Agreement Between
Palomar Medical Technologies, Inc.
and Nexar Technologies, Inc.
This Agreement dated as of the 31st day of March, 1997 is by and
between Palomar Medical Technologies, Inc. (together with its subsidiaries other
than Nexar, "Palomar") and Nexar Technologies, Inc. ("Nexar") a wholly owned
subsidiary of Palomar.
Palomar has provided all of Nexar's funds for operations to date in the
form of non-interest bearing loans. The total amount of funds provided by
Palomar through December 31, 1996 has been $22,817,998 (the "Indebtedness"),
including $2,750,000 incurred by Palomar on the Company's behalf to settle
claims of a former executive officer and to acquire certain technology (for
further assignment to the Company) from such officer and a company controlled by
such officer. Palomar has also agreed to make a $1,000,000 capital contribution
(the "Additional Capital Contribution") to Nexar for the purpose of Nexar paying
management bonuses in such amount for services rendered in 1996. The purpose of
this Agreement, among other things, is to set forth the terms and conditions for
repayment or contribution to capital of Nexar for the Indebtedness. Accordingly,
the parties hereby agree as follows:
1. General Terms. Upon the closing of an initial public offering (an
"IPO") of the common stock of Nexar, $8,249,549 of the Indebtedness
will be repaid to Palomar (subject to a $1,000,000 offset if the
Additional Capital Contribution has not been made on the date of such
repayment), $4,568,449 will be converted into 45,684 shares of Nexar's
Convertible Preferred Stock, and $10,000,000 will be converted into
1,900,000 shares of Nexar's common stock, of which 700,000 will be
issued without restriction. The balance of 1,200,000 shares (the
"Contingent Shares") shall be subject to mandatory repurchase, in whole
or in part, by Nexar at $0.01 per share at any time after the 48 month
anniversary of the IPO unless released from escrow under Section 2,
below.
2. Escrow of Contingent Shares. The Contingent Shares shall be placed in
escrow, subject to release to Palomar in installments of 400,000 shares
each (upon achievement of any 3 of the 4 milestones specified below;
none, some, or all of which may occur) as follows:
(a) if Nexar achieves $7,000,000 in net income after
taxes or $100 million in total revenues for the
fiscal year ended December 31, 1997;
(b) if Nexar achieves $14,000,000 in net income after
taxes or $200 million in total revenues for the
fiscal year ended December 31, 1998;
(c) if Nexar achieves $21,000,000 in net income after
taxes or $300 million in total revenues for the
fiscal year ended December 31, 1999; and
1
(d) if Nexar achieves $28,000,000 in net income after
taxes or $400 million in total revenues for the
fiscal year ended December 31, 2000.
Alternatively, all of the Contingent Shares will be released to Palomar
immediately upon the happening of any one of the following:
(y) if the average per share market value closing bid
price of Nexar's common stock is (i) 175% of the IPO
price for ten consecutive trading days at any time
prior to the 12 month anniversary of the IPO, or (ii)
225% of the IPO price for ten consecutive trading
days at any time prior to the 24 month anniversary of
the IPO, or (iii) 275% of the IPO price for ten
consecutive trading days at any time prior to the 36
month anniversary of the IPO, or (iv) 325% of the IPO
price for ten consecutive trading days at any time
prior to the 48 month anniversary of the IPO; or
(z) if Nexar achieves $70,000,000 in cumulative net
income after taxes for the four fiscal years ended
December 31, 2000 or if Nexar is party to any merger
(other than a merger with a subsidiary or in which
Nexar is the survivor and "acquiror"), a sale of
substantially all assets or similar change in control
transaction.
If any or all of the alternative conditions for release of the
Contingent Shares has not occurred by the 48 month anniversary of the
IPO, any of the Contingent Shares remaining subject to escrow at such
time shall be repurchased by Nexar as described above.
This Agreement amends, restates and supersedes in its entirety an
agreement between the parties hereto with respect to the subject matter hereof
dated February 28, 1997.
[Signatures appear on the following page.]
2
Executed as a sealed instrument as of the date first above written.
PALOMAR MEDICAL TECHNOLOGIES, INC.
By: Xxxxxxx X. Xxxxxxxx
---------------------------------
Vice President of Finance
NEXAR TECHNOLOGIES, INC.
By: Xxxxxx X. Xxxxx
---------------------------------
President
3
