LOAN AGREEMENT
This Loan Agreement is made and entered into this 22nd day of May, 1998
by and between Coherent, Inc., a Delaware corporation ("Coherent"), and Palomar
Medical Technologies, Inc., a Delaware corporation ("PMTI").
Subject to the terms and conditions contained herein, the parties agree
as follows:
1. LOAN. Coherent shall loan PMTI a total of $4,000,000, to help
finance PMTI's working capital requirements (the "Loans"), which loans shall be
evidenced by one or more promissory notes in the form set forth in Exhibit A.
The parties agree that the initial loan shall be $3,000,000. The remaining
$1,000,000 shall be loaned to PMTI at its request at any time during the next 30
days. The promissory notes, together with any other promissory notes issued by
PMTI to Coherent that recite that they are secured by this Agreement, are
collectively referred to herein as the "Notes". The Note shall bear interest at
8.5 % per annum. The principal balance shall be due on or before 5:00 p.m.
California time on September 15, 1998. [By a side letter agreement between the
parties, dated June 25, 1998, this date has been extended to October 15, 1998.]
Interest shall be paid monthly. Should the principal not be paid in a timely
manner, interest shall accrue on the outstanding principal balance at the lesser
of 1 1/2 % per month or the highest rate permitted by law.
2. SECURITY INTEREST. PMTI hereby creates and grants to Coherent a
security interest in the collateral described in Section 3 hereof to secure the
payment and performance of the following obligations of PMTI to Coherent:
(a) Payment of the indebtedness evidenced by the Note and any and all
modifications, extensions or renewals thereof,
(b) Performance and discharge of each and every obligation, covenant,
condition and agreement of PMTI herein contained.
3. COLLATERAL. The collateral in which the security interest is created
(the "Collateral") shall consist of all of the inventory owned by Star Medical
Technologies, a wholly-owned subsidiary of PMTI ("Star Medical") from time to
time during the term of this Agreement. Coherent agrees that PMTI and/or Star
Medical may sell such inventory to its customers in the ordinary course of
business, provided that Coherent is granted a security interest in the proceeds
thereof to the extent that the book value of the Collateral is less than the
total indebtedness represented by the Note.
4. RECORDING. PMTI will execute (or cause Star Medical to execute),
deliver and cause to be recorded or filed in the manner and place required by
law, any document or instrument that may be requested by Coherent, including
financing statements or other instruments of similar character, to perfect and
protect the lien of this Loan Agreement upon any and all of the Collateral.
5. EVENTS OF DEFAULT. An Event of Default (as hereinafter defined) of
any Note issued under this Agreement shall cause all Note to be immediately due
and payable. As used herein, an "Event of Default" shall be any of the
following:
(a) The failure of PMTI to punctually and properly pay the indebtedness
evidenced by the Note in accordance with its terms.
(b) The failure of PMTI punctually and properly to observe, keep or
perform any covenant, agreement or condition required to be observed, kept or
performed by this Loan Agreement.
6. RIGHTS OF SECURED PARTY. Coherent shall have all the rights as a
secured party under the laws of California, including the right to sell any part
of the Collateral at a public or private sale or bid as a purchaser of the
Collateral.
7. APPLICATION OF PROCEEDS OF SALE. The proceeds of the sale of any
Collateral sold pursuant to Section 6 hereof shall be applied as follows:
FIRST: To the payment of costs and expenses of such sale,
including the fees and out-of-pocket expenses of counsel employed in connection
therewith, and the payment of all other costs and expenses incurred by Coherent
and in connection with the administration and enforcement of this Agreement;
SECOND: To the payment and discharge in full of all
obligations described in Section 2 hereof including, without limitation, the
unpaid principal and interest and other sums then owing in respect of the Note;
and
THIRD: The balance (if any) of such proceeds shall be paid to
PMTI, its successors and assigns, or as a court of competent jurisdiction may
direct.
8. COVENANTS OF PMTI. PMTI covenants and warrants that, unless
compliance is waived by Coherent in writing:
(a) PMTI will not further encumber, sell, contract for sale or
otherwise dispose of any of the Collateral until such time as the security
interest created by this Agreement has terminated. PMTI will not permit Star
Medical to further encumber, sell, contract for sale or otherwise dispose of any
of the Collateral until such time as the security interest created by this
Agreement has terminated.
(b) PMTI will take all actions necessary or appropriate to preserve and
defend its title to the Collateral and the validity of the lien created by this
Agreement.
(c) PMTI will promptly notify Coherent in writing of any event which
materially and adversely affects the ability of PMTI or Coherent to dispose of
the Collateral, or the rights or remedies of Coherent in relation thereto,
including, but not limited to, the levy of any legal process against the
Collateral.
(d) PMTI will, without expense to Coherent, do, execute, acknowledge
and deliver, or cause to be done, executed, acknowledged and delivered, all such
further acts and instruments as Coherent shall from time to time require in
order to facilitate the performance of this Agreement.
(e) PMTI agrees to promptly enter into good faith negotiations with
Coherent regarding the sale of Star Medical for a price of no less than $42
million, on terms to be agreed upon between PMTI and Coherent. The parties agree
to use reasonable diligence to negotiate and enter into a letter of intent
containing the material terms of the transaction within the next 30 days. The
letter of intent shall include provisions providing for a closing date on or
before September 15, 1998 and standard language prohibiting PMTI from entering
into discussions with third parties regarding the possible sale of Star Medical
or any of Star Medical's assets, subject to the fiduciary responsibilities of
PMTI's board of directors. PMTI agrees to discontinue and/or refrain from
discussing the sale of Star Medical, or the licensing of any of Star Medical's
technology, with any third party until the earlier of (i) the expiration of 30
days, or (ii) both parties agree that negotiations are finished, subject to the
fiduciary responsibilities of PMTI's board of directors.
9. MISCELLANEOUS.
(a) No failure or delay by Coherent in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, and no single or partial
exercise thereof shall preclude any other of further exercise of the exercise of
any other right, power or privilege.
(b) Should any one or more of the provisions hereof be determined to be
illegal or unenforceable, all other provisions hereof shall be give effect
separately therefrom and shall not be affected thereby.
(c) The security interest created by this Loan Agreement shall fully
terminate immediately upon the full and complete satisfaction and discharge of
all of the Obligations set forth in paragraph 3 hereof. Upon such termination,
Coherent shall execute and deliver to PMTI such termination statements and other
instruments of release of such security interest as PMTI may reasonably require.
(d) All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered or
mailed first class, postage prepaid, to the parties at the following addresses
(or such other address as shall be given in writing by either party to the
other):
To Coherent:
Coherent, Inc.
0000 Xxxxxxx Xxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Attn: General Counsel
Facsimile No.: (000) 000-0000
To PMTI:
Palomar Medical Technologies, Inc.
00 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: General Counsel
Facsimile No.: (000) 000-0000
(e) This Loan Agreement and security interest created hereby shall
inure to the benefit of the Coherent, its successor and assigns and any
transferee of any of the Obligations secured hereby, and shall be binding upon
PMTI and its successors and heirs.
(f) The laws of the State of California shall govern the validity of
this Agreement, the construction of its terms and the interpretation of the
rights and duties of the parties.
The foregoing Agreement is hereby executed as of the date first above
written.
COHERENT, INC.
a Delaware corporation
By: /s/
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Xxxxx X. Xxxxxx
Title: Sr. VP and General Counsel
PALOMAR MEDICAL TECHNOLOGIES, INC.
a Delaware corporation
By: /s/
--------------------------------
Xxxxx X. Xxxxxxx
Title: Chairman & Chief Executive Officer
EXHIBIT A
PROMISSORY NOTE
$3,000,000 Santa Clara, California
May 22, 1998
FOR VALUE RECEIVED, the undersigned, Palomar Medical Technologies,
Inc., a Delaware corporation ("PMTI"), promises to pay to Coherent, Inc., a
Delaware corporation ("Coherent"), or order, the principal sum of Three Million
Dollars ($3,000,000). Interest shall accrue on the outstanding principal balance
at a rate of 8.5% per annum and shall be payable monthly. The principal amount
shall be due and payable on or before 5:00 p.m. California time on September 15,
1998.
Should the principal and interest not be paid in a timely manner,
interest shall accrue on the outstanding principal and interest balance at the
lesser of 1 1/2 % per month or the highest rate permitted by law. This
promissory note shall be immediately due and payable in the Event of Default (as
defined in the Loan Agreement between PMTI and Coherent of even date herewith
(the "Loan Agreement")).
This note may be prepaid by PMTI at any time without penalty.
PMTI shall reimburse Coherent for all costs and expenses incurred by it
and shall pay the reasonable fees and disbursements of counsel to Coherent in
connection with the enforcement of Coherent's rights hereunder.
No amendment, modification or waiver of any provision of this Note nor
consent to any departure by PMTI therefrom shall be effective unless the same
shall be in writing and signed by Coherent and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given.
PMTI hereby waives any requirement of notice of dishonor, notice of
protest and protest.
This Note shall be deemed to be a contract made under the laws of the
State of California and shall be construed in accordance with the laws of said
State. This Note shall be binding upon PMTI and its successors and assigns and
the terms hereof shall inure to the benefit of Coherent and its successors and
assigns, including subsequent holders hereof. The holding of any provision of
this Note to be invalid or unenforceable by a court of competent jurisdiction
shall not affect any other provisions and the other provisions of this Note
shall remain in full force and effect.
This Note is secured with all of the inventory of PMTI's wholly-owned
subsidiary, Star Medical Technologies, pursuant to the terms of the Loan
Agreement.
PALOMAR MEDICAL TECHNOLOGIES, INC.
By: /s/
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