NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NEITHER
THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION SHALL BE
APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
Void after 5:00 p.m. Eastern Time, on ________________.
WARRANT TO PURCHASE COMMON STOCK
OF
PALOMAR MEDICAL TECHNOLOGIES, INC.
FOR VALUE RECEIVED, PALOMAR MEDICAL TECHNOLOGIES, INC., a Delaware corporation
(the "Company"), hereby certifies that (the "Purchaser") or its permitted
assigns, is entitled to purchase from the Company, at any time or from time to
time on or after _________________ and prior to 5:00 P.M., Eastern Time, on
_________________, a total of _________ fully paid and nonassessable shares of
the common stock, par value $.01 per share, of the Company for an aggregate
purchase price of $____ per share. (Hereinafter, (i) said common stock, together
with any other equity securities which may be issued by the Company with respect
thereto or in substitution therefor, is referred to as the "Common Stock", (ii)
the shares of the Common Stock purchasable hereunder are referred to as the
"Warrant Shares", (iii) the aggregate purchase price payable hereunder for the
Warrant Shares is referred to as the "Aggregate Warrant Price", (iv) the price
payable hereunder for each of the Warrant Shares is referred to as the "Exercise
Price", (v) this Warrant, and all warrants hereafter issued in exchange or
substitution for this Warrant are referred to as the "Warrant" and (vi) the
holder of this Warrant is referred to as the "Holder".) The Exercise Price is
subject to adjustment as hereinafter provided.
1. Exercise of Warrant. This Warrant may be exercised, in whole at any time
or in part from time to time, on or after August 20, 1998 and prior to 5:00
P.M., Eastern Time, on February 19, 2003, by the Holder of this Warrant by the
surrender of this Warrant (with the subscription form at the end hereof duly
executed) at the address set forth in Subsection 9(a) hereof, together with
proper payment of the Aggregate Warrant Price, or the proportionate part thereof
if this Warrant is exercised in part; provided, however, that the Holder shall
only be entitled to exercise this Warrant from time to time to extent that the
Holder will, through such exercise, obtain that number of shares of Common Stock
(the "Exercisable Shares") that, together with shares of Common Stock directly
or indirectly beneficially owned by the Holder, its subsidiaries and affiliated
persons including persons serving as exclusive full time advisors of the Holder
33
(each a "Holder Person" and, collectively, "Holder Persons"), would not result
in direct and indirect beneficial ownership by all Holder Persons that would
exceed 10% of the outstanding shares of Common Stock, as calculated in
accordance with Rule 16a-1(a)(1). For purposes of calculating the number of
Exercisable Shares, the Holder shall be entitled to use the outstanding number
contained in the Company's most recent Quarterly Report on Form 10-QSB or Annual
Report on Form 10-KSB in accordance with Rule 13D-1(e). For purposes of
determining the number of Exercisable Shares, the Company shall be entitled to
rely and shall be fully protected in relying, on any statement or representation
made by the Holder to the Company without any obligation on the part of the
Company to make any inquiry or investigation or to examine its records or the
records of any transfer agent for the Common Stock to confirm such calculation.
Payment for Warrant Shares shall be made by certified or official bank check
payable to the order of the Company. If this Warrant is exercised in part, this
Warrant must be exercised for a minimum of 50,000 shares of the Common Stock (or
such lesser number of shares of Common Stock as shall remain available for
purchase under the terms of the Warrant), and the Holder is entitled to receive
a new Warrant covering the number of Warrant Shares in respect of which this
Warrant has not been exercised and setting forth the proportionate part of the
Aggregate Warrant Price applicable to such Warrant Shares. Upon such surrender
of this Warrant, the Company will (a) issue a certificate or certificates in the
name of the Holder for the largest number of whole shares of the Common Stock to
which the Holder shall be entitled if this Warrant is exercised in whole and (b)
deliver the proportionate part thereof if this Warrant is exercised in part,
pursuant to the provisions of the Warrant. In lieu of any fractional share of
the Common Stock which would otherwise be issuable in respect to the exercise of
the Warrant, the Company at its option (a) may pay in cash an amount equal to
the product of (i) the daily mean average of the Closing Price (as hereinafter
defined) of a share of Common Stock on the ten consecutive trading days before
the Conversion Date and (ii) such fraction of a share or (b) may issue an
additional share of Common Stock.
Upon exercise of the Warrant, the Company shall issue and deliver to the
Holder certificates for the Common Stock issuable upon such exercise within ten
business days after such exercise and the person exercising shall be deemed to
be the holder of record of the Common Stock issuable upon such exercise.
No warrant granted herein shall be exercisable after 5:00 p.m. Eastern Time
on the fifth anniversary of the date of issuance.
2. Consolidations and Mergers. In case of any consolidation or merger of
the Company with any other corporation (other than a wholly-owned subsidiary of
the Company), or in case of any sale or transfer of all or substantially all of
the assets of the Company, or in the case of any share exchange pursuant to
which all of the outstanding shares of Common Stock are converted into other
securities or property, the Company shall make appropriate provision or cause
appropriate provision to be made so that each Holder shall have the right
thereafter to obtain upon exercise of the Warrant the kind and amount of shares
of stock and other securities and property receivable upon such consolidation,
merger, sale, transfer, or share exchange by a holder of the number of shares of
Common Stock for which the Warrant may be exercised prior to the effective date
34
of such consolidation, merger, sale, transfer, or share exchange. If, in
connection with any such consolidation, merger, sale, transfer, or share
exchange, each holder of shares of Common Stock is entitled to elect to receive
securities, cash, or other assets upon completion of such transaction, the
Company shall provide or cause to be provided to each Holder the right to elect
the securities, cash, or other assets for which the Warrant may be exercised by
such Holder subject to the same conditions applicable to holders of the Common
Stock (including, without limitation, notice of the right to elect, limitations
on the period in which such election shall be made, and the effect of failing to
exercise the election). The Company shall not effect any such transaction unless
the provisions of this paragraph have been complied with. The above provisions
shall similarly apply to successive consolidations, mergers, sales, transfers,
or share exchanges.
3. Adjustments to the Exercise Price. Notwithstanding anything in this
Section 3 to the contrary, no change in the exercise price shall actually be
made until the cumulative effect of the adjustments called for by this Section 3
since the date of the last change in the Exercise Price would change the
Exercise Price by more than 1%. However, once the cumulative effect would result
in such a change, then the Exercise Price shall actually be changed to reflect
all adjustments called for by this Section 3 and not previously made.
Notwithstanding anything in this Section 3, no change in the Exercise Price
shall be made that would result in an Exercise Price of less than the par value
of the Common Stock to be issued upon exercise of this Warrant.
The "Closing Price" for each day shall be the closing price on such day as
reported on the New York Stock Exchange Composite Tape, or, if the Common Stock
is not listed or admitted to trading on such Exchange, on the principal national
securities exchange on which Common Stock is listed or admitted to trading, or,
if not listed or admitted to trading on any national securities exchange, the
closing bid price as reported on the Nasdaq Stock Market (or, if not so
reported, the closing price), or, if not admitted for quotation on the Nasdaq
Stock Market, the average of the high bid and low asked prices on such day as
recorded by the National Association of Securities Dealers, Inc. through the
National Association of Securities Dealers Automated Quotations System
("NASDAQ"), or if the National Association of Securities Dealers, Inc. through
NASDAQ shall not have reported any bid and asked prices for the Common Stock on
such day, the average of the bid and asked prices for such day as furnished by
any New York Stock Exchange member firm selected from time to time by the
Company for such purposes, or, if no such bid and asked prices can be obtained
from any such firm, the fair market value of one share of Common Stock on such
day as determined in good faith by the Board of Directors. Such determination by
the Board of Directors shall be conclusive.
Subject to the provisions of the first paragraph of this Section 3, the
Exercise Price shall be appropriately adjusted from time to time to account for
stock splits, stock dividends, combinations, recapitalizations,
reclassifications and similar events and under certain circumstances as follows:
35
(i) In case the Company shall issue rights or warrants to all holders
of the Common Stock entitling such holders to subscribe for or purchase
Common Stock on the record date referred to below at a price per share less
than the average daily Closing Prices of the Common Stock for the 30
consecutive business days commencing 45 business days before the record
date (the "Current Market Price"), then in each such case the Exercise
Price in effect on such record date shall be adjusted in accordance with
the formula
EP1 = EP x O + N x P
-----
M
-----
O + N
where
EP1 = the adjusted Exercise Price.
EP = the current Exercise Price.
O = the number of shares of Common Stock outstanding on
the record date.
N = the number of additional shares of Common Stock
issuable pursuant to the exercise of such rights or
warrants.
P = the offering price per share of the additional
shares (which amount shall include amounts received
by the Corporation in respect of the issuance and the
exercise of such rights or warrants).
M = the Current Market Price per share of Common Stock on
the record date.
Such adjustment shall become effective immediately after the record date
for the determination of stockholders entitled to receive such rights or
warrants. If any or all such rights or warrants are not so issued or expire
or terminate before being exercised, the Exercise Price then in effect
shall be readjusted appropriately.
(ii) In case the Company shall, by dividend or otherwise, distribute
to all holders of its Common Stock evidences of its indebtedness or assets
(including securities, but excluding any warrants or subscription rights
referred to in subparagraph (i) above and any dividend or distribution paid
in cash out of the retained earnings of the Company), then in each such
case the Exercise Price then in effect shall be adjusted in accordance with
the formula
EP1 = EP x M-F
-----
M
36
where
EP1 = the adjusted Exercise Price.
EP = the current Exercise Price.
M = the Current Market Price per share of Common Stock on the
record date mentioned below.
F = the aggregate amount of such cash dividend and/or the fair
market value on the record date of the assets or securities
to be distributed divided by the number of shares of common
Stock outstanding on the record date. The Board of Directors
shall determine such fair market value, which determination
shall be conclusive.
Such adjustment shall become effective immediately after the record date
for the determination of stockholders entitled to receive such dividend or
distribution.
(iii) If at any time an adjustment to the Exercise Price shall be made
in accordance with subparagraph (i) or (ii) above, the Holder of any
Warrant shall thereafter, on the exercise hereof, be entitled to receive
that number of shares of Common Stock determined by multiplying the number
of shares of Common Stock which would be issuable on such exercise
immediately prior to such issuance by a fraction of which (i) the numerator
is the Exercise Price in effect immediately prior to such issuance and (ii)
the denominator is the Exercise Price in effect on the date of such
exercise.
(iv) All calculations hereunder shall be made to the nearest cent or
to the nearest 1/100 of a share, as the case may be.
(v) If at any time as a result of an adjustment made pursuant to
Section 2, the Holder of any Warrant thereafter exercised shall become
entitled to receive securities, cash, or assets other than Common Stock,
the number or amount of such securities or property so receivable upon
exercise shall be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as practicable to the provisions with respect
to the Common Stock contained in subparagraphs (i) to (iv) above.
Except as otherwise provided above in this Section 3, no adjustment in
the Exercise Price shall be made in respect of any conversion for share
distributions or dividends theretofore declared and paid or payable on the
Common Stock.
Whenever the Exercise Price is adjusted, the Company will give notice
by mail to the Holders, which notice shall be made within 45 days after the
effective date of such adjustment and shall state the adjustment and the
Exercise Price. Notwithstanding the foregoing notice provisions, failure by
the Company to give such notice or a defect in such notice shall not affect
the binding nature of such corporate action of the Company.
37
Whenever the Company shall propose to take any of the actions
specified in Section 2 or in subparagraphs (i) or (ii) of the third
paragraph of this Section 3 which would result in any adjustment in the
Exercise Price under this Section 3, the Company shall cause a notice to be
mailed at least 30 days prior to the date on which the books of the Company
will close or on which a record will be taken for such action, to the
Holders. Such notice shall specify the action proposed to be taken by the
Company and the date as of which holders of record of the Common Stock
shall participate in any such actions or be entitled to exchange their
Common Stock for securities or other property, as the case may be. Failure
by the Corporation to mail the notice or any defect in such notice shall
not affect the validity of the transaction.
Notwithstanding any other provision of this Section 3, no adjustment
in the Exercise Price need be made (a) for sales of Common Stock pursuant
to a plan for reinvestment of dividends and interest, provided that the
purchase price in any such sale is at least equal to the fair market value
of the Common Stock at the time of such purchase, or pursuant to any plan
adopted by the Corporation for the benefit of its employees, directors, or
consultants; or (b) after the Common Stock becomes convertible into cash
(no interest shall accrue on the cash).
4. Company Call Option. If at any time after August 19, 1998 the Closing
Price of a share of Common Stock equals or exceeds $5.00 for ten (10)
consecutive trading days, the Company shall thereafter have the option (the
"Company Call Option"), exercisable at any time before this Warrant expires or
is exercised in full, to repurchase this Warrant at a price equal to the Call
Option Price (as hereinafter defined). The Company Call Option may be exercised
by providing written notice of exercise (the "Call Option Notice") to the
Holder, which notice shall specify a date not less than thirty (30) and not more
than sixty (60) days thereafter (the "Call Option Closing Date") upon which the
Company shall repurchase the Warrant. On the Call Option Closing Date, the
Holder shall assign and transfer this Warrant to the Company against payment by
the Company, by check or wire transfer, of the Call Option Price. As used
herein, the Call Option Price shall be calculated in accordance with the formula
COP = N x (ACP - EP)
where
COP = the Call Option Price.
N = the number of shares of Common Stock issuable upon
exercise of this Warrant on the date the Call Option Notice
is sent by the Company.
ACP = the average Closing Price of a share of Common Stock on
the ten (10) trading days preceding the date the Call Option
Notice is sent by the Company.
38
EP = the Exercise Price in effect on the date the Call Option
Notice is sent by the Company.
Upon delivery by the Company of a Call Option Notice, the Holder's right to
exercise this Warrant shall terminate, and the Holder's only right hereunder
shall be to receive the Call Option Price on the Call Option Closing Date as
provided in this Section 4.
5. Reservation of Warrant Shares. On and after the later to occur of (i)
six months after the Closing Date and (ii) the first date following the Closing
Date on which the Closing Price of a share of Common Stock has equaled or
exceeded $2.50 for a period of ten (10) consecutive trading days, the Company
shall reserve and keep available, solely for issuance or delivery upon exercise
of this Warrant, the number of shares of Common Stock as from time to time shall
be receivable upon the exercise of this Warrant.
6. Fully Paid Stock; Taxes. The Company agrees that the shares of the
Common Stock represented by each and every certificate for Warrant Shares
delivered on the exercise of this Warrant shall, at the time of such delivery,
be validly issued and outstanding, fully paid and nonassessable, and not subject
to preemptive rights, and the Company will take all such actions as may be
necessary to assure that the par value or stated value, if any, per share of the
Common Stock is at all times equal to or less than the then Exercise Price. The
Company further covenants and agrees that it will pay, when due and payable, any
and all federal and state stamp, original issue or similar taxes that may be
payable in respect of the issue of any Warrant Share or certificate therefor.
7. Transfer.
(a) Securities Laws. Neither this Warrant nor the Warrant Shares
issuable upon the exercise hereof have been registered under the Securities
Act of 1933, as amended (the "Securities Act"), or under any state
securities laws and unless so registered may not be transferred, sold,
pledged, hypothecated or otherwise disposed of unless an exemption from
such registration is available. In the event the Holder desires to transfer
this Warrant or any of the Warrant Shares issued, the Holder must give the
Company prior written notice of such proposed transfer including the name
and address of the proposed transferee. Such transfer may be made only
either (i) upon publication by the Securities and Exchange Commission (the
"Commission") of a ruling, interpretation, opinion or "no action letter"
based upon facts presented to said Commission, or (ii) upon receipt by the
Company of an opinion of counsel to the Company in either case to the
effect that the proposed transfer will not violate the provisions of the
Securities Act, the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or the rules and regulations promulgated under either such
act, or in the case of clause (ii) above, to the effect that the Warrant or
Warrant Shares to be sold or transferred has been registered under the
Securities Act and that there is in effect a registration statement in
which is included a prospectus meeting the requirements of Subsection 10
(a) of the Securities Act, which is being or will be delivered to the
purchaser or transferee at or prior to the time of delivery of the
certificates evidencing the Warrant or Warrant Stock to be sold or
transferred.
39
(b) Conditions to Transfer. Prior to any such proposed transfer, and
as a condition thereto, if such transfer is not made pursuant to an
effective registration statement under the Securities Act, the Holder will,
if requested by the Company, deliver to the Company (i) an investment
covenant signed by the proposed transferee, (ii) an agreement by such
transferee to the impression of the restrictive investment legend set forth
herein on the certificate or certificates representing the securities
acquired by such transferee, (iii) an agreement by such transferee that the
Company may place a "stop transfer order" with its transfer agent or
registrar, and (iv) an agreement by the transferee to indemnify the Company
to the same extent as set forth in the next succeeding paragraph.
(c) Indemnity. The Holder acknowledges that the Holder understands the
meaning and legal consequences of this Section 7, and the Holder hereby
agrees to indemnify and hold harmless the Company, its representatives and
each officer and director thereof from and against any and all loss, damage
or liability (including all attorneys' fees and costs incurred in enforcing
this indemnity provision) due to or arising out of (a) the inaccuracy of
any representation or the breach of any warranty of the Holder contained
in, or any other breach of, this warrant, (b) any transfer of the Warrant
or any of the Warrant Shares in violation of the Securities Act, the
Exchange Act or the rules and regulations promulgated under either of such
acts, (c) any transfer of the Warrant or any of the Warrant Shares not in
accordance with this Warrant or (d) any untrue statement or omission to
state any material fact in connection with the investment representations
or with respect to the facts and representations supplied by the Holder to
counsel to the Company upon which its opinion as to a proposed transfer
shall have been based.
(d) Transfer. Except as restricted hereby, this Warrant and the
Warrant Shares issued may be transferred by the Holder in whole or in part
at any time or from time to time. Upon surrender of this Warrant to the
Company or at the office of its stock transfer agent, if any, with
assignment documentation duly executed and funds sufficient to pay any
transfer tax, and upon compliance with the foregoing provisions, the
Company shall, without charge, execute and deliver a new Warrant in the
name of the assignee named in such instrument of assignment, and this
Warrant shall promptly be canceled. Any assignment, transfer, pledge,
hypothecation or other disposition of this Warrant attempted contrary to
the provisions of this Warrant, or any levy of execution, attachment or
other process attempted upon the Warrant, shall be null and void and
without effect.
(e) Legend and Stop Transfer Orders. Unless the Warrant Shares have
been registered under the Securities Act, upon exercise of any part of the
Warrant and the issuance of any of the Warrant Shares, the Company shall
instruct its transfer agent to enter stop transfer orders with respect to
such shares, and all certificates representing Warrant Shares shall bear on
the face thereof substantially the following legend, insofar as is
consistent with Delaware law:
40
"The shares of common stock represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may not be
sold, offered for sale, assigned, transferred or otherwise disposed of
unless registered pursuant to the provisions of that Act or an opinion of
counsel to the Company is obtained stating that such disposition is in
compliance with an available exemption from such registration."
8. Loss, etc. of Warrant. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of an
unsecured indemnity from the Holder reasonably satisfactory to the Company, if
lost, stolen or destroyed, and upon surrender and cancellation of the Warrant,
if mutilated, the Company shall execute and deliver to the Holder a new Warrant
of like date, tenor and denomination.
9. Warrant Holder Not Shareholder. Except as otherwise provided herein,
this Warrant does not confer upon the Holder any right to vote or to consent to
or receive notice as a shareholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a shareholder, prior
to the exercise hereof.
10. Communication. No notice or other communication under this Warrant
shall be effective unless the same is in writing and is (i) mailed by
first-class mail, postage prepaid, or (ii) sent by facsimile, addressed to:
(a) the Company at 00 Xxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxxxx 00000,
facsimile no. (000) 000-0000, attention: Xxxx X. Xxxxxx, Director of
Finance, or such other address as the Company has designated in writing to
the Holder, with a copy to Xxxxx X. Xxxxxxxx, Esq., Xxxxx, Xxxx & Xxxxx
LLP, Xxx Xxxx Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, facsimile no.
(000) 000-0000 or
(b) the Holder at or such other address as the Holder has designated
in writing to the Company.
11. Headings. The headings of this Warrant have been inserted as a matter
of convenience and shall not affect the construction hereof
12. Applicable Law. This Warrant shall be governed by and construed in
accordance with the law of the State of Delaware without giving effect to the
principles of conflicts of law thereof.
41
IN WITNESS WHEREOF, PALOMAR MEDICAL TECHNOLOGIES, INC. has caused this
Warrant to be signed by its Chief Executive Officer and its corporate seal to be
hereunto affixed and attested by its Secretary this ____ day of ________, 1998.
ATTEST: PALOMAR MEDICAL TECHNOLOGIES, INC.
____________________________ By:
Title: Chief Executive Officer
[Corporate Seal]
42
SUBSCRIPTION
The undersigned, ______________________________________________,
pursuant to the provisions of the foregoing Warrant, hereby agrees to subscribe
for the purchase of _________ shares of the Common Stock of PALOMAR MEDICAL
TECHNOLOGIES, INC. covered by said Warrant, and makes payment therefor in full
at the price per share provided by said Warrant.
Dated: ___________________ Signature: _________________________
Address: _________________________
----------------------------------
----------------------------------
Soc. Sec. or Fed ID Number: _____________
43
ASSIGNMENT
FOR VALUE RECEIVED ____________________________________ hereby sells,
assigns and transfers unto ___________________________________ the foregoing
Warrant and all rights evidenced thereby, and does irrevocably constitute and
appoint __________________________________, attorney, to transfer said Warrant
on the books of PALOMAR MEDICAL TECHNOLOGIES, INC.
Dated: ___________________ Signature: _________________________
Address: _________________________
----------------------------------
----------------------------------
Soc. Sec. or Fed ID Number: _____________
44
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED ____________________________________ hereby sells,
assigns and transfers unto ____________________________________ the right to
purchase ___________ shares of the Common Stock of PALOMAR MEDICAL TECHNOLOGIES,
INC. by the foregoing Warrant, and a proportionate part of said Warrant and the
rights evidenced hereby, and does irrevocably constitute and appoint
___________________________________, attorney, to transfer that part of said
Warrant on the books of PALOMAR MEDICAL TECHNOLOGIES, INC.
Dated: ___________________ Signature: _________________________
Address: _________________________
----------------------------------
----------------------------------
Soc. Sec. or Fed ID Number: _____________
