SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of March 27,
1997, by and among PALOMAR MEDICAL TECHNOLOGIES, INC., a corporation organized
under the laws of the State of Delaware (the "COMPANY"), with headquarters
located at 00 Xxxxxx Xxxx Xxxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000 and each of the
purchasers (the "PURCHASERS") set forth on the execution pages hereof (the
"Execution Pages").
WHEREAS:
A. The Company and each Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the "SECURITIES
ACT");
B. Each Purchaser desires to purchase, upon the terms and conditions
stated in this Agreement, shares (the "PREFERRED SHARES") of the Company's
Series H Convertible Preferred Stock, par value $.01 per share ("PREFERRED
STOCK") convertible into its common stock, par value $.01 per share, of the
Company (the "COMMON STOCK"). The rights, preferences and privileges of the
Preferred Stock, including the terms upon which such Preferred Stock is
convertible into shares of Common Stock are set forth in the form of Certificate
of Designations, Preferences and Rights attached hereto as EXHIBIT A (the
"CERTIFICATE OF DESIGNATIONS"). The shares of Common Stock issuable upon
conversion of the Preferred Shares or otherwise pursuant to the Certificate of
Designations are referred to herein as the "CONVERSION SHARES". The Preferred
Shares and Conversion Shares are collectively referred to herein as the
"SECURITIES."
C. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
in the form attached hereto as EXHIBIT B (the "REGISTRATION RIGHTS AGREEMENT"),
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated thereunder,
and applicable state securities laws;
NOW, THEREFORE, the Company and the Purchasers hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
a. PURCHASE OF PREFERRED SHARES. On the Closing Date (as defined
below), subject to the satisfaction (or waiver) of the conditions set forth in
Sections 6 and 7 below, the Company shall issue and sell to each Purchaser and
each Purchaser severally agrees to purchase from the Company, such number of
Preferred Shares as is set forth on such Purchaser's signature page
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hereto. The purchase price (the "PURCHASE PRICE") per Preferred Share at such
closing shall be equal to One Thousand Dollars ($1,000.00) and the aggregate
purchase price for all of the Preferred Shares to be purchased by the Purchasers
shall be Six Million Dollars ($6,000,000.00). For the avoidance of doubt, in no
event shall any Purchaser be required to purchase more than the number of
Preferred Shares being subscribed for hereunder by such Purchaser as set forth
on such Purchaser's Execution Page. The Company may sell up to Fourteen Million
Dollars ($14,000,000.00) of additional Preferred Shares, at One Thousand Dollars
($1,000.00) per Preferred Share at one additional closing within 60 days of the
Closing Date (such closing, if any, is herein referred to as the "ADDITIONAL
CLOSING").
b. FORM OF PAYMENT. On the Closing Date, each Purchaser shall pay the
aggregate Purchase Price for the Preferred Shares being purchased by such
Purchaser hereunder by wire transfer to the Company, in accordance with the
Company's written wiring instructions, against delivery of duly executed
certificates representing the Preferred Shares being purchased by such Purchaser
hereunder and the Company shall deliver such certificates against delivery of
such aggregate Purchase Price.
c. CLOSING DATE. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Preferred Shares pursuant to this Agreement (the
"CLOSING DATE") shall be 12:00 noon eastern time on March 31, 1997, (subject to
a two (2) business day grace period at either party's option), or such other
time as may be mutually agreed upon by the Company and the Purchasers. The
closing shall occur at the offices of Xxxxx, Xxxx & Xxxxx, LLP, Xxx Xxxx Xxxxxx
Xxxxxx, Xxxxxx, XX 00000.
2. PURCHASERS' REPRESENTATIONS AND WARRANTIES
Each Purchaser severally represents and warrants to the Company that:
a. INVESTMENT PURPOSE. Purchaser is purchasing the Preferred Shares for
Purchaser's own account for investment only and not with a present view towards
the public sale or distribution thereof, except pursuant to sales that are
exempt from the registration requirements of the Securities Act and/or sales
registered under the Securities Act. Purchaser understands that Purchaser must
bear the economic risk of this investment indefinitely, unless the Securities
are registered pursuant to the Securities Act and any applicable state
securities or blue sky laws or an exemption from such registration is available,
and that the Company has no present intention of registering any such Securities
other than as contemplated by the Registration Rights Agreement. Notwithstanding
anything in this Section 2(a) to the contrary, by making the representations
herein, the Purchaser does not agree to hold the Securities for any minimum or
other specific term and reserves the right to dispose of the Securities at any
time in accordance with or pursuant to a registration statement or an exemption
under the Securities Act.
b. ACCREDITED INVESTOR STATUS. Purchaser is an "ACCREDITED INVESTOR" as
that term is defined in Rule 501(a) of Regulation D.
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c. RELIANCE ON EXEMPTIONS. Purchaser understands that the Preferred
Shares are being offered and sold to Purchaser in reliance upon specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and Purchaser's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of Purchaser set forth herein in order to
determine the availability of such exemptions and the eligibility of Purchaser
to acquire the Preferred Shares.
d. INFORMATION. Purchaser and its counsel, if any, have been furnished
all materials relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Preferred Shares which have
been specifically requested by Purchaser or its counsel. Purchaser and its
counsel, if any, have been afforded the opportunity to ask questions of the
Company and have received what Purchaser believes to be complete and
satisfactory answers to any such inquiries. Neither such inquiries nor any other
due diligence investigation conducted by Purchaser or its counsel or any of its
representatives shall modify, amend or affect Purchaser's right to rely on the
Company's representations and warranties contained in Section 3 below. Purchaser
understands that Purchaser's investment in the Securities involves a high degree
of risk.
e. GOVERNMENTAL REVIEW. Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities.
f. TRANSFER OR RESALE. Purchaser understands that (i) except as
provided in the Registration Rights Agreement, the Securities have not been and
are not being registered under the Securities Act or any state securities laws,
and may not be transferred unless (a) subsequently registered thereunder, or (b)
Purchaser shall have delivered to the Company an opinion of counsel (which
opinion shall be in form, substance and scope customary for opinions of counsel
in comparable transactions) to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration or (c) sold pursuant to Rule 144 promulgated under the Securities
Act (or a successor rule) ("RULE 144"), or (d) sold or transferred to an
affiliate of Purchaser; (ii) any sale of such Securities made in reliance on
Rule 144 may be made only in accordance with the terms of said Rule and further,
if said Rule is not applicable, any resale of such Securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the Securities
Act) may require compliance with some other exemption under the Securities Act
or the rules and regulations of the Securities and Exchange Commission (the
"SEC") thereunder; and (iii) neither the Company nor any other person is under
any obligation to register such Securities under the Securities Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder (in each case, other than pursuant to the Registration Rights
Agreement).
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g. LEGENDS. Purchaser understands that the Preferred Shares and, until
such time as the Conversion Shares have been registered under the Securities Act
as contemplated by the Registration Rights Agreement or otherwise may be sold by
Purchaser pursuant to Rule 144 without any restriction as to the public resale
thereof, the certificates for the Conversion Shares may bear a restrictive
legend in substantially the following form (and a stop-transfer order may be
placed against transfer of the certificates for such Securities):
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities have been
acquired for investment and may not be sold, transferred or assigned in
the absence of an effective registration statement for the securities
under said Act, or an opinion of counsel, in form, substance and scope
customary for opinions of counsel in comparable transactions, that
registration is not required under said Act or unless sold pursuant to
Rule 144(k) under said Act.
The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by state securities laws, (a) the sale of
such Security is registered under the Securities Act, or (b) such holder
provides the Company with an opinion of counsel, in form, substance and scope
customary for opinions of counsel in comparable transactions, to the effect that
a public sale or transfer of such Security may be made without registration
under the Securities Act or (c) such holder provides the Company with reasonable
assurances that such Security has been sold pursuant to Rule 144 or can be sold
pursuant to Rule 144 without any restriction as to the number of Securities
acquired as of a particular date that can then be immediately sold. Purchaser
agrees to sell all Securities, including those represented by a certificate(s)
from which the legend has been removed, pursuant to an effective registration
statement and to deliver a prospectus in connection with such sale (if and to
the extent such delivery is required) or in compliance with an exemption from
the registration requirements of the Securities Act. In the event the above
legend is removed from any Security and thereafter the effectiveness of a
registration statement covering such Security is suspended or the Company
determines that a supplement or amendment thereto is required by applicable
securities laws, then upon reasonable advance notice to Purchaser the Company
may require that the above legend be placed on any such Security that cannot
then be sold pursuant to an effective registration statement or Rule 144 without
any restriction as to the number of Securities acquired as of a particular date
that can then be immediately sold, which legend shall be removed when such
Security has been sold pursuant to Rule 144 or may be sold pursuant to an
effective registration statement or Rule 144 without any restriction as to the
number of Securities acquired as of a particular date that can then be
immediately sold.
h. [Intentionally Omitted]
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i. AUTHORIZATION; ENFORCEMENT. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of Purchaser and are valid and binding agreements of Purchaser
enforceable in accordance with their terms.
j. RESIDENCY. Purchaser is a resident of the jurisdiction set forth
under such Purchaser's name on the signature page hereto executed by such
Purchaser.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Purchaser that:
a. ORGANIZATION AND QUALIFICATION. The Company and each of its
subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction in which it is incorporated, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Company and each of its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
where the failure so to qualify would have a Material Adverse Effect. "MATERIAL
ADVERSE EFFECT" means any material adverse effect on the operations, properties,
financial condition or prospects of the Company and its subsidiaries, taken as a
whole on a consolidated basis or on the transactions contemplated hereby.
b. AUTHORIZATION; ENFORCEMENT. (i) The Company has the requisite
corporate power and authority to enter into and perform this Agreement and the
Registration Rights Agreement, to issue and sell the Preferred Shares in
accordance with the terms hereof, and to issue the Conversion Shares upon
conversion of the Preferred Shares in accordance with the terms of the
Certificate of Designations; (ii) the execution, delivery and performance of
this Agreement and the Registration Rights Agreement by the Company and the
consummation by it of the transactions contemplated hereby and thereby
(including without limitation the issuance of the Preferred Shares and the
issuance and reservation for issuance of the Conversion Shares) have been duly
authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board or Directors, or its stockholders is
required (under Rule 4460(i) promulgated by the National Association of
Securities Dealers or otherwise); (iii) this Agreement has been duly executed
and delivered by the Company; and (iv) this Agreement constitutes, and, upon
execution and delivery by the Company of the Registration Rights Agreement, such
agreement will constitute, valid and binding obligations of the Company
enforceable against the Company in accordance with their terms.
c. CAPITALIZATION. The capitalization of the Company as of the date
hereof, including the authorized capital stock, the number of shares issued and
outstanding, the number of shares reserved for issuance pursuant to the
Company's stock option plans, the number of shares reserved for issuance
pursuant to securities (other than the Preferred Shares) exercisable for, or
convertible into or exchangeable for any shares of Common Stock and the number
of shares to be reserved for issuance upon conversion of the Preferred Shares is
set forth on SCHEDULE 3(C). All of such outstanding shares of capital stock have
been, or upon issuance will be, validly issued,
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fully paid and nonassessable. No shares of capital stock of the Company
(including the Preferred Shares and the Conversion Shares) are subject to
preemptive rights or any other similar rights of the stockholders of the Company
or any liens or encumbrances. Except as disclosed in SCHEDULE 3(C) or as
contemplated herein, as of the date of this Agreement, (i) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exercisable or exchangeable for, any shares of capital stock
of the Company or any of its subsidiaries, or arrangements by which the Company
or any of its subsidiaries is or may become bound to issue additional shares of
capital stock of the Company or any of its subsidiaries, and (ii) there are no
agreements or arrangements under which the Company or any of its subsidiaries is
obligated to register the sale of any of the Company's securities under the
Securities Act (except the Registration Rights Agreement). The Company has made
available to each Purchaser true and correct copies of the Company's Certificate
of Incorporation as in effect on the date hereof ("CERTIFICATE OF
INCORPORATION"), the Company's By-laws as in effect on the date hereof (the
"BY-LAWS"), and all other instruments and agreements governing securities
convertible into or exercisable or exchangeable for Common Stock of the Company.
The Certificate of Designations, in the form attached hereto, has been duly
filed with the Secretary of State of the State of Delaware and, upon the
issuance of the Preferred Shares in accordance with the terms hereof, each
Purchaser shall be entitled to the rights set forth therein. The Company shall
provide each Purchaser with a written update of this representation signed by
the Company's Chief Executive Officer or Chief Financial Officer on behalf of
the Company as of the Closing Date.
d. ISSUANCE OF SHARES. The Preferred Shares are duly authorized and,
upon issuance in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, and free from all taxes, liens, claims
and encumbrances and will not be subject to preemptive rights or other similar
rights of stockholders of the Company. The Conversion Shares are duly authorized
and reserved for issuance, and, upon conversion of the Preferred Shares in
accordance with the terms thereof, will be validly issued, fully paid and
non-assessable, and free from all taxes, liens, claims and encumbrances and will
not be subject to preemptive rights or other similar rights of stockholders of
the Company.
e. NO CONFLICTS. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement by the Company, the performance
by the Company of its obligations under the Certificate of Designations, and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance and reservation for issuance, as
applicable, of the Preferred Shares and Conversion Shares) will not (i) result
in a violation of the Certificate of Incorporation or By-laws or (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its subsidiaries is a party, or result
in a violation of any law, rule, regulation, order, judgment or decree
(including U.S. federal and state securities laws and regulations) applicable to
the Company or any of
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its subsidiaries or by which any property or asset of the Company or any of its
subsidiaries is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect). Neither
the Company nor any of its subsidiaries is in violation of its Certificate of
Incorporation or other organizational documents and neither the Company nor any
of its subsidiaries is in default (and no event has occurred which, with notice
or lapse of time or both, would put the Company or any of its subsidiaries in
default) under, nor has there occurred any event giving others (with notice or
lapse of time or both) any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, except for possible defaults or rights as
would not, individually or in the aggregate, have a Material Adverse Effect. The
businesses of the Company and its subsidiaries are not being conducted, and
shall not be conducted so long as a Purchaser owns any of the Securities, in
violation of any law, ordinance or regulation of any governmental entity, except
for possible violations the sanctions for which either singly or in the
aggregate would not have a Material Adverse Effect. Except as specifically
contemplated by this Agreement and as required under the Securities Act and any
applicable state securities laws and the filing of an application with NASDAQ
(as defined below) to list or approve for quotation the Conversion Shares, the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency or any
regulatory or self regulatory agency in order for it to execute, deliver or
perform any of its obligations under this Agreement or the Registration Rights
Agreement or to perform its obligations under the Certificate of Designations,
in each case in accordance with the terms hereof or thereof. The Company is not
in violation of the listing requirements of the NASDAQ Small Cap Market
("NASDAQ") and does not reasonably anticipate that the Common Stock will be
delisted by NASDAQ in the foreseeable future.
f. SEC DOCUMENTS, FINANCIAL STATEMENTS. Since December 31, 1993, the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT") (all of the foregoing, filed prior to the date hereof and after December
31, 1993, and all exhibits included therein and financial statements and
schedules thereto and documents (other than exhibits) incorporated by reference
therein together with any registration statements or other documents filed by
the Company pursuant to the Securities Act prior to the date hereof and those
certain news releases attached hereto as SCHEDULE 3(F), being hereinafter
referred to herein as the "SEC DOCUMENTS"). The Company has delivered to each
Purchaser true and complete copies of the SEC Documents, except for such
exhibits, schedules and incorporated documents. As of their respective dates,
the SEC Documents complied in all material respects with the requirements of the
Exchange Act or the Securities Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
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respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with U.S. generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may include
footnotes or may not be condensed or summary statements) and fairly present in
all material respects the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments). Except as
set forth in the financial statements of the Company included in the SEC
Documents, the Company has no liabilities, contingent or otherwise, other than
(i) liabilities incurred in the ordinary course of business subsequent to the
date of the most recent financial statements included in the SEC Documents and
(ii) obligations under contracts and commitments incurred in the ordinary course
of business and not required under generally accepted accounting principles to
be reflected in such financial statements, which, individually or in the
aggregate, are not material to the financial condition or operating results of
the Company.
g. ABSENCE OF CERTAIN CHANGES. Since December 31, 1995, there has been
no material adverse change and no material adverse development in the business,
properties, operations, financial condition, results of operations or prospects
of the Company, except as disclosed in the SEC Documents.
h. ABSENCE OF LITIGATION. Except for the declaratory judgment action
filed by the Company against XXXX/Biophile in the United States District Court
for the District of Massachusetts in October, 1996 and the Declaratory judgment
action filed by Selvac Acquisitions Corp. against the Company and other parties
in the United States District Court for the District of New Jersey in March,
1997, or except as disclosed in the SEC Documents, there is no action, suit,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its subsidiaries, threatened against or
affecting the Company, any of its subsidiaries, or any of their respective
directors or officers in their capacities as such, wherein an unfavorable
decision, ruling or finding would have a material adverse effect on the
properties, business, condition (financial or other), results of operations or
prospects of the Company and its subsidiaries taken as a whole or the
transactions contemplated by this Agreement or any of the documents contemplated
hereby or which would adversely affect the validity or enforceability of, or the
authority or ability of the Company to perform its obligations under, this
Agreement or any of such other documents.
i. DISCLOSURE. All information relating to or concerning the Company
set forth in this Agreement or provided to the Purchasers pursuant to Section
2(d) hereof and otherwise in connection with the transactions contemplated
hereby is true and correct in all material respects and the Company has not
omitted to state any material fact necessary in order to make the statements
made herein or therein, in light of the circumstances under which they were
made, not
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misleading. No event or circumstance has occurred or exists with respect to the
Company or its subsidiaries or their respective businesses, properties,
prospects, operations or financial conditions, which, under applicable law, rule
or regulation, requires public disclosure or announcement by the Company but
which has not been so publicly announced or disclosed (assuming for this purpose
that the Company's Exchange Act Reports are being incorporated into an effective
registration statement filed by the Company under the Securities Act).
j. ACKNOWLEDGMENT REGARDING PURCHASERS' PURCHASE OF THE SECURITIES. The
Company acknowledges and agrees that none of the Purchasers are acting as a
financial advisor or fiduciary of the Company (or in any similar capacity) with
respect to this Agreement or the transactions contemplated hereby, and any
advice given by any Purchaser, or any of their representatives or agents, in
connection with this Agreement and the transactions contemplated hereby is
merely incidental to each Purchaser's purchase of Preferred Shares. The Company
further represents to each Purchaser that the Company's decision to enter into
this Agreement has been based solely on an independent evaluation by the Company
and its representatives.
k. CURRENT PUBLIC INFORMATION. The Company is currently eligible to
register the resale of its Common Stock on a registration statement on Form S-3
under the Securities Act.
l. NO GENERAL SOLICITATION. Neither the Company nor any distributor
participating on the Company's behalf in the transactions contemplated hereby
(if any) nor any person acting for the Company, or any such distributor, has
conducted any "GENERAL SOLICITATION," as such term is defined in Regulation D,
with respect to any of the Securities being offered hereby.
m. NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would require registration of the
Securities being offered hereby under the Securities Act.
n. NO BROKERS. The Company has taken no action which would give rise to
any claim by any person for brokerage commissions, finder's fees or similar
payments by any Purchaser relating to this Agreement or the transactions
contemplated hereby, except for dealings with Xxxxxxx Arnouse whose commissions
and fees will be paid for by the Company.
o. ACKNOWLEDGMENT OF DILUTION. The number of Conversion Shares issuable
upon conversion of the Preferred Shares may increase substantially in certain
circumstances, including the circumstance wherein the trading price of the
Common Stock declines. The Company acknowledges that its obligation to issue
Conversion Shares upon conversion of the Preferred Shares in accordance with the
Certificate of Designations is absolute and unconditional, regardless of the
dilution that such issuance may have on the ownership interests of other
stockholders.
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p. INTELLECTUAL PROPERTY. Each of the Company and its subsidiaries owns
or possesses adequate and enforceable rights to use all patents, patent
applications, trademarks, trademark applications, trade names, service marks,
copyrights, copyright applications, licenses, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) and other similar rights and proprietary
knowledge (collectively, "INTANGIBLES") necessary for the conduct of its
business as now being conducted and as described in the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995. Neither the Company
nor any subsidiary of the Company infringes or is in conflict with any right of
any other person with respect to any Intangibles which, individually or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
have a Material Adverse Effect.
q. FOREIGN CORRUPT PRACTICES. Neither the Company, nor any of its
subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any subsidiary has, in the course of acting for, or
on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977;
or made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.
4. COVENANTS.
a. BEST EFFORTS. The parties shall use their best efforts timely to
satisfy each of the conditions described in Section 6 and 7 of this Agreement.
b. BLUE SKY LAWS. The Company shall, on or before the Closing Date take
such action as the Company shall reasonably determine is necessary to qualify
the Securities for sale to the Purchasers pursuant to this Agreement under
applicable securities or "blue sky" laws of the states of the United States or
obtain exemption therefrom, and shall provide evidence of any such action so
taken to the Purchasers on or prior to the Closing Date.
c. REPORTING STATUS. So long as any Purchaser beneficially owns any of
the Securities, the Company shall timely file all reports required to be filed
with the SEC pursuant to the Exchange Act, and the Company shall not terminate
its status as an issuer required to file reports under the Exchange Act even if
the Exchange Act or the rules and regulations thereunder would permit such
termination.
d. USE OF PROCEEDS. The Company shall use the proceeds from the sale of
the Preferred Shares for internal working capital purposes, mergers and
acquisitions, investments and general corporate purposes.
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e. ADDITIONAL EQUITY CAPITAL; RIGHT OF FIRST OFFER. The Company agrees
that during the period beginning on the date hereof and ending ninety (90) days
following the later of (i) the Closing Date and (ii) the date of the Additional
Closing, if any (the "LOCK-UP PERIOD"), the Company will not, without the prior
written consent of Purchasers (or their designated agents) holding at least two
thirds (2/3rds) of the then outstanding Preferred Shares, issue or sell or
contract with any party to issue or sell any Below Market Security (as defined
below) ("FUTURE OFFERINGS"). In addition, the Company will not conduct any
Future Offering during the period beginning on the date hereof and ending 180
days following the later of (i) the Closing Date and (ii) the Additional
Closing, if any, unless it shall have first delivered to each Purchaser at least
five (5) business days prior to the closing of such Future Offering, written
notice describing the proposed Future Offering, including the terms and
conditions thereof, and providing each Purchaser and its affiliates, an option
during the five (5) business day period following delivery of such notice to
purchase up to the Applicable Portion (as defined below) of the Below Market
Securities being offered in the Future Offering on the same terms as
contemplated by such Future Offering (the limitations referred to in this and
the immediately preceding sentence are collectively referred to as the "CAPITAL
RAISING LIMITATIONS"). The Capital Raising Limitations shall not apply to the
sale of Preferred Shares at the Additional Closing, if any, on the terms set
forth herein or to any transaction involving issuances of securities in
connection with a merger, consolidation, acquisition or sale of assets, or in
connection with any strategic partnership or joint venture (the primary purpose
of which is not to raise equity capital), or in connection with the disposition
or acquisition of a business, product or license by the Company or exercise of
options by employees, consultants or directors. The Capital Raising Limitations
also shall not apply to (i) the issuance of securities pursuant to an
underwritten public offering, (ii) the issuance of securities upon exercise or
conversion of the Company's options, warrants or other convertible securities
outstanding as of the date hereof or (iii) the grant of additional options or
warrants, or the issuance of additional securities, under any Company stock
option or restricted stock plan for the benefit of the Company's employees,
directors or consultants. The "APPLICABLE PORTION" shall mean the product of (i)
a fraction, the numerator of which is the number of Preferred Shares purchased
by such Purchaser hereunder and the denominator of which is the total number of
Preferred Shares purchased by all of the Purchasers hereunder (including
Preferred Shares issued on the Closing Date and on the date of the Additional
Closing, if any). "BELOW MARKET SECURITIES" shall mean any Common Stock or any
security of the Company which is convertible into or exercisable or exchangeable
for Common Stock and which is sold at a "gross selling price per share" of
Common Stock which is less than the average of the Closing Bid Prices (as
defined in the Certificate of Designations) for the five (5) trading days
immediately preceding the date of issuance of such security, where the price per
share of Common Stock for any security convertible into or exchangeable or
exercisable for Common Stock shall be determined by dividing (i) the total
amount, if any, received or receivable by the Company as consideration for
issuance or sale of such security, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the exercise,
conversion or exchange thereof by (ii) the maximum total number of shares of
Common Stock issuable upon the exercise, conversion or exchange of such
security.
11
f. EXPENSES. On the date of the Closing, the Company shall pay Five
Thousand Dollars ($5,000.00) to RGC International Investors, LDC ("RGC") as a
non-accountable expense allowance to be applied by RGC against all expenses
incurred by RGC and its affiliates in connection with the negotiation,
preparation, execution, delivery and performance of this Agreement and the other
agreements to be executed in connection herewith, including, without limitation,
RGC and its affiliates' attorneys' fees and expenses.
g. FINANCIAL INFORMATION. Upon the written request of any Purchaser
holding any Securities, the Company shall send the following reports to such
Purchaser: a copy of its Annual Report on Form 10-K, its Quarterly Reports on
Form 10-Q, any proxy statements, any Current Reports on Form 8-K and any press
releases issued by the Company or any of its subsidiaries.
h. RESERVATION OF SHARES. The Company shall at all times have
authorized and reserved for the purpose of issuance a sufficient number of
shares of Common Stock to provide for the full conversion of the outstanding
Preferred Shares and issuance of the Conversion Shares in connection therewith
and as otherwise required by the Certificate of Designations. The Company shall
not reduce the number of shares reserved for issuance upon conversion of the
Preferred Shares without the consent of Purchasers holding a majority of the
Preferred Shares then held by all Purchasers.
i. LISTING. Promptly (and in no event more than fifteen (15) days)
following the Company's receipt of a Conversion Notice (as defined in the
Certificate of Designations) with respect to any Preferred Share, the Company
shall secure the listing or approval for quotation of all of the Conversion
Shares upon each national securities exchange or automated quotation system, if
any, upon which shares of Common Stock are then listed (subject to official
notice of issuance) and thereafter shall maintain, so long as any other shares
of Common Stock shall be so listed, such listing of all Conversion Shares from
time to time issuable upon conversion of the Preferred Shares. The Company will
take all action necessary to continue the listing and trading of its Common
Stock on the NASDAQ, the NASDAQ National Market ("NNM"), the New York Stock
Exchange ("NYSE") or the American Stock Exchange ("AMEX") and will comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the National Association of Securities Dealers ("NASD") and
such exchanges, as applicable.
j. CORPORATE EXISTENCE. So long as a Purchaser beneficially owns any
Preferred Shares, the Company shall maintain its corporate existence, except in
the event of a merger, consolidation or sale of all or substantially all of the
Company's assets, as long as the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the
agreements and instruments entered into in connection herewith regardless of
whether or not the Company would have had a sufficient number of shares of
Common Stock authorized and available for issuance in order to effect the
conversion of all Preferred Shares outstanding as of the date of such
transaction and (ii) is a publicly traded corporation whose common stock is
listed for trading on the NASDAQ, NNM, NYSE or AMEX.
k. [Intentionally Omitted]
12
l. If no Additional Closing occurs, or if it occurs for fewer than
14,000 Preferred Shares, the Company shall promptly amend the Certificate of
Designations to reduce the authorized number of Preferred Shares from 20,000 to
the number actually issued and sold hereunder.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall instruct its transfer agent to issue certificates,
registered in the name of each Purchaser or its nominee, for the Conversion
Shares in such amounts as specified from time to time by such Purchaser to the
Company upon conversion of the Preferred Shares. Prior to registration of the
Conversion Shares under the Securities Act or resale of such Securities under
Rule 144, all such certificates shall bear the restrictive legend specified in
Section 2(g) of this Agreement. The Company warrants that no instruction other
than such instructions referred to in this Section 5, and stop transfer
instructions to give effect to Section 2(f) hereof in the case of the Conversion
Shares prior to registration of the Conversion Shares under the Securities Act,
will be given by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Registration Rights Agreement.
Nothing in this Section shall affect in any way each Purchaser's obligations and
agreement set forth in Section 2(g) hereof to resell the Securities pursuant to
an effective registration statement and to deliver a prospectus in connection
with such sale or in compliance with an exemption from the registration
requirements of applicable securities law. If a Purchaser provides the Company
with an opinion of counsel, which opinion of counsel shall be in form, substance
and scope customary for opinions of counsel in comparable transactions, to the
effect that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from registration, the Company shall permit the
transfer, and, in the case of the Conversion Shares, promptly instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by a Purchaser. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to a
Purchaser by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 will be inadequate and agrees, in
the event of a breach or threatened breach by the Company of the provisions of
this Section 5, that a Purchaser shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic loss
and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Preferred
Shares to a Purchaser at the closing is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions thereto, provided
that these conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion.
13
(a) The applicable Purchaser shall have executed the signature page to
this Agreement and the Registration Rights Agreement, and delivered the same to
the Company.
(b) The applicable Purchaser shall have delivered the Purchase Price
for the Preferred Shares purchased in accordance with Section 1(b) above and the
aggregate number of Preferred Shares purchased by all Purchasers hereunder shall
not be less than 6,000.
(c) The representations and warranties of the applicable Purchaser
shall be true and correct as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date), and the applicable Purchaser shall have performed,
satisfied and complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by the applicable Purchaser at or prior to the Closing Date.
(d) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
7. CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE.
The obligation of each Purchaser hereunder to purchase the Preferred
Shares to be purchased by it on the Closing Date is subject to the satisfaction
of each of the following conditions, provided that these conditions are for such
Purchaser's sole benefit and may be waived by such Purchaser at any time in the
Purchaser's sole discretion:
(a) The Company shall have executed the signature page to this
Agreement and the Registration Rights Agreement, and delivered the same to such
Purchaser.
(b) The Certificate of Designations shall have been accepted for filing
with the Secretary of State of the State of Delaware and a copy thereof
certified by the Secretary of State of Delaware shall have been delivered to
such Purchaser.
(c) The Company shall have delivered duly executed certificates (in
such denominations as such Purchaser shall request) representing the Preferred
Shares being so purchased to such Purchaser in accordance with Section 1(b)
above.
(d) The aggregate number of Preferred Shares purchased by all
Purchasers hereunder shall be 6,000 (plus in the case of the Additional Closing,
if any, up to, but not more than, 14,000).
14
(e) The Common Stock shall be authorized for quotation on NASDAQ and
trading in the Common Stock (or NASDAQ generally) shall not have been suspended
by the SEC or NASD.
(f) The representations and warranties of the Company shall be true and
correct as of the date when made and as of the Closing Date as though made at
that time (except for representations and warranties that speak as of a specific
date) and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or prior
to the Closing date. Such Purchaser shall have received a certificate, executed
by the chief executive officer of the Company, dated as of the Closing Date to
the foregoing effect and as to such other matters as may be reasonably requested
by such Purchaser.
(g) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
(h) Such Purchaser shall have received the officer's certificate
described in Section 3(c) above, dated as of the Closing Date.
(i) Such Purchaser shall have received an opinion of the Company's
counsel, dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Purchaser and in substantially the form of EXHIBIT C
attached hereto.
(j) The Company shall have executed, and shall have delivered evidence
reasonably satisfactory to the Purchasers that the Company's transfer agent has
agreed to act in accordance with the irrevocable instructions in the form
attached hereto as EXHIBIT D; PROVIDED, HOWEVER, if such evidence is not
delivered on or prior to the Closing Date, the Company shall use its best
efforts to deliver such evidence as soon as practicable thereafter.
8. GOVERNING LAW; MISCELLANEOUS.
a. GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware. The Company
irrevocably consents to the jurisdiction of the United States federal courts
located in the County of Kent in the State of Delaware in any suit or proceeding
based on or arising under this Agreement and irrevocably agrees that all claims
in respect of such suit or proceeding may be determined in such courts. The
Company irrevocably waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding. The Company further agrees that service
of process upon the Company mailed by first class mail shall be deemed in every
respect effective service of process upon the Company
15
in any suit or proceeding arising hereunder. Nothing herein shall affect a
Purchaser's right to serve process in any other manner permitted by law. The
Company agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
b. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party.
c. HEADINGS. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. SEVERABILITY. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Purchasers make any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be waived other than by an instrument in
writing signed by the party to be charged with enforcement and no provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and the Purchasers.
f. NOTICES. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier or confirmed telecopy, in each case addressed to a party. The addresses
for such communications shall be:
If to the Company:
Palomar Medical Technologies, Inc.
00 Xxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxx Xxxxxx, Director of Finance
with a copy to each of the Company's General Counsel at the
same address and to:
16
Xxxxx, Xxxx & Xxxxx, LLP
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxx Xxxxxxxx
If to RGC International Investors, LDC:
RGC International Investors, LDC
x/x Xxxx Xxxx Xxxxxxx Xxxxxxxxxx, X.X.
000 X. Xxxxxxxxxx Xxxx
Xxxxx 0000
Xxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx Xxxxx
If to any other Purchaser, to such address set forth under such
Purchaser's name on the signature page hereto executed by such Purchaser.
Each party shall provide notice to the other parties of any change in
address.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Neither
the Company nor any Purchaser shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, any Purchaser may assign its rights hereunder to
any of its "AFFILIATES," as that term is defined under the Exchange Act, without
the consent of the Company. This provision shall not limit a Purchaser's right
to transfer the Securities pursuant to the terms of the Certificate of
Designations and this Agreement or to assign such Purchaser's rights hereunder
to any such transferee.
h. THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. SURVIVAL. The representations and warranties of the Company and the
agreements and covenants set forth in Sections 3, 4, 5 and 8 shall survive the
closings hereunder notwithstanding any due diligence investigation conducted by
or on behalf of any Purchasers. The Company agrees to indemnify and hold
harmless each Purchaser and each of such Purchaser's officers, directors,
employees, partners, agents and affiliates for loss or damage arising as a
result of or related to any breach or alleged breach by the Company of any of
its representations or covenants set forth herein, including advancement of
expenses as they are incurred.
17
j. PUBLICITY. The Company and each Purchaser shall have the right to
approve before issuance any press releases, SEC, NASDAQ or NASD filings, or any
other public statements with respect to the transactions contemplated hereby;
PROVIDED, HOWEVER, that the Company shall be entitled, without the prior
approval of the Purchasers, to make any press release or SEC, NASDAQ or NASD
filings with respect to such transactions as is required by applicable law and
regulations (although the Purchasers shall be consulted by the Company in
connection with any such press release prior to its release and shall be
provided with a copy thereof).
k. FURTHER ASSURANCES. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. TERMINATION. In the event that the closing shall not have occurred
on or before March 31, 1997, unless the parties agree otherwise, this Agreement
shall terminate at the close of business on such date.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
18
IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Agreement to be duly executed as of the date first above written.
PURCHASER:
RGC International Investors, LDC
By:
------------------------------
Name:
-------------------------
Title:
-------------------------
RESIDENCE: Cayman Islands
ADDRESS:
RGC International Investors, LDC
x/x Xxxx Xxxx Xxxxxxx Xxxxxxxxxx, X.X.
000 X. Xxxxxxxxxx Xxxx
Xxxxx 0000
Xxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx Xxxxx
AGGREGATE SUBSCRIPTION AMOUNT
Number of Preferred Shares: 6,000
Purchase Price: $6,000,000
PALOMAR MEDICAL TECHNOLOGIES, INC.
By:
-------------------------------
Name:
-------------------------
Title:
-------------------------
EXHIBIT A
TO
SECURITIES
PURCHASE
AGREEMENT
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
OF
SERIES H CONVERTIBLE PREFERRED STOCK
OF
PALOMAR MEDICAL TECHNOLOGIES, INC.
Pursuant to Section 151 of the
Delaware General Corporation Law
Palomar Medical Technologies, a corporation organized and existing
under the laws of the State of Delaware (the "CORPORATION"), hereby certifies
that the following resolutions were adopted by the Board of Directors of the
Corporation pursuant to authority of the Board of Directors as required by
Section 151 of the Delaware General Corporation Law.
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (the "BOARD OF DIRECTORS" or the "BOARD")
in accordance with the provisions of its Certificate of Incorporation, the Board
of Directors hereby authorizes a series of the Corporation's previously
authorized Preferred Stock, par value $.01 per share (the "PREFERRED STOCK"),
and hereby states the designation and number of shares, and fixes the relative
rights, preferences, privileges, powers and restrictions thereof as follows:
Series H Convertible Preferred Stock:
I. DESIGNATION AND AMOUNT
The designation of this series, which consists of 20,000 shares of
Preferred Stock, is the Series H Convertible Preferred Stock (the "SERIES H
PREFERRED STOCK") and the face amount shall be One Thousand U.S. Dollars
($1,000.00) per share (the "FACE AMOUNT").
II. NO DIVIDENDS
The Series H Preferred Stock will bear no dividends, and the holders of
the Series H Preferred Stock shall not be entitled to receive dividends on the
Series H Preferred Stock.
1
III. CERTAIN DEFINITIONS
For purposes of this Certificate of Designations, the following terms
shall have the following meanings:
A. "CLOSING BID PRICE" means, for any security as of any date, the
closing bid price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg
Financial Markets or a comparable reporting service of national reputation
selected by the Corporation and reasonably acceptable to holders of a majority
of the then outstanding shares of Series H Preferred Stock if Bloomberg
Financial Markets is not then reporting closing bid prices of such security
(collectively, "BLOOMBERG"), or if the foregoing does not apply, the last
reported sale price of such security in the over-the-counter market on the
electronic bulletin board for such security as reported by Bloomberg, or, if no
sale price is reported for such security by Bloomberg, the average of the bid
prices of any market makers for such security as reported in the "pink sheets"
by the National Quotation Bureau, Inc. If the Closing Bid Price cannot be
calculated for such security on such date on any of the foregoing bases, the
Closing Bid Price of such security on such date shall be the fair market value
as reasonably determined by an investment banking firm selected by the
Corporation and reasonably acceptable to holders of a majority of the then
outstanding shares of Series H Preferred Stock, with the costs of such appraisal
to be borne by the Corporation.
B. "CLOSING DATE" means the Closing Date under that certain Securities
Purchase Agreement dated March 27, 1997 by and among the Corporation and the
initial purchasers of the Series H Preferred Stock (the "SECURITIES PURCHASE
AGREEMENT").
C. "CONVERSION DATE" means, for any Optional Conversion, the date
specified in the notice of conversion in the form attached hereto (the "NOTICE
OF CONVERSION"), so long as the copy of the Notice of Conversion is faxed (or
delivered by other means resulting in notice) to the Corporation before
Midnight, New York City time, on the Conversion Date indicated in the Notice of
Conversion. If the Notice of Conversion is not so delivered before such time,
then the Conversion Date shall be the date the holder delivers the Notice of
Conversion to the Corporation. The Conversion Date for the Required Conversion
at Maturity shall be the Maturity Date (as such terms are defined in Paragraph D
of Article IV).
2
D. "CONVERSION PERCENTAGE" shall have the following meaning and shall
be subject to adjustment as provided herein:
IF THE CONVERSION DATE IS: THEN THE CONVERSION PERCENTAGE IS:
On or prior to the 179th day 100%
after the Closing Date
On or after the 180th and on or prior
to the 269th day after the Closing Date 90%
On or after the 270th day after 85%
the Closing Date
E. "CONVERSION PRICE" means, (i) with respect to any Conversion Date
occurring prior to the 210th day after the Closing Date, the Variable Conversion
Price and (ii) with respect to any Conversion Date occurring on or after the
210th day after the Closing Date, the lower of the Conversion Price Ceiling and
the Variable Conversion Price, each in effect as of such date and subject to
adjustment as provided herein.
F. "CONVERSION PRICE CEILING" means the average of the Closing Bid
Prices for the Common Stock for the twenty (20) consecutive trading days ending
on the trading day immediately preceding the 210th day after the Closing Date
(subject to equitable adjustment for any stock splits, stock dividends,
reclassifications or similar events during such twenty (20) trading day period),
and shall be subject to adjustment as provided herein.
G. "CONVERSION PRICE FLOOR" means (i) on or prior to that date which is
two hundred ten (210) days after the Closing Date, $6.00, and (ii) after that
date which is two hundred ten (210) days after the Closing Date, the lower of
(a) $6.00 and (b) the product of (.65) and the Conversion Price Ceiling, and
shall be subject to adjustment as provided herein.
H. "N" means the sum of (a) the number of days from, but excluding, the
date of issuance of such share of Series H Preferred Stock, through and
including the earlier of (i) the Conversion Date for such share of Series H
Preferred Stock and (ii) such date (if any) that the average of the Closing Bid
Prices for the Common Stock for ten (10) consecutive trading days is greater
than one hundred and seventy five percent (175%) of the initial Conversion Price
Ceiling determined under Paragraph F of this Article III (subject to equitable
adjustment for any of the events described in Article XI.A) plus (b) the number
of days not included in clause (a) of this Paragraph H (if any) during the
period beginning on, but excluding, the date such share of Series H Preferred
Stock was required to be (but was not) redeemed by the Corporation pursuant to
Article VIII.B and the subsequent Conversion Date for such share of Series H
Preferred Stock.
3
I. "PREMIUM" means an amount equal to: (i) (.06)x(N/365)x(1,000) for
the period beginning on the Closing Date and ending on that date which is 179
days after the Closing Date, (ii) (.07)x(N/365)x(1,000) for the period beginning
on the 180th day after the Closing Date and ending on that date which is 269
days after the Closing Date, and (iii) (.08)x(N/365)x(1,000) for the period
beginning on the 270th day after the Closing Date and thereafter.
I. "VARIABLE CONVERSION PRICE" means, as of any date of determination,
the amount obtained by multiplying the Conversion Percentage then in effect by
the average of the Closing Bid Prices for the Common Stock for ten (10)
consecutive trading days ending on the trading day immediately preceding such
date of determination (subject to equitable adjustments for any stock splits,
stock dividends, reclassifications or similar events during such ten (10)
trading day period), and shall be subject to adjustment as provided herein.
IV. CONVERSION
A. CONVERSION AT THE OPTION OF THE HOLDER. Subject to the limitations
on conversions contained in Paragraph C of this Article IV, each holder of
shares of Series H Preferred Stock may, at any time and from time to time,
convert (an "OPTIONAL CONVERSION") each of its shares of Series H Preferred
Stock into a number of fully paid and nonassessable shares of Common Stock
determined in accordance with the following formula:
1,000 + THE PREMIUM
---------------------
CONVERSION PRICE
B. MECHANICS OF CONVERSION. In order to convert Series H Preferred
Stock into shares of Common Stock, a holder shall: (x) deliver (by facsimile or
otherwise) a copy of the fully executed Notice of Conversion to the Corporation
and (y) surrender or cause to be surrendered the original certificates
representing the Series H Preferred Stock being converted (the "PREFERRED STOCK
CERTIFICATES"), duly endorsed, along with a copy of the Notice of Conversion as
soon as practicable thereafter to the Corporation. At the request of a holder
and upon receipt by the Corporation of a facsimile copy of a Notice of
Conversion from a holder, the Corporation shall immediately send, via facsimile,
a confirmation to such holder stating that the Notice of Conversion has been
received, the date upon which the Corporation expects to deliver the Common
Stock issuable upon such conversion and the name and telephone number of a
contact person at the Corporation regarding the conversion. The Corporation
shall not be obligated to issue shares of Common Stock issuable upon such
conversion unless either the Preferred Stock Certificates are delivered to the
Corporation as provided above, or the holder notifies the Corporation that such
certificates have been lost, stolen or destroyed (subject to the requirements of
Article XIV.B).
(i) DELIVERY OF COMMON STOCK UPON CONVERSION. The Corporation
shall, within one business day after the later of (a) the second business day
following the Conversion Date in the case of DWAC deliveries and the third
business day following the Conversion date in all other cases
4
and (b) the date of such surrender (or, in the case of lost, stolen or destroyed
certificates, the date on which indemnity pursuant to Article XIV.B is provided)
(the "DELIVERY PERIOD"), and provided the holder has surrendered Preferred Stock
Certificates, issue and deliver to or upon the order of the holder (x) that
number of shares of Common Stock issuable upon conversion of such shares of
Series H Preferred Stock being converted and (y) a certificate representing the
number of shares of Series H Preferred Stock not being converted, if any.
(ii) TAXES. The Corporation shall pay any and all taxes which
may be imposed upon it with respect to the issuance and delivery of the shares
of Common Stock upon the conversion of the Series H Preferred Stock.
(iii) NO FRACTIONAL SHARES. If any conversion of Series H
Preferred Stock would result in the issuance of either a fractional share of
Common Stock, such fractional share shall be disregarded and the number of
shares of Common Stock issuable upon conversion of the Series H Preferred Stock
shall be the closest whole number of shares.
(iv) STATUS AS STOCKHOLDER. Upon submission of a Notice of
Conversion by a holder of Series H Preferred Stock, the shares covered thereby
shall be deemed converted into shares of Common Stock as of the Conversion Date
and the holder's rights as a holder of such converted shares of Series H
Preferred Stock shall cease and terminate, excepting only the right to receive
certificates for such shares of Common Stock and to any remedies provided herein
or otherwise available at law or in equity to such holder because of a failure
by the Corporation to comply with the terms of this Certificate of Designations
(including its right to regain its status as a Series H Preferred Stockholder
pursuant to Article VI.E).
(v) CONVERSION DISPUTES. In the case of any dispute with
respect to a conversion, the Corporation shall promptly issue such number of
shares of Common Stock as are not disputed in accordance with subparagraph (i)
above. If such dispute involves the calculation of the Conversion Price, the
Corporation shall submit the disputed calculations to its outside accountant via
facsimile within two (2) business days of receipt of the Notice of Conversion.
The accountant shall audit the calculations and notify the Corporation and the
holder of the results no later than two (2) business days from the date it
receives the disputed calculations. The accountant's calculation shall be deemed
conclusive, absent manifest error. The Corporation shall then issue the
appropriate number of shares of Common Stock in accordance with subparagraph (i)
above.
C. LIMITATIONS ON CONVERSIONS. (i) Except in a Required Conversion at
Maturity, in no event shall a holder of shares of Series H Preferred Stock be
entitled to receive shares of Common Stock to the extent that the sum of (a) the
number of shares of Common Stock beneficially owned by the holder and its
affiliates (exclusive of shares issuable upon conversion of the unconverted
portion of the shares of Series H Preferred Stock or the unexercised or
unconverted portion of any other securities of the Corporation subject to a
limitation on conversion or exercise analogous to the limitations contained
herein) and (b) the number of shares of Common Stock issuable upon the
conversion of the shares of Series H Preferred Stock with respect to which the
determination of this
5
subparagraph is being made, would result in beneficial ownership by the holder
and its affiliates of more than 4.9% of the outstanding shares of Common Stock.
For purposes of this subparagraph, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13 D-G thereunder, except as otherwise provided in
clause (i) above. The Corporation shall be entitled to rely, and shall be fully
protected in relying, on any statement or representation made by a holder of
Series H Preferred Stock to the Corporation in connection with a particular
conversion without any obligation on the part of the Corporation to make any
inquiry or investigation or to examine its records or the records of any
transfer agent for the Common Stock. The restriction contained in this Paragraph
C shall not be altered, amended, deleted or changed in any manner whatsoever
unless the holders of a majority of the Common Stock and each holder of Series H
Preferred Stock shall approve such alteration, amendment, deletion or change.
(ii) Except as otherwise provided in Article XIII, during any
thirty (30) day period beginning on the Closing Date and ending on the earlier
of (a) that date which is two hundred and nine (209) days after the Closing Date
and (b) that date (if any) that the Corporation delivers an Optional Redemption
Notice (as defined below) to the holders of Series H Preferred Stock pursuant to
Article VIII.B, no holder of Series H Preferred Stock may convert in excess of
thirty-three percent (33%) of the shares of Series H Preferred Stock initially
purchased by such Holder; provided, however, if such holder has already
converted sixty-six percent (66%) of the shares of Series H Preferred Stock so
purchased, such holder may convert the remaining thirty-four percent (34%) of
the shares so purchased in the next succeeding thirty day period or thereafter.
D. REQUIRED CONVERSION AT MATURITY. Provided all shares of Common Stock
issuable upon conversion of all outstanding shares of Series H Preferred Stock
are then (i) authorized and reserved for issuance, (ii) registered under the
Securities Act of 1933, as amended (the "SECURITIES ACT") for resale by the
holders of such shares of Series H Preferred Stock and (iii) eligible to be
traded on either the NASDAQ, the New York Stock Exchange or the American Stock
Exchange, each share of Series H Preferred Stock issued and outstanding on March
27, 2002 (the "MATURITY DATE") (and any accrued and unpaid Conversion Default
Payments), automatically shall be converted into shares of Common Stock on such
date in accordance with the conversion formulas set forth in Paragraph A of this
Article IV (the "REQUIRED CONVERSION AT MATURITY"). If a Required Conversion at
Maturity occurs, the Corporation and the holders of Series H Preferred Stock
shall follow the applicable conversion procedures set forth in Paragraph B of
this Article IV; PROVIDED, HOWEVER, that the holders of Series H Preferred Stock
are not required to deliver a Notice of Conversion to the Corporation.
V. RESERVATION OF SHARES OF COMMON STOCK
A. RESERVED AMOUNT. Upon adoption of this Certificate of Designations
by the Corporation's Board of Directors, the Corporation shall have reserved
4,500,000 authorized but unissued shares of Common Stock for issuance upon
conversion of the Series H Preferred Stock and
6
thereafter the number of authorized but unissued shares of Common Stock so
reserved (the "RESERVED AMOUNT") shall at all times be sufficient to provide for
the conversion of the Series H Preferred Stock outstanding at the then current
Conversion Price. The Reserved Amount shall be allocated to the holders of
Series H Preferred Stock as provided in Article XIV.D.
B. INCREASES TO RESERVED AMOUNT. If the Reserved Amount for any three
(3) consecutive trading days (the last of such three (3) trading days being the
"AUTHORIZATION TRIGGER DATE") shall (i) during the period beginning on the
Closing Date and ending on that date which is one hundred fifty (150) days after
the Closing Date be less than 100% of the number of shares of Common Stock
issuable upon conversion of the Series H Preferred Stock on such trading days,
or (ii) on or after that date which is one hundred fifty one (151) days after
the Closing Date, be less than 135% of the number of shares of Common Stock
issuable upon conversion of the Series H Preferred Stock on such trading days,
the Corporation shall immediately notify the holders of Series H Preferred Stock
of such occurrence and shall take immediate action (including seeking
shareholder approval to authorize the issuance of additional shares of Common
Stock) to increase the Reserved Amount to 150% of the number of shares of Common
Stock into which the Series H Preferred Stock are then convertible. In the event
the Corporation fails to so increase the Reserved Amount within ninety (90) days
after an Authorization Trigger Date, each holder of Series H Preferred Stock
shall thereafter have the option, exercisable in whole or in part at any time
and from time to time by delivery of a Redemption Notice (as defined in Article
VIII.D) to the Corporation, to require the Corporation to purchase for cash, at
an amount per share equal to the Redemption Amount (as defined in Article
VIII.C), a portion of the holder's Series H Preferred Stock such that, after
giving effect to such purchase, the holder's allocated portion of the Reserved
Amount exceeds 135% of the total number of shares of Common Stock issuable to
such holder upon conversion of its Series H Preferred Stock. If the Corporation
fails to redeem any of such shares within five (5) business days after its
receipt of a Redemption Notice, then such holder shall be entitled to the
remedies provided in Article VIII.D.
VI. FAILURE TO SATISFY CONVERSIONS
A. CONVERSION DEFAULT PAYMENTS. If, at any time, (x) a holder of shares
of Series H Preferred Stock submits a Notice of Conversion and the Corporation
fails for any reason (other than because such issuance would exceed such
holder's allocated portion of the Reserved Amount, for which failure the holders
shall have the remedies set forth in Article V) to deliver, on or prior to the
fourth business day following the expiration of the Delivery Period for such
conversion, the shares of Common Stock to which such holder is entitled upon
such conversion, or (y) the Corporation provides notice to any holder of Series
H Preferred Stock at any time of its intention not to issue shares of Common
Stock upon exercise by any holder of its conversion rights in accordance with
the terms of this Certificate of Designations other than because such issuance
would exceed such holder's allocated portion of the Reserved Amount (each of (x)
and (y) being a "CONVERSION DEFAULT"), then the Corporation shall pay to the
affected holder, in the case of a Conversion Default described in clause (x)
above, and to all holders, in the case of a Conversion Default described in
clause (y) above, payments for the first ten (10) business days following the
expiration of the Delivery Period, in the case of a Conversion Default described
in clause (x), and for the first ten (10) business days of any other Conversion
Default, an amount equal to $1,000 per day. In the event any
7
Conversion Default continues beyond such ten (10) business day period, the
Corporation shall pay to the holder an additional amount equal to:
(.24) x (D/365) x (the Default Amount)
where:
"D" means the number of days after the expiration of the ten (10)
business day period described above through and including the Default Cure Date;
"DEFAULT AMOUNT" means (i) the total Face Amount of all shares of
Series H Preferred Stock held by such holder plus (ii) the total Premium as of
the first day of the Conversion Default on all shares of Series H Preferred
Stock included in clause (i) of this definition; and
"DEFAULT CURE DATE" means (i) with respect to a Conversion Default
described in clause (x) of its definition, the date the Corporation effects the
conversion of the full number of shares of Series H Preferred Stock and (ii)
with respect to a Conversion Default described in clause (y) of its definition,
the date the Corporation begins to honor all conversions of Series H Preferred
Stock in accordance with Article IV.A.
The payments to which a holder shall be entitled pursuant to this
Paragraph A are referred to herein as "CONVERSION DEFAULT PAYMENTS." A holder
may elect to receive accrued Conversion Default Payments in cash or to convert
all or any portion of such accrued Conversion Default Payments, at any time,
into Common Stock at the Conversion Price in effect at the time of such
conversion. In the event a holder elects to receive any Conversion Default
Payments in cash, it shall so notify the Corporation in writing. Such payment
shall be made in accordance with and be subject to the provisions of Article
XIV.F. In the event a holder elects to convert all or any portion of the
Conversion Default Payments, the holder shall indicate on a Notice of Conversion
such portion of the Conversion Default Payments which such holder elects to so
convert and such conversion shall otherwise be effected in accordance with the
provisions of Article IV.
B. ADJUSTMENT TO CONVERSION PRICE. If a holder has not received
certificates for all shares of Common Stock prior to the tenth (10th) business
day after the expiration of the Delivery Period with respect to a conversion of
Series H Preferred Stock for any reason (other than because such issuance would
exceed such holder's allocated portion of the Reserved Amount, for which failure
the holders shall have the remedies set forth in Article V), then the Conversion
Price in respect of any shares of Series H Preferred Stock held by such holder
shall thereafter be the lesser of (i) the Conversion Price on the Conversion
Date specified in the Notice of Conversion which resulted in the Conversion
Default and (ii) the lowest Conversion Price in effect during the period
beginning on, and including, such Conversion Date through and including the day
such shares of Common Stock are delivered to the holder and (iii) the Conversion
Price (calculated in accordance with Article III.E) on the Conversion Date
specified in the Notice of Conversion for such share of Series H Preferred
Stock. If there shall occur a Conversion Default of the type described in clause
(y) of Article VI.A,
8
then the Conversion Price with respect to any conversion thereafter shall be the
lower of (x) the lowest Conversion Price in effect at any time during the period
beginning on, and following, the date of the occurrence of such Conversion
Default through and including the Default Cure Date and (y) the Conversion Price
(calculated in accordance with Article III.E) on the Conversion Date specified
in the Notice of Conversion for such share of Series H Preferred Stock.. The
Conversion Price shall thereafter be subject to further adjustment for any
events described in Article XI.
C. BUY-IN CURE. If (i) the Corporation fails for any reason to deliver
during the Delivery Period shares of Common Stock to a holder upon a conversion
of shares of Series H Preferred Stock having a Conversion Date on or prior to a
date upon which the Corporation has notified the applicable holder in writing
that the Corporation is unable to honor conversions and (ii) after the
applicable Delivery Period with respect to such conversion, such holder
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by such holder of the shares of Common Stock
which such holder anticipated receiving upon such conversion (a "BUY-IN"), the
Corporation shall pay such holder (in addition to any other remedies available
to the holder) the amount by which (x) such holder's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the total Face Amount (plus the accrued Premium thereon)
of the portion of the Series H Preferred Stock resulting in the Buy-In. For
example, if a holder purchases shares of Common Stock having a total purchase
price of $11,000 to cover a Buy-In with respect to an attempted conversion of
Series H Preferred Stock having a total Face Amount and accrued Premium of
$10,000, the Corporation will be required to pay the holder $1,000. A holder
shall provide the Corporation written notification indicating any amounts
payable to such holder pursuant to this Paragraph C. The Corporation shall make
any payments required pursuant to this Paragraph C in accordance with and
subject to the provisions of Article XIV.F.
D. REDEMPTION RIGHT. If the Corporation fails, and such failure
continues uncured for five (5) business days after the Corporation has been
notified thereof in writing by the holder, for any reason (other than because
such issuance would exceed such holder's allocated portion of the Reserved
Amount, for which failure the holders shall have the remedies set forth in
Article V) to issue shares of Common Stock within ten (10) business days after
the expiration of the Delivery Period with respect to any conversion of Series H
Preferred Stock, then the holder may elect at any time and from time to time
prior to the Default Cure Date for such Conversion Default, by delivery of a
Redemption Notice (as defined in Article VIII.D) to the Corporation, to have all
or any portion of such holder's outstanding shares of Series H Preferred Stock
purchased by the Corporation for cash, at an amount per share equal to the
Redemption Amount (as defined in Article VIII.C). If the Corporation fails to
redeem any of such shares within five (5) business days after its receipt of a
Redemption Notice, then such holder shall be entitled to the remedies provided
in Article VIII.D.
E. RETENTION OF RIGHTS AS SERIES H PREFERRED STOCKHOLDER. If a holder
has not received certificates for all shares of Common Stock prior to the tenth
(10th) business day after the expiration of the Delivery Period with respect to
a conversion of Series H Preferred Stock for any reason, then the Corporation
shall, as soon as practicable, return such unconverted shares of Series H
Preferred
9
Stock to the holder and (unless the holder otherwise elects to retain its status
as a holder of Common Stock) the holder shall regain the rights of a holder of
Series H Preferred Stock with respect to such shares. In all cases, the holder
shall retain all of its rights and remedies (including, without limitation, (i)
the right to receive Conversion Default Payments pursuant to Paragraph A above
to the extent required thereby for such Conversion Default and any subsequent
Conversion Default and (ii) the right to have the Conversion Price with respect
to subsequent conversions determined in accordance with Paragraph B above) for
the Corporation's failure to convert Series H Preferred Stock.
VII. [INTENTIONALLY OMITTED]
VIII. REDEMPTION DUE TO CERTAIN EVENTS
A. REDEMPTION BY HOLDER. In the event (each of the events described in
clauses (i)-(v) below after expiration of the applicable cure period (if any)
being a "REDEMPTION EVENT"):
(i) the Common Stock (including all of the shares of Common
Stock issuable upon conversion of the Series H Preferred Stock) is
suspended from trading on any of, or is not listed or designated for
quotation (and authorized) for trading on at least one of, the New York
Stock Exchange, the American Stock Exchange, the NASDAQ National Market
or the NASDAQ Small Cap Market ("NASDAQ") for an aggregate of ten (10)
trading days in any nine (9) month period,
(ii) the Registration Statement required to be filed by the
Corporation pursuant to Section 2(a) of the Registration Rights Agreement, dated
as of March 27, 1997, by and among the Corporation and the other signatories
thereto (the "REGISTRATION RIGHTS AGREEMENT"), has not been declared effective
by the 180th day following the Closing Date or such Registration Statement,
after being declared effective, cannot be utilized by the holders of Series H
Preferred Stock for the resale of all of their Registrable Securities (as
defined in the Registration Rights Agreement) for an aggregate of more than
thirty (30) days in any consecutive twelve month period,
(iii) the Corporation fails, and any such failure continues
uncured for five (5) business days after the Corporation has been notified
thereof in writing by the holder, to remove any restrictive legend on any
certificate or any shares of Common Stock issued to the holders of Series H
Preferred Stock upon conversion of the Series H Preferred Stock as and when
required by this Certificate of Designations, the Securities Purchase Agreement
or the Registration Rights Agreement,
(iv) the Corporation provides notice to any holder of Series H
Preferred Stock, including by way of public announcement, at any time, of its
intention not to issue shares of Common Stock to any holder of Series H
Preferred Stock upon conversion in accordance with the terms of this Certificate
of Designations (other than due to the circumstances contemplated by Article V,
for which the holders shall have the remedies set forth in such Article), or
10
(v) the Corporation shall:
(a) sell, convey or dispose of all or
substantially all of its assets;
(b) merge, consolidate or engage in any
other business combination with any other entity (other than a
merger, consolidation or business combination in which the
holders of the Corporation's voting securities immediately
preceding such merger, consolidation or business combination
own, on a pro rata basis, at least 50% of the surviving
entity's voting securities); or
(c) have fifty percent (50%) or more of the
voting power of its capital stock owned beneficially by one
person, entity or "group" (as such term is used under Section
13(d) of the Securities Exchange Act of 1934, as amended),
then, upon the occurrence of any such Redemption Event, each holder of shares of
Series H Preferred Stock shall thereafter have the option, exercisable in whole
or in part at any time and from time to time by delivery of a Redemption Notice
(as defined in Paragraph D below) to the Corporation while such Redemption Event
continues, to require the Corporation to purchase for cash any or all of the
then outstanding shares of Series H Preferred Stock held by such holder for an
amount per share equal to the Redemption Amount (as defined in Paragraph C
below) in effect at the time of the redemption hereunder. For the avoidance of
doubt, the occurrence of any event described in clauses (i), (ii), (iv) or (v)
above shall immediately constitute a Redemption Event and there shall be no cure
period.
B. REDEMPTION BY CORPORATION.
(i) If at any time after that date which is two (2) years after the
Closing Date, the average of the Closing Bid Prices for the Common Stock for ten
(10) consecutive trading days is greater than the Conversion Price Ceiling
multiplied by 1.5 (subject to equitable adjustments for stock splits, stock
dividends, reclassifications or similar events during such ten (10) trading day
period), then the Corporation shall have the right to redeem up to fifty percent
(50%) of the Series H Preferred Stock for a price per share equal to the
Optional Redemption Amount (as defined below). If at any time after the Closing
Date the average of the Closing Bid Prices for the Common Stock for ten (10)
consecutive trading days is greater than the Conversion Price Ceiling multiplied
by 2.0 (subject to equitable adjustments for stock splits, stock dividends,
reclassifications or similar events during such ten (10) trading day period)
then the Corporation shall have the right to redeem (such right, collectively
with the Corporation's redemption rights pursuant to the immediately preceding
sentence, shall be referred to as "REDEMPTION AT CORPORATION'S ELECTION") any or
all of the Series H Preferred Stock for an amount equal to the Optional
redemption Amount. A Redemption at Corporation's Election shall be exercisable
by the Corporation in its sole discretion by delivery of an Optional Redemption
Notice (as defined below). Holders of Series H Preferred Stock may convert all
or any part of their shares of Series H Preferred Stock into Common Stock by
delivering a Notice of Conversion to the Corporation at any time prior to that
date which is ten (10) days after receipt of an Optional Redemption Notice. The
"OPTIONAL REDEMPTION Amount" with respect
11
to each share of Preferred Stock means (a) for redemptions pursuant to the first
sentence of this subparagraph (i), an amount equal to:
(1,000 + P) X 1.5
-------------------
CCP
and (b) for redemptions pursuant to the second sentence of this subparagraph
(I), an amount equal to:
(1,000 + P) X 2.0
--------------------
CCP
where:
"P" means the accrued Premium on such share of Series H Preferred Stock through
the date of redemption; and
"CCP" means the Conversion Price Ceiling on the date of the redemption.
(ii) The Corporation shall effect each redemption under this Section
VIII.B by giving at least ten (10) trading days but not more than twenty (20)
trading days (subject to extension as set forth below) prior written notice (the
"OPTIONAL REDEMPTION NOTICE") of the date which such redemption is to become
effective (the "EFFECTIVE DATE OF REDEMPTION") and the Optional Redemption
Amount to (a) the holders of Series H Preferred Stock selected for redemption at
the address and facsimile number of such holder appearing in the Corporation's
register for the Series H Preferred Stock and (b) the transfer agent for the
Common Stock, which Optional Redemption Notice shall be deemed to have been
delivered on the business day after the Corporation's fax (with a copy sent by
overnight courier) of such notice to the holders of Series H Preferred Stock.
(iii) The Optional Redemption Amount shall be paid to the holder of the
Series H Preferred Stock being redeemed within three (3) business days of the
Effective Date of Redemption; PROVIDED, HOWEVER, that the Corporation shall not
be obligated to deliver any portion of the Optional Redemption Amount until
either the certificates evidencing the Series H Preferred Stock being redeemed
are delivered to the office of the Corporation, or the holder notifies the
Corporation that such certificates have been lost, stolen or destroyed and
delivers the documentation in accordance with Article XIV.B hereof.
Notwithstanding anything herein to the contrary, in the event that the
certificates evidencing the Series H Preferred Stock redeemed are not delivered
to the Corporation prior to the 3rd business day following the Effective Date of
Redemption, the redemption of the Series H Preferred Stock pursuant to this
Article VIII.B shall still be deemed effective as of the Effective Date of
Redemption and the Optional Redemption Price shall be paid to the holder of
Series H Preferred Stock redeemed within five (5) business days of the date the
12
certificates evidencing the Series H Preferred Stock redeemed are actually
delivered to the Corporation.
(iv) Notwithstanding the provisions of Article IV hereof, if the
Conversion Price on the date a holder delivers a Conversion Notice is less than
or equal to the Conversion Price Floor then in effect, the Corporation may, at
its option, elect to redeem the shares of Series H Preferred Stock which are the
subject of such Conversion Notice at a price per share equal to the Floor
Redemption Amount (as defined below) in lieu of converting such shares to Common
Stock. Each holder of Series H Preferred Stock shall have the right, by sending
a written request to the Corporation, to require the Corporation to provide
advance written notice to such holder stating whether the Corporation will elect
to exercise its redemption rights pursuant to this paragraph (iv). The
Corporation shall have five (5) business days from receipt of such request to
reply in writing to such holder. In the event Corporation either fails to so
reply or replies that it will not elect to exercise such redemption rights, the
Corporation shall forfeit its rights to redeem shares of Series H Preferred
Stock pursuant to this paragraph (iv) during the thirty (30) day period
immediately following the expiration of the Corporation's reply period or
receipt of such election not to redeem, as the case may be. In the event the
Corporation notifies a holder of its intention to redeem shares of Series H
Preferred Stock pursuant to this paragraph (v) and such holder delivers a
Conversion Notice at any time during which the Corporation has redemption rights
pursuant to this paragraph (iv) and the Corporation, prior to the date of such
Conversion Notice, has not provided such holder with written notice that it no
longer intends to exercise its redemption rights pursuant to this paragraph
(iv), the Corporation shall, no later than thirty (30) days from the date of
such Conversion Notice, pay to such holder the Floor Redemption Amount for each
share of series H Preferred which is covered by such Conversion Notice. The
Floor Redemption Amount per share means an amount equal to:
(1000+P) x (RAP)
where:
"P" means the accrued Premium on such share of Series H Preferred Stock
through the date of redemption.
"RAP" means:
If the Redemption occurs: RAP
On or prior to the 209th
day after the Closing Date 110%
On or after the 210th and on or prior
to the 299th day after the Closing Date 112%
13
On or after the 300th and on or prior
to the 394th day after the Closing Date 115%
On or after the 395th day
after the Closing Date 120%
(v) If the Corporation fails to pay, when due and owing, any Optional
Redemption Amount or Floor Redemption Amount, then the holder of Series H
Preferred Stock entitled to receive such Optional Redemption Amount or Floor
Redemption Amount, as the case may be, shall have the right, at any time and
from time to time, to require the Corporation, upon written notice, to
immediately convert (in accordance with the terms of paragraph A of Article IV)
any or all of the shares of Series H Preferred Stock which are the subject of
such redemption, into shares of Common Stock at the lowest Conversion Price in
effect during the period beginning on the date the Corporation elected to redeem
such shares of Series H Preferred Stock and ending on the earlier of the date
the Corporation effects such redemption and the twentieth trading day following
either the Conversion Date which gave rise to the right of redemption (in the
case of a redemption pursuant to subparagraph (iv) of this Paragraph B) or the
Effective Date of Redemption (in the case of a Redemption at Corporation's
Election), as the case may be. In addition, if the Corporation fails to pay a
Floor Redemption Amount, when due and owing, the Corporation shall thereafter
forfeit its rights this Paragraph B to effect any redemption with respect to any
or all issued and outstanding shares of Series H Preferred Stock, and in the
case of a failure to pay all or any portion of an Optional Redemption Amount,
shall pay the holder entitled to such Optional Redemption Amount an amount equal
to:
ORA
____ x (ORF-LCBP)
OCP
where:
"ORA" means the amount of the Optional Redemption Amount which the
Corporation failed to so pay;
"OCP" means the Conversion Price in effect on the Effective Date of
Redemption;
"ORF" means (i) with respect to any redemption pursuant to the first
sentence of Article VIII.B (I), the product obtained by multiplying 1.5 by the
Conversion Price Ceiling and (ii) with respect to any redemption pursuant to the
second sentence of Article VIII.B(ii), the product obtained by multiplying 2.0
by the Conversion Price Ceiling; and
"LCBP" means the lowest Closing Big Price of the Corporation's Common
Stock during the Twenty (20) trading day period beginning on the Effective Date
of redemption.
14
C. DEFINITION OF REDEMPTION AMOUNT. The "REDEMPTION AMOUNT" with
respect to a share of Series H Preferred Stock means an amount equal to:
1,000 + P
------------ X M
CP
where:
"P" means the accrued Premium on such share of Series H Preferred Stock
through the date of redemption;
"CP" means the Conversion Price in effect on the date of the Redemption
Notice; and
"M" means the highest Closing Bid Price of the Corporation's Common
Stock during the period beginning on the date of the Redemption Notice and
ending on the date of the redemption.
D. REDEMPTION DEFAULTS. If the Corporation fails to pay any holder the
Redemption Amount with respect to any share of Series H Preferred Stock within
five (5) business days of its receipt of a notice requiring such redemption (a
"REDEMPTION NOTICE"), then the holder of Series H Preferred Stock delivering
such Redemption Notice (i) shall be entitled to interest on the Redemption
Amount at a per annum rate equal to the lower of twenty-four percent (24%) and
the highest rate permitted by applicable law from the date of the Redemption
Notice until the date of redemption hereunder, and (ii) shall have the right, at
any time and from time to time, to require the Corporation, upon written notice,
to immediately convert (in accordance with the terms of Paragraph A of Article
IV) all or any portion of the Redemption Amount, plus interest as aforesaid,
into shares of Common Stock at the lowest Conversion Price in effect during the
period beginning on the date of the Redemption Notice and ending on the
Conversion Date with respect to the conversion of such Redemption Amount. In the
event the Corporation is not able to redeem all of the shares of Series H
Preferred Stock subject to Redemption Notices, the Corporation shall redeem
shares of Series H Preferred Stock from each holder pro rata, based on the total
number of shares of Series H Preferred Stock included by such holder in the
Redemption Notice relative to the total number of shares of Series H Preferred
Stock in all of the Redemption Notices.
IX. RANK
All shares of the Series H Preferred Stock shall rank (i) prior to the
Corporation's common stock, par value $.01 per share (the "COMMON STOCK"); (ii)
PARI PASSU with any class or series of capital stock of the Corporation now
outstanding or hereafter created other than the Common Stock or classes or
series of capital stock of the Corporation specifically ranking, by their terms,
junior to the Series H Preferred Stock (the "PARI PASSU SECURITIES"); and (iii)
junior to any class or series of
15
capital stock of the Corporation hereafter created (with the consent of
the holders of Series H Preferred Stock obtained in accordance with
Article XIII hereof) specifically ranking, by its terms, senior to the
Series H Preferred Stock (the "SENIOR SECURITIES"), in each case as to
distribution of assets upon liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary.
X. LIQUIDATION PREFERENCE
A. If the Corporation shall commence a voluntary case under the U.S.
Federal bankruptcy laws or any other applicable bankruptcy, insolvency or
similar law, or consent to the entry of an order for relief in an involuntary
case under any law or to the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the Corporation
or of any substantial part of its property, or make an assignment for the
benefit of its creditors, or admit in writing its inability to pay its debts
generally as they become due, or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the U.S. Federal bankruptcy laws or any other
applicable bankruptcy, insolvency or similar law resulting in the appointment of
a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and any such decree or
order shall be unstayed and in effect for a period of sixty (60) consecutive
days and, on account of any such event, the Corporation shall liquidate,
dissolve or wind up, or if the Corporation shall otherwise liquidate, dissolve
or wind up (a "LIQUIDATION EVENT"), no distribution shall be made to the holders
of any shares of capital stock of the Corporation (other than Senior Securities)
upon liquidation, dissolution or winding up unless prior thereto the holders of
shares of Series H Preferred Stock shall have received the Liquidation
Preference with respect to each share. If, upon the occurrence of a Liquidation
Event, the assets and funds available for distribution among the holders of the
Series H Preferred Stock and holders of PARI PASSU Securities shall be
insufficient to permit the payment to such holders of the preferential amounts
payable thereon, then the entire assets and funds of the Corporation legally
available for distribution to the Series H Preferred Stock and the PARI PASSU
Securities shall be distributed ratably among such shares in proportion to the
ratio that the Liquidation Preference payable on each such share bears to the
aggregate Liquidation Preference payable on all such shares. After payment in
full of the Liquidation Preference of the shares of the Series H Preferred Stock
and the PARI PASSU Securities, the holders of such shares shall not be entitled
to any further participation in any distribution of assets by the Corporation.
B. The purchase or redemption by the Corporation of stock of any class,
in any manner permitted by law, shall not, for the purposes hereof, be regarded
as a liquidation, dissolution or winding up of the Corporation. Neither the
consolidation or merger of the Corporation with or into any other entity nor the
sale or transfer by the Corporation of less than substantially all of its assets
shall, for the purposes hereof, be deemed to be a liquidation, dissolution or
winding up of the Corporation.
16
C. The "LIQUIDATION PREFERENCE" with respect to a share of Series H
Preferred Stock means an amount equal to the Face Amount thereof plus the
Premium thereon through the date of final distribution. The Liquidation
Preference with respect to any PARI PASSU Securities shall be as set forth in
the Certificate of Designations filed in respect thereof.
XI. ADJUSTMENTS TO THE CONVERSION PRICE
The Conversion Price shall be subject to adjustment from time to time
as follows:
A. STOCK SPLITS, STOCK DIVIDENDS, ETC. If at any time on or after a
determination of the Conversion Price Ceiling or Conversion Price Floor, the
number of outstanding shares of Common Stock is increased by a stock split,
stock dividend, combination, reclassification or other similar event, the
Conversion Price Ceiling and Conversion Price Floor shall be proportionately
reduced, or if the number of outstanding shares of Common Stock is decreased by
a reverse stock split, combination or reclassification of shares, or other
similar event at anytime on or after the determination of the Conversion Price
Ceiling or Conversion Price Floor, the Conversion Price Ceiling and Conversion
Price Floor shall be proportionately increased. In such event, the Corporation
shall notify the transfer agent for the Common Stock of such change on or before
the effective date thereof.
B. ADJUSTMENT DUE TO MAJOR ANNOUNCEMENT. In the event the Corporation
(i) makes a public announcement that it intends to consolidate or merge with any
other entity (other than a merger in which the Corporation is the surviving or
continuing entity and its capital stock is unchanged) or to sell or transfer all
or substantially all of the assets of the Corporation or (ii) any person, group
or entity (including the Corporation) publicly announces a tender offer to
purchase 50% or more of the Corporation's Common Stock (the date of the
announcement referred to in clause (i) or (ii) of this Paragraph B is
hereinafter referred to as the "ANNOUNCEMENT DATE"), then the Conversion Price
shall, effective upon the Announcement Date and continuing through the
Abandonment Date (as defined below), be equal to the Conversion Price which
would have been applicable for an Optional Conversion occurring on the
Announcement Date. From and after the Abandonment Date, the Conversion Price
shall be determined as set forth in Article III.F "ABANDONMENT DATE" means with
respect to any proposed transaction or tender offer for which a public
announcement as contemplated by this Paragraph B has been made, the date upon
which the Corporation (in the case of clause (i) above) or the person, group or
entity (in the case of clause (ii) above) publicly announces the termination or
abandonment of the proposed transaction or tender offer which caused this
Paragraph B to become operative.
C. ADJUSTMENT DUE TO MERGER, CONSOLIDATION, ETC. If, at any time when
any Series H Preferred Stock is issued and outstanding, there shall be (i) any
reclassification or change of the outstanding shares of Common Stock (other than
a change in par value, or from par value to no par value, or from no par value
to par value, or as a result of a subdivision or combination), (ii) any
17
consolidation or merger of the Corporation with any other entity (other than a
merger in which the Corporation is the surviving or continuing entity and its
capital stock is unchanged), (iii) any sale or transfer of all or substantially
all of the assets of the Corporation or (iv) any share exchange pursuant to
which all of the outstanding shares of Common Stock are converted into other
securities or property, then the holders of Series H Preferred Stock shall
thereafter have the right to receive upon conversion, in lieu of the shares of
Common Stock immediately theretofore issuable (without giving effect to any
limitations upon conversion imposed by Article IV.C), such shares of stock,
securities and/or other property as may be issued or payable with respect to or
in exchange for the number of shares of Common Stock immediately theretofore
issuable upon conversion (without giving effect to any limitations upon
conversion imposed by Article IV.C) had such merger, consolidation, exchange of
shares, recapitalization, reorganization or other similar event not taken place,
and in any such case, appropriate provisions shall be made with respect to the
rights and interests of the holders of the Series H Preferred Stock to the end
that the provisions hereof (including, without limitation, provisions for
adjustment of the Conversion Price and of the number of shares of Common Stock
issuable upon conversion of the Series H Preferred Stock) shall thereafter be
applicable, as nearly as may be practicable in relation to any shares of stock
or securities thereafter deliverable upon the conversion thereof. The
Corporation shall not effect any transaction described in this Paragraph C
unless (i) each holder of Series H Preferred Stock has received written notice
of such transaction at least thirty (30) days prior thereto, but in no event
later than ten (10) days prior to the record date for the determination of
shareholders entitled to vote with respect thereto, and (ii) the resulting
successor or acquiring entity (if not the Corporation) assumes by written
instrument the obligations of this Paragraph C. The above provisions shall apply
regardless of whether or not there would have been a sufficient number of shares
of Common Stock authorized and available for issuance upon conversion of the
shares of Series H Preferred Stock outstanding as of the date of such
transaction, and shall similarly apply to successive reclassifications,
consolidations, mergers, sales, transfers or share exchanges.
D. ADJUSTMENT DUE TO DISTRIBUTION. If the Corporation shall declare or
make any distribution of its assets (or rights to acquire its assets) to holders
of Common Stock as a partial liquidating dividend, by way of return of capital
or otherwise (including any dividend or distribution to the Corporation's
shareholders in cash or shares (or rights to acquire shares) of capital stock of
a subsidiary (I.E. a spin-off)) (a "Distribution"), then the holders of Series H
Preferred Stock shall be entitled, upon any conversion of shares of Series H
Preferred Stock after the date of record for determining shareholders entitled
to such Distribution, to receive the amount of such assets which would have been
payable to the holder with respect to the shares of Common Stock issuable upon
such conversion (without giving effect to any limitations upon conversion
imposed by Article IV.C) had such holder been the holder of such shares of
Common Stock on the record date for the determination of shareholders entitled
to such Distribution.
E. [Intentionally Omitted]
F. PURCHASE RIGHTS. If at any time when any Series H Preferred Stock is
issued and outstanding, the Corporation issues any Convertible Securities or
rights to purchase stock, warrants,
18
securities or other property (the "PURCHASE RIGHTS") pro rata to the record
holders of any class of Common Stock, then the holders of Series H Preferred
Stock will be entitled to acquire, upon the terms applicable to such Purchase
Rights, the aggregate Purchase Rights which such holder could have acquired if
such holder had held the number of shares of Common Stock acquirable upon
complete conversion of the Series H Preferred Stock (without giving effect to
any limitations upon conversion imposed by Article IV.C) immediately before the
date on which a record is taken for the grant, issuance or sale of such Purchase
Rights, or, if no such record is taken, the date as of which the record holders
of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.
G. NOTICE OF ADJUSTMENTS. Upon the occurrence of each adjustment or
readjustment of the Conversion Price pursuant to this Article XI, the
Corporation, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to each holder of Series H Preferred Stock
a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder of Series
H Preferred Stock, furnish to such holder a like certificate setting forth (i)
such adjustment or readjustment, (ii) the Conversion Price at the time in effect
and (iii) the number of shares of Common Stock and the amount, if any, of other
securities or property which at the time would be received upon conversion of a
share of Series H Preferred Stock.
XII. VOTING RIGHTS
The holders of the Series H Preferred Stock have no voting power
whatsoever, except as otherwise provided by the Delaware General Corporation Law
(the "GENERAL CORPORATE LAW"), in this Article XII and in Article XIII below.
Notwithstanding the above, the Corporation shall provide each holder of
Series H Preferred Stock, at its request, with copies of proxy materials and
other information sent to shareholders. If the Corporation takes a record of its
shareholders for the purpose of determining shareholders entitled to (a) receive
payment of any dividend or other distribution, any right to subscribe for,
purchase or otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or (b) to vote in connection with any proposed sale,
lease or conveyance of all or substantially all of the assets of the
Corporation, or any proposed merger, consolidation, liquidation, dissolution or
winding up of the Corporation, the Corporation shall mail a notice to each
holder, at least twenty (20) days prior to the record date specified therein (or
thirty (30) days prior to the consummation of the transaction or event,
whichever is earlier, but in no event earlier than public announcement of such
proposed transaction), of the date on which any such record is to be taken for
the purpose of such vote, dividend, distribution, right or other event, and a
brief statement regarding the amount and character of such vote, dividend,
distribution, right or other event to the extent known at such time.
19
To the extent that under the General Corporate Law the vote of the
holders of the Series H Preferred Stock, voting separately as a class or series,
as applicable, is required to authorize a given action of the Corporation, the
affirmative vote or consent of the holders of at least a majority of the shares
of the Series H Preferred Stock represented at a duly held meeting at which a
quorum is present or by written consent of a majority of the shares of Series H
Preferred Stock (except as otherwise may be required under the General Corporate
Law) shall constitute the approval of such action by the class. To the extent
that under the General Corporate Law holders of the Series H Preferred Stock are
entitled to vote on a matter with holders of Common Stock, voting together as
one class, each share of Series H Preferred Stock shall be entitled to a number
of votes equal to the number of shares of Common Stock into which it is then
convertible (without giving effect to any limitations upon conversion imposed by
Article IV.C) using the record date for the taking of such vote of shareholders
as the date as of which the Conversion Price is calculated. Holders of the
Series H Preferred Stock shall be entitled to notice of (and copies of proxy
materials and other information sent to shareholders) all shareholder meetings
or written consents with respect to which they would be entitled to vote, which
notice would be provided pursuant to the Corporation's by-laws and the General
Corporate Law.
XIII. PROTECTION PROVISIONS
So long as any shares of Series H Preferred Stock are outstanding, the
Corporation shall not, without first obtaining the approval (by vote or written
consent, as provided by the General Corporate Law) of the holders of at least a
majority of the then outstanding shares of Series H Preferred Stock:
(a) alter or change the rights, preferences or privileges of
the Series H Preferred Stock;
(b) alter or change the rights, preferences or privileges of
any capital stock of the Corporation so as to affect adversely the Series H
Preferred Stock;
(c) create any new class or series of capital stock having a
preference over the Series H Preferred Stock as to distribution of assets upon
liquidation, dissolution or winding up of the Corporation (as previously defined
in Article IX hereof, "SENIOR SECURITIES");
(d) increase the authorized number of shares of Series H
Preferred Stock;
(e) issue any shares of Series H Preferred Stock other than
pursuant to the Securities Purchase Agreement; or
(f) redeem, or declare or pay any cash dividend or
distribution on, any capital stock of the Corporation ranking junior to the
Series H Preferred Stock as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation (including the Common Stock).
20
If holders of at least a majority of the then outstanding shares of Series H
Preferred Stock agree to allow the Corporation to alter or change the rights,
preferences or privileges of the shares of Series H Preferred Stock pursuant to
subsection (a) above, then the Corporation shall deliver notice of such approved
change to the holders of the Series H Preferred Stock that did not agree to such
alteration or change (the "DISSENTING Holders") and the Dissenting Holders shall
have the right, for a period of thirty (30) days, to convert all of their shares
of Series H Preferred Stock pursuant to the terms of this Certificate of
Designations as they existed prior to such alteration or change or to continue
to hold their shares of Series H Preferred Stock.
XIV. MISCELLANEOUS
A. CANCELLATION OF SERIES H PREFERRED STOCK. If any shares of Series H
Preferred Stock are converted pursuant to Article IV, the shares so converted
shall be canceled, shall return to the status of authorized, but unissued
preferred stock of no designated series, and shall not be issuable by the
Corporation as Series H Preferred Stock.
B. LOST OR STOLEN CERTIFICATES. Upon receipt by the Corporation of (i)
evidence of the loss, theft, destruction or mutilation of any Preferred Stock
Certificate(s) and (ii) (y) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to the Corporation, or (z) in the case of
mutilation, upon surrender and cancellation of the Preferred Stock
Certificate(s), the Corporation shall execute and deliver new Preferred Stock
Certificate(s) of like tenor and date. However, the Corporation shall not be
obligated to reissue such lost or stolen Preferred Stock Certificate(s) if the
holder contemporaneously requests the Corporation to convert such Series H
Preferred Stock.
C. [Intentionally Omitted]
D. ALLOCATIONS OF RESERVED AMOUNT. The Reserved Amount and each
increase to the Reserved Amount shall be allocated pro rata among the holders of
Series H Preferred Stock based on the number of shares of Series H Preferred
Stock held by each holder at the time of the establishment of or increase in the
Reserved Amount, as the case may be. In the event a holder shall sell or
otherwise transfer any of such holder's shares of Series H Preferred Stock, each
transferee shall be allocated a pro rata portion of such transferor's Reserved
Amount. Any portion of the Reserved Amount which remains allocated to any person
or entity which does not hold any Series H Preferred Stock shall be allocated to
the remaining holders of shares of Series H Preferred Stock, pro rata based on
the number of shares of Series H Preferred Stock then held by such holders.
E. STATEMENTS OF AVAILABLE SHARES. So long as any shares of Series H
Preferred Stock are outstanding, the Corporation shall deliver to each holder a
written report notifying the holders of any occurrence which prohibits the
Corporation from issuing Common Stock upon any conversion. In addition, the
Corporation shall provide, within ten (10) days after delivery to the
Corporation of a written request by any holder, any of the following information
as of the date of such request: (i) the total number of shares of Series H
Preferred Stock outstanding, (ii) the total
21
number of shares of Common Stock issued upon all prior conversions of Series H
Preferred Stock, (iii) the total number of shares of Common Stock which are
reserved for issuance upon conversion of the Series H Preferred Stock, (iv) the
total number of shares of Common Stock which may thereafter be issued by the
Corporation upon conversion of the Series H Preferred Stock before the
Corporation would exceed the Reserved Amount.
F. PAYMENT OF CASH; DEFAULTS. Whenever the Corporation is required to
make any cash payment to a holder under this Certificate of Designations (as a
Conversion Default Payment, upon redemption or otherwise), such cash payment
shall be made to the holder within five (5) business days after delivery by such
holder of a notice specifying that the holder elects to receive such payment in
cash and the method (E.G., by check, wire transfer) in which such payment should
be made. If such payment is not delivered within such five (5) business day
period, such holder shall thereafter be entitled to interest on the unpaid
amount at a per annum rate equal to the lower of twenty-four percent (24%) and
the highest rate permitted by applicable law until such amount is paid in full
to the holder.
G. REMEDIES CUMULATIVE. The remedies provided in this Certificate of
Designations shall be cumulative and in addition to all other remedies available
under this Certificate of Designations, at law or in equity (including a decree
of specific performance and/or other injunctive relief), and nothing herein
shall limit a holder's right to pursue actual damages for any failure by the
Corporation to comply with the terms of this Certificate of Designations. The
Corporation acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the holders of Series H Preferred Stock and that the
remedy at law for any such breach may be inadequate. The Corporation therefore
agrees, in the event of any such breach or threatened breach, the holders of
Series H Preferred Stock shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
22
IN WITNESS WHEREOF, this Certificate of Designations is executed on
behalf of the Corporation this 26th day of March, 1997.
PALOMAR MEDICAL TECHNOLOGIES, INC.
By: /s/ Xxxxx Xxxxxxx Xxxx
-------------------------------
Xxxxx Xxxxxxx Xxxx
Assistant Secretary
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series H Preferred Stock)
The undersigned hereby irrevocably elects to convert ____________ shares of
Series H Preferred Stock (the "CONVERSION"), represented by stock certificate
No(s). ___________ (the "PREFERRED STOCK CERTIFICATES") into shares of common
stock ("COMMON STOCK") of Palomar Medical Technologies, Inc. (the "CORPORATION")
according to the conditions of the Certificate of Designations, Preferences and
Rights of Series H Convertible Preferred Stock (the "CERTIFICATE OF
DESIGNATIONS"), as of the date written below. If securities are to be issued in
the name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering herewith such
certificates. No fee will be charged to the holder for any conversion, except
for transfer taxes, if any. A copy of each Preferred Stock Certificate is
attached hereto (or evidence of loss, theft or destruction thereof).
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable to the undersigned upon conversion of the
Series H Preferred Stock shall be made pursuant to registration of the Common
Stock under the Securities Act of 1933, as amended (the "ACT"), or pursuant to
an exemption from registration under the Act.
Date of Conversion:
Applicable Conversion Price:
Amount of Conversion Default
Payments to be Converted, if any:
Number of Shares of
Common Stock to be Issued:
By:
Name:
itle:
(Must be _____ exactly as _____ appears on the Preferred
Stock Certificate)
Name:
Address:
Social Security or
Federal Tax I.D. Number:
* The Corporation is not required to issue shares of Common Stock until the
original Preferred Stock Certificate(s) (or evidence of loss, theft or
destruction thereof) to be converted are received by the Corporation. The
Corporation shall issue and deliver shares of Common Stock to an overnight
courier not later than the business day following the later of (a) the second
business day following the Conversion Date in the case of DWAC deliveries and
the third business day following the Conversion Date in all other cases and (b)
receipt of the original Preferred Stock Certificate(s) (or evidence of loss,
theft or destruction thereof) to be converted, and shall make payments pursuant
to the Certificate of Designations for the number of business days that such
issuance and delivery is late.
EXHIBIT B
TO
SECURITIES PURCHASE
AGREEMENT
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of March 27,
1997 by and among PALOMAR MEDICAL TECHNOLOGIES, INC., a corporation organized
under the laws of the State of Delaware, with headquarters located at 00 Xxxxxx
Xxxx Xxxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000 (the "COMPANY"), and the undersigned
purchasers of Preferred Shares under the Securities Purchase Agreement (together
with affiliates, the "INITIAL INVESTORS").
WHEREAS:
A. In connection with the Securities Purchase Agreement of even date
herewith by and between the Company and the Initial Investors (the "SECURITIES
PURCHASE AGREEMENT"), the Company has agreed, upon the terms and subject to the
conditions contained therein, to issue and sell to the Initial Investors shares
of its Series H Convertible Preferred Stock (the "PREFERRED STOCK") that is
convertible into shares (the "CONVERSION SHARES") of the Company's common stock,
par value $.01 per share (the "COMMON STOCK"), upon the terms and subject to the
limitations and conditions set forth in the Certificate of Designations, Rights
and Preferences with respect to such Preferred Stock (the "CERTIFICATE OF
DESIGNATIONS"); and
B. To induce the Initial Investors to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"SECURITIES ACT"), and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investors hereby agree as follows:
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have the
following meanings:
(i) "INVESTORS" means the Initial Investors and any
transferees or assignees who agree to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(ii) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("RULE 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
1
(iii) "REGISTRABLE SECURITIES" means the Conversion Shares
(including any Conversion Shares issuable with respect to Conversion Default
Payments under the Certificate of Designations or in redemption of any Preferred
Stock) issued or issuable with respect to the Preferred Stock and any shares of
capital stock issued or issuable, from time to time (with any adjustments), on
or in exchange for or otherwise with respect to any of the foregoing.
(iv) "REGISTRATION STATEMENT" means a registration statement
of the Company under the Securities Act.
b. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreement.
2. REGISTRATION.
a. MANDATORY REGISTRATION. The Company shall prepare, and, on or prior
to the sixtieth (60th) day after the Closing Date (the "FILING DATE"), file with
the SEC a Registration Statement on Form S-3 (or, if Form S-3 is not then
available, on such form of Registration Statement as is then available to effect
a registration of all of the Registrable Securities, subject to the consent of
the Initial Investors (as determined pursuant to Section 11(j) hereof)) covering
the resale of at least 4,500,000 shares of Registrable Securities (provided that
such number may be proportionally reduced if fewer than 20,000 shares are issued
under the Securities Purchase Agreement), which Registration Statement, to the
extent allowable under the Securities Act and the Rules promulgated thereunder
(including Rule 416), shall state that such Registration Statement also covers
such indeterminate number of additional shares of Common Stock as may become
issuable upon conversion of the Preferred Stock to prevent dilution resulting
from stock splits, stock dividends or similar transactions. The Registrable
Securities included on the Registration Statement shall be allocated to the
Investors as set forth in Section 11(k) hereof. The Registration Statement (and
each amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided to (and subject to the approval of) the
Initial Investors and their counsel prior to its filing or other submission.
b. UNDERWRITTEN OFFERING. If any offering pursuant to a Registration
Statement pursuant to Section 2(a) hereof involves an underwritten offering, the
Investors who hold a majority in interest of the Registrable Securities subject
to such underwritten offering, with the consent of the Initial Investors, shall
have the right to select a total of one legal counsel to represent the Investors
and an investment banker or bankers and manager or managers to administer the
offering, which investment banker or bankers or manager or managers shall be
reasonably satisfactory to the Company.
c. PAYMENTS BY THE COMPANY. The Company shall cause the registration
statement to become effective as soon as practicable after filing, but in no
event later than the one hundred twentieth (120th) day following the Closing
Date (the "REGISTRATION DEADLINE"). If (i) the registration statement(s)
covering the Registrable Securities required to be filed by the Company pursuant
to Section 2(a) hereof is not declared effective by the SEC on or before the
Registration Deadline or if, after the registration statement has been declared
effective by the SEC, sales of all the Registrable Securities (including any
Registrable Securities required to be registered pursuant to Section 3(b)
hereof) cannot be made pursuant to the registration statement
2
(by reason of a stop order or the Company's failure to update the registration
statement or any other reason outside the control of the Investors) or (ii) the
Common Stock is not listed or included for quotation on the NASDAQ Small Cap
Market ("NASDAQ"), the NASDAQ National Market (the "NNM"), the New York Stock
Exchange (the "NYSE") or the American Stock Exchange (the "AMEX") at any time
after the Registration Deadline, then the Company will make payments to the
Investors in such amounts and at such times as shall be determined pursuant to
this Section 2(c) as partial relief for the damages to the Investors by reason
of any such delay in or reduction of their ability to sell the Registrable
Securities (which remedy shall not be exclusive of any other remedies available
at law or in equity). The Company shall pay to each Investor an amount equal to
the sum of (i) the aggregate Purchase Price of the Preferred Stock held by such
Investor (including, without limitation, Preferred Stock that has been converted
into Conversion Shares then held by such Investor) (the "AGGREGATE SHARE PRICE")
multiplied by two hundredths (.02) if the Registration Statement filed pursuant
to Section 2(a) is not declared effective on or prior to the Registration
Deadline plus (ii) an amount equal to the Aggregate Share Price multiplied by
two hundredths (.02) for each thirty (30) days thereafter that the Registration
Statement has not been declared effective or that sales cannot be made pursuant
to the Registration Statement after it has been declared effective or that the
Common Stock is not listed or included for quotation on NASDAQ, the NYSE or
AMEX; PROVIDED, HOWEVER that there shall be excluded from each such period any
delays which are solely attributable to changes (other than corrections of
Company mistakes with respect to information previously provided by the
Investors) required by the Investors in the Registration Statement with respect
to information relating to the Investors, including, without limitation, changes
to the plan of distribution and PROVIDED, FURTHER, that the aggregate amount
payable to any Investor under this Section 2(c) shall not exceed ten percent
(10%) of such Investor's Aggregate Share Price. (For example, if the
Registration Statement is not effective by the Registration Deadline, the
Company would pay $20,000 for each $1,000,000 of Aggregate Share Price and the
Company would pay an additional $20,000 for each $1,000,000 of Aggregate Share
Price thereafter for each additional thirty (30) days the Registration Statement
is not effective (up to a maximum of $100,000 for each $1,000,000 Aggregate
Share Price)). Such amounts shall be paid in cash or, at each Investor's option,
may be convertible into Common Stock at the "CONVERSION PRICE" (as defined in
the Certificate of Designations). Any shares of Common Stock issued upon
conversion of such amounts shall be Registrable Securities. If the Investor
desires to convert the amounts due hereunder into Registrable Securities it
shall so notify the Company in writing within two (2) business days of the date
on which such amounts are first payable in cash and such amounts shall be so
convertible (pursuant to the mechanics set forth under Article IV of the
Certificate of Designations), beginning on the last day upon which the cash
amount would otherwise be due in accordance with the following sentence.
Payments of cash pursuant hereto shall be made within five (5) days after the
end of each period that gives rise to such obligation.
d. [Intentionally Omitted]
e. ELIGIBILITY FOR FORM S-3. The Company represents and warrants that
it meets the requirements for the use of Form S-3 for registration of the sale
by the Initial Investors and any other Investor of the Registrable Securities
and the Company shall file all reports required to be filed by the Company with
the SEC in a timely manner so as to maintain such eligibility for the use of
Form S-3.
3
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare promptly and file with the SEC
the Registration Statement required by Section 2(a), and cause such Registration
Statement relating to Registrable Securities to become effective as soon as
practicable after such filing, but in no event later than the Registration
Deadline, and keep the Registration Statement effective pursuant to Rule 415 at
all times until such date as is the earlier of (i) the date on which all of the
Registrable Securities have been sold and (ii) the date on which all Registrable
Securities (in the reasonable opinion of counsel to the Initial Investors) may
be immediately sold by the Investors to the public without registration
(including, in accordance with Rule 144(k) promulgated under the Securities Act)
(the "Registration Period"), which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein and all
documents incorporated by reference therein) shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein not misleading.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the Securities Act with respect to the disposition
of all Registrable Securities of the Company covered by the Registration
Statement until such time as all of such Registrable Securities have been
disposed of in accordance with the intended methods of disposition by the seller
or sellers thereof as set forth in the Registration Statement. In the event an
Investor notifies the Company that the number of shares available under a
Registration Statement filed pursuant to this Agreement was, for any three (3)
consecutive trading days (the date the Investor notifies the Company of such
occurrence being the "REGISTRATION TRIGGER DATE"), is insufficient to cover a
number of shares equal to the applicable Registration Percentage (as defined
below) multiplied by all of the Registrable Securities issued or issuable upon
conversion of the Preferred Stock held by such Investor (without giving effect
to any limitations on conversion contained in Article IV.C of the Certificate of
Designations), the Company shall amend the Registration Statement, or file a new
Registration Statement (on the short form available therefor, if applicable), or
both, so as to cover one hundred fifty percent (150%) of the Registrable
Securities issued or issuable to such Investor (without giving effect to any
limitations on conversion contained in Article IV.C of the Certificate of
Designations), in each case, as soon as practicable, but in any event within
fifteen (15) days after the Registration Trigger Date (based on the market price
of the Common Stock and other relevant factors on which the Company reasonably
elects to rely). The Company shall cause such amendment and/or new Registration
Statement to become effective as soon as practicable following the filing
thereof. In the event the Company fails to obtain the effectiveness of any such
Registration Statement within ninety (90) days after a Registration Trigger
Date, each Investor shall thereafter have the option, exercisable in whole or in
part at any time and from time to time by delivery of a written notice to the
Company (a "REDEMPTION NOTICE"), to require the Company to purchase for cash, at
an amount per share equal to the Redemption Amount (as defined in Article VIII.C
of the Certificate of Designations), a portion of the Investor's Preferred Stock
such that the total number of shares of Common Stock issuable to such Investor
upon conversion of its Preferred Stock (without giving effect to any limitations
on conversion contained in Article IV.C of the Certificate of Designations) does
not exceed 135% of the Registrable Securities issued or issuable upon conversion
of such Investor's Preferred Stock (without giving effect to any limitations on
conversion contained in Article IV.C of the Certificate of Designations). If the
4
Corporation fails to redeem any of such shares within five (5) business days
after its receipt of a Redemption Notice, then such Investor shall be entitled
to the remedies provided in Article VIII.D of the Certificate of Designations.
As used herein, "REGISTRATION PERCENTAGE" means one hundred percent (100%) for
the period ending on the 150th day following the Closing Date and means one
hundred and thirty-five percent (135%) thereafter.
c. The Company shall furnish to each Investor whose
Registrable Securities are included in the Registration Statement and its legal
counsel (i) promptly after the same is prepared and publicly distributed, filed
with the SEC, or received by the Company, one copy of the Registration Statement
and any amendment thereto, each preliminary prospectus and prospectus and each
amendment or supplement thereto, and, in the case of the Registration Statement
referred to in Section 2(a), each letter written by or on behalf of the Company
to the SEC or the staff of the SEC, and each item of correspondence from the SEC
or the staff of the SEC, in each case relating to such Registration Statement
(other than any portion, if any, thereof which contains information for which
the Company has sought confidential treatment), and (ii) such number of copies
of a prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor.
d. The Company shall use reasonable efforts to (i) register
and qualify the Registrable Securities covered by the Registration Statement
under such other securities or "blue sky" laws of such jurisdictions in the
United States as each Investor who holds Registrable Securities being offered
reasonably requests, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; PROVIDED, HOWEVER, that the Company shall not be
required in connection therewith or as a condition thereto to (a) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause the Company undue expense
or burden, or (e) make any change in its charter or bylaws, which in each case
the Board of Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders.
e. In the event the Investors who hold a majority in interest
of the Registrable Securities being offered in an offering select underwriters
for the offering, the Company shall enter into and perform its obligations under
an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.
f. As promptly as practicable after becoming aware of such
event, the Company shall notify each Investor of the happening of any event, of
which the Company has knowledge, as a result of which the prospectus included in
the Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request.
5
g. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest practicable moment and to notify each
Investor who holds Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance of such order
and the resolution thereof.
h. The Company shall permit a single firm of counsel
designated by the Initial Investors to review the Registration Statement and all
amendments and supplements thereto a reasonable period of time (and in no event
less than three (3) business days) prior to their filing with the SEC, and not
file any document in a form to which such counsel reasonably objects. In the
event such counsel fails to convey to the Company all of its comments (or that
it has no comments) to such Registration Statement prior to the scheduled filing
date of such Registration Statement (which date shall comply with the
requirements set forth in this Section 3(h), the sixty (60) and the one hundred
and twenty (120) day periods referred to in Section 2(a) and 2(c) shall be
extended by such number of business days after such scheduled filing date that
such counsel so conveys such comments (or that it has no comments).
i. The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the Securities Act) covering a
twelve-month period beginning not later than the first day of the Company's
fiscal quarter next following the effective date of the Registration Statement.
j. At the request of any Investor, the Company shall furnish,
on the date of effectiveness of the Registration Statement (i) an opinion, dated
as of such date, from counsel representing the Company addressed to the
Investors and in form, scope and substance as is customarily given in an
underwritten public offering and (ii) in the case of an underwriting, a letter,
dated such date, from the Company's independent certified public accountants in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and the Investors.
k. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to the
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Investors, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "INSPECTORS") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "RECORDS"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; PROVIDED, HOWEVER, that each Inspector shall
hold in confidence and shall not make any disclosure (except to an Investor) of
any Record or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(a) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (b) the release of such
Records is ordered pursuant to a subpoena or other order from a court or
government body of competent jurisdiction, or (c) the information in such
Records has been made generally available to the public other than by disclosure
in violation of this or any other agreement. The Company shall not be required
to disclose any confidential information in such Records to any Inspector until
and unless such Inspector shall have entered into confidentiality
6
agreements (in form and substance satisfactory to the Company) with the Company
with respect thereto, substantially in the form of this Section 3(k). Each
Investor agrees that it shall, upon learning that disclosure of such Records is
sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to the Company and allow the Company, at
its expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, the Records deemed confidential. Nothing herein
shall be deemed to limit the Investor's ability to sell Registrable Securities
in a manner which is otherwise consistent with applicable laws and regulations.
l. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement, or (v) such Investor
consents to the form and content of any such disclosure. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure, and allow the Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
m. The Company shall use its best efforts to promptly either
(i) cause all the Registrable Securities covered by the Registration Statement
to be listed on the NYSE or the AMEX or another national securities exchange and
on each additional national securities exchange on which securities of the same
class or series issued by the Company are then listed, if any, if the listing of
such Registrable Securities is then permitted under the rules of such exchange,
or (ii) secure the designation and quotation, of all the Registrable Securities
covered by the Registration Statement on the NASDAQ Small Cap Market or the NNM
and, without limiting the generality of the foregoing, to arrange for or
maintain at least two market makers to register with the National Association of
Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities.
n. The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
o. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Investors may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Investors may request, and, within three (3)
business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall cause legal
counsel selected by the Company to deliver, to the transfer agent for the
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) an opinion of such
counsel in the form attached hereto as EXHIBIT 1.
7
p. At the request of any Investor, the Company shall prepare
and file with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary in order to change the plan
of distribution set forth in such Registration Statement.
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least ten (10)
business days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor in writing of the information
the Company requires from each such Investor and each such Investor shall
provide such information no later than five (5) business days prior to such
anticipated filing date.
b. Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
c. Each Investor whose Registrable Securities are included in
a Registration Statement understands that the Securities Act may require
delivery of a prospectus relating thereto in connection with any sale thereof
pursuant to such Registration Statement and each such Investor shall deliver a
prospectus in connection with any such sale.
d. Each Investor agrees to notify the Company promptly, but in
any event within 72 hours after the date on which all Registrable Securities and
Preferred Shares owned by such Investor have been sold by such Investor, if such
date is prior to the expiration of the Registration Period, so that the Company
may comply with its obligation to terminate the Registration Statement in
accordance with Item 512 of Regulation S-K or Regulation S-B, as the case may
be.
e. In the event Investors holding a majority in interest of
the Registrable Securities being offered determine to engage the services of an
underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
8
f. Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(f)
or 3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
g. No Investor may participate in any offering of Registrable
Securities hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting arrangements in
usual and customary form entered into by the Company, (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions and any expenses in excess of those
payable by the Company pursuant to Section 5 below.
5. EXPENSES OF REGISTRATION.
All expenses incurred by the Company in connection with registrations,
filings or qualifications pursuant to Sections 2 and 3, including, without
limitation, all registration, listing and qualifications fees, printers and
accounting fees, the fees and disbursements of counsel for the Company and the
fees and disbursements contemplated by Section 3(j) hereof shall be borne by the
Company. The Company shall also reimburse the Investors for the reasonable fees
and disbursements of one counsel selected by the Investors pursuant to Section
2(b) hereof. The Investors shall be responsible for any underwriting discounts
and commissions attributable to the Registrable Securities to be sold by them.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify,
hold harmless and defend (i) each Investor who holds such Registrable
Securities, and (ii) the directors, officers, partners, members, employees,
agents and each person who controls any Investor within the meaning of Section
15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT"), if any, (each, an "INDEMNIFIED PERSON"),
against any joint or several losses, claims, damages, liabilities or expenses
(collectively, together with actions, proceedings or inquiries by any regulatory
or self-regulatory organization, whether commenced or threatened, in respect
thereof, "CLAIMS") to which any of them may become subject insofar as such
Claims arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of a material fact in a Registration Statement or the omission
or alleged omission to state therein a material fact required to be stated or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements
9
made therein, in light of the circumstances under which the statements therein
were made, not misleading, or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any other law, including,
without limitation, any state securities law, or any rule or regulation
thereunder relating to the offer or sale of the Registrable Securities (the
matters in the foregoing clauses (i) through (iii) being, collectively,
"VIOLATIONS"). Subject to the restrictions set forth in Section 6(c) with
respect to the number of legal counsel, the Company shall reimburse the
Investors and each such underwriter or controlling person, promptly as such
expenses are incurred and are due and payable, for any reasonable legal fees or
other reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by such Indemnified Person expressly for use in the Registration
Statement or any such amendment thereof or supplement thereto; (ii) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld; and (iii) with respect to any preliminary prospectus,
shall not inure to the benefit of any Indemnified Person if the untrue statement
or omission of material fact contained in the preliminary prospectus was
corrected on a timely basis in the prospectus, as then amended or supplemented,
if such corrected prospectus was timely made available by the Company pursuant
to Section 3(c) hereof, and the Indemnified Person was promptly advised in
writing not to use the incorrect prospectus prior to the use giving rise to a
Violation and such Indemnified Person, notwithstanding such advice, used it.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not jointly
to indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 6(a), the Company, each of its directors, each of
its officers who signs the Registration Statement, its employees, agents and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the Securities Act or the Exchange Act
(collectively and together with an Indemnified Person, an "INDEMNIFIED PARTY"),
against any Claim to which any of them may become subject, under the Securities
Act, the Exchange Act or otherwise, insofar as such Claim arises out of or is
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished to the Company by such Investor expressly for use in
connection with such Registration Statement; and subject to Section 6(c) such
Investor will reimburse any legal or other expenses (promptly as such expenses
are incurred and are due and payable) reasonably incurred by them in connection
with investigating or defending any such Claim; PROVIDED, HOWEVER, that the
indemnity agreement contained in this Section 6(b) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably
withheld; PROVIDED, FURTHER, HOWEVER, that the Investor shall be liable under
this Agreement (including this Section 6(b) and Section 7) for only that amount
as does not exceed the net proceeds actually received by such Investor as a
result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable
10
Securities by the Investors pursuant to Section 9. Notwithstanding anything to
the contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented, and the Indemnified Party
failed to utilize such corrected prospectus.
c. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; PROVIDED, HOWEVER, that such indemnifying party shall not be
entitled to assume such defense and an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential conflicts of interest between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding or the actual or potential defendants in, or targets
of, any such action include both the Indemnified Person or the Indemnified Party
and the indemnifying party and any such Indemnified Person or Indemnified Party
reasonably determines that there may be legal defenses available to such
Indemnified Person or Indemnified Party which are different from or in addition
to those available to such indemnifying party. The indemnifying party shall pay
for only one separate legal counsel for the Indemnified Persons or the
Indemnified Parties, as applicable, and such legal counsel shall be selected by
Investors holding a majority-in-interest of the Registrable Securities included
in the Registration Statement to which the Claim relates (with the approval of
the Initial Investors if it holds Registrable Securities included in such
Registration Statement), if the Investors are entitled to indemnification
hereunder, or by the Company, if the Company is entitled to indemnification
hereunder, as applicable. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is actually prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; PROVIDED, HOWEVER, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
such fraudulent misrepresentation, and (iii) contribution
11
(together with any indemnification or other obligations under this Agreement) by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities.
8. REPORTS UNDER THE EXCHANGE ACT.
With a view to making available to the Investors the benefits of Rule
144 promulgated under the Securities Act or any other similar rule or regulation
of the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees to:
a. file with the SEC in a timely manner and make and keep
available all reports and other documents required of the Company under the
Securities Act and the Exchange Act so long as the Company remains subject to
such requirements (it being understood that nothing herein shall limit the
Company's obligations under Section 4(c) of the Securities Purchase Agreement)
and the filing and availability of such reports and other documents is required
for the applicable provisions of Rule 144; and
b. furnish to each Investor so long as such Investor owns
shares of Preferred Stock or Registrable Securities, promptly upon request, (i)
a written statement by the Company that it has complied with the reporting
requirements of Rule 144, the Securities Act and the Exchange Act, (ii) a copy
of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably requested to permit the Investors to sell such securities
pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights of the Investors hereunder, including the right to have the
Company register Registrable Securities pursuant to this Agreement, shall be
automatically assignable by each Investor to any transferee of all or any
portion of the shares of Preferred Stock or the Registrable Securities if: (i)
the Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the Securities Act
and applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, and (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with written consent of the Company, the
Initial Investors (to the extent the Initial Investors still own shares of
Preferred Stock or Registrable Securities) and Investors who hold a majority
interest of the Registrable Securities. Any amendment or waiver effected in
accordance with this Section 10 shall be binding upon each Investor and the
Company.
12
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy, and shall be effective five days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier or confirmed telecopy, in each case addressed to a party. The addresses
for such communications shall be:
If to the Company:
Palomar Medical Technologies, Inc.
00 Xxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxx Xxxxxx, Director of Finance
with a copy to each of the Company's General Counsel at the
same address and to:
Xxxxx, Xxxx & Xxxxx, LLP
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxx Xxxxxxxx
If to RGC International Investors, LDC:
RGC International Investors, LDC
x/x Xxxx Xxxx Xxxxxxx Xxxxxxxxxx, X.X.
000 X. Xxxxxxxxxx Xxxx
Xxxxx 0000
Xxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx Xxxxx
and 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 11(b).
13
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts made
and to be performed in the State of Delaware. The Company irrevocably consents
to the jurisdiction of the United States federal courts located in the County of
Kent in the State of Delaware in any suit or proceeding based on or arising
under this Agreement and irrevocably agrees that all claims in respect of such
suit or proceeding may be determined in such courts. The Company irrevocably
waives the defense of an inconvenient forum to the maintenance of such suit or
proceeding. The Company further agrees that service of process upon the Company,
mailed by first class mail shall be deemed in every respect effective service of
process upon the Company in any such suit or proceeding. Nothing herein shall
affect the Investors' right to serve process in any other manner permitted by
law. The Company agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
e. This Agreement and the Securities Purchase Agreement
(including all schedules and exhibits thereto) constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein. This Agreement and the
Securities Purchase Agreement supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
j. All consents and other determinations to be made by the
Investors or the Initial Investors pursuant to this Agreement shall be made by
the Investors or the Initial Investors holding a majority of the Registrable
Securities (determined as if all shares of Preferred Stock then outstanding had
been converted into or exercised for Registrable Securities) held by all
Investors or Initial Investors, as the case may be.
k. The initial number of Registrable Securities included on
any Registration Statement and each increase to the number of Registrable
Securities included thereon shall be
14
allocated pro rata among the Investors based on the number of Registrable
Securities held by each Investor at the time of such establishment or increase,
as the case may be. In the event an Investor shall sell or otherwise transfer
any of such holder's Registrable Securities, each transferee shall be allocated
a pro rata portion of the number of Registrable Securities included on a
Registration Statement for such transferor. Any shares of Common Stock included
on a Registration Statement and which remain allocated to any person or entity
which does not hold any Registrable Securities shall be allocated to the
remaining Investors, pro rata based on the number of shares of Registrable
Securities then held by such Investors.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
15
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
PALOMAR MEDICAL TECHNOLOGIES, INC.
By:
-------------------------------
Name:
-----------------------------
Its:
------------------------------
Initial Investors:
RGC International Investors, LDC
By:
-------------------------------
Name:
-----------------------------
Its:
------------------------------
EXHIBIT 1
TO
REGISTRATION
RIGHTS
AGREEMENT
[Date]
VIA FACSILIME
Xxxxxxx Xxxxxx, Esq.
AMERICAN STOCK TRANSFER & TRUST COMPANY
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile (000) 000-0000
RE: PALOMAR MEDICAL TECHNOLOGIES, INC.
Dear Xx. Xxxxxx:
We are counsel to PALOMAR MEDICAL TECHNOLOGIES, INC., a corporation
organized under the laws of the State of Delaware (the "COMPANY"), and we
understand that [Name of Investor] (the "HOLDER") has purchased from the Company
shares of the Company's Series H Convertible Preferred Stock (the "PREFERRED
STOCK") that are convertible into shares of the Company's Common Stock, par
value $.01 per share (the "COMMON STOCK"). The Preferred Stock were purchased by
the Holder pursuant to a Securities Purchase Agreement, dated as of March 27,
1997, by and among the Company and the signatories thereto (the "AGREEMENT").
Pursuant to a Registration Rights Agreement, dated as of March 27, 1997, by and
among the Company and the signatories thereto (the "REGISTRATION RIGHTS
AGREEMENT"), the Company agreed with the Holder, among other things, to register
the Registrable Securities (as that term is defined in the Registration Rights
Agreement) under the Securities Act of 1933, as amended (the "SECURITIES ACT"),
upon the terms provided in the Registration Rights Agreement. In connection with
the Company's obligations under the Registration Rights Agreement, on ________,
1997, the Company filed a Registration Statement on Form S-___ (File No. 333-
_____________) (the "REGISTRATION STATEMENT") with the Securities and Exchange
Commission (the "SEC") relating to the Registrable Securities, which names the
Holder as a selling stockholder thereunder.
[Customary introductory and scope of examination language to be
inserted]
Based on the foregoing, we are of the opinion that the Registrable
Securities have been registered under the Securities Act.
[Other customary language to be included.]
Very truly yours,
cc: [Name of Investor]
EXHIBIT C
TO
SECURITIES
PURCHASE
AGREEMENT
XXXXX, XXXX & XXXXX LLP
XXX XXXX XXXXXX XXXXXX
XXXXXX, XXXXXXXXXXXXX 00000-0000
TELEPHONE 000-000-0000
FACSIMILE 000-000-0000
http:/xxx.xxx.xxx
March 31, 1997
The Subscribers listed on
EXHIBIT A attached hereto
Re: Palomar Medical Technologies, Inc.
Ladies and Gentlemen:
We have acted as counsel to Palomar Medical Technologies, Inc., a
Delaware corporation (the "Company"), in connection with the sale of the
Company's Series H Convertible Preferred Stock, par value $.01 per share (the
"Preferred Shares"), convertible into shares of the Company's Common Stock, par
value $.01 per share (the "Common Stock"), pursuant to the terms and conditions
of that certain Securities Purchase Agreement, dated as of March 28, 1997 (the
"Purchase Agreement"), by and between the Company and each of the Subscribers
listed on EXHIBIT A attached hereto (the "Subscribers"). Capitalized terms- used
herein and not otherwise defined herein shall have the respective meanings
assigned to such terms in the Purchase Agreement.
In connection with our rendering of the opinions expressed below, we
reviewed (i) the Certificate of Incorporation (the "Charter") and By-Laws (the
"By-Laws") of the Company, each as amended to date; (ii) certificates issued by
the Secretary of State of the State of Delaware dated March 27, 1997, with
respect to the legal existence and good standing of the Company and Palomar
Medical Products, Inc., Nexar Technologies, Inc., Cosmetic Technology
International, Inc., Spectrum Medical Technologies, Inc., Palomar Electronics
Corporation and Dynaco Corp. in Delaware, a certificate issued by the Secretary
of State of the State of Arizona dated March 27, 1997, with respect to the legal
existence and good standing of Tissue Technologies, Inc. in Arizona and a
certificate issued by the Secretary of State of the State of California dated
March 27, 1997, with respect to the legal existence and good standing of Comtel
Electronics in California (such entities, other than the Company, hereinafter
referred to as the "Subsidiaries"); (iii) a certificate issued by the Secretary
of the Commonwealth of The Commonwealth of Massachusetts as to the qualification
of the Company to conduct business as a foreign corporation; (iv) the relevant
records of meetings of the directors and stockholders of the Company and
consents of the directors and stockholders filed therewith; (v) the Purchase
Agreement, the Certificate of Designation and the Registration Rights Agreement;
(vi) the other documents delivered at the Closing; (vii) a certificate of the
Company with respect to certain factual matters; and (viii) such
other documents and certificates as we have deemed necessary to enable us to
render the opinions expressed below.
In rendering the opinions expressed in paragraph 1 below with respect
to the legal existence and good standing of the Company in Delaware, and with
respect to qualification and good standing of the Company as a foreign
corporation in The Commonwealth of Massachusetts, we have relied solely upon the
certificates referred to in clauses (ii) and (iii) of the preceding paragraph,
and such opinions are given as of the date of such certificates. We express no
opinion as to the tax good standing of the Company.
With respect to the opinion expressed in paragraph 7 below, we note
that we did not observe or supervise the activities of the Company or its
representatives in connection with the offering and sale of the Preferred
Shares. In rendering such, opinion we have assumed without investigation that in
connection with such offering and sale there has been no general solicitation or
general advertising by the Company or its representatives.
With respect to the opinion expressed in paragraph 8 below, the term
Material Agreement, Indenture or Instrument shall mean those documents proposed
by the Company to be filed as exhibits to its Annual Report on Form 10-KSB (and
any other documents of which we have actual knowledge that in our opinion are
required to be so filed by the Company) in satisfaction of the requirements of
Item 13 of Part III of such Form, which previously have not been filed by the
Company as an SEC Document or an exhibit to an SEC Document ("Material
Agreement, Indenture or Instrument"). In rendering such opinion we have relied
completely upon the Company's representation that the documents listed on
EXHIBIT JR attached hereto comprise all such documents.
In rendering the opinions expressed herein, we have also examined and
have relied completely upon all of the representations and warranties as to
matters of fact contained in the Purchase Agreement and contained in the related
instruments and other documents delivered by the Company to you in connection
with the issuance and sale of the Preferred Shares, and we have assumed the
completeness and accuracy of all factual matters described in such
representations and warranties.
We have not, except as specifically noted above, made any independent
review or INVESTIGATION OF FACTS RELATING TO THE COMPANY, INCLUDING, without
limiting the generality of the foregoing, any investigation as to the existence
of any actions, suits or proceedings pending or threatened against the Company
or agreements, judgments, injunctions, orders or decrees binding upon the
Company or which might result in the imposition of any lien or other encumbrance
on any assets of the Company.
We have assumed the authenticity and completeness of all documents
furnished to us as originals, the genuineness of all signatures (other than on
behalf of the Company), the legal capacity of natural persons, the conformity to
the originals of all documents furnished to us as copies, and the accuracy and
completeness of all corporate records made available to us by the Company.
When an opinion set forth below is given to our actual knowledge, the
knowledge is limited to the conscious awareness of facts or other information of
the individual lawyers in our firm who were actively involved in representation
of the Company and without any special or additional investigation undertaken
for the purposes of this opinion.
You have not asked us to pass upon your power and authority to enter
into the Purchase Agreement or the Registration Rights Agreement. Accordingly,
for the purposes of this opinion, we have assumed that each of you has all
requisite power and authority to enter into the Purchase Agreement and the
Registration Rights Agreement and to effect all of the transactions thereunder,
and that the Purchase Agreement, the Registration Rights Agreement and each
other agreement or instrument we have reviewed constitutes the legal, valid and
binding obligation of all parties thereto other than the Company.
We have made such examination of Massachusetts law, Federal law and the
corporation law of the State of Delaware as we deem necessary for the purposes
of this opinion. We do not purport to pass herein on the laws of any state or
jurisdiction other than the federal law of the United States of America, the law
of The Commonwealth of Massachusetts and the Delaware General Corporation Law.
We note that the Purchase Agreement is governed by the law of the State
of Delaware. We have assumed, with your permission, that the substantive law of
the State of Delaware, other than the corporation law of the State of Delaware,
is identical in all respects material to our opinions to the substantive law of
The Commonwealth of Massachusetts.
THE OPINIONS herein expressed are qualified to the extent that (i) the
validity or enforceability of any provisions of any agreement or instrument may
be subject to or affected by any bankruptcy, reorganization, insolvency,
moratorium, fraudulent transfer, usury or similar law of general application
from time to time in effect and relating to or affecting the rights or remedies
of creditors generally, (n) the remedy of specific performance or any other
equitable remedy may be unavailable in any jurisdiction or may be withheld as a
matter of judicial discretion, and (iii) the enforcement of any rights or
remedies is or may be subject to an implied duty on the part of the party
seeking to enforce such rights to take action and make determinations on a
reasonable BASIS AND IN GOOD FAITH. In ADDITION, WE EXPRESS NO OPINION herein as
to: prospective waivers of rights to notice or a hearing or OF OTHER RIGHTS
GRANTED BY CONSTITUTION or statute; powers of
attorney; provisions purporting to relieve parties of the consequences of their
own negligence or misconduct; provisions purporting to establish evidentiary
standards; or provisions to the effect that rights or remedies are not
exclusive, that every right or remedy is cumulative and may be exercised in
addition to any other right or remedy, or that failure to exercise or delay in
exercising rights and remedies will not operate as a waiver of any such right or
remedy.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing, in good
standing under the laws of the State of Delaware and has all requisite
corporate power and authority to conduct its business as currently
conducted. Each of the Subsidiaries is a corporation duly organized,
validly existing, in good standing under the laws of its state of
incorporation and has all requisite corporate power and authority to
conduct its business as currently conducted. The Company is duly
qualified as a foreign corporation and is in good standing in The
Commonwealth of Massachusetts, which is the only jurisdiction in which
failure to so qualify would have a Material Adverse Effect. The Company
has power and authority to enter into and perform each of the Purchase
Agreement and the Registration Rights Agreement and to issue the
Preferred Shares and to issue the Conversion Shares upon conversion of
the Preferred Shares.
2. The Purchase Agreement, the Registration Rights Agreement and the
Certificate of Designation have been duly and validly executed and
delivered by the Company and constitute the legal, valid and binding
obligations of the Company enforceable against the Company in
accordance with their respective terms. You have not requested and we
do not express any opinion as to the validity or enforceability of the
indemnification and contribution provisions of the Registration Rights
Agreement.
3. The authorized capital stock of the Company consists of (a) 100,000,000
SHARES OF COMMON STOCK AND (B) 5,000,000 shares of Preferred Stock, par
value $.01 per share.
4. The Certificate of Designation has been filed with the Secretary of
State of the State of Delaware, and the holders of the Preferred Shares
are entitled to the rights and privileges set forth therein subject to
the exceptions set forth in paragraphs 8 and 9.
5. The Preferred Shares and the Conversion Shares are duly authorized, the
Preferred Shares are validly issued, fully paid and non-assessable and
the Conversion Shares, when issued in accordance with the Certificate
of Designation, will be validly issued, fully paid and non-assessable.
The Company has reserved for issuance upon conversion of the Conversion
Shares 4,500,000 shares of Common Stock, as well as such additional
shares of Common Stock as may be required to be issued upon conversion
as a result of the antidilution provisions of the Preferred Shares.
6. To our knowledge, there are no preemptive rights to acquire the
Preferred Shares or the Conversion Shares or any other securities of
the Company upon issuance of the Preferred Shares or the Conversion
Shares. The Common Stock was authorized for trading on the NASDAQ Small
Cap Market as of the close of business on March 28, 1997. No suspension
of trading in the Common Stock on the NASDAQ Small Cap Market is in
effect or threatened.
7. Assuming the accuracy of the respective representations and warranties
of the Company and the Subscribers set forth in the Purchase Agreement,
the offer, issuance, sale and delivery of the Preferred Shares and the
Conversion Shares in accordance with the terms of the Purchase
Agreement and the Certificate of Designation constitute exempt
transactions or exempt securities, as the case may be, under the
Securities Act of 1933, as amended.
8. The execution, delivery and performance of the Purchase Agreement and
Registration Rights Agreement by the Company and the consummation by
the Company of the transactions contemplated by the Purchase Agreement
and the Registration Rights Agreement, including, without limitation,
the issuance of the Preferred Shares and the issuance of the Conversion
Shares in accordance with the terms of the Certificate of Designation,
do not and will not result in a violation of the Company's Certificate
of Incorporation or By-Laws or conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument
that is filed as an exhibit to the SEC Documents or any other Material
Agreement, Indenture or Instrument except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a Material Adverse
Effect or a material adverse effect
on the Company's ability to perform its obligations under the Purchase
Agreement or the Registration Rights Agreement or the Subscribers'
rights as a holder of Preferred Shares.
9. The execution, delivery and performance of the Purchase Agreement and
the Registration Rights Agreement by the Company and the consummation
by the Company of the transactions contemplated by the Purchase
Agreement and the Registration Rights Agreement, including, without
limitation, the issuance of the Preferred Shares and the issuance of
the Conversion Shares in accordance with the terms of the Certificate
of Designation, (i) do not and will not result in a violation of any
federal, Delaware General Corporation or Massachusetts law, rule, or
regulation, or, to our knowledge, any order, judgment or decree,
applicable to the Company, or by which any property or asset of the
Company is bound or affected, and (ii) will not require the Company to
obtain any approval, consent, authorization, waiver, exemption or order
of, or make any filing or registration with, any court or governmental
or regulatory agency, self regulatory organization or stock market or
exchange or, to our knowledge, any third party, in order for it to
execute, deliver or perform any of its obligations under the Purchase
Agreement or the Registration Rights Agreement or to issue and deliver
the Preferred Shares or to issue and deliver the Conversion Shares in
accordance with the terms thereof or for you to exercise your rights
and remedies under any of the Purchase Agreement or the Registration
Rights Agreement (other than any SEC, NASD, NASDAQ or state securities
filings which may be required to be made by the Company subsequent to
the consummation of the transactions contemplated by the Purchase
Agreement, and any registration statement which may be filed pursuant
to the Registration Rights Agreement). We express no opinion under this
paragraph 9 with respect to any usury or similar laws or any provision
of the securities or "blue sky" laws of any state or other jurisdiction
other than, with respect to its securities or "blue sky" laws, The
Commonwealth of Massachusetts.
10. Except as disclosed in the Purchase Agreement or the SEC Documents, to
our knowledge, 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.
11. To our knowledge, the Company currently meets the registrant
eligibility requirements to register the resale of the Common Shares on
form S-3 under the Securities Act.
These opinions are limited to the matters expressly stated herein and
are rendered solely for your benefit and may not be quoted or relied upon for
any other purpose or by any other person.
Very truly yours,
XXXXX, XXXX & XXXXX LLP
By: /s/ Xxxxx X. Xxxxxxxx
-----------------------
A Partner
cc: Xxxxx Xxx, American Stock Transfer
& Trust Company
EXHIBIT A
To
Exhibit C
RGC International Investors, LDC
EXHIBIT B
To
Exhibit C
1. Stock Purchase Agreement dated March 19, 1996, by and between Dynaco
Acquisition Corp., Comtel Electronics, Inc., Xxxxx X. Xxxxx, Xxxxx
Xxxxx and Palomar Electronics Corp.
2. Agreement for Purchase of Stock dated July 12, 1996, by and between the
Company, Xxxxxxx Xxxxxxx Xxxxxxx and Xxxxxxx Xxxxxxx.
3. Form of Stock Option Agreement under the 1996 Stock Option Plan.
4. Securities Purchase Agreement between Palomar Electronics Corporation
and Clearwater Fund IV, LLC, dated December 31, 1996.
5. Securities Purchase Agreement between Palomar Electronics Corporation,
the Company and The Travelers Insurance Company, dated as of December
18, 1996.
6. Security Purchase Agreement between Palomar Electronics Corporation and
GFL Advantage Fund Limited dated December 31, 1996.
7. Option Agreement between the Company and GFL Advantage Fund Limited
dated December 31,1996.
8. Common Stock Purchase Warrant dated December 31, 1996.
9. Form of Net Warrant to Purchase Common Stock
10. Subscription Agreement between the Company and Finmanagement, Inc.
dated December 27, 1996.
11. Subscription Agreement dated as of April 12, 1996, between the Company
and GFL Advantage Fund Limited.
12. Registration Rights Agreement dated as April 17, 1996 by and between
the Company and GFL Advantage Fund Limited.
13. Warrant dated as of April 16, 1996.
14. Form of Warrant to Purchase Common Stock dated February 1, 1996.
15. Form of Offshore Stock Subscription Agreement dated February 1, 1996.
16. Form of Subscription Agreement dated as of March 10, 1997.
17. Form of Registration Rights Agreement dated as of March 10, 1997.
18. Form of 5% Convertible Debenture due March 10, 2002.
19. Subscription Agreement between the Company and Soginvest Bank dated as
of March 13, 1997.
20. 6% Convertible Debenture due March 13, 2002.
21. Asset Purchase and Settlement Agreement by and among the Company, Nexar
Technologies, Inc., Technovation Computer Labs, Inc. and Xxxxxx X.
Xxxxxxxx, dated February 28, 1997.
22. List of exhibits omitted from the Asset Purchase and Settlement
Agreement.
23. (The Company hereby undertakes and agrees to furnish copies of the
exhibits and schedules set forth in exhibit 10(dddd) above to the
Commission upon its request.)
24. Employment Agreement dated as of January 1, 1997, between the Company
and Xxxxxx Xxxxxxxx.
25. Employment Agreement dated as of January 1, 1997, between the Company
and Xxxxxxx X. Xxxxxxxx.
26. Employment Agreement dated as of January 1, 1997, between the Company
and Xxxxxx X. Xxxxxx.
27. Employment Agreement dated as of January 1, 1997, between the Company
and Xxxxxxx Xxxxxxxx.
28. Securities Purchase Agreement between the Company and RGC International
Investors, LDC, dated March 27, 1997.
29. Registration Rights Agreement between the Company and RGC International
Investors, LDC, dated March 27, 1997.
30. Consent of Xxxxxx Xxxxxxxx LLP.
EXHIBIT D
TO
SECURITIES
PURCHASE
AGREEMENT
March 31, 1997
VIA FACSILIME
Xxxxxxx Xxxxxx, Esq.
AMERICAN STOCK TRANSFER & TRUST COMPANY
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile (000) 000-0000
RE: PALOMAR MEDICAL TECHNOLOGIES, INC.
Dear Xx. Xxxxxx:
Reference is made to that certain Securities Purchase Agreement, of even date
herewith, be and among Palomar Medical Technologies, Inc., a Delaware
corporation (the "Company") and the other signatories thereto (each, a "Holder")
pursuant to which the Company is issuing to the Holders 20,000 shares of its
Series H Preferred Stock, par value, $.01 per share (the "Preferred Shares").
The Preferred Shares are convertible into shares of the Company's common stock,
par value $.01 per share (the "Conversion Shares"). This letter shall serve as
our irrevocable authorization and direction to you to issue Conversion Shares to
Holder from time to time upon the direction of the Company. Certificates for the
Conversion Shares shall not bear any legend restricting their transfer and
should not be subject to any stop-transfer restriction; PROVIDED, HOWEVER that
if the Conversion Shares are not registered for resale under the Securities Act
of 1933, as amended, then the certificates for the Conversion Shares shall bear
the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS
SOLD PURSUANT TO RULE 144 UNDER THE ACT.
Please be advised that the Holder is relying upon this letter as an
inducement to enter into the Securities Purchase Agreement and, accordingly,
Holder is a third party beneficiary to these instructions. Moreover, the Company
cannot revoke or modify these instructions without the prior written consent of
Holder.
Please execute this letter in the space indicated to acknowledge your
agreement to act in accordance with these instructions. Should you have any
questions concerning this matter, please contact me at (000)000-0000.
Very truly yours,
PALOMAR MEDICAL TECHNOLOGIES, INC.
By: /s/ Xxxx X. Xxxxxx
-------------------------------
Name: Xxxx X. Xxxxxx
Title: Director of Finance
Acknowledged:
AMERICAN STOCK TRANSFER
& TRUST COMPANY
By:
Name:
Title:
Date:
Enclosure
cc: RGC International Investors, LDC
SCHEDULE 3(C)
TO
SECURITIES
PURCHASE
AGREEMENT
Nasdaq Issue Symbol: PMTI Total C/S Outstanding 31,971,145 10,687 None None
---------- ------
Total Number
of Number of
Authorized Total Shares Number Number of Date
Shares/ Shares Reserved of Date of Shares Registration Late
Conversion Outstanding for Shares Board to be must be Registration
Specify Type of Plan/Reason for Shares Exercised Issuance Cancelled Approval Registered Effective Penalty
-------------------------------- -------- ----------- ----------- --------- --------- ----------- ------------- ------------
1991 Stock Option Plan 350,000 248,100 101,900 0 8/30/91 0
& 9/1/92
1993 Stock Option Plan 500,000 175,000 325,000 0 4/23/93 0
1995 Stock Option Plan 1,000,000 29,400 970,600 0 8/3/94 0
1996 Stock Option Plan 2,500,000 0 2,500,000 0 6/7/96 0
-------- -------- ----------- ----- ---------
Total Stock Option Plans 4,350,000 452,500 3,897,500 0 0
1996 ESPP Plan 1,000,000 580 999,420 0 6/7/96 0
Employee 401(k) Plan 300,000 45,885 254,115 0 8/18/95 0
Warrants 15,781,086 6,095,549 9,685,534 0 various dates 530,687 Various None
FORM S-8 2,190,000 Various None
Debentures 4.5%
SF9.375M=$7.432M 840,892 0 840,892 0 6/13/96 840,892 10/3/96 None
Issued 7/3/96, Due 7/3/03 S-3 Filed 3/4/97
Conversion Discount 333-22725
0% yr 1-3, 5% yr 4,
10% yr 5, 15% yr 6,
20% yr 7
Debentures 4.5% $5M 750,000 353,191 396,809 0 10/16/96 0
Issued 10/17/96, Due
10/17/99-10/17/01
Conversion Discount 15%,
Floor $6.44,
Ceiling $9.66
Debentures 5% $6M 1,200,000 0 1,200,000 0 1/23/97 1,020,000 3/31/97 Inc. interest
Issued 12/31/96 & 1/13/97, from 5% by .5%
Due 12/31/01 & 1/13/02 every 30 days
Conversion Discount 15%, until effective
Floor $5.25, Ceiling $15 S-3 Filed 3/4/97
333-22725
Debentures 5% $5.5M 1,320,000 0 1,320,000 0 3/4/97 1,320,000 7/8/97 2% of face (max
Issued 3/10/97, Due 3/10/02 of 10%)
Conversion Discount
greater than 90 days=0%
less than 89 days=10%
Debentures 6% $500K 45,455 0 45,455 0 3/__/97 45,455 9/7/97 2% of face (max
Issued 3/13/97, Due 3/13/02 of 10%)
Conversion at $11
Preferred Stock 4%-8%
Series F $6M 600,000 0 600,000 0 7/12/96 0
Issued 7/12/96 &12/16/96
Conversion Discount 20%, Floor
$7, Ceiling $16
Preferred Stock 7%
Series G $10M 1,700,000 362,824 1,337,176 0 9/23/96 0
Issued 9/27/96 &12/16/96
Conversion Discount 15%,
Floor $6, Ceiling $8-$11.50
Nexar Technology Acquisition 250,000 0 250,000 0 250,000 Pre Nexar
(Estimate) IPO Close
Will Issue Prior to
Nexar IPO Closing
----------- ----------
Total 20,826,901 Form S-3 4,017,721
Reserved
Shares
-----------
Total 31,971,145 Form S-8 2,190,000
Shares
Outstanding
=========== ==========
Total 52,798,046 Total 6,207,721
Shares to be
Outstanding Registered
&
Reserved
===========
Total 100,000,000
Shares
Authorized
===========
Total 47,201,954
Shares
Available
SCHEDULE 3(F)
TO
SECURITIES
PURCHASE
AGREEMENT
NEWS RELEASE
FOR IMMEDIATE RELEASE
CONTACTS:
Xxxx X. Xxxxxxxxx Xxx Xxxxxx Xxxxxxx Xxxxxxxxxx
Director of Investor Relations Associate Chairman
Palomar Medical Technologies, Inc. Xxxxxx Xxxxxx Assoc., Inc. Consulting for Strategic Growth, Ltd.
000-000-0000 000-000-0000 000-000-0000
PALOMAR'S PREVIOUSLY FILED PATENT LAWSUIT AGAINST XXXX/BIOPHILE
PRE-DATES XXXX/BIOPHILE'S LEGAL ACTION ANNOUNCED TWO DAYS AGO
XXXXXXX, Mass., March 12, 1997 -- Palomar Medical Technologies, Inc. (NASDAQ:
PMTI) today announced that it filed a declaratory judgment several months ago
against XXXX/Biophile International Corp. (NASDAQ: XXXX) seeking a declaration
that Palomar's Epilaser(TM) laser-based hair removal system does not infringe on
XXXX/Biophile's laser hair removal method, and, furthermore, that
XXXX/Biophile's patent is both invalid and unenforceable. Palomar's suit was
filed in United States District Court in Boston, Mass.
Palomar's declaratory judgment action was filed substantially before
XXXX/Biophile's announcement two days ago that its Selvac Acquisition Corp. unit
had filed a lawsuit against Palomar for patent infringement and unfair
competition, essentially the same claims made previously by Palomar in its suit
against XXXX/Biophile. Selvac licenses the patented laser hair removal method
owned by Xx. Xxxxx Zaias.
"We filed this declaratory judgment months ago after learning that XXXX/Biophile
was misrepresenting to our customers that our product might infringe on their
patent," said Xxxxxx Xxxxxxxx, chairman and chief executive officer of Palomar.
"We are announcing our lawsuit today since our patent has only issued recently
and, therefore, all of the information is now in the public domain, allowing for
resolution of these issues."
(more)
PALOMAR / 2
XXXX/Biophile's lawsuit was announced hours after Palomar announced it had
received U.S. Food and Drug Administration (FDA) to sell and market its Epilaser
system. Palomar announced yesterday the issuance of a U.S. patent that discloses
and protects the laser-based hair removal technology developed by Dr. R. Rox
Xxxxxxxx at Massachusetts General Hospital's Xxxxxxx Laboratories, the
technology used in Epilaser and for which Palomar is the exclusive licensee.
Palomar Medical Technologies, Inc. is a leading supplier of proprietary laser
systems for dermatological and cosmetic laser treatment, and also engages in the
development and sale of specialty electronic products.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
With the exception of the historical information contained in this release, the
matters described herein contain forward-looking statements that involve risk
and uncertainties that may individually or mutually impact the matters herein
described, including but not limited to product demand and market acceptance,
the effect of economic conditions, the impact of competitive products and
pricing, governmental regulations, results of litigation, technological
difficulties and/or other factors outside the control of the company, which are
detailed from time to time in the company's SEC reports, including the report on
Form 10-Q for the quarter ended September 30, 1996.
####
Palomar news releases are available through
PR Newswire Company News on-Call by
fax at 000-000-0000, Extension
107555, or
xxxx://xxx.xxxxxxxxxx.xxx/(XXXX).
Palomar's home page address is xxxx://xxx.xxxxxx.xxx
####
NEWS RELEASE
FOR IMMEDIATE RELEASE
CONTACTS:
Xxxx X. Xxxxxxxxx Xxx Xxxxxx Xxxxxxx Xxxxxxxxxx
Director of Investor Relations Associate Chairman
Palomar Medical Technologies, Inc. Xxxxxx Xxxxxx Assoc., Inc. Consulting for Strategic Growth, Ltd.
000-000-0000 000-000-0000 000-000-0000
PALOMAR REPORTS FINANCIAL RESULTS; ELECTRONIC BUSINESS SPIN-OUT
IN PROCESS, SOLE FOCUS IS NOW ON COSMETIC LASER INDUSTRY
XXXXXXX, Mass., March 18, 1997 -- Palomar Medical Technologies, Inc. (NASDAQ:
PMTI) today announced that revenues for the fourth quarter ended December 31,
1996, increased 235 percent to $20,944,453, compared with the fourth quarter of
1995. Palomar also reported a loss for the quarter ended December 31, 1996 of
($18,650,578), or ($0.69) per share, of which ($11,500,000), or ($0.40) per
share, is attributable to non-recurring write-offs.
For the year ended December 31, 1996, revenues increased 220 percent to
$70,098,443, compared with the previous year. Palomar also reported a loss for
the year ended December 31, 1996, of ($37,863,792), or ($1.49) per share, of
which ($11,500,000), or ($0.44) per share, is attributable to non-recurring
write-offs.
"Our fourth quarter net loss includes approximately $7.2 million of operating
losses attributed to the following four factors," said Xxxxxx Xxxxxxxx, chairman
and chief executive officer of Palomar, "They are: the delay in receiving FDA
hair removal clearance for our EpiLaser(TM) system, which was only obtained this
month; start-up costs associated with our new cosmetic laser center services
division; reduced sales volume in our Nexar subsidiary due to unavoidable parts
shortages; and interruption in production caused by the relocation to larger
facilities of our Nexar and Comtel manufacturing plants.
(more)
PALOMAR / 2
"The majority of the non-recurring losses are a result of the assessment of our
technology and assets related to our electronic businesses. We reserved $8.5
million against technology assets and other costs in the fourth quarter,"
continued Georgiev. "In addition, Nexar settled claims with a former executive
for $1.4 million, which was charged to operations, and under which Nexar is
purchasing previously-licensed core technology and eliminating future royalty
payments on the use of this core technology. As part of our strategy to maximize
shareholder value, we are in the process of spinning out our electronic
businesses, preferably as majority-owned, publicly traded companies."
"The company also assessed its goodwill and joint ventures in related cosmetic
laser businesses and took a charge of $1.6 million," continued Georgiev. "This
write-down, combined with the previously mentioned, non-recurring costs in the
electronics segment, brings the total one-time charges for the year to
approximately ($11,500,000), or ($0.44) per share."
Georgiev added, "The public spin-out of Nexar is anticipated to close by
mid-April. That offering registers 2,500,000 shares of Nexar common stock in an
anticipated range of $11 to $13 per share."
Georgiev also said, "A spin-out of the remainder of our electronics group is
planned for later in 1997. The investments made in our electronics businesses
over the past two years are expected to yield high returns and could provide
liquid assets which can be used to fund our core cosmetic laser business in the
future.
"We are prepared to rapidly expand our cosmetic laser business," stated
Georgiev, "since we believe that all important elements are now in place. We
accomplished a major strategic alliance for the establishment of laser centers
with Columbia/HCA, a $20 billion company and one of the world's largest owners
and operators of medical facilities; we have FDA clearance for our complete
suite of laser systems, including EpiLaser for hair removal; we have a very
strong proprietary position in laser hair removal due to the recent issuance of
the Massachusetts General Hospital patent, for which we are the exclusive
licensee; we have major laser production capacity in place; we have expanded and
strengthened our management team; we are broadening our research and
development, as well as clinical, relationships with the highest-quality
institutions in the world; and we have established a subsidiary in the United
Kingdom to rapidly penetrate European markets.
(more)
PALOMAR / 3
Georgiev concluded, "With freed-up resources from the electronics segment, we
intend to devote resources from the electronics segment to solely focus on
achieving the largest possible market share in 1997 in our core business --
cosmetic laser products and services. We believe that we are strongly positioned
to capitalize on these multi-billion dollar markets and achieve a dominant
position within the next two years."
Palomar Medical Technologies, Inc. is a leading supplier of proprietary laser
systems for dermatological and cosmetic laser treatment, such as hair removal
and the treatment of wrinkles, spider veins, tattoos, age spots, warts, scars,
and xxxxx. Palomar also engages in the development and sale of specialty
electronic products.
The condensed consolidated statement of operations for the company follows:
PALOMAR MEDICAL TECHNOLOGIES, INC.
(Amounts in thousands, except per share data)
Three Months Ended Year Ended
December 31 December 31
1996 1995 1996 1995
Revenues $20,944 $6,241 $70,098 $21,907
Net loss ($18,651)* ($6,589) ($37,864)* ($12,621)
Net loss per share ($0.69)* ($0.39) ($1.49)* ($0.89)
Weighted-average number
of shares used in computation
of per-share net loss 28,996 17,082 26,167 14,165
* INCLUDES LOSS OF ($11,500,000), OR ($0.40) AND ($0.44) PER SHARE, FOR THE
THREE MONTHS AND YEAR ENDED DECEMBER 31, 1996 RESPECTIVELY, OF NON-RECURRING
WRITE-OFFS.
A REGISTRATION STATEMENT RELATING TO THE NEXAR SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. THESE
SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME
THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS COMMUNICATION DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO THE REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
(more)
PALOMAR / 4
A copy of the Nexar prospectus may be obtained from Xxxx Xxxxxxxxx, Director of
Investor Relations, Palomar Medical Technologies, Inc., 00 Xxxxxx Xxxx Xxxxx,
Xxxxxxx, XX 00000.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
With the exception of the historical information contained in this release, the
matters described herein contain forward-looking statements that involve risk
and uncertainties that may individually or mutually impact the matters herein
described, including but not limited to product demand and market acceptance,
the effect of economic conditions, the impact of competitive products and
pricing, governmental regulations, results of litigation, technological
difficulties and/or other factors outside the control of the company, which are
detailed from time to time in the company's SEC reports, including the report on
Form 10-Q for the quarter ended September 30, 1996.
####
Palomar news releases are available through
PR Newswire Company News on-Call by
fax at 000-000-0000, Extension
107555, or
xxxx://xxx.xxxxxxxxxx.xxx/(XXXX).
Palomar's home page address is xxxx://xxx.xxxxxx.xxx
