investment Property at any time paid,
deposited, credited or held in such Deposit Accounts and Securities Accounts
(whether for collection, provisionally or otherwise) or otherwise in the
possession of such financial institutions, and each such financial institution
shall act as the Designated Purchasers' agent in connection therewith.
4.12 FURTHER ASSURANCES, ETC.(i) Grantor agrees that, from time to time at its
own expense, Grantor will promptly execute and deliver all further instruments
and documents, and take all further action, that the Designated Purchaser may
reasonably request, in order to perfect, preserve and protect any security
interest granted or purported to be granted hereby or to enable the Designated
Purchaser to exercise and enforce its rights and remedies hereunder with respect
to any Collateral. With respect to the foregoing and the grant of the security
interest hereunder, Grantor hereby authorizes the Designated Purchaser to
Authenticate and to file one or more financing or continuation statements, and
amendments thereto, and make filings with the United States Patent and Trademark
Office or United States Copyright Office (or any successor office or any similar
office in any other country), in each case for the purpose of perfecting,
continuing, enforcing or protecting the security interest granted by Grantor,
without the signature of Grantor, and naming Grantor as debtor and the Secured
Parties as secured parties. A carbon, photographic, telecopied or other
reproduction of this Agreement, any Intellectual Property Security Agreement or
any financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law. Grantor shall from
time to time amend the Schedules hereto to reflect the addition of Collateral
hereunder or to reflect the disposition of Collateral pursuant to transactions
permitted under any Transaction Document, PROVIDED that the Company's failure to
so amend any such schedule to reflect the addition of Collateral shall not
render the security interest granted to the Secured Parties in and to such
Collateral invalid or unenforceable. Grantor shall deliver to the Designated
Purchaser copies of such revised Schedules and, upon such delivery, such
Schedules shall be deemed to be the Schedules hereunder.
ARTICLE V
REMEDIES
If any Event of Default shall have occurred and be continuing:
(a) The Designated Purchaser on behalf of the Secured Parties may exercise
in respect of the Collateral, in addition to other rights and remedies provided
for herein or otherwise available to it, all the rights and remedies of a
secured party on default under the U.C.C.
(b) All cash proceeds received by the Designated Purchaser in respect of
any sale of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Designated Purchaser, be held, to the
extent permitted under applicable law, by the Designated Purchaser as additional
collateral security for all or any part of the Secured Obligations, and/or then
or at any time thereafter shall be applied (after payment of any amounts payable
to the Designated Purchaser pursuant to Section 5.2) in whole or in part by the
Designated Purchaser for the ratable benefit of the Secured Parties. Any surplus
of such cash or cash proceeds held by the Designated Purchaser and remaining
after payment in full of all the Secured Obligations, shall be paid over to
Grantor or to whomsoever may be lawfully entitled to receive such surplus.
-23-
(c) The Designated Purchaser may exercise any and all rights and remedies
of Grantor under or in connection with the Collateral, including the right to
xxx upon or otherwise collect, extend the time for payment of, modify or amend
the terms of, compromise or settle for cash, credit, or otherwise upon any
terms, grant other indulgences, extensions, renewals, compositions, or releases,
and take or omit to take any other action with respect to the Collateral, any
security therefor, any agreement relating thereto, any insurance applicable
thereto, or any Person liable directly or indirectly in connection with any of
the foregoing, without discharging or otherwise affecting the liability of
Grantor for the Secured Obligations or under this Agreement or any other
Transaction Document and the Assigned Agreements or otherwise in respect of the
Collateral, including any and all rights of Grantor to demand or otherwise
require payment of any amount under, or performance of any provision of, any
Collateral.
5.2 INDEMNITY AND EXPENSES. Grantor agrees to indemnify the Designated Purchaser
from and against any and all claims, losses and liabilities arising out of or
resulting from this Agreement and the other Transaction Documents (including
enforcement of this Agreement and other Transaction Documents), except claims,
losses or liabilities resulting from the Designated Purchaser's gross negligence
or willful misconduct as determined by a final judgment of a court of competent
jurisdiction. Grantor will upon demand pay to the Designated Purchaser the
amount of any and all reasonable expenses, including the reasonable fees and
disbursements of its counsel and of any experts and Designated Purchaser, which
the Designated Purchaser may incur in connection with the following:
(a) the administration of this Agreement;
(b) the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral;
(c) the exercise or enforcement of any of the rights of the Secured Parties
hereunder; or
(d) the failure by Grantor to perform or observe any of the provisions
hereof.
5.3 WAIVERS. Grantor hereby waives any right, to the extent permitted by
applicable law, to receive prior notice of or a judicial or other hearing with
respect to any action or prejudgment remedy or proceeding by the Designated
Purchaser to take possession, exercise control over or dispose of any item of
Collateral where such action is permitted under the terms of this Agreement or
any other Transaction Document or by applicable laws or the time, place or terms
of sale in connection with the exercise of the Designated Purchaser's rights
hereunder. Grantor waives, to the extent permitted by applicable laws, any
bonds, security or sureties required by the Designated Purchaser with respect to
any of the Collateral. Grantor also waives any damages (direct, consequential or
otherwise) occasioned by the enforcement of the Secured Parties' rights under
this Agreement or any other Transaction Document, including, the taking of
possession of any Collateral or the giving of notice to any Account Debtor or
the collection of any Receivables Collateral, all to the extent that such waiver
is permitted by laws. Grantor also consents that the Designated Purchaser, in
connection with the enforcement of the Designated Purchaser' rights and remedies
under this Agreement, may enter upon any premises owned by or leased to it
without obligations to pay rent or for use and occupancy, through self-help,
without judicial process and without having first obtained an order of any
court. These waivers and all other waivers provided for in this Agreement and
the other Transaction Documents have been negotiated by the parties and Grantor
acknowledges that it has been represented by counsel of its own choice and has
consulted such counsel with respect to its rights hereunder.
-24-
ARTICLE VI
THE DESIGNATED PURCHASER
6.1 APPOINTMENT AS ATTORNEY-IN-FACT. The Grantor hereby irrevocably constitutes
and appoints the Designated Purchaser and any officer or agent thereof, with
full power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of the Grantor and in the
name of the Grantor or in its own name, for the purpose of carrying out the
terms of this Agreement, to take, upon the occurrence and during the continuance
of any Event of Default, any and all appropriate action and to execute any and
all documents and instruments that may be necessary or desirable to accomplish
the purposes of this Agreement. Upon the occurrence and during the continuance
of an Event of Default, the Grantor hereby gives the Designated Purchaser the
power and right, on behalf of the Grantor, without notice to or assent by the
Grantor, to do any or all of the following:
(a) in the name of Grantor or its own name, or otherwise, take possession
of and indorse and collect any checks, drafts, notes, acceptances or other
instruments for the payment of moneys due under or in respect of any Collateral
and file any claim or take any other action or proceeding in any court of law or
equity or otherwise deemed appropriate by the Designated Purchaser for the
purpose of collecting any and all such moneys due under or in respect of any
Collateral whenever payable; and
(b) (i) direct any party liable for any payment under any of the Collateral
to make payment of any and all moneys due or to become due thereunder directly
to the Designated Purchaser or as the Designated Purchaser shall direct; (ii)
ask or demand for, collect, and receive payment of and give receipt for, any and
all moneys, claims and other amounts due or to become due at any time in respect
of or arising out of any Collateral; (iii) receive, collect, sign and endorse
any drafts or other instruments, documents and chattel paper in connection with
any of the Collateral; (iv) commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect the Collateral or any portion thereof and to enforce any other right in
respect of any Collateral; (v) defend any suit, action or proceeding brought
against the Grantor with respect to any Collateral; (vi) settle, compromise or
adjust any such suit, action or proceeding and, in connection therewith, give
such discharges or releases as the Designated Purchaser may deem appropriate;
and (vii) generally, sell, transfer, pledge and make any agreement with respect
to or otherwise deal with any of the Collateral as fully and completely as
though the Designated Purchaser (for the benefit of the Secured Parties) were
the absolute owner thereof for all purposes, and do, at the option of the
Secured Parties and at their expense, at any time, or from time to time, all
acts and things that the Secured Parties deem necessary to protect, preserve or
realize upon the Collateral and the Secured Parties' security interests therein
and to effect the intent of this Agreement, all as fully and effectively as
Grantor might do.
-25-
Grantor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
6.2 SECURED PARTIES MAY PERFORM. If the Grantor fails to perform any agreement
contained herein, the Designated Purchaser may perform, or cause performance of,
such agreement and the reasonable expenses of the Designated Purchaser incurred
in connection therewith shall be payable by Grantor pursuant to SECTION 6.5.
6.3 DESIGNATED PURCHASER HAS NO DUTY. (a) In addition to, the powers conferred
on the Designated Purchaser hereunder are solely to protect its interest (on
behalf of the Secured Parties) in the Collateral and shall not impose any duty
on it to exercise any such powers. Neither the Designated Purchaser nor any of
its officers, directors, employees or agents shall be liable for failure to
demand, collect or realize upon any of the Collateral or for any delay in doing
so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of Grantor or any other Person or to take any other
action whatsoever with regard to the Collateral or any part thereof (including
the taking of any necessary steps to preserve rights against prior parties or
any other rights pertaining to any Collateral). Neither the Designated Purchaser
nor any of its officers, directors, employees or agents shall be responsible to
Grantor for any act or failure to act hereunder, except for their own gross
negligence or willful misconduct.
(b) Grantor assumes all responsibility and liability arising from or
relating to the use, sale or other disposition of the Collateral. The Secured
Obligations shall not be affected by any failure of the Designated Purchaser to
take any steps to perfect the pledge and security interest granted hereunder or
to collect or realize upon the Collateral, nor shall loss or damage to the
Collateral release the Grantor from any Secured Obligations.
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 TRANSACTION DOCUMENT. (a) This Agreement is a Transaction Document executed
pursuant to the Note Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions thereof.
(b) Concurrently herewith Grantor is executing and delivering the Pledge
Agreement pursuant to which Grantor is pledging all the certificated Investment
Property of Grantor. Such pledges shall be governed by the terms of the Pledge
Agreement and not by this Agreement.
7.2 AMENDMENTS, ETC.; SUCCESSORS AND ASSIGNS.
(a) No amendment to or waiver of any provision of this Agreement nor
consent to any departure by Grantor herefrom, shall in any event be effective
unless the same shall be in writing and signed by the Designated Purchaser and,
with respect to any such amendment, by Grantor, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
-26-
(b) Upon the delivery by Grantor of supplements to the Schedules to this
Agreement pursuant to SECTION 4.12 the schedule supplements attached to each
such certificate shall be incorporated into and become a part of and supplement
SCHEDULES I through VII hereto, as appropriate, and the Designated Purchaser may
attach such schedule supplements to such Schedules, and each reference to such
Schedules shall mean and be a reference to such Schedules, as supplemented
pursuant hereto.
(c) This Agreement shall be binding upon Grantor and its successors,
transferees and assigns and shall inure to the benefit the Designated Purchaser
and the Secured Parties and their respective successors, transferees and
assigns; PROVIDED, HOWEVER, that Grantor may not assign its obligations
hereunder without the prior written consent of the Designated Purchaser.
7.3 ADDRESSES FOR NOTICES. All notices and other communications provided for
hereunder shall be in writing and mailed, delivered or transmitted by facsimile
to each party hereto at the address set forth in Section 11 of the Note
Agreement. All such notices and other communications shall be deemed to be given
or made at the times provided in Section 11 of the Note Agreement.
7.4 SECTION CAPTIONS. Section captions used in this Agreement are for
convenience of reference only, and shall not affect the construction of this
Agreement.
7.5 SEVERABILITY. If any provision of this Agreement is held to be illegal,
invalid or unenforceable, (a) the legality, validity and enforceability of the
remaining provisions of this Agreement shall not be affected or impaired thereby
and (b) the parties shall endeavor in good faith negotiations to replace the
illegal, invalid or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the illegal, invalid or
unenforceable provisions. The invalidity of a provision in a particular
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
7.6 COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which shall constitute one
and the same instrument.
7.7 GOVERNING LAW, ETC. (A) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND PERFORMED ENTIRELY WITHIN SUCH STATE, EXCEPT TO THE EXTENT THAT THE VALIDITY
OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN
RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF NEW YORK.
(B) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT MAY BE BROUGHT IN XXX XXXXXX XX XXX XXXXX XX XXX XXXX SITTING IN NEW
YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE; PROVIDED,
HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER
-27-
PROPERTY SHALL BE BROUGHT, AT THE DESIGNATED PURCHASER'S OPTION, IN THE COURTS
OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HERETO CONSENTS, FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE
COURTS. GRANTOR AND THE GRANTOR IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR OTHER DOCUMENT
RELATED THERETO. EACH PARTY HERETO WAIVES PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY
THE LAW OF SUCH STATE.
7.8 WAIVER OF JURY TRIAL. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
ARISING UNDER ANY TRANSACTION DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED
OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT
TO ANY TRANSACTION DOCUMENT OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR
TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR
A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
7.9 ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS
REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES
OR BY PRIOR OR CONTEMPORANEONS WRITTEN AGREEMENTS. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS AMONG THE PARTIES.
[Signature page follows.]
-28-
IN WITNESS WHEREOF, Grantor has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
DIOMED, INC.
/s/ XXXXX X. XXXXX, XX.
By: ___________________________
Name: Xxxxx X. Xxxxx, Xx.
Title: Chief Executive Officer
ACKNOWLEDGED AND ACCEPTED:
GIBRALT US, INC.,
as the Designated Purchaser
and the Designated Lender
/s/ XXXXXX XXXXXX
By: _________________________
Name: Xxxxxx Xxxxxx
Title: Authorized Officer
-29-
SCHEDULE I
to
Security Agreement
Item A. STATE OF ORGANIZATION, IDENTIFICATION NUMBER, CHIEF EXECUTIVE OFFICE
CHIEF EXECUTIVE OFFICE STATE OF ORGANIZATION
--------------------- --------------------
0 Xxxxxx Xxxx Xxxxxxxx
Xxxxxxx, XX 00000
Item B. LOCATION OF EQUIPMENT & INVENTORY (OWNED LOCATIONS)
MAILING ADDRESS COUNTY STATE
---------------- ---------- -------
0 Xxxxxx Xxxx Xxxxxxxxxx XX
Xxxxxxx, XX 00000
Item C. LEASED PROPERTY; BAILEES
NAME OF RELATIONSHIP
LANDLORD/BAILEE ADDRESS TO GRANTOR
----------------- --------- ------------
None
Item D. TRADE NAMES
TRADE NAME
------------
None
Item E. COMMERCIAL TORT CLAIMS
DESCRIPTION OF COMMERCIAL
TORT CLAIM
--------------------------
None
SCHEDULE II
to
Security Agreement
Item A. PATENTS
1) Solid State Laser Diode Light Source (filed: February 1991)
A method and apparatus for coupling light into small diameter
fibres thereby providing high brightness.
Granted: Australia, Brazil, Canada, UK, USA, Austria, Denmark, France, Germany,
Italy, Switzerland
Pending: Japan
Opposed: Europe
------------------------------------------ --------------------- ---------------
Country Status Number Expiry
------------------------------------------ --------------------- ---------------
Australia Granted 646660 February 2011
------------------------------------------ --------------------- ---------------
Brazil Granted PI9106032-0 February 2011
------------------------------------------ --------------------- ---------------
Canada Granted 2074834 February 2011
------------------------------------------ --------------------- ---------------
UK Granted 2256503 February 2011
------------------------------------------ --------------------- ---------------
Japan Pending 3-503921 February 2011
------------------------------------------ --------------------- ---------------
USA Granted 5258989 February 2011
------------------------------------------ --------------------- ---------------
European Patent (EP)Opposed 0515410 February 2011
------------------------------------------ --------------------- ---------------
UK (EP) Granted 0515410 February 2011
------------------------------------------ --------------------- ---------------
Austria (EP) Granted E115783 February 2011
------------------------------------------ --------------------- ---------------
Denmark (EP) Granted 0515410 February 2011
------------------------------------------ --------------------- ---------------
France (EP) Granted 0515410 February 2011
------------------------------------------ --------------------- ---------------
Germany (EP) Granted P69105952.7 February 2011
------------------------------------------ --------------------- ---------------
Italy (EP) Granted 0515410 February 2011
------------------------------------------ --------------------- ---------------
Switzerland (EP) Granted 0515410 February 2011
------------------------------------------ --------------------- ---------------
2) High Power Light Source (filed: August 1991)
Using multiple small spot sizes of high brightness light
sources (as in the prior patent) to be multiplexed onto a
common fibre
Granted: Australia, Brazil, Canada, UK, Japan, USA, Austria, Belgium, Denmark,
France, Germany, Greece, Italy, Luxembourg, Holland, Spain,
Sweden, Switzerland
Opposed: Europe
-------------------- ---------------------- --------------------- -------------
Country Status Number Expiry
-------------------- ---------------------- --------------------- -------------
Australia Granted 649707 August 2011
-------------------- ---------------------- --------------------- -------------
Brazil Granted PI9106718-9 August 2011
-------------------- ---------------------- --------------------- -------------
Canada Granted 2088497 August 2011
-------------------- ---------------------- --------------------- -------------
UK Granted 2261528 August 2011
-------------------- ---------------------- --------------------- -------------
Japan Granted 3078836 August 2011
-------------------- ---------------------- --------------------- -------------
USA Granted 5319528 August 2011
-------------------- ---------------------- --------------------- -------------
European Patent (EP) Opposed 0541658 August 2011
-------------------- ---------------------- --------------------- -------------
UK (EP) Granted 0541658 August 2011
-------------------- ---------------------- --------------------- -------------
Austria (EP) Granted E190733 August 2011
-------------------- ---------------------- --------------------- -------------
Belgium (EP) Granted 0541658 August 2011
-------------------- ---------------------- --------------------- -------------
Denmark (EP) Granted 0541658 August 2011
-------------------- ---------------------- --------------------- -------------
France (EP) Granted 0541658 August 2011
-------------------- ---------------------- --------------------- -------------
Germany (EP) Granted 0541658 August 2011
-------------------- ---------------------- --------------------- -------------
Greece (EP) Granted 0541658 August 2011
-------------------- ---------------------- --------------------- -------------
Italy (EP) Granted 0541658 August 2011
-------------------- ---------------------- --------------------- -------------
Luxembourg (EP) Granted 0541658 August 2011
-------------------- ---------------------- --------------------- -------------
Netherlands (EP) Granted 0541658 August 2011
-------------------- ---------------------- --------------------- -------------
Spain (EP) Granted 0541658 August 2011
-------------------- ---------------------- --------------------- -------------
Sweden (EP) Granted 0541658 August 2011
-------------------- ---------------------- --------------------- -------------
Switzerland (EP) Granted 0541658 August 2011
-------------------- ---------------------- --------------------- -------------
USA (continuation) Granted 5463534 October 2012
-------------------- ---------------------- --------------------- -------------
3) Laser Diode Drive Circuit (filed: September 1993)
A low-noise switch-mode power supply for driving laser diodes
with high linearity even at low drive currents
Granted: Australia, USA, UK, France, Germany, Ireland, Italy,
Switzerland
Pending: Canada, Japan
---------------------- ---------------------- -------------- ----------------
Country Status Number Expiry
---------------------- ---------------------- -------------- ----------------
Australia Granted 674882 September 2013
---------------------- ---------------------- -------------- ----------------
Canada Pending 2146555 September 2013
---------------------- ---------------------- -------------- ----------------
Japan Pending 6-508806 September 2013
---------------------- ---------------------- -------------- ----------------
USA Granted 5734668 March 2015
---------------------- ---------------------- -------------- ----------------
European Patent (EP) Granted 0664058 September 2013
---------------------- ---------------------- -------------- ----------------
UK (EP) Granted 0664058 September 2013
---------------------- ---------------------- -------------- ----------------
France (EP) Granted 0664058 September 2013
---------------------- ---------------------- -------------- ----------------
Germany (EP) Granted 69315851.4 September 2013
---------------------- ---------------------- -------------- ----------------
Ireland (EP) Granted 0664058 September 2013
---------------------- ---------------------- -------------- ----------------
Italy (EP) Granted 0664058 September 2013
---------------------- ---------------------- -------------- ----------------
Switzerland (EP) Granted 0664058 September 2013
---------------------- ---------------------- -------------- ----------------
4) Xxxxxxx Cooled Apparatus and Methods for Dermatological Treatment
(Filed: January 1998)
A means of cooling the treatment area of a patient's skin when
illuminated with high power lasers
Granted: USA
Pending: Canada, Japan, Europe
------------------------ ------------ --------------------- -----------------
Country Status Number Expiry
------------------------ ------------ --------------------- -----------------
USA Granted 5830208 January 2017
------------------------ ------------ --------------------- -----------------
Japan Pending 10-532905 January 2018
------------------------ ------------ --------------------- -----------------
European Patent (EP) Pending 98902500.2 January 2018
------------------------ ------------ --------------------- -----------------
5) Medical Spacing Guide (filed: January 1998)
A means of accurately positioning a delivery optical fibre a
known distance from a treatment site whilst protecting the
optics from debris
Granted: USA
-------------- ---------------------- --------------------- -------------
Country Status Number Expiry
-------------- ---------------------- --------------------- -------------
USA Granted 5885275 January 2018
-------------- ---------------------- --------------------- -------------
6) Medical Laser Device (EVLT) (filed: June 2001)
A means of accurately locating optical fibres within the body
for delivering energy to tissue
Filed: UK (global filings will be made following the defined
timescales)
--------- ---------------------- --------------------- ----------------------
Country Status Number Expiry
--------- ---------------------- --------------------- ----------------------
UK Pending 0114687.7 June 2021
--------- ---------------------- --------------------- ----------------------
USA Pending 60/369256 April 2022
--------- ---------------------- --------------------- ----------------------
Item B. PATENT LICENSES:
Fiber Optic Diffusers (filed: March 1990)
Assignee / Licensee: Health Research Inc. (HRI), Buffalo, NY
A means of improving fibre optic diffusers for use in PDT
applications, and methods to manufacture such devices
Filed: USA, Canada
---------- ---------------------- --------------------- ----------------------
Country Status Number Expiry
---------- ---------------------- --------------------- ----------------------
USA Granted 5074632 March 2010
---------- ---------------------- --------------------- ----------------------
Canada Granted 2028757 March 2010
---------- ---------------------- --------------------- ----------------------
SCHEDULE III
to
Security Agreement
Item A. TRADEMARKS:
DIOMED HAS THE FOLLOWING TRADEMARK REGISTRATIONS:
Diomed: Australia, Benelux, Brazil, Canada, France, Italy,
Japan, Korea (South), South Africa, Spain,
Switzerland, UK, USA
Diomed & Device: UK
Dioscan: UK
Diomed Litescan UK
EVLT: UK (USA application pending)
Optiguide: Benelux, Canada, France, Italy, USA
SummerLegs: UK (USA application pending)
SummerLegs logo: UK (USA application pending)
DIOMED USES THE FOLLOWING LOGOS:
-------------------------------
Diomed logo with and without "Diomed"
SummerLegs logo with and without "SummerLegs"
Fibersdirect logo with and without "xxxxxxxxxxxx.xxx"
DIOMED USES THE FOLLOWING SLOGANS:
---------------------------------
"Diomed - Making Light Work"
"SummerLegs - A welcome ray of sunshine for varicose vein sufferers"
DIOMED HAS REGISTERED THE FOLLOWING DOMAIN NAMES:
--------------------------------------------------------------
xxxxxx-xxxxxx.xxx
xxxxxxxxxxxx.xxx
xxxxxxxxxx.xxx
xxxxxxxxxx.xxx
xxxxxxxxxxxxx.xxx
xxxxxxxxxxxxx.xxx
xxxxxxxxxxxx.xxx
xxxxxxxxxxxx.xxx
xxxxxxxxxx.xxx xxxx.xxx
xxxxxxxxxx.xxx xxxxxxxxxx.xxx
xxxxxxxx.xxx xxxxxxxxx.xxx
xxxxxxxx.xxx
TRADEMARK APPLICATIONS IN PREPARATION: NONE
Item B. TRADEMARK LICENSES: NONE
SCHEDULE IV
to
Security Agreement
Item A. COPYRIGHTS
REGISTERED COPYRIGHTS: NONE
COPYRIGHTS PENDING REGISTRATION APPLICATIONS: NONE
COPYRIGHT REGISTRATION APPLICATIONS IN PREPARATION: NONE
Item B. COPYRIGHT LICENSES: NONE
SCHEDULE V
to
Security Agreement
TRADE SECRET OR KNOW-HOW LICENSES: NONE
SCHEDULE VI
to
Security Agreement
ASSIGNED AGREEMENTS
Laser Development and Supply Agreement dated February 16, 2000 between Diomed,
Inc. and QLT Phototherapeutics Inc.
Laser Development and Supply Agreement dated August 1, 2000 between Diomed, Inc.
and Axcan Pharma (Ireland) Limited
Laser Development and Supply Agreement dated September 4, 2002 between Diomed,
Inc. and LDI, Inc.
SCHEDULE VII
to
Security Agreement
DEPOSIT ACCOUNTS
BANK ACCOUNT TYPE
---- ------------
BOSTON PRIVATE BANK OPERATING CHECKING ACCOUNT
00 XXXX XXXXXX XXXXXX
XXXXXX, XX 00000
BOSTON PRIVATE BANK MONEY MARKET ACCOUNT
00 XXXX XXXXXX XXXXXX
XXXXXX, XX 00000
SECURITIES ACCOUNTS: NONE
EXHIBIT E TO EXCHANGE AGREEMENT
AMENDED AND RESTATED PLEDGE AGREEMENT
This AMENDED AND RESTATED PLEDGE AGREEMENT, dated as of April 22, 2003
(as amended, restated, amended and restated, supplemented or otherwise modified
from time to time, this "AGREEMENT"), is made by DIOMED, INC., a Delaware
corporation (the "PLEDGOR"), in favor of GIBRALT US, INC., a Colorado
corporation (the "DESIGNATED NOTE PURCHASER" and the "DESIGNATED LENDER") for
the benefit of the Secured Parties (such capitalized term and the other
capitalized terms not otherwise defined herein have the meanings provided for in
ARTICLE I of this Agreement), and amends and restates in its entirety the Pledge
Agreement dated as of December 27, 2002 by Pledgor in favor of the Designated
Note Purchaser and the Designated Lender.
W I T N E S S E T H:
WHEREAS, pursuant to (i) an Exchange Agreement dated as of the date
hereof (as amended, restated, supplemented or otherwise modified from time to
time, the "EXCHANGE AGREEMENT"), among the Pledgor, Diomed Holdings, Inc., a
Delaware corporation ("HOLDINGS"), the Note Purchasers (as defined therein) and
the Designated Note Purchaser, (ii) a Secured Loan Agreement dated as of the
date hereof (as amended, restated, supplemented or otherwise modified from time
to time, the "SECURED LOAN AGREEMENT") among the Pledgor, Holdings, the Lenders
(as defined therein) and the Designated Lender and (iii) the other Documents
referred to therein, the Pledgor and the Secured Parties have agreed to enter
into this Agreement; and
WHEREAS, as a condition precedent to the consummation of the Exchange
Transaction by the Note Purchasers under the Exchange Agreement and the making
of the Loans by the Lenders under the Secured Loan Agreement, the Pledgor is
required to execute and deliver this Agreement; and
WHEREAS, the Pledgor will derive substantial benefits from the
transactions contemplated by the Exchange Agreement and the Secured Loan
Agreement, and has duly authorized the execution, delivery and performance of
this Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in order to induce the Secured
Parties to consummate the Exchange Transaction pursuant to the Exchange
Agreement and make the Loans pursuant to the Secured Loan Agreement, the Pledgor
agrees, for the benefit of each Secured Party, as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. The following terms (whether or not underscored) when used in
this Agreement, including its preamble and recitals, shall have the following
meanings (such definitions to be equally applicable to the singular and plural
forms thereof):
"AGREEMENT" is defined in the PREAMBLE.
"COLLATERAL" is defined in SECTION 2.1.
"DESIGNATED LENDER" is defined in the PREAMBLE.
"DESIGNATED NOTE PURCHASER" is defined in the PREAMBLE.
"DESIGNATED NOTE PURCHASER AND THE DESIGNATED LENDER" shall
mean (i) so long as the Designated Note Purchaser and the Designated Lender are
Gibralt US, Inc., the Designated Note Purchaser or the Designated Lender, and
(ii) if Gibralt US, Inc. is not both the Designated Note Purchaser and the
Designated Lender, then the party determined by the Designated Note Purchaser
and the Designated Lender to so act.
"DISTRIBUTIONS" means all Equity Interest dividends, other
dividends, including liquidating dividends, Equity Interests resulting from (or
in connection with the exercise of) splits, reclassifications, warrants,
options, non-cash dividends and all other distributions (whether similar or
dissimilar to the foregoing) on or with respect to any Pledged Equity Interests
or other Equity Interests constituting Collateral, but shall not include
Dividends.
"DIVIDENDS" means cash dividends and cash distributions with
respect to any Pledged Equity Interests made in the ordinary course of business
and not as a liquidating dividend.
"EQUITY INTERESTS" means, with respect to any Person, all
shares, interests, participations or other equivalents (however, designated,
whether voting or non-voting) of such Person's capital, whether now outstanding
or issued after the Closing Date.
"EXCHANGE AGREEMENT" is defined in the FIRST RECITAL.
"HOLDINGS" is defined in the FIRST RECITAL.
"PERSON" is defined in the Exchange Agreement.
"PLEDGED EQUITY INTERESTS" means all Pledged Shares.
"PLEDGED SHARES" is defined in CLAUSE (B) of SECTION 2.1.
"PLEDGOR" is defined in the PREAMBLE.
"PROCEEDS" is defined in the Security Agreement.
"SECURED LOAN AGREEMENT" is defined in the FIRST RECITAL.
"SECURED OBLIGATIONS" is defined in the Security Agreement.
"SECURED PARTY" is defined in the Exchange Agreement.
"SECURITIES ACT" is defined in SECTION 6.2.
"SECURITIES ISSUER" means Diomed PDT, Inc., a Delaware
corporation and a wholly-owned subsidiary of the Pledgor.
"SECURITY AGREEMENT" is defined in the Exchange Agreement.
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"TERMINATION DATE" is defined in the Security Agreement.
"U.C.C." is defined in the Security Agreement.
1.2 EXCHANGE AGREEMENT DEFINITIONS. Unless otherwise defined herein or the
context otherwise requires, terms used in this Agreement, including its preamble
and recitals, have the meanings provided in the Exchange Agreement.
1.3 U.C.C. DEFINITIONS. Unless otherwise defined herein or the context otherwise
requires, terms for which meanings are provided in the U.C.C. are used in this
Agreement, including its preamble and recitals, with such meanings.
1.4 OTHER INTERPRETIVE PROVISIONS. The rules of construction in Sections 9(d) of
the Exchange Agreement shall be equally applicable to this Agreement.
ARTICLE II
PLEDGE
2.1 GRANT OF SECURITY INTEREST. The Pledgor hereby pledges, assigns, charges,
mortgages, delivers, and transfers to the Designated Note Purchaser and the
Designated Lender, and hereby grants to the Designated Note Purchaser and the
Designated Lender and each of the Secured Parties, a continuing security
interest in all of its right, title and interest in and to the following
property of the Pledgor, whether now or hereafter existing or acquired
(collectively, the "COLLATERAL"):
(a) all issued and outstanding shares of capital stock of the Securities Issuer
as identified in SCHEDULE I hereto (as such Schedule may be supplemented from
time to time pursuant to SECTION 4.1(B)) opposite the name of the Pledgor and
all additional shares of capital stock of any the Securities Issuer from time to
time acquired by the Pledgor in any manner, and the certificates representing
such shares of capital stock (such shares of capital stock being referred to
herein as the "PLEDGED SHARES");
(b) all Dividends, Distributions, other payments and rights with respect to the
items listed in CLAUSE (A) above; and
(c) all Proceeds of any and all of the foregoing Collateral.
2.2 SECURITY FOR SECURED OBLIGATIONS. The Collateral of the Pledgor under this
Agreement secures the prompt payment in full of all Secured Obligations under
the Documents.
2.3 DELIVERY OF COLLATERAL. All certificates representing or evidencing any
Collateral, including all Pledged Equity Interests, shall be delivered to the
Designated Note Purchaser to be held by the Designated Note Purchaser on behalf
of the Secured Parties pursuant hereto and as provided in the Exchange Agreement
and the Secured Loan Agreement, shall be in suitable form for transfer by
delivery, and shall be accompanied by all necessary instruments of transfer or
assignment, duly executed in blank. The Designated Note Purchaser and the
Designated Lender acknowledge that such certificate and instrument has
previously been delivered to Gibralt US, Inc.
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2.4 DIVIDENDS ON PLEDGED EQUITY INTERESTS. In the event that any Dividend is to
be paid on any Pledged Equity Interest at a time when no Event of Default has
occurred and is continuing, such Dividend may be paid directly to the Pledgor.
If any such Event of Default has occurred and is continuing, then any such
Dividend or payment shall be paid directly to the Designated Note Purchaser and
the Designated Lender to be held as a part of the Collateral.
2.5 CONTINUING SECURITY INTEREST; TRANSFER OF NOTES. This Agreement shall create
a continuing security interest in the Collateral and shall remain in full force
and effect until the Termination Date, be binding upon the Pledgor and its
successors, transferees and assigns, and inure, together with the rights and
remedies of the Designated Note Purchaser and the Designated Lender hereunder,
to the benefit of the Designated Note Purchaser and the Designated Lender and
each Secured Party. Without limiting the generality of the foregoing, each
Secured Party may assign or otherwise transfer (in whole or in part) any Note
held by it to any other Person, and such other Person shall thereupon become
vested with all the rights and benefits in respect thereof granted to such
Secured Party under any Document (including this Agreement) or otherwise,
subject, however, to any contrary provisions in such assignment or transfer.
2.6 SECURITY INTEREST ABSOLUTE. All rights of the Designated Note Purchaser and
the Designated Lender and the security interests granted to the Secured Parties
hereunder, and all obligations of the Pledgor hereunder, shall be, absolute and
unconditional, irrespective of any of the following conditions, occurrences or
events:
(a) any lack of validity or enforceability of any Document;
(b) the failure of the Designated Note Purchaser and the Designated Lender or
any Secured Party to assert any claim or demand or to enforce any right or
remedy against Holdings, the Pledgor or any other Person under the provisions of
any Document, or otherwise or to exercise any right or remedy against any other
guarantor of, or collateral securing, any Secured Obligation;
(c) any change in the time, manner or place of payment of, or in any other term
of, all or any of the Secured Obligations or any other extension, compromise or
renewal of any Secured Obligation, including any increase in the Secured
Obligations resulting from the extension of additional credit to Holdings, the
Pledgor or otherwise;
(d) any reduction, limitation, impairment or termination of any Secured
Obligation for any reason, including any claim of waiver, release, surrender,
alteration or compromise, and shall not be subject to (and the Pledgor hereby
waives any right to or claim of) any defense or setoff, counterclaim, recoupment
or termination whatsoever by reason of the invalidity, illegality,
nongenuineness, irregularity, compromise, unenforceability of, or any other
event or occurrence affecting, any Secured Obligation or otherwise;
(e) any amendment to, rescission, waiver, or other modification of, or any
consent to departure from, any of the terms of any Document;
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(f) any addition, exchange, release, surrender or non-perfection of any
collateral (including the Collateral), or any amendment to or waiver or release
of or addition to or consent to departure from any guaranty, for any of the
Secured Obligations; or
(g) any other circumstances which might otherwise constitute a defense available
to, or a legal or equitable discharge of, Holdings, the Pledgor or otherwise.
2.7 SUBROGATION. Until the Termination Date, the Pledgor shall not exercise any
claim or other rights which it may now or hereafter acquire against Holdings
that arises from the existence, payment, performance or enforcement of the
Pledgor's obligations under this Agreement, including any right of subrogation,
reimbursement, exoneration or indemnification, any right to participate in any
claim or remedy against Holdings or any collateral which the Designated Note
Purchaser and the Designated Lender or any Secured Party now has or hereafter
acquires, whether or not such claim, remedy or right arises in equity or under
contract, statute or common law, including the right to take or receive from
Holdings, directly or indirectly, in cash or other property or by set-off or in
any manner, payment or security on account of such claim or other rights. If any
amount shall be paid to the Pledgor in violation of the preceding sentence, such
amount shall be deemed to have been paid for the benefit of the Secured Parties,
and shall forthwith be paid to the Designated Note Purchaser and the Designated
Lender to be held as additional Collateral. The Pledgor acknowledges that it
will receive direct and indirect benefits for the financing arrangements
contemplated by the Documents and that the agreement set forth in this Section
is knowingly made in contemplation of such benefits.
2.8 RELEASE; TERMINATION.
(a) Upon any sale, transfer or other disposition of any item of Collateral of
the Pledgor, the Designated Note Purchaser and the Designated Lender will, at
the Pledgor's expense and without any representations, warranties or recourse of
any kind whatsoever, execute and deliver to the Pledgor such documents as the
Pledgor shall reasonably request to evidence the release of such item of
Collateral from the pledge, assignment and security interest granted hereby;
PROVIDED, HOWEVER, that (i) at the time of such request and such release no
Event of Default shall have occurred and be continuing, (ii) the Pledgor shall
have delivered to the each Secured Party, at least ten Business Days prior to
the date of the proposed release, a written request for release describing the
item of Collateral and the terms of the sale, lease, transfer or other
disposition in reasonable detail, including, without limitation, the price
thereof and any expenses in connection therewith, together with a form of
release for execution by the Designated Note Purchaser and the Designated Lender
(which release shall be in from and substance satisfactory to the Designated
Note Purchaser and the Designated Lender) and a certificate of the Pledgor to
the effect that the transaction is in compliance with the Documents and as to
such other matters as the Designated Note Purchaser and the Designated Lender
may reasonably request and (iii) the proceeds of any such sale, lease, transfer
or other disposition shall be used to redeem the Notes in accordance with the
terms and conditions of the Notes. Notwithstanding the foregoing, the Pledgor
agrees that this Agreement shall continue to be effective or be reinstated, as
the case may be, if at any time any payment (in whole or in part) of any of the
Secured Obligations is rescinded or must otherwise be restored by any Secured
Party upon the insolvency, bankruptcy or reorganization of the Pledgor, Holdings
or otherwise, all as though such payment had not been made.(b) Upon the
Termination Date, the pledge, assignment and security interest granted hereby
shall terminate and all rights to the Collateral shall revert to the Pledgor.
Upon any such termination, the Designated Note Purchaser and the Designated
Lender will, at the Pledgor's expense and without any representations,
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warranties or recourse of any kind whatsoever, execute and deliver to the
Pledgor such documents as the Pledgor shall reasonably request to evidence such
termination and deliver to the Pledgor all certificates and instruments
representing or evidencing the Collateral then held by the Designated Note
Purchaser and the Designated Lender.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Pledgor represents and warrants unto the Designated Note Purchaser
and the Designated Lender and each Secured Party, as at the date of each pledge
and delivery hereunder (including each pledge and delivery of a Pledged Equity
Interest) by the Pledgor to the Designated Note Purchaser and the Designated
Lender of any Collateral, as set forth in this Article.
3.1 OWNERSHIP; NO LIENS, ETC. The Pledgor is the legal and beneficial owner of,
and has good and marketable title to (and has full right and authority to pledge
and assign) such Collateral, free and clear of all Liens, except for this
security interest granted pursuant hereto in favor of the Secured Parties.
3.2 VALID SECURITY INTEREST. The delivery of such Collateral to the Designated
Note Purchaser and the Designated Lender, to hold for the benefit of the Secured
Parties, is effective to create a valid, perfected, first priority security
interest in such Collateral and all Proceeds thereof, subject to no other Liens,
securing the payment of the Secured Obligations. No filing or other action will
be necessary to perfect or protect such security interest.
3.3 AS TO PLEDGED SHARES. All of such Pledged Shares are duly authorized and
validly issued, fully paid, and non-assessable, and constitute all of the issued
and outstanding voting capital stock and all of the non-voting shares of capital
stock of the Securities Issuer thereof. The Pledgor has no Subsidiaries other
than the Securities Issuer.
3.4 AUTHORIZATION, APPROVAL, ETC. No authorization, approval, or other action
by, and no notice to or filing with, any Governmental Authority or any other
Person is required either:
(a) for the pledge by the Pledgor of any Collateral pursuant to this Agreement
or for the execution, delivery, and performance of this Agreement by the
Pledgor; or
(b) for the exercise by any Secured Party of the voting or other rights provided
for in this Agreement or the remedies in respect of the Collateral pursuant to
this Agreement, except, with respect to the Pledged Equity Interests, as may be
required in connection with a disposition of such Pledged Equity Interests by
laws affecting the offering and sale of securities generally.
3.5 DUE EXECUTION, VALIDITY, ETC. The Pledgor has full power and authority, and
holds all requisite governmental licenses, permits and other approvals, to enter
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into and perform its obligations under this Agreement. The execution, delivery
and performance by the Pledgor of this Agreement does not contravene or result
in a default under the Pledgor's articles of incorporation or by-laws or
contravene or result in a default under any material contractual restriction,
Lien or applicable law binding on the Pledgor. This Agreement has been duly
authorized by the Pledgor, has been duly executed and delivered on behalf of the
Pledgor and constitutes the legal, valid and binding obligation of the Pledgor
enforceable in accordance with its terms, subject to the effect of any
applicable bankruptcy, insolvency or similar applicable law affecting creditor's
right generally, and subject to the effect of general principles of equity
(regardless of whether considered in a proceeding in equity or at law).
3.6 OTHER DOCUMENTS. Each representation and warranty of the Pledgor contained
in each Document to which it is a party is true and correct in all material
respects as of such date (unless such representation and warranty is stated to
relate solely to an earlier date, in which case such representation and warranty
is true and correct in all material respects as of such earlier date).
ARTICLE IV
COVENANTS
The Pledgor covenants and agrees that, until the Termination Date, the
Pledgor will, unless the Designated Note Purchaser and the Designated Lender
shall otherwise agree in writing, perform the obligations set forth in this
Section.
4.1 PROTECT COLLATERAL; FURTHER ASSURANCES, ETC. (a) (a) The Pledgor will not
create or suffer to exist any Lien on the Collateral (except a Lien in favor of
the Secured Parties). The Pledgor will warrant and defend the right and title
herein granted unto the Secured Parties in and to the Collateral (and all right,
title, and interest represented by the Collateral) against the claims and
demands of all Persons whomsoever.
(b) The Pledgor agrees that at any time, and from time to time, at the expense
of the Pledgor, the Pledgor will promptly execute and deliver all further
instruments, and take all further action, that may be necessary, or that the
Designated Note Purchaser and the Designated Lender may reasonably request, in
order to perfect and protect any security interest granted or purported to be
granted hereby or to enable the Designated Note Purchaser and the Designated
Lender to exercise and enforce its rights and remedies hereunder with respect to
any Collateral.
(c) The Pledgor will not permit the Securities Issuer to issue any Equity
Interest unless the same is immediately delivered in pledge to the Designated
Note Purchaser and the Designated Lender hereunder.
4.2 POWERS, CONTROL, ETC. (a) The Pledgor agrees that all Pledged Equity
Interests delivered by the Pledgor pursuant to this Agreement will be
accompanied by duly executed undated blank powers, or other equivalent
instruments of transfer acceptable to the Designated Note Purchaser and the
Designated Lender.
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(a) (b) The Pledgor will, from time to time upon the request of the Designated
Note Purchaser and the Designated Lender, promptly deliver to the Designated
Note Purchaser and the Designated Lender such powers, instruments, and similar
documents, satisfactory in form and substance to the Designated Note Purchaser
and the Designated Lender, with respect to the Collateral as the Designated Note
Purchaser and the Designated Lender may reasonably request and will, from time
to time upon the request of the Designated Note Purchaser and the Designated
Lender after the occurrence of any Event of Default, promptly transfer any
Pledged Equity Interests into the name of any nominee designated by the
Designated Note Purchaser and the Designated Lender.
4.3 CONTINUOUS PLEDGE. Subject to SECTION 2.4, the Pledgor will, at all times,
keep pledged to the Designated Note Purchaser and the Designated Lender pursuant
hereto all Pledged Equity Interests and all other Equity Interests constituting
Collateral, all Dividends and Distributions with respect thereto, and all other
Collateral and other securities, instruments, proceeds, and rights from time to
time received by or distributable to the Pledgor in respect of any Collateral.
4.4 VOTING RIGHTS; DIVIDENDS, ETC. The Pledgor agrees:
(a) after any Event of Default shall have occurred and be continuing, promptly
upon receipt thereof by the Pledgor and without any request therefor by the
Designated Note Purchaser and the Designated Lender, to deliver (properly
endorsed where required hereby or requested by the Designated Note Purchaser and
the Designated Lender) to the Designated Note Purchaser and the Designated
Lender all Dividends, Distributions, other cash payments, and proceeds of the
Collateral, all of which shall be held by the Designated Note Purchaser and the
Designated Lender as additional Collateral for use in accordance with SECTION
6.4; and
(b) after any Event of Default shall have occurred and be continuing and the
Designated Note Purchaser and the Designated Lender has notified the Pledgor of
the Designated Note Purchaser and the Designated Lender's intention to exercise
its voting power under this clause:
(i) the Designated Note Purchaser and the Designated Lender may exercise (to the
exclusion of the Pledgor) the voting power and all other incidental rights of
ownership with respect to any Pledged Equity Interests and the Pledgor hereby
grants the Designated Note Purchaser and the Designated Lender an irrevocable
proxy, exercisable under such circumstances, to vote the Pledged Equity
Interests; and
(ii) the Pledgor shall promptly deliver to the Designated Note Purchaser and the
Designated Lender such additional proxies and other documents as may be
necessary to allow the Designated Note Purchaser and the Designated Lender to
exercise such voting power.
(c) All Dividends, Distributions, cash payments, and proceeds which may at any
time and from time to time be held by the Pledgor but which the Pledgor is then
obligated to deliver to the Designated Note Purchaser and the Designated Lender,
shall, until delivery to the Designated Note Purchaser and the Designated
Lender, be held by the Pledgor separate and apart from its other property in
trust for the Secured Parties. Until an Event of Default shall have occurred and
be continuing and the Designated Note Purchaser and the Designated Lender shall
have given the notice referred to in CLAUSE (B) above, the Pledgor shall have
the exclusive voting power with respect to any Equity Interests constituting
Collateral and the Designated Note Purchaser and the Designated Lender shall,
upon the written request of the Pledgor, promptly deliver such proxies and other
documents, if any, as shall be reasonably requested by the Pledgor which are
necessary to allow the Pledgor to exercise voting power with respect to any such
Equity Interests constituting Collateral; PROVIDED, HOWEVER, that no vote shall
be cast, or consent, waiver, or ratification given, or action taken or any
action not taken by the Pledgor that would materially impair any Collateral.
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ARTICLE V
THE DESIGNATED NOTE PURCHASER AND THE DESIGNATED LENDER
5.1 APPOINTMENT AS ATTORNEY-IN-FACT. The Pledgor hereby irrevocably constitutes
and appoints the Designated Note Purchaser and the Designated Lender and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of the Pledgor and in the name of the Pledgor or in its own name, for
the purpose of carrying out the terms of this Agreement, to take, upon the
occurrence and during the continuance of any Event of Default, any and all
appropriate action and to execute any and all documents and instruments that may
be necessary or desirable to accomplish the purposes of this Agreement. Upon the
occurrence and during the continuance of an Event of Default, the Pledgor hereby
gives the Designated Note Purchaser and the Designated Lender the power and
right, on behalf of the Pledgor, without notice to or assent by the Pledgor, to
do any or all of the following:
(a) in the name of the Pledgor or its own name, or otherwise, take possession of
and indorse and collect any checks, drafts, notes, acceptances or other
instruments for the payment of moneys due under or in respect of any Collateral
and file any claim or take any other action or proceeding in any court of law or
equity or otherwise deemed appropriate by the Secured Parties for the purpose of
collecting any and all such moneys due under or in respect of any Collateral
whenever payable; and
(b) (i) direct any party liable for any payment under any of the Collateral to
make payment of any and all moneys due or to become due thereunder directly to
the Designated Note Purchaser and the Designated Lender or as the Designated
Note Purchaser and the Designated Lender shall direct; (ii) ask or demand for,
collect, and receive payment of and give receipt for, any and all moneys, claims
and other amounts due or to become due at any time in respect of or arising out
of any Collateral; (iii) receive, collect, sign and endorse any drafts or other
instruments, documents and chattel paper in connection with any of the
Collateral; (iv) commence and prosecute any suits, actions or proceedings at law
or in equity in any court of competent jurisdiction to collect the Collateral or
any portion thereof and to enforce any other right in respect of any Collateral;
(v) defend any suit, action or proceeding brought against the Pledgor with
respect to any Collateral; (vi) settle, compromise or adjust any such suit,
action or proceeding and, in connection therewith, give such discharges or
releases as the Designated Note Purchaser and the Designated Lender (at the
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direction of the Secured Parties) may deem appropriate; and (vii) generally,
sell, transfer, pledge and make any agreement with respect to or otherwise deal
with any of the Collateral as fully and completely as though the Designated Note
Purchaser and the Designated Lender (for the benefit of the Secured Parties)
were the absolute owner thereof for all purposes, and do, at the option of the
Designated Note Purchaser and the Designated Lender and at the Pledgors'
expense, at any time, or from time to time, all acts and things that the
Designated Note Purchaser and the Designated Lender deems necessary to protect,
preserve or realize upon the Collateral and the Secured Parties' security
interests therein and to effect the intent of this Agreement, all as fully and
effectively as the Pledgor might do.
The Pledgor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
5.2 SECURED PARTIES MAY PERFORM. If the Pledgor fails to perform any agreement
contained herein, the Designated Note Purchaser and the Designated Lender may
perform, or cause performance of, such agreement and the reasonable expenses of
the Designated Note Purchaser and the Designated Lender incurred in connection
therewith shall be payable by the Pledgor pursuant to SECTION 6.5.
5.3 DESIGNATED NOTE PURCHASER AND THE DESIGNATED LENDER HAVE NO DUTY. (a) In
addition to, and not in limitation of, SECTION 2.7, the powers conferred on the
Designated Note Purchaser and the Designated Lender hereunder are solely to
protect its interest (on behalf of the Secured Parties) in the Collateral and
shall not impose any duty on it to exercise any such powers. Neither the
Designated Note Purchaser and the Designated Lender nor any of its officers,
directors, employees or agents shall be liable for failure to demand, collect or
realize upon any of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of the Pledgor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof (including the
taking of any necessary steps to preserve rights against prior parties or any
other rights pertaining to any Collateral). Neither the Designated Note
Purchaser and the Designated Lender nor any of its officers, directors,
employees or agents shall be responsible to the Pledgor for any act or failure
to act hereunder, except for their own gross negligence or willful
misconduct.(b) The Pledgor assumes all responsibility and liability arising from
or relating to the use, sale or other disposition of the Collateral. The Secured
Obligations shall not be affected by any failure of the Designated Note
Purchaser and the Designated Lender to take any steps to perfect the pledge and
security interest granted hereunder or to collect or realize upon the
Collateral, nor shall loss or damage to the Collateral release the Pledgor from
any Secured Obligations.
ARTICLE VI
REMEDIES
6.1 CERTAIN REMEDIES. If any Event of Default shall have occurred and be
continuing:
(a) The Designated Note Purchaser and the Designated Lender may exercise in
respect of the Collateral, in addition to other rights and remedies provided for
herein or otherwise available to them, all the rights and remedies of a secured
party on default under the U.C.C.
(b) The Designated Note Purchaser and the Designated Lender may:
(i) transfer all or any part of the Collateral into the name of the
Designated Note Purchaser and the Designated Lender (on behalf of the
Secured Parties) or its nominee, with or without disclosing that such
Collateral is subject to the lien and security interest hereunder;
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(ii) notify the parties obligated on any of the Collateral to make
payment to the Designated Note Purchaser and the Designated Lender of any
amount due or to become due thereunder;
(iii) enforce collection of any of the Collateral by suit or
otherwise, and surrender, release or exchange all or any part thereof, or
compromise or extend or renew for any period (whether or not longer than
the original period) any obligations of any nature of any party with
respect thereto;
(iv) endorse any checks, drafts, or other writings in the Pledgor's
name to allow collection of the Collateral;
(v) take control of any proceeds of the Collateral; and
(vi) execute (in the name, place and stead of the Pledgor)
endorsements, assignments, stock powers and other instruments of conveyance
or transfer with respect to all or any of the Collateral.
6.2 APPLICABLE LAWS. If the Designated Note Purchaser and the Designated Lender
shall determine to exercise their right to sell all or any of the Collateral
pursuant to SECTION 6.1, the Pledgor agrees that, upon request of the Designated
Note Purchaser and the Designated Lender, the Pledgor will, at its own expense
do or cause to be done all such acts and things as may be reasonably requested
by the Designated Note Purchaser and the Designated Lender necessary to make
such sale of the Collateral or any part thereof valid and binding and in
compliance with applicable law.
6.3 COMPLIANCE WITH RESTRICTIONS. The Pledgor agrees that in any sale of any of
the Collateral whenever an Event of Default shall have occurred and be
continuing, the Designated Note Purchaser and the Designated Lender is hereby
authorized to comply with any limitation or restriction in connection with such
sale as it may be advised by counsel is necessary in order to avoid any
violation of applicable law (including compliance with such procedures as may
restrict the number of prospective bidders and purchasers, require that such
prospective bidders and purchasers have certain qualifications, and restrict
such prospective bidders and purchasers to persons who will represent and agree
that they are purchasing for their own account for investment and not with a
view to the distribution or resale of such Collateral), or in order to obtain
any required approval of the sale or of the purchaser by any governmental
authority or official, and the Pledgor further agrees that such compliance shall
not result in such sale being considered or deemed not to have been made in a
commercially reasonable manner, nor shall the Designated Note Purchaser and the
Designated Lender be liable nor accountable to the Pledgor for any discount
allowed by reason of the fact that such Collateral is sold in compliance with
any such limitation or restriction.
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6.4 APPLICATION OF PROCEEDS. All cash proceeds received by the Designated Note
Purchaser and the Designated Lender in respect of any sale of, collection from,
or other realization upon, all or any part of the Collateral shall be applied
(after payment of any amounts payable to the Designated Note Purchaser and the
Designated Lender pursuant to Section 6.5 below) in whole or in part by the
Designated Note Purchaser and the Designated Lender for the ratable benefit of
the Secured Parties against all or any part of the Secured Obligations. Any
surplus of such cash or cash proceeds held by the Designated Note Purchaser and
the Designated Lender and remaining after payment in full in cash of all the
Secured Obligations and the termination of this Agreement as provided in SECTION
2.8(B) hereof, shall be paid over to the Pledgor or to whomsoever may be
lawfully entitled to receive such surplus.
6.5 INDEMNITY AND EXPENSES. The Pledgor agrees to indemnify and hold harmless
the Designated Note Purchaser and the Designated Lender and the Designated Note
Purchaser and the Designated Lender from and against any and all claims, losses,
and liabilities arising out of or resulting from this Agreement and the other
Documents (including enforcement of this Agreement and the other Documents),
except claims, losses, or liabilities resulting from the Designated Note
Purchaser and the Designated Lender's gross negligence or willful misconduct as
determined by a final judgment of a court of competent jurisdiction. The Pledgor
will, upon demand, pay to the Designated Note Purchaser and the Designated
Lender the amount of any and all reasonable expenses, including the reasonable
fees and disbursements of its counsel and of any experts and agents, which the
Designated Note Purchaser and the Designated Lender may incur in connection with
the following:
(a) the administration of this Agreement and the other Documents;
(b) the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral;
(c) the exercise or enforcement of any of the rights of the Designated
Note Purchaser and the Designated Lender hereunder; or
(d) the failure by the Pledgor to perform or observe any of the
provisions hereof.
6.6 WAIVERS. The Pledgor hereby waives any right, to the extent permitted by
applicable law, to receive prior notice of or a judicial or other hearing with
respect to any action or prejudgment remedy or proceeding by the Designated Note
Purchaser and the Designated Lender to take possession, exercise control over or
dispose of any item of Collateral where such action is permitted under the terms
of this Agreement or any other Document or by applicable laws or the time, place
or terms of sale in connection with the exercise of the Designated Note
Purchaser and the Designated Lender's rights hereunder. The Pledgor waives, to
the extent permitted by applicable laws, any bonds, security or sureties
required by the Designated Note Purchaser and the Designated Lender with respect
to any of the Collateral. The Pledgor also waives any damages (direct,
consequential or otherwise) occasioned by the enforcement of the Designated Note
Purchaser and the Designated Lender's rights under this Agreement or any other
Document, including, the taking of possession of any Collateral, all to the
extent that such waiver is permitted by applicable laws. These waivers and all
other waivers provided for in this Agreement and the other Documents have been
negotiated by the parties and the Pledgor acknowledges that it has been
represented by counsel of its own choice and has consulted such counsel with
respect to its rights hereunder.
- 12-
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 DOCUMENT. (a) This Agreement is a Document executed pursuant to the Exchange
Agreement and shall (unless otherwise expressly indicated herein) be construed,
administered and applied in accordance with the terms and provisions thereof.
(a) (b) Concurrently herewith the Pledgor is executing and delivering the
Security Agreement pursuant to which the Pledgor is granting a security interest
to the Secured Parties in all of the properties and assets of the Pledgor (other
than the Collateral hereunder). Such security interests shall be governed by the
terms of the Security Agreement and not by this Agreement.
7.2 AMENDMENTS, ETC.; SUCCESSORS AND ASSIGNS.
(a) No amendment to or waiver of any provision of this Agreement nor consent to
any departure by the Pledgor herefrom, shall in any event be effective unless
the same shall be in writing and signed by the Designated Note Purchaser and the
Designated Lender holding a majority in principal amount of the Notes and, with
respect to any such amendment, by the Pledgor, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
(b) Upon delivery by the Pledgor of a supplement to SCHEDULE I pursuant to
SECTION 4.1(B), the schedule supplement attached to each such certificate shall
be incorporated into and become part of and supplement SCHEDULE I hereto, and
the Designated Note Purchaser and the Designated Lender may attach such schedule
supplement to such Schedule and each reference to such Schedule shall mean and
be a reference to such Schedule, as supplemented pursuant hereto.
(c) This Agreement shall be binding upon the Pledgor and its successors,
transferees and assigns and shall inure to the benefit of the Designated Note
Purchaser and the Designated Lender and each Secured Parties and their
respective successors, transferees and assigns; PROVIDED, HOWEVER, that the
Pledgor may not assign its obligations hereunder without the prior written
consent of the Designated Note Purchaser and the Designated Lender.
7.3 ADDRESSES FOR NOTICES. All notices and other communications provided for
hereunder shall be in writing and mailed, delivered or transmitted by facsimile
to any party hereto at the address set forth in Section 11 of the Exchange
Agreement (with any notice to the Pledgor being delivered to the Pledgor in care
of Holdings). All such notices and other communications shall be deemed to be
given or made at the times provided in Section 11 of the Exchange Agreement.
7.4 SECTION CAPTIONS. Section captions used in this Agreement are for
convenience of reference only, and shall not affect the construction of this
Agreement.
- 13-
7.5 SEVERABILITY. If any provision of this Agreement is held to be illegal,
invalid or unenforceable, (a) the legality, validity and enforceability of the
remaining provisions of this Agreement shall not be affected or impaired thereby
and (b) the parties shall endeavor in good faith negotiations to replace the
illegal, invalid or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the illegal, invalid or
unenforceable provisions. The invalidity of a provision in a particular
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
7.6 COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which shall constitute one
and the same instrument.
7.7 GOVERNING LAW, ETC. (A) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE
AND PERFORMED ENTIRELY WITHIN SUCH STATE, EXCEPT TO THE EXTENT THAT THE VALIDITY
OR PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN
RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
OTHER THAN THE STATE OF NEW YORK OR ANY SECURED PARTY.
(a) (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE
BROUGHT IN XXX XXXXXX XX XXX XXXXX XX XXX XXXX SITTING IN NEW YORK OR OF THE
UNITED STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE; PROVIDED, HOWEVER, THAT
ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY SHALL BE
BROUGHT, AT THE OPTION OF THE DESIGNATED NOTE PURCHASER AND THE DESIGNATED
LENDER, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER
PROPERTY MAY BE FOUND. BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY
HERETO CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF THOSE COURTS. THE PLEDGOR, THE DESIGNATED NOTE PURCHASER AND THE
DESIGNATED LENDER IRREVOCABLY WAIVE ANY OBJECTION, INCLUDING ANY OBJECTION TO
THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS AGREEMENT OR OTHER DOCUMENT RELATED THERETO.
EACH PARTY HERETO WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER
PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH
STATE.
7.8 WAIVER OF JURY TRIAL. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
ARISING UNDER ANY DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL
TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY
DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING
- 14-
OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND
EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY
PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
7.9 ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER DOCUMENTS REPRESENT THE FINAL
AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES OR BY PRIOR OR
CONTEMPORANEOUS WRITTEN AGREEMENTS. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG
THE PARTIES.
[Signature page follows.]
- 15-
IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be duly
executed and delivered by its respective officer thereunto duly authorized as of
the date first above written.
DIOMED, INC.
/s/ XXXXX X. XXXXX, XX.
By: _____________________________
Name: Xxxxx X. Xxxxx, Xx.
Title: Chief Executive Officer
ACKNOWLEDGED AND ACCEPTED:
GIBRALT US, INC.,
as the Designated Note Purchaser
and the Designated Lender
/s/ XXXXXX XXXXXX
By: __________________________
Name: Xxxxxx Xxxxxx
Title: Authorized Officer
- 16-
SCHEDULE I
to
Pledge Agreement
PLEDGED SHARES
Securities Issuer
(Jurisdiction of Authorized Outstanding % of Shares Certificate
ORGANIZATION) SHARES SHARES PLEDGED NO.
------------- ------ ------ ------- ----
Diomed PDT, Inc. ( a 100 100 100 1
Delaware Corporation)
- 17-
EXHIBIT F TO EXCHANGE AGREEMENT
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT, dated
as of April 22, 2003 (this "Agreement"), is made by and between DIOMED HOLDINGS,
INC., a Delaware corporation, with headquarters located at Xxx Xxxxxx Xxxx,
Xxxxxxx, XX 00000 (the "COMPANY"), and each entity named on Schedule I hereto as
"Investors" (each, an "INVESTOR"), amends and restates in its entirety the
Registration Rights Agreement dated as of December 27, 2002 (the "2002
REGISTRATION RIGHTS AGREEMENT") entered into by the Company and certain and the
Note Purchasers (as defined in the Note Agreement, as defined below).
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of the
Note Purchase Agreement, dated as of December 27, 2002, among the Note
Purchasers listed therein, the Designated Purchaser (as defined therein),
Diomed, Inc., a Delaware corporation and a wholly-owned subsidiary of the
Company ("DIOMED") and the Company (the "NOTE AGREEMENT"); terms not otherwise
defined herein shall have the meanings ascribed to them in the Exchange
Agreement (as defined below), Diomed issued to those Investors who are Note
Purchasers one or more Notes of the Company, in an aggregate principal amount of
$2,000,000, consisting of $1,000,000 aggregate principal amount of Class A Notes
and $1,000,000 aggregate principal amount of Class B Notes; and
WHEREAS, pursuant to the Exchange Agreement dated as of April
22, 2003 by and among the Company, Diomed, the Note Purchasers and the
Designated Note Purchaser (the "EXCHANGE AGREEMENT"), (i) the Class A Notes and
Class B Notes were exchanged for Class C Notes, (ii) the Company issued the
Exchange Conversion Shares representing the Note Exchange Shares to the Note
Purchasers, (iii) Warrants held by the Note Purchasers were conditionally
delivered to the Company, and (iv) the Company issued the Exchange Conversion
shares representing the Warrant Exchange Shares to the Note Purchasers; and
WHEREAS, pursuant to the Secured Loan Agreement dated as of
April 22, 2003 by and among the Company, Diomed, the Lenders and the Designated
Lender (the "SECURED LOAN AGREEMENT"), the Lenders made the Lender's Commitment,
and the Company issued the Commitment Shares and the Class D Notes; and
WHEREAS, to induce the Investors to execute and deliver the
Exchange Agreement and the Secured Loan Agreement, respectively, 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 "1933 ACT"), with respect to the Exchange Conversion
Shares, the Exchange Shares, the Commitment Shares and the Common Shares; and
Page 1
WHEREAS, pursuant to the Exchange Agreement and the Secured
Loan Agreement, the Company agreed to amend and restate this Agreement such that
the registration rights granted by the Company pursuant to the 2002 Registration
Rights Agreement, in order to extend such registration rights to the holders of
the Exchange Conversion Shares, the Note Exchange Shares, the Warrant Exchange
Shares, the Commitment Shares and the Common Shares, and make such other changes
as necessary to reflect the Exchange Transaction and the making of the Loans.
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
Investors hereby agree as follows:
1. DEFINITIONS. Capitalized terms not defined herein shall have their
respective meanings under the Exchange Agreement, unless the context
clearly indicates otherwise. In addition, as used in this Agreement,
the following terms shall have the following meanings:
(a) "INVESTOR" means an Investor and any permitted transferee or assignee
who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof and who holds Registrable Securities.
(b) "POTENTIAL MATERIAL EVENT" means any of the following: (i) the
possession by the Company of material information not ripe for
disclosure in a Registration Statement, which shall be evidenced by
determinations in good faith by the Board of Directors of the Company
that disclosure of such information in the Registration Statement
would be detrimental to the business and affairs of the Company; or
(ii) any material engagement or activity by the Company which would,
in the good faith determination of the Board of Directors of the
Company, be adversely affected by disclosure in a Registration
Statement at such time, which determination shall be accompanied by a
good faith determination by the Board of Directors of the Company that
the Registration Statement would be materially misleading absent the
inclusion of such information.
(c) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration
effected by preparing and filing a Registration Statement or Statements
in compliance with the 1933 Act and pursuant to Rule 415 under the 1933
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 SEC.
(d) "REGISTRABLE SECURITIES" means the Exchange Conversion Shares, the
Exchange Shares, the Commitment Shares and the Common Shares, provided
that if the Note Purchasers rescind the Exchange Transaction pursuant
to the Exchange Agreement and the Note Agreement shall, accordingly, be
reinstated, then the term "Registrable Securities" shall mean the
Shares (as defined in the Note Agreement), the Commitment Shares and
the Common Shares.
(e) "REGISTRATION STATEMENT" means a Registration Statement of the Company
under the 1933 Act.
(f) "SEC" means the United States Securities and Exchange Commission.
Page 2
2. REGISTRATION.
(a) REQUEST FOR REGISTRATION. Subject to the conditions of this Section 2,
if from and after the date which is thirty (30) days after the earlier of the
final closing under the Contemplated Equity Financing and the termination of the
private offering pursuant to which the Contemplated Equity Financing is made
until the third anniversary date of this Agreement, and so long as any of the
Registrable Securities are outstanding and are not the subject of an effective
Registration Statement, if the Company shall receive a written request from the
holders of fifty percent (50%) or more of the Registrable Securities then
outstanding (for purposes of this Section 1.2, the "INITIATING INVESTORS") that
the Company file a registration statement under the Act covering the
registration of Registrable Securities with an anticipated aggregate offering
price of at least $1,000,000, then the Company shall, within twenty (20) days of
the receipt thereof, give written notice of such request to all Investors, and
subject to the limitations of this Section 2, use its commercial best efforts to
effect, as soon as practicable, the registration under the 1933 Act of all
Registrable Securities that the Investors request to be registered in a written
request received by the Company within twenty (20) days of the mailing of the
Company's notice pursuant to this Section 2(a). If the Initiating Investors
intend to distribute the Registrable Securities covered by their request by
means of an underwriting, they shall so advise the Company as a part of their
request made pursuant to this Section 2(a), and the Company shall include such
information in the written notice referred to in this Section 2(a). In such
event the right of any Investor to include its Registrable Securities in such
registration shall be conditioned upon such Investor's participation in such
underwriting and the inclusion of such Investor's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Investors and such Investor) to the extent provided herein. All
Investors proposing to distribute their securities through such underwriting
shall enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by the Company (which
underwriter or underwriters shall be reasonably acceptable to a majority in
interest of the Initiating Investors). Notwithstanding any other provision of
this Section 2(a), if the underwriter advises the Company that marketing factors
require a limitation on the number of securities underwritten (including
Registrable Securities), then the Company shall so advise all Investors whose
securities would otherwise be underwritten pursuant hereto, and the number of
shares that may be included in the underwriting shall be allocated to the
Investors pro rata based on the number of Registrable Securities held by all
such Investors (including the Initiating Investors). In no event shall any
Registrable Securities be excluded from such underwriting unless all other
securities are first excluded. Any Registrable Securities excluded or withdrawn
from such underwriting shall be withdrawn from the registration. Notwithstanding
the foregoing, the Company shall not be required to effect a registration
pursuant to this Section 2(a):
(i) in any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting
such registration, unless the Company is already subject to service in such
jurisdiction and except as may be required under the Act; or
Page 3
(ii) after the Company has effected two (2) registrations pursuant to
Section 2(a), and such registrations have been declared or ordered
effective; or
(iii) during (a) the one hundred eighty (180) days following the
effective date of a Company-initiated registration subject to Section 2(b)
below or (b) if the Company shall furnish to Investors requesting a
registration statement pursuant to this Section 2(a) a certificate signed
by the Company's Chief Executive Officer or Chairman of the Board within
thirty (30) days of such Investor's request notifying such Investors of the
Company's bona fide intent to file a Company-initiated registration
statement within ninety (90) days following such notice, provided that the
Company is actively employing in good faith all commercially reasonable
efforts to cause such registration statement to become effective; or
(iv) if the Company shall furnish to Investors requesting a
registration statement pursuant to this Section 2(a) a certificate signed
by the Company's Chief Executive Officer or Chairman of the Board stating
that in the good faith judgment of the Board of Directors of the Company,
it would be seriously detrimental to the Company and its stockholders for
such registration statement to be effected at such time, in which event the
Company shall have the right to defer such filing for a period of not more
than one hundred eighty (180) days after receipt of the request of the
Initiating Investors, provided that such right shall be exercised by the
Company not more than once in any twelve (12)-month period and provided
further that the Company shall not register any securities for the account
of itself or any other stockholder during such one hundred eighty (180) day
period (other than a registration relating solely to the sale of securities
of participants in a Company stock plan, a registration relating to a
corporate reorganization or transaction under Rule 145 of the 1933 Act, a
registration on any form that does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities, or a registration in which
the only Common Stock being registered is Common Stock issuable upon
conversion of debt securities that are also being registered).
(b) From and after the date hereof and so long as any of the
Registrable Securities are outstanding and are not the subject of an
effective Registration Statement, if the Company contemplates making an
offering of Common Stock (or other equity securities convertible into or
exchangeable for Common Stock) registered for sale under the 1933 Act (in
connection with any Financing Transaction or otherwise), or if the Company
at any time proposes to file a Registration Statement under the 1933 Act
covering any of its securities other than: (i) a registration on Form S-8
or S-4, or any successor or similar forms; and (ii) a shelf registration
under Rule 415 under the 1933 Act for the sole purpose of registering
shares to be issued in connection with the acquisition of assets; it will
each such time give prompt written notice to the Designated Note Purchaser
and the Designated Lender of its intention to do so and of such Investor's
rights under this Section 2(b). Upon the written request of any such
Investor made within thirty (30) days after the receipt of any such notice
Page 4
(which request shall specify the Registrable Securities intended to be
disposed of by such Investor and the intended method of disposition
thereof), the Company will use its best efforts to effect the registration
under the 1933 Act of all Registrable Securities which the Company has been
so requested to register by the holders thereof, to the extent requisite to
permit the disposition (in accordance with the intended methods of
disposition) of the Registrable Securities requesting registration, by
inclusion of such Registrable Securities in the Registration Statement
which covers the securities which the Company proposes to register;
PROVIDED, that if, at any time after giving written notice of its intention
to register any Registrable Securities and prior to the effective date of
the Registration Statement filed in connection with such registration, the
Company shall determine for any reason either not to register or to delay
registration of such Registrable Securities, the Company may, at its
election, give written notice of such determination to the Investors'
Representative and, thereupon, (i) in the case of a determination not to
register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its
obligation to pay the expenses of registration as described in Section 5 in
connection therewith), and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any Registrable
Securities, for the same period as the delay in registering such other
securities. The Company shall pay all Registration Expenses incurred by the
Investors in connection with each registration of Registrable Securities
requested pursuant to this Section 2.
(c) If (A) a registration pursuant to Section 2(a) or (b) involves an
underwritten offering of the securities being registered, whether or not
for sale for the account of the Company, to be distributed (on a firm
commitment basis), and (B) the managing underwriter of such underwritten
offering shall inform the Company and the Investors requesting such
registration by letter of its belief that the distribution of all or a
specified number of such Registrable Securities concurrently with the
securities being distributed by such underwriters would interfere with the
successful marketing of the securities being distributed by such
underwriters (such writing to state the basis of such belief and the
approximate number of such Registrable Securities which may be distributed
without such effect), then the Company may, upon written notice to the
Designated Note Purchaser and the Designated Lender, exclude from such
registration such number of such Registrable Securities that it would
otherwise be required to register pursuant to Section 2(a) or (b), as the
case may be, as is necessary to reduce the total amount of securities to be
so registered to the maximum amount of securities that can be so marketed
as stated in the managing underwriter's letter, PROVIDED that: (1) if the
securities (other than the Registrable Securities) to be so registered for
sale are to be offered for the account of other persons in the case of a
registration pursuant to Section 2(a), or persons other than the Company in
the case of a registration under Section 2(b), then, the Company may only
exclude Registrable Shares only if all securities of such other persons
(which shall include the Company in the case of a registration described in
Section 2(a)) are so excluded; and (2) Registrable Securities held by
Investors shall be reduced pro rata among such Investors to the extent
required by such managing underwriters; and (3) under no circumstances
shall the number of Registrable Securities to be included in such
registration to be reduced under this Section 2(a) or (b), as the case may
be, by more than 30%.
Page 5
(d) The Company agrees (i) if so required by a managing underwriter of
an offering of Registrable Securities not to effect any public sale or
distribution of any equity securities of the Company or securities
convertible into or exchangeable or exercisable for any of such securities
during the seven days prior to and the 180 days after any underwritten
registration pursuant to Section 2(c) has been consummated, except as part
of such underwritten registration and except pursuant to registrations on
Form X-0, Xxxx X-0, or any successor or similar forms thereto, and (ii) to
cause each holder of its securities or any securities convertible into or
exchangeable or exercisable for any of such securities, in each case
purchased directly from the Company at any time after the date of this
Agreement (other than in a public offering) to agree not to effect any such
public sale or distribution of such securities during such period except as
part of such underwritten registration.
(e) Each Investor agrees, if so requested by a managing underwriter of
an offering of Common Stock (or other equity securities convertible into or
exchangeable for Common Stock), not to effect any public sale or
distribution of Common Stock (or other equity securities convertible into
or exchangeable for Common Stock) of the Company held by such Investor
(other than those included in the registration) for a period (the "HOLDBACK
PERIOD") agreed to by the representative of the underwriters of the Company
and the Company, which shall not exceed 180 days following the effective
date of the registration statement of the Company filed under the 1933 Act.
Each Investor agrees to execute and deliver such other agreements as may
reasonably requested by the Company or the underwriter which are consistent
with the foregoing or which are necessary to give effect thereto. The
obligations described in this Section 2(e) shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or S-8
or similar forms that my be promulgated in the future, a registration
relating solely to a Rule 145 transaction of Form S-4 or similar forms
promulgated in the future. The Company may impose stop-transfer
instructions with respect to the shares of Common Stock (or other equity
securities convertible into or exchangeable for Common Stock) subject to
the foregoing restriction until the end of the applicable Holdback Period.
3. Obligations of the Company. In connection with any registration of the
Registrable Securities under Section 2, the Company shall do each of
the following:
(a) The Company shall use its best efforts to cause any Registration
Statement described in Section 2 which includes Registrable Securities to
become and remain effective for a period of time (the "REGISTRATION
PERIOD") sufficient to permit distribution of the Registrable Securities as
provided in such Registration Statement; provided, however, that the
Company may withdraw any registration of its securities at any time prior
to the effective date of the Registration Statement relating thereto;
provided further, that before filing such Registration Statement or any
amendments thereto, the Company will furnish to the Investors that are to
be included in such registration and their counsel copies of all such
documents proposed to be filed.
(b) Prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statement
and the prospectus used in connection with the Registration Statement as
may be necessary to keep the Registration Statement effective at all times
Page 6
during the Registration Period, and, during the Registration Period, comply
with the provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
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;
(c) If so requested by the Designated Note Purchaser and the
Designated Lender, the Company shall permit a single firm of counsel
designated by the Designated Note Purchaser and the Designated Lender (the
"INVESTORS' COUNSEL") to review drafts of the Registration Statement and
all amendments and supplements thereto a reasonable period of time (but not
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;
(d) Notify the Designated Note Purchaser and the Designated Lender and
the Investors' Counsel, and any managing underwriters immediately (and, in
the case of (i)(A) below, not less than five (5) days prior to the
contemplated date of such filing) and (if requested by any the Designated
Note Purchaser and the Designated Lender) confirm such notice in writing no
later than one (1) business day following the day (i)(A) when a Prospectus
or any Prospectus supplement or post-effective amendment to the
Registration Statement is proposed to be filed; (B) whenever the SEC
notifies the Company whether there will be a "review" of Registration
Statement; (C) whenever the Company receives (or a representative of the
Company receives on its behalf) any oral or written comments from the SEC
relating to a Registration Statement (copies or, in the case of oral
comments, summaries of such comments shall be promptly furnished by the
Company to the Investors); and (D) with respect to the Registration
Statement or any post-effective amendment, when the same has become
effective; (ii) of any request by the SEC or any other Federal or state
governmental authority for amendments or supplements to the Registration
Statement or Prospectus or for additional information; (iii) of the
issuance by the SEC of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or
the initiation of any Proceedings for that purpose; (iv) if at any time the
Company has actual knowledge that any of the representations or warranties
of the Company contained in any agreement (including any underwriting
agreement) contemplated hereby ceases to be true and correct in all
material respects; (v) of the receipt by the Company of any notification
with respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that to the best knowledge
of the Company makes any statement made in the Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires any
revisions to the Registration Statement, Prospectus or other documents so
that, in the case of the Registration Statement or the Prospectus, as the
case may be, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading. In addition, if requested by the Designated
Note Purchaser and the Designated Lender, the Company shall furnish the
Page 7
Designated Note Purchaser and the Designated Lender with copies of all
intended written responses to the comments contemplated in clause (C) of
this Section 3(d) not later than one (1) business day in advance of the
filing of such responses with the SEC so that the Designated Note Purchaser
and the Designated Lender and the Investors' Counsel shall have the
opportunity to comment thereon;
(e) Furnish to the Designated Note Purchaser and the Designated Lender
and the Investors' Counsel (i) promptly after the same is prepared and
publicly distributed, filed with the SEC, or received by the Company, one
(1) copy of the Registration Statement, each preliminary prospectus and
prospectus, and each amendment or supplement thereto, and (ii) if so
requested by any Investor, such number of copies of a 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;
(f) As promptly as practicable after becoming aware thereof, notify
the Designated Note Purchaser and the Designated Lender of the happening of
any event of which the Company has actual 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 omits to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, and use its best efforts promptly to prepare a
supplement or amendment to the Registration Statement or other appropriate
filing with the SEC to correct such untrue statement or omission, and
deliver a number of copies of such supplement or amendment to the
Designated Note Purchaser and the Designated Lender and each Investor as
such Investor may reasonably request;
(g) As promptly as practicable after becoming aware thereof, notify
the Designated Note Purchaser and the Designated Lender of the issuance by
the SEC of a Notice of Effectiveness or any notice of effectiveness or any
stop order or other suspension of the effectiveness of the Registration
Statement at the earliest possible time;
(h) Notwithstanding the foregoing, if at any time or from time to time
after the date of effectiveness of the Registration Statement, the Company
notifies the Designated Note Purchaser and the Designated Lender in writing
of the existence of a Potential Material Event, the Investors shall not
offer or sell any Registrable Securities, or engage in any other
transaction involving or relating to the Registrable Securities, from the
time of the giving of notice with respect to a Potential Material Event
until such Investor receives written notice from the Company that such
Potential Material Event either has been disclosed to the public or no
longer constitutes a Potential Material Event;
(i) Use its reasonable efforts to secure and maintain the designation
of all the Registrable Securities covered by the Registration Statement on
the AMEX;
(j) Provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than three (3) business
days after the effective date of the Registration Statement;
Page 8
(k) Cooperate with the Investors to facilitate the timely preparation
and delivery of certificates for the Registrable Securities to be offered
pursuant to the Registration Statement and enable such certificates for the
Registrable Securities to be in such denominations or amounts as the case
may be, as the Investors may reasonably request, and, within five (5)
business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and
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 appropriate instruction and opinion of such counsel;
(l) Take all other reasonable actions necessary to expedite and
facilitate disposition by the Investor of the Registrable Securities
pursuant to the Registration Statement;
(m) Not take, or omit to take, any actions that would preclude the
filing or effectiveness of the Registration Statement or require the
withdrawal of the Registration Statement;
(n) Not complete any acquisitions or business combinations until the
SEC has declared effective the Registration Statement that registers the
shares of Common Stock underlying the Notes and the Warrants.
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 of the
information the Company requires from each such Investor (the "REQUESTED
INFORMATION") if such Investor elects to have any of such Investor's
Registrable Securities included in the Registration Statement. If at least
two (2) business days prior to the filing date the Company has not received
the Requested Information from an Investor (a "NON-RESPONSIVE INVESTOR"),
then the Company may file the Registration Statement without including
Registrable Securities of such Non-Responsive Investor;
(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; and
Page 9
(c) 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(e)
or 3(f), above, 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(e) or 3(f)
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.
(d) Each Investor that sells Registrable Securities pursuant to a
registration under this Agreement agrees that in connection with
registration as follows:
(i) Such seller shall cooperate as reasonably requested by the
Company with the Company in connection with the preparation of the
Registration Statement, and for as long as the Company is obligated to
file and keep effective the Registration Statement, shall provide to
the Company, in writing, for use in the Registration Statement, all
such information regarding such seller and its plan of distribution of
the Registrable Securities as may reasonably be necessary to enable
the Company to prepare the Registration Statement and prospectus
covering the Registrable Securities, to maintain the currency and
effectiveness thereof and otherwise to comply with all applicable
requirements of law in connection therewith; and
(ii) During such time as such seller may be engaged in a
distribution of the Registrable Securities, such seller shall comply
with Rules 10b-6 and 10b-7 promulgated under the Securities Exchange
Act and pursuant thereto it shall, among other things; (x) not engage
in any stabilization activity in connection with the securities of the
Company in contravention of such rules; (y) distribute the Registrable
Securities under the Registration Statement solely in the manner
described in the Registration Statement; and (z) cease distribution of
such Registrable Securities pursuant to such Registration Statement
upon written notice from the Company that the prospectus covering the
Registrable Securities contains any untrue statement of a material
fact required to be stated therein or necessary to make the statements
therein not misleading.
5. EXPENSES OF REGISTRATION.
(a) All reasonable expenses (other than underwriting discounts
and commissions of the Investors) incurred in connection with
registrations, filings or qualifications pursuant to Sections 2 and 3,
but including, without limitation, all registration, listing, and
qualifications fees, printers, legal and accounting fees, the fees and
disbursements of counsel for the Company, and a fee for a single
counsel for the Investors (as a group and not individually) not
exceeding $50,000 for the Registration Statement covering the
Registrable Securities applicable to the Notes and Warrants issued on
the Closing Date shall be borne by the Company.
Page 10
(b) Neither the Company nor any of its subsidiaries has, as of
the date hereof, nor shall have the Company nor any of its
subsidiaries, on or after the date of this Agreement, entered into any
agreement with respect to its securities that is inconsistent with the
rights granted to the Investors in this Agreement or otherwise
conflicts with the provisions hereof. Except as disclosed in the
Exchange Agreement, the Secured Loan Agreement or the other Documents
entered into simultaneously therewith, neither the Company nor any of
its subsidiaries has previously entered into any agreement granting
any registration rights with respect to any of its securities to any
Person. Without limiting the generality of the foregoing, without the
written consent of the Investors holding a majority of the Registrable
Securities, the Company shall not grant in connection with any
Financing Transaction to any Person the right to request the Company
to register any securities of the Company under the 1933 Act unless
the Company shall amend this Agreement to provide the Investors the
same rights of registration as are granted in connection with such
Financing Transaction.
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
and hold harmless each Investor who holds such Registrable Securities,
the directors, managers and members, if any, of such Investor, the
officers, if any, of such Investor, and each person, if any, who
Controls any Investor within the meaning of the 1933 Act or the
Exchange Act (each, an "INVESTOR INDEMNIFIED PERSON" or "INVESTOR
INDEMNIFIED PARTY"), against any losses, claims, damages, liabilities
or expenses (joint or several) incurred (collectively, "CLAIMS") to
which any of them may become subject under the 1933 Act, the Exchange
Act or otherwise, insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or
are based upon any of the following statements, omissions or
violations in the Registration Statement, or any post-effective
amendment thereof, or any prospectus included therein: (i) any untrue
statement or alleged untrue statement of a material fact contained in
the Registration Statement or any post-effective amendment thereof or
the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact 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 1933 Act, the Exchange Act, any state
securities law or any rule or regulation under the 1933 Act, the
Exchange Act or any state securities law (the matters in the foregoing
clauses (i) through (iii) being, collectively, "VIOLATIONS"). Subject
to clause (b) of this Section 5, the Company shall
reimburse the Investors, promptly as such expenses are incurred and
are due and payable, for any 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 5(a) shall not
(I) apply to a Claim arising out of or based upon a Violation which
occurs in reliance upon and in conformity with information furnished
Page 11
in writing to the Company by or on behalf of any Investor Indemnified
Person expressly for use in connection with the preparation of the
Registration Statement or any such amendment thereof or supplement
thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; (II) be available to the extent such
Claim is based on a failure of the Investor to deliver or cause to be
delivered the prospectus made available by the Company; (III) 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 unreasonably withheld; or (IV) apply to any violation or
alleged violation by an Investor Indemnified Person of the 1933 Act,
the Exchange Act, any state securities laws or any rule or regulation
under the 1933 Act, the Exchange Act, or any state securities laws,
other than any violations or alleged violations regarding the delivery
by the Company of a Registration Statement. Each Investor will
indemnify the Company and its officers, directors and agents (each, a
"COMPANY INDEMNIFIED PERSON" or "COMPANY INDEMNIFIED PARTY"; together
with an Investor Indemnified Person or an Investor Indemnified Party,
being an "INDEMNIFIED PERSON" and an "INDEMNIFIED PARTY",
respectively) against any claims 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 or on behalf of
such Investor, expressly for use in connection with the preparation of
the Registration Statement, subject to such limitations and conditions
as are applicable to the Indemnification provided by the Company to
this Section 5. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Company
Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
(b) 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
be 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, 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. In case any such action is brought against any Indemnified
Person or Indemnified Party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with any
other indemnifying party similarly notified, assume the defense
thereof, subject to the provisions herein stated and after notice from
the indemnifying party to such Indemnified Person or Indemnified Party
of its election so to assume the defense thereof, the indemnifying
party will not be liable to such Indemnified Person or Indemnified
Party under this Section 6 for any legal or other reasonable
out-of-pocket expenses subsequently incurred by such Indemnified
Person or Indemnified Party in connection with the defense thereof
other than reasonable costs of investigation, unless the indemnifying
party shall not pursue the action to its final conclusion. The
Indemnified Person or Indemnified Party shall have the right to employ
separate counsel in any such action and to participate in the defense
thereof, but the fees and reasonable out-of-pocket expenses of such
Page 12
counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel
reasonably satisfactory to the Indemnified Person or Indemnified
Party. 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 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 (a) 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; (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the 0000 Xxx) shall be entitled to contribution from any seller of
Registrable Securities who was not guilty of such fraudulent
misrepresentation; and (c) contribution 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 Exchange Act. With a view to making available to
the Investors the benefits of Rule 144 promulgated under the 1933 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) make and keep public information available, as those
terms are understood and defined in Rule 144;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the 1933 Act and
the Exchange Act;
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written
statement by the Company that it has complied with the reporting
requirements of Rule 144, the 1933 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; and
(d) cause its counsel to deliver to its transfer agent such
opinions of law as shall be required to remove restrictive
legends on the shares to be sold.
9. Amendment OF REGISTRATION RIGHTS. Any provision 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 the written consent of
the Company and Investors who hold a two-thirds (2/3), or,
sixty-six percent (66%) interest of the Registrable Securities.
Any amendment or waiver effected in accordance with this Section
9 shall be binding upon each Investor and the Company.
Page 13
10. Appointment and Authority of Designated Note Purchaser and the
Designated Lender. Each of the Investors hereby irrevocably constitutes and
appoints the Designated Note Purchaser and the Designated Lender and any officer
or agent thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of the Investor and in the name of the Investor or in its own name, for
the purpose of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute any and all documents and instruments that may
be necessary or desirable to accomplish the purposes of this Agreement. The
Designated Note Purchaser and the Designated Lender shall have full discretion
and authority, without consultation with the Investors, to accept and give
notices on behalf of the Investors, to communicate with the Investors at such
times and in such manner as the Designated Note Purchaser and the Designated
Lender in their discretion determine is appropriate and to grant extensions of
deadlines or waive any of the Company's obligations set forth in Sections 2 and
3 hereof. The Designated Note Purchaser and the Designated Lender shall not have
discretion or authority to exercise any investment discretion over the Notes,
including causing the conversion of any Notes or exercise of any Warrants,
absent an Investor's express written authority. The Investors and the other
Persons constituting Investors hereunder hereby indemnify and hold harmless the
Designated Note Purchaser and the Designated Lender for any and all damages and
liability which results from the Designated Note Purchaser's and the Designated
Lender' service in their capacity as such to the full extent as provided under
the Exchange Agreement and the Secured Loan Agreement, respectively, and in
connection therewith hereby expressly incorporate herein by this reference
Section 10 of the Exchange Agreement (or, if the Exchange Transaction is
rescinded by the Note Purchasers pursuant to the Exchange Agreement and the Note
Agreement reinstated accordingly, Section 10 of the Note Agreement) and the
Secured Loan Agreement.
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) Notices required or permitted to be given hereunder shall be given
in the manner contemplated by the Exchange Agreement (or, if the
Exchange Transaction is rescinded by the Note Purchasers pursuant to
the Exchange Agreement and the Note Agreement reinstated accordingly,
the Note Agreement) and the Secured Loan Agreement, (i) if to the
Company or to the Investors, to their respective address contemplated
by the Note Agreement, (iii) if to the Investors' Representative or
the Investors' Counsel, at their respective address provided to the
Company by the Investors' Representative in writing, and (iv) if to
any other 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
10(b).
Page 14
(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) With respect to governing law, jurisdiction and waiver of jury trial,
the parties agree as follows:
(i) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND
PERFORMED ENTIRELY WITHIN SUCH STATE.
(ii) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY
BE BROUGHT IN XXX XXXXXX XX XXX XXXXX XX XXX XXXX SITTING IN NEW YORK
COUNTY OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE. BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY AND THE
INVESTORS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY AND THE
INVESTORS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN
SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR OTHER DOCUMENT RELATED
THERETO. EACH OF THE COMPANY AND THE INVESTORS WAIVES PERSONAL SERVICE OF
ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER
MEANS PERMITTED BY THE LAW OF SUCH STATE.
(iii) EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT
TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING
UNDER ANY TRANSACTION DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH
RESPECT TO ANY DOCUMENT OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT
OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR
RIGHT TO TRIAL BY JURY.
Page 15
(e) 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.
(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) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(h) The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning thereof.
(i) This Agreement may be executed in one 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 telephone line facsimile
transmission of a copy of this Agreement bearing the signature of the
party so delivering this Agreement.
(j) The Company acknowledges that any failure by the Company to perform its
obligations under Section 3(a) hereof, or any delay in such performance
could result in loss to the Investors, and the Company agrees that, in
addition to any other liability the Company may have by reason of such
failure or delay, the Company shall be liable for all direct damages
caused by any such failure or delay, unless the same is the result of
force majeure. Neither party shall be liable for consequential damages.
(k) This agreement and the other Transaction Documents represent the final
agreement among the parties and may not be contradicted by evidence of
prior, contemporaneous, or subsequent oral agreements of the parties or
by prior or contemporaneons written agreements. There are no unwritten
oral agreements among the parties.
[Signature page follows.]
Page 16
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
COMPANY:
DIOMED HOLDINGS, INC.
/s/ XXXXX X. XXXXX, XX.
By: _______________________________
Name: Xxxxx X. Xxxxx, Xx.
Title: Chief Executive Officer
INVESTOR:
Name of Investor
By: _________________________________
Name:
---------------------------------
Title:
Page 17
SCHEDULE I
SCHEDULE OF INVESTORS
---------------------
THOSE INVESTORS WHO ARE NOTE PURCHASERS:
Gibralt US, Inc.
Xxxxxxx Xxxxxxx
Xxxxxx Xxxxxxxxx
Xxxxxx Xxxxxxxx
THOSE INVESTORS WHO ARE APRIL 2003 NOTE PURCHASERS:
--------------------------------------------------
Gibralt US, Inc.
Xxxxx X. Xxxxx, Xx.
Xxxxx Xxxxxx
Page 18
