PREFERRED STOCKHOLDER AGREEMENT AND CONSENT
PREFERRED
STOCKHOLDER
AGREEMENT
AND CONSENT
This
Agreement and Consent is made as of the 28th
day of
September, 2007, between Diomed Holdings, Inc. (the “Company”),
a
Delaware corporation, and the undersigned (the “Holder”),
who
is the registered holder of shares of Series 2006 Preferred Stock (the
“Preferred
Stock)
issued
by the Company pursuant to the Securities Purchase Agreement, dated as of July
27, 2006, between the Company and the Purchasers of Preferred Stock named
therein (the “2006
Purchase Agreement”).
Capitalized terms used below with definition shall have the respective meanings
given them in the Company’s Certificate of Incorporation, as amended through the
date hereof (as so amended, the “Certificate
of Incorporation”).
The
Company proposes to enter into a Loan Agreement with Hercules Technology Growth
Capital, Inc. or an affiliate thereof (“Hercules”)
pursuant to which Hercules will loan to the Company on a secured basis up to
the
aggregate principal amount of $10,000,000 on the terms and conditions described
in the Term Sheet annexed hereto as Exhibit
A
and as
the Company and Hercules shall agree in the definitive documentation related
thereto (the “Financing”).
The
Company further proposes to amend certain terms and provisions of its
outstanding Variable Rate Convertible Debentures due October 2008 (the
“Debentures”)
pursuant to which the holders of such Debentures will consent to the Financing
and such Debentures will become secured obligations of the Company on the terms
and conditions described in the Term Sheet annexed hereto as Exhibit
B
and as
the Company and the holders of the Debentures shall agree (subject to the
approval of Hercules) in the definitive documentation related thereto (the
“Refinancing”).
For
itself and on behalf of all subsequent holders of the Preferred Stock held
by
it, and in consideration of the mutual promises set forth in this Agreement
and
Consent, the Holder and the Company hereby agree as follows:
1.
In
order to induce the Holder to provide its consent as provided in this Agreement
and Consent, the Company hereby agrees that at such time as the Holder exercises
its right to convert any shares of Preferred Stock under Section 4 of Section
2A
of ARTICLE FIFTH of the Certificate of Incorporation, then, in addition to
such
shares as may be issuable under the terms and conditions of such Section, the
Company will further issue and deliver such additional shares of Common Stock
as
the Holder would be entitled to receive if the Exchange Rate were $0.70.
2.
If the
Holder holds warrants issued by the Company pursuant to the Securities Purchase
Agreement, dated September 30, 2005, between the Company and the purchasers
named therein by operation of the anti-dilution provisions contained therein,
then, as a result of the Financing and Refinancing, the exercise price of such
warrants shall be reduced to $1.75 and the number of underlying shares of common
stock will be increased accordingly.
3.
In
connection with the Financing and the Refinancing, and notwithstanding anything
to the contrary in the 2006 Purchase Agreement or the Company’s Certificate of
Incorporation, the Holder hereby irrevocably:
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a.
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consents
to the Financing and the Refinancing, including, without limitation,
(i)
the incurrence by the Company of indebtedness pursuant to the Financing
and Refinancing and to the grant of any and all security interests
by the
Company and its subsidiaries as are required to be granted in their
assets
pursuant to the Financing and the Refinancing and (ii) the repayment
and
prepayment of the indebtedness arising out of the Financing and
Refinancing as required or permitted under the terms and conditions
of the
Financing and Refinancing;
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b.
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agrees
that the issuance of the warrants proposed to be issued to Hercules
pursuant to the terms of the Financing and the change in conversion
price
of the Debentures pursuant to the terms of the Refinancing (and the
equivalent change to the warrants issued to those persons who purchased
the Debentures) will not result in any antidilution adjustment to
the
Preferred Stock and further waives (i) any and all rights and benefits
which might otherwise arise under the Company’s Certificate of
Incorporation or the 2006 Purchase Agreement pursuant to an antidilution
adjustment as a result of the Financing or Refinancing and (ii) any
right
to any notice of any change in the conversion or exercise price of
any
other outstanding security of the Company arising from the Financing
or
Refinancing beyond the notice provided by this Agreement and Consent;
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c.
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agrees
that notwithstanding the consideration to be delivered by the Company
pursuant to Section 2 below, the rights of the Holder to vote the
shares
of the Preferred Stock owned by it pursuant to Section 2(a) of Section
2A
of ARTICLE FIFTH of the Certificate of Incorporation shall be determined
on the basis that the Exchange Rate remains $1.15;
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d.
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agrees
that notwithstanding the terms and conditions of this Agreement and
Consent, the Financing and the Refinancing, no Dividend Commencement
Event
(as defined in Section 1 of Section 2A of the Certificate of
Incorporation) has occurred and no Dividends have become due and
payable;
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e.
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agrees
that neither the Financing nor the Refinancing shall be deemed to
be a
“Subsequent Financing” as defined in the 2006 Purchase Agreement and
therefore that the 2006 Purchase Agreement does not afford to the
Holder
any participation rights in the Financing or the Refinancing; and
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f.
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consents
to the issuance of the warrants proposed to be issued to Hercules
pursuant
to the terms of the Financing for purposes of Section 4.27(j) of
the 2006
Purchase Agreement.
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4.
This
Agreement and Consent shall be effective simultaneously with the closing of
the
Financing and Refinancing, provided
that it
shall at such time have been executed and delivered to the Company by the
holders of Preferred Stock constituting not less than 65% of the Preferred
Stock
issued and outstanding on September 10, 2007.
5.
All
other terms and conditions of the Preferred Stock and the 2006 Purchase
Agreement remain in full force and effect.
[Signature
Page Follows}
2
IN
WITNESS WHEREOF, the undersigned have signed this Agreement and Consent as
of
the date and year set forth above.
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NAME OF INVESTOR:
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NUMBER SHARES PREFERRED STOCK HELD:
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By:
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(Signature
of authorized person above)
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Name
and Title:
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DIOMED
HOLDINGS, INC.
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By:
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Xxxxx
Xxxxx, Chief Financial Officer
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[Signature
Page to Preferred Stockholder
Agreement
and Consent]
3
EXHIBIT
A
Below
is a summary of the principal business considerations
related
to our growth capital financing loan proposal.
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Commitment
Amount:
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$
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10,000,000
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Interest
Rate (1)
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Prime
+ 3.20
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%
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Deferred
Interest Charge (2)
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9.50
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%
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(1)
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Wall
Street Journal Prime, which surveys large US banks and publishes
the
consensus prime rate. As of the date of this Document,
Prime is 8.25%.
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One
time payment due at maturity and calculated against funds
borrowed.
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Lender:
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Hercules
Technology Growth Capital, Inc. and any affiliate or
transferee.('Hercules”
or 'Lender”).
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Borrower:
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Diomed
Holdings, Inc. and its subsidiaries. ('Diomed”
or 'Borrower”).
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Term
Sheet Expiration:
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September
26, 2007.
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Loan
Closing:
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Best
efforts to close by October 2, 2007.
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Availability
Period:
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The
commitment is available as follows:
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Tranche
A: $6.0
million of Loan Commitment is funded at closing.
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Tranche
B: Remaining
$4.0 million will be available at Borrower’s option beginning January 31,
2008 and will remain available through March 30, 2008.
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Use
of Proceeds:
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The
proceeds of the Loan will be used for general corporate
purposes.
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Interest-only
Period:
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Through
June 1, 2008.
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Amortization:
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Beginning
on July 1, 2008, Borrower shall repay Principal on a schedule comprised
of
twenty-four equal monthly principal and interest
payments.
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Maturity:
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July
1, 2010.
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Collateral:
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The
Loan will be secured by a perfected first position lien on all of
the
borrower's assets, including Intellectual Property (“IP”). This lien will
allow for licensing in the normal course of business.
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Warrant:
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A
warrant (the “Warrant”) will be issued by Borrower to Lender to purchase
$100,000 worth of shares of common stock at an Exercise Price of
$0.70.
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Option
to invest:
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Borrower
shall grant to Lender the option to invest up to $1.0 million in
a
subsequent institutional equity financing on the same terms, conditions,
and pricing offered to the investors in such subsequent equity financing.
This option to invest does not apply to equity transactions with
strategic
partners or regular shelf registered
offerings.
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4
The
information contained herein is confidential and may not be released by you
or
your representative in
written
or verbal form without the prior written consent of the
Lender
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Success
Fee:
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Borrower
shall remit the following cash payments to Lender:
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1)
$200,000 at Loan Closing.
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2)
$900,000 on June 30, 2008
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3)
Borrower shall remit a cash payment to Lender in an amount equal
to 1.00%
of any gross consideration paid for the acquisition of the business
of
Diomed Holdings and its operating subsidiaries.
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Financial
Covenants:
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No
financial ratio covenants.
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Reporting
Requirements:
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Borrower
will furnish to Lender monthly and quarterly financial statements,
annual
audited financial statements and all materials provided to the
shareholders along with other financial information Lender reasonably
requests or generally provided to other Holders of the common
stock.
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Expenses:
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Borrower
shall pay the invoiced expenses, including UCC searches, filing costs,
and
other miscellaneous expenses, and reasonable fees of counsel (in-house
and
outside) applicable to drafting, negotiating and/or finalizing the
Loan.
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Commitment
Fee:
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A
Commitment Fee of 2.0% of the Commitment Amount is required in order
for
Lender to commence the due diligence process. In the event that the
transaction is not approved, the Commitment Fee shall be returned
in its
entirety to Borrower (minus due diligence expenses). In the event
of
approval, the Commitment Fee will be applied in its entirety as a
Facility
Fee and towards the Lender’s non-legal transaction costs and due diligence
expenses {Paid}.
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The
information contained herein is confidential and may not be released by you
or
your representative in
written
or verbal form without the prior written consent of the
Lender
5
In
consideration of the time, cost and expense devoted, and to be devoted, by
the
Lender in connection with
the
transaction contemplated by this proposal, Borrower agrees that until Loan
Closing (the “Exclusive Period”) it will not (a) solicit or entertain any
proposal, (b) negotiate with any other person, or
(c)
provide any information with respect to Borrower to any person who might be
expected to propose
alternate financing, or Commitment Fee will be deemed earned in
full.
The
proposed terms and conditions are provided for discussion purposes only and
do
not represent an agreement
or commitment to lend, provided however that the terms entitled and associated
with “Expenses”,
“Commitment Fee” and “Exclusive Period” shall be binding obligations of the
parties hereto.
The actual terms and conditions upon which the Lender may agree to extend credit
to the Borrower are subject to satisfactory completion of due diligence,
internal credit approvals, satisfactory review of documentation and such other
terms and conditions as may be determined by Lender and which would be contained
in definitive legal documents for the loan contemplated hereby.
If
the
basic terms are acceptable, please fax an executed copy of this letter to
000-000-0000 and wire payment
of the Commitment Fee. This
offer will expire at 5PM (ET) on September 26, 2007 unless
accepted
by Borrower or extended by Lender. We look forward to your response. Please
feel
free to call us at 000-000-0000 (work) or 000-000-0000 (cell).
We
appreciate your consideration of this proposal. We look forward to the
opportunity to work together and establish a long-term strategic relationship
with you and Diomed, Inc.
Sincerely,
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R.
Xxxxx Xxxxx
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Principal,
Life Sciences
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Hercules
Technology Growth Capital, Inc.
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Hercules
Technology Growth Capital, Inc.
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AGREED
AND ACCEPTED this _____ day
of
2007
Diomed,
Inc.
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By:
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Name:
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Title:
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The
information contained herein is confidential and may not be released by you
or
your representative in
written
or verbal form without the prior written consent of the
Lender
6
EXHIBIT
B
Diomed
Holdings, Inc.
Restructuring
of Variable Rate Convertible Debentures
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Issuer:
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Diomed
Holdings, Inc.
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Issue:
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$7
Million Variable Rate Convertible Debentures due October 2008
(the
“Debentures”), of which approximately $3.7 million are issued and
outstanding.
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Existing
Terms:
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Except
as modified by definitive documentation and further to this term
sheet,
all original terms of the Debentures and associated documents shall
remain
in effect.
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Conversion
Price:
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The
Conversion Price will be $0.70 per share.
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Coupon:
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The
coupon will be the greater of (i) 6-month LIBOR plus 5.00% and (ii)
10%,
per annum on the unpaid/unconverted principal balance payable quarterly
in
cash.
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Rank:
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The
Debentures shall be secured obligations of the Company, subordinate
to the
new debentures issued by the Company in favor of
Hercules.
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Investor(s)
Trading Restriction:
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The
Investor(s) and its affiliates will agree not to trade in the Company’s
Common Stock until the earlier of (i) the announcement of the Closing
of
this transaction, or (ii) termination of discussions between the
Investor(s) and the Company regarding this transaction.
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Expense
Reimbursement:
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The
Company shall pay up to $5,000 to the Investor(s) (individually)
for
outside legal expenses reasonably incurred in relation to documentation
of
this restructuring.
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Documentation:
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The
definitive documentation shall contain such additional and supplementary
provisions, including without limitation representations, warranties,
covenants, agreements, payments, options and remedies, as are appropriate
to preserve and protect economic benefits intended to be conveyed
to the
Company and to the Investor(s) pursuant hereto.
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7
