EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT, dated as of December 31, 1997, by and between
PALOMAR MEDICAL TECHNOLOGIES, INC., a Delaware corporation, with headquarters
located at 00 Xxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxxxx 00000 (the "Company"),
and ADVANTAGE FUND LIMITED a British Virgin Islands corporation, with
administrative offices located at x/x XXXXX, Xxxx Xxxxxxxxx 0, Xxxxxxx,
Xxxxxxxxxxx Antilles (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and Genesee Fund Limited, a British Virgin Islands
corporation ("GFL") have executed and delivered, one to the other, a
Subscription Agreement, dated as of September 26, 1996 (the "Subscription
Agreement"), pursuant to which the Company issued and sold to GFL, and GFL
purchased from the Company 10,000 shares of Series G Convertible Preferred Stock
(the "Series G Preferred Stock") of the Company, of which 2,684 shares (the
"Series G Preferred Shares") are issued and outstanding and held by the Buyer;
WHEREAS, pursuant to the Securities Purchase Agreement, dated as of
December 31, 1996, by and between Palomar Electronics Corporation, a Delaware
corporation, the Company and the Buyer, the Company sold to the Buyer and the
Buyer purchased from the Company 200,000 shares (the "Outstanding Nexar Shares")
of Common Stock, $.01 par value (the "Nexar Common Stock"), of Nexar
Technologies, Inc., a Delaware corporation ("Nexar") and in connection therewith
the Company and the Buyer executed and delivered, one to the other, an Option
Agreement, dated as of December 31, 1996 (the "Option Agreement"), pursuant to
which, among other things, the Company granted to the Buyer the right, upon the
terms and subject to the conditions of the Option Agreement, to exchange the
Outstanding Nexar Shares for shares of Common Stock, $.01 par value (the "Common
Stock") of the Company;
WHEREAS, the Company and the Buyer wish to provide the Buyer the right to
exchange the Series G Preferred Shares for shares of Common Stock upon the terms
and subject to the conditions of this Agreement;
WHEREAS, disputes have arisen regarding the exercise by the Buyer of its
rights under the Option Agreement and the performance by the Company of its
obligations under the Option Agreement and the Buyer and the Company wish to
resolve such disputes as provided in this Agreement; and
WHEREAS, the Company and the Buyer have executed and delivered one to the
other a Stock Purchase Agreement, dated as of the date hereof (the "Stock
Purchase Agreement") pursuant to which the Buyer is purchasing, upon the terms
and subject to the conditions of the Stock Purchase Agreement, shares of Nexar
Common Stock owned by the Company;
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 parties agree as follows:
1. BUYER REPRESENTATIONS, WARRANTIES, ETC.
The Buyer represents and warrants to, and covenants and agrees with, the
Company as follows:
(a) ACCREDITED INVESTOR. The Buyer is an oaccredited investoro as that term
is defined in Rule 501 of the General Rules and Regulations under the Securities
Act of 1933, as amended (the "1933 Act") by reason of Rule 501(a)(3);
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(b) REOFFERS AND RESALES. All subsequent offers and sales by the Buyer of
the shares of Common Stock issuable upon exchange of the Series G Preferred
Shares pursuant to this Agreement (the "Common Shares") shall be made pursuant
to registration of such Common Shares under the 1933 Act or pursuant to an
exemption from registration;
(c) COMPANY RELIANCE. The Buyer understands that the Common Shares are
being offered to it in reliance on the exemption from the registration
requirements of the 1933 Act provided by Section 3(a)(9) of the 1933 Act and may
also be offered in reliance on Regulation D under the 1933 Act ("Regulation D"}
and exemptions from state securities laws, including exemptions available by
reason of satisfying the requirements of Regulation D, and that the Company is
relying upon the truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Buyer set forth herein in order to determine the availability of such
exemptions;
(d) INFORMATION PROVIDED. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and its Subsidiaries and materials relating to the offer of the
Common Shares which have been requested by the Buyer; the Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company and have received satisfactory answers to any such inquiries. Without
limiting the generality of the foregoing, the Buyer has had the opportunity to
obtain and to review the Company's (1) Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1996, (2) Quarterly Reports on Form 10-Q for the
fiscal quarters ended March 31, June 30 and September 30, 1997, (3) Current
Report on Form 8-K dated December 9, 1997, and (4) Amendment No. 2 to the
Company's Registration Statement on Form S-3 (Registration No. 333-42129) (the
"Company Registration Statement") filed with the Securities and Exchange
Commission (the "SEC") on January 9, 1998 (collectively, the "SEC Reports"); and
the Buyer understands that its investment in the Common Shares involves a high
degree of risk;
(e) ABSENCE OF APPROVALS. The Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Common Shares; and
(f) AGREEMENT. This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Buyer and is a valid and binding
agreement of the Buyer enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.
(g) The Buyer acknowledges that, except for the historical material
contained herein or in the SEC Reports, the matters disclosed herein and therein
are forward-looking statements under the federal securities laws that involve
risks and uncertainties, including, but not limited to, product demand and
market acceptance risks, the effect of economic conditions, the impact of
competitive products and pricing, product development, commercialization and
technological difficulties, capacity and supply constraints or difficulties, the
results of financing efforts, actual purchases under agreements, the effect of
the Company's accounting policies, and other risks detailed in the SEC Reports.
Actual results could differ materially from those estimated or anticipated in
these forward-looking statements. Without limiting the generality of the
foregoing, the Buyer acknowledges the Risk Factors set forth in the Company
Registration Statement.
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2. COMPANY REPRESENTATIONS, WARRANTIES, ETC.
The Company represents and warrants to, and covenants and agrees with, the
Buyer that:
(a) ORGANIZATION AND AUTHORITY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite corporate power and authority to (i) own, lease
and operate its properties and to carry on its business as now being conducted,
and (ii) to execute, deliver and perform its obligations under this Agreement
and the other agreements to be executed and delivered by the Company in
connection herewith, and to consummate the transactions contemplated hereby. The
Company is duly qualified to do business as a foreign corporation and is in good
standing in all jurisdictions wherein such qualification is necessary and where
failure so to qualify could have a material adverse effect on the business,
properties, operations, condition (financial or other), results of operations or
prospects of the Company.
(b) CONCERNING THE COMMON SHARES. The Common Shares have been duly
authorized and, when issued in exchange for the Series G Preferred Shares in
accordance with this Agreement, will be duly and validly issued, fully paid and
non-assessable and will not subject the holder thereof to personal liability by
reason of being such holder. There are no preemptive rights of any stockholder
of the Company, as such, to acquire any of the Common Shares. The Common Stock
has been duly listed for trading on the Nasdaq SmallCap Market ("Nasdaq") and is
currently listed for trading thereon and (1) the Company has not been notified
since December 31, 1994 by Nasdaq of any failure or potential failure to meet
the criteria for continued listing and trading on Nasdaq and (2) no suspension
of trading in the Common Stock is in effect. The transactions contemplated by
this Agreement will not be subject to the rules adopted by Nasdaq which require
stockholder approval of certain transactions, including issuances of common
stock below the lower of book value or market price (the "Nasdaq Stockholder
Approval Rule").
(c) EXCHANGE AGREEMENT AND REGISTRATION RIGHTS AGREEMENT. This Agreement
has been duly and validly authorized, executed and delivered by the Company and
this Agreement is the valid and binding agreement of the Company enforceable in
accordance with its terms, subject as to enforceability to general principles of
equity and to bankruptcy, insolvency, moratorium and other similar laws
affecting the enforcement of creditors' rights generally. The Subscription
Agreement and the Registration Rights Agreement, dated as of September 26, 1996,
by and between the Company and the Buyer (the "Registration Rights Agreement"),
are in full force and effect and are valid and binding agreements of the Company
enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.
(d) NON-CONTRAVENTION. The execution and delivery of this
Agreement by the Company and the issuance of the Common Shares and the
consummation by the Company of the other transactions contemplated by this
Agreement, do not and will not conflict with or result in a breach by the
Company of any of the terms or provisions of, or constitute a default under, the
certificate of incorporation or by-laws of the Company, or any indenture,
mortgage, deed of trust or other material agreement or instrument to which the
Company is a party or by which it or any of its properties or assets are bound,
or any applicable law, rule or regulation or any applicable decree, judgment or
order of any court, United States federal or state regulatory body,
administrative agency or other governmental body having jurisdiction over the
Company or any of its properties or assets.
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(e) APPROVALS. No authorization, approval or consent of, or filing with,
any court, governmental body, regulatory agency, self-regulatory organization,
or stock exchange or market or the stockholders of the Company is required to be
obtained or made by the Company for the issuance of the Common Shares upon
exchange of the Series G Preferred Shares pursuant to this Agreement, other than
the requirements of any applicable blue sky laws.
(f) INFORMATION PROVIDED. The information provided by or on behalf of the
Company to the Buyer, including, without limitation, the information referred to
in Section 2(e) of this Agreement, does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading.
(g) ABSENCE OF CERTAIN CHANGES. Since December 31, 1996, there has been no
material adverse change and no material adverse development in the business,
properties, operations, condition (financial or other), results of operations or
prospects of the Company or any of its subsidiaries, except as disclosed in the
SEC Reports.
(h) ABSENCE OF CERTAIN PROCEEDINGS. Except as disclosed in the SEC Reports,
there is no action, suit, proceeding, inquiry or investigation before or by any
court, public board or body pending or, to the knowledge of the Company or any
of its subsidiaries, threatened against or affecting the Company or any of its
subsidiaries, 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) PROPERTIES. The Company and its subsidiaries have good title to all
property real and personal (tangible and intangible) and other assets owned by
them, free and clear of all security interests, charges, mortgages, liens or
other encumbrances, except such as are described in the SEC Reports or such as
do not materially interfere with the use of such property made, or proposed to
be made, by the Company or its subsidiaries. The leases, licenses or other
contracts or instruments under which the Company and its subsidiaries lease,
hold or are entitled to use any property, real or personal, are valid,
subsisting and enforceable with only such exceptions as do not materially
interfere with the use of such property made, or proposed to be made, by the
Company or its subsidiaries. Neither the Company nor any of its subsidiaries has
received notice of any material violation of any applicable law, ordinance,
regulation, order or requirement relating to its owned or leased properties.
(j) LABOR RELATIONS. No material labor problem exists or, to the knowledge
of the Company, is imminent with respect to any of the employees of the Company
or any of its subsidiaries.
(k) SEC FILINGS. The Company has timely filed all required forms, reports
and other documents with the SEC since December 1, 1996. All of such forms,
reports and other documents complied, when filed, in all material respects, with
all applicable requirements of the 1933 Act and the Securities Exchange Act of
1934, as amended (the "1934 Act").
(l) NO COMMISSIONS. The Company has not and will not pay any commission or
other remuneration to any person in connection with the exchange by the Buyer of
the Common Shares for the Series G Preferred Shares.
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(m) RULE 144. The Common Shares may be sold by the Buyer or its nominee
pursuant to Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the holders of Common Shares
to sell securities of the Company without registration ("Rule 144") (1) prior to
September 26, 1998 if the holder thereof is in compliance with paragraphs (e),
(f), (g), (h) and (i) of Rule 144 at the time of such sale, and (2) on and after
September 26, 1998 pursuant to paragraph (k) of Rule 144 if the holder of the
Common Shares is not and has not been an affiliate (as such term is defined in
Rule 144) during the preceding three months. As of the date hereof, adequate
current public information with respect to the Company is available in
accordance with paragraph (c)(1) of Rule 144.
(n) SUBORDINATED NOTE. The outstanding principal amount under that certain
4.5% Convertible Subordinated Promissory Note dated October 17, 1996 of the
Company in the original principal amount of $2,500,000 is currently $100,000.
The Company is not currently in default under such Note.
3. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
(a) TRANSFER RESTRICTIONS. The Buyer acknowledges that, except as otherwise
provided in Section 3(b), (1) the Common Shares have not been and are not being
registered under the 1933 Act, and may not be transferred unless (A)
subsequently registered thereunder for resale or (B) the Buyer shall have
delivered to the Company an opinion of counsel, reasonably satisfactory in form,
scope and substance to the Company, to the effect that the Common Shares to be
sold or transferred may be sold or transferred without such registration; (2)
any sale of the Common Shares 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 Common Shares 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 used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (3) neither the Company nor any other person is under any
obligation to register the Common Shares under the 1933 Act or to comply with
the terms and conditions of any exemption thereunder.
(b) RULE 144. With a view to making available to the Buyer and each other
holder of Series G Preferred Stock and Common Shares (the Buyer and each such
other holder, an "Investor") the benefits of Rule 144, the Company agrees to:
(1) make and keep public information available, as that term is
understood and defined in Rule 144;
(2) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act;
(3) furnish to each Investor so long as such Investor owns shares of
Series G Preferred Stock and Common Shares, promptly upon request, (i) a written
statement by the Company that it has filed all reports required to be filed by
Section 13 or 15(d) of the 1934 Act during the preceding 12 months and has been
subject to such filing requirements for the past 90 days, (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;
(4) if at any time the Company is not required to file such reports
with the SEC under Sections 13 or 15(d) of the 1934 Act, to use its best efforts
to make publicly available other information, upon the request of an Investor,
so long as is necessary to permit publication
5
by brokers and dealers of quotations for the Common Stock and sales of the
Common Shares in accordance with Rule 15c2-11 under the 1934 Act; and
(5) within two business days after the provision to the Company of
evidence reasonably satisfactory to the Company (x) of compliance with the
applicable provisions of paragraphs (e), (f), (g) and (h) of Rule 144 in
connection with the sale of Common Shares by an Investor (which evidence may
include an opinion of counsel for the Investor, in form, scope and substance
customary for opinions in comparable transactions, if an opinion of counsel is
reasonably requested by the Company), the Company will take all necessary
actions to permit and cooperate with such Investor in completing the transfer of
such Common Shares including instructing the Transfer Agent (as defined herein)
to effect such transfer, and will not place any restrictive legend on
certificates for the Common Shares or impose any stop-transfer restriction
thereon, and (y) of compliance with the requirements of paragraph (k) of Rule
144, the Company will promptly remove any restrictive legend and cancel any
stop-transfer restriction on Common Shares held by an Investor.
(c) NO RESTRICTIVE LEGEND. The Company shall not place any restrictive
legend on certificates for Common Shares issued on exchange of the Series G
Preferred Shares pursuant to this Agreement or impose any stop-transfer
restriction thereon.
(d) NASDAQ LISTING; REPORTING STATUS. Within ten days after the Closing
Date, the Company shall file with Nasdaq an amended listing application or other
document required by Nasdaq in order that the listing of shares of Common Stock
originally made by the Company in connection with the issuance of the Series G
Preferred Stock will be applicable to the Common Shares and, if required by
Nasdaq because the listing application relating to the Series G Preferred Stock
may not be made applicable to the Common Shares, shall file with Nasdaq a
listing application for the number of Common Shares which may be issuable upon
exchange of the Series G Preferred Shares pursuant to this Agreement, on Nasdaq
and shall provide evidence of such filing to the Buyer promptly after such
filing. The Company shall use its best efforts to obtain such modification or
listing. So long as the Buyer beneficially owns any of the Common Shares, the
Company shall file all reports required to be filed with the SEC pursuant to
Section 13 or 15(d) of the 1934 Act, and the Company shall not, prior to the
date which is two years after the Closing Date, terminate its status as an
issuer required to file reports under the 1934 Act even if the 1934 Act or the
rules and regulations thereunder would permit such termination.
(e) MARGIN REQUIREMENTS. Neither the Company nor any agent acting on its
behalf has taken or will take any action which might cause this Agreement or the
transactions contemplated hereby to violate Regulation G, Regulation T or any
other regulation of the Board of Governors of the Federal Reserve System or to
violate the 1934 Act, in each case as in effect now or as the same may hereafter
be in effect.
(f) BLUE SKY LAWS. On or before the Closing Date, the Company shall take
such action as shall be necessary to qualify, or to obtain an exemption for, the
Common Shares for issuance to the Buyer pursuant to this Agreement under such of
the securities or oblue skyo laws of jurisdictions in the United States as shall
be applicable to the issuance of the Common Shares to the Buyer pursuant to this
Agreement. The Company shall furnish copies of all filings, applications, orders
and grants or confirmations of exemptions relating to such securities or oblue
skyo laws on or before the Closing Date.
(g) CERTAIN EXPENSES. Whether or not the closing occurs, the Company shall
pay or reimburse the Buyer for all reasonable expenses (including, without
limitation, legal fees and expenses of counsel to the Buyer) incurred by the
Buyer in connection with this Agreement and the transactions contemplated
hereby.
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(h) CERTAIN ISSUANCES OF SECURITIES. If the transactions contemplated by
this Agreement are subject to the Nasdaq Stockholder Approval Rule, unless the
Company obtains Stockholder Approval or a waiver thereof from Nasdaq, the
Company will not issue any shares of Common Stock or shares of any other series
of preferred stock or other securities convertible into, exchangeable for or
otherwise entitling the holder to acquire shares of Common Stock which would be
subject to the requirements of the Nasdaq Stockholder Approval Rule (or any
successor or replacement provision thereof) and which would be integrated with
the sale of the Series G Preferred Shares to the Buyer or the issuance of Common
Shares upon conversion or exchange thereof for purposes of the Nasdaq
Stockholder Approval Rule (or any successor, replacement or other similar
provision applicable to the Company). As used herein, "Stockholder Approval"
means the approval by a majority of the votes cast by the holders of shares of
Common Stock (in person or by proxy) at a meeting of the stockholders of the
Company (duly convened at which a quorum was present), or a written consent of
holders of shares of Common Stock entitled to such number of votes given without
a meeting, of the issuance by the Company of 20% or more of the Common Stock of
the Company for less than the greater of the book or market value of such Common
Stock on conversion or exchange of the Series G Preferred Stock, as and to the
extent required under the Nasdaq Stockholder Approval Rule as in effect from
time to time or any successor, replacement or other similar provision applicable
to the Company.
(i) BEST EFFORTS. Each of the parties shall use its best efforts timely to
satisfy each of the conditions to the other party's obligations to complete the
closing of the transactions contemplated by this Agreement set forth in Section
6 or 7, as the case may be, of this Agreement on or before the Closing Date.
4. EXCHANGE RIGHTS; TRANSFER AGENT INSTRUCTIONS.
(a) EXCHANGE RIGHTS. (i) The Company hereby agrees that, at any time after
the closing under this Agreement, the Buyer and each other holder of Series G
Preferred Stock (the Buyer and each such other holder, a "Holder") may exchange
shares of Series G Preferred Stock for shares of Common Stock in lieu of
converting such shares in accordance with the Certificate of Designations of the
Series G Convertible Preferred Stock (the "Certificate of Designations"). The
terms and conditions pursuant to which shares of Series G Preferred Stock may be
exchanged for shares of Common Stock shall in all respects be identical to the
terms pursuant to which such shares may be converted under the Certificate of
Designations and the provisions of Section 9 of the Certificate of Designations
are hereby incorporated herein by this reference as if set forth in full herein,
except as set forth below:
(a) the Minimum Conversion Price shall be $.01;
(b) The number of trading days used in calculating the arithmetic
average of the Closing Price of the Common Stock described in clause
(a)(i)(z)(II)(B) of Section 9 of the Certificate of Designations shall be
five (such arithmetic average is referred to herein as the "Exchange
Price");
(c) each reference in the provisions of Section 9 of the Certificate
of Incorporation to oconversion o or oconverto or other forms of such words
shall be deemed to be a reference to oexchangeo or the appropriate form of
such word;
(d) each reference in the provisions of Sections 9(a), 9(b) and 9(c)
to the oConversion Amounto shall be deemed to be a reference to the
oExchange Amount,o which initially shall mean $1,000.00, subject to
adjustment in accordance with Sections 9(a), 9(b) and 9(c) of the
Certificate of Designations as if it were the Conversion Amount;
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(e) each reference in the provisions of Sections 9(a), 9(b) and 9(c)
of the Certificate of Designations to the oConversion Dateo shall be deemed
to be a reference to Exchange Date and, for purposes of this Section 4
oExchange Dateo shall mean the date on which the Notice of Exchange is
actually received by the Company, any transfer agent for the Series G
Preferred Stock or the transfer agent for the Common Stock, in case of an
exchange at the option of a Holder pursuant to Section 4(a).
(b) LIMITATION ON EXCHANGES. So long as the Company shall be in compliance
in all material respects with its obligations to the Holders (including, without
limitation, its obligations under the Subscription Agreement, the Registration
Rights Agreement, this Certificate of Designations and this Agreement, then,
notwithstanding any other provisions of Section 4(a), (x) no Holder shall be
entitled to exercise exchange rights prior to March 1, 1998 and (y) no Holder
shall be entitled on any Exchange Date to exchange any shares of Series G
Preferred Stock to the extent that the sum of (1) the number of shares of Series
G Preferred Stock for which valid notices of exchange were given by such Holder
within 30 days preceding such Exchange Date plus (2) the number of shares of
Series G Preferred Stock held by such Holder with respect to which the
determination in this Section 4(b) is being made would exceed the applicable
Exchangeability Amount.
As used herein, oExchangeability Amounto for any Exchange Date means the
number of shares of Series G Preferred Stock set forth below opposite the
Exchange Rate which is in effect for exchanges on such Exchange Date
EXCHANGE RATE EXCHANGEABILITY AMOUNT
$.01 to $2.00 per share 268
$2.01 to $3.00 per share 536
$3.01 to $4.00 per share 804
$4.01 per share or greater 1,072
; PROVIDED, HOWEVER, that the Exchange Rates shown above shall be subject to
equitable adjustments for stock splits, stock dividends, combinations,
recapitalizations, and similar events which occur on or after the Closing Date.
If at any time by reason of a proposed transfer or otherwise the number of
Holders is to be increased, then the Exchange Amount applicable to each such
Holder shall be allocated between or among the transferring Holder and the new
Holders pro rata, the Company shall be entitled to make a notation thereof on
the particular certificates and any such new Holder, by such Holder's acceptance
of shares of Series G Preferred Stock, agrees to such allocation and notation.
(c) EXCHANGE AT OPTION OF COMPANY. So long as the Company shall be in
compliance in all material respects with its obligations to the holders of the
Series G Preferred Stock (including, without limitation, its obligations under
this Agreement, the Registration Rights Agreement and the Certificate of
Designations), the Company shall have the right, exercisable at any time or from
time to time after February 28, 1998 by at least 15 business days but not more
than 20 business days prior notice (a "Company Exchange Notice") to the holders
of the Series G Preferred Stock, to require such holders to exchange, in
accordance with the provisions, and subject to the limitations, of this Section
4, all or any part of the outstanding shares of Series G Preferred Stock for
shares of Common Stock to the extent the same are at such time exchangeable for
shares of Common Stock. Unless paragraph (k) of Rule 144 is available to the
holder and the Company has complied with all of its obligations in this
Agreement with respect thereto, the number of outstanding shares of Series G
Preferred Stock which the Company may require a holder to exchange on any
exchange date may not exceed such number of shares of Series G Preferred Stock
which are exchangeable for a number of shares of Common
8
Stock which, together with the number of shares of Common Stock sold for the
account of such holder within the preceding three months, equals one percent of
the outstanding shares of Common Stock as shown by the most recent report or
statement published by the Company. The Company Exchange Notice shall state (1)
the number of shares of Series G Preferred Stock which the Company seeks to
require to be exchanged for shares of Common Stock and (2) the exchange date
(which shall not be less than 15 business days or more than 20 business days
after the date the Company Exchange Notice is given). If the Company shall give
a Company Exchange Notice, then, unless theretofore exchanged by a Holder, and,
so long as the Company shall be in compliance in all material respects with its
obligations to the holders of the Series G Preferred Stock (including, without
limitation, its obligations under this Agreement, the Registration Rights
Agreement and the Certificate of Designations) on such exchange date, on the
exchange date properly set forth therein, the lesser of (A) the number of shares
of Series G Preferred Stock which the Company seeks to require to be exchanged,
as set forth in such Company Exchange Notice or (B) the maximum number of shares
of Series G Preferred Stock which on such exchange date is exchangeable in
accordance with Section 4(a) hereof, shall be exchanged for such number of
shares of Common Stock as shall be determined pursuant to this Section 4 as if
the exchange of such number of shares of Series G Preferred Stock were made by
the Holders thereof in accordance herewith without any further action on the
part of the holders of such shares of Series G Preferred Stock. Upon receipt by
the Company of certificates for shares of Series G Preferred Stock exchanged for
shares of Common Stock in accordance with this Section 4(c) after a Company
Exchange Notice is given, the Company shall issue and, within three trading days
after such surrender, deliver to or upon the order of such Holder (1) that
number of shares of Common Stock for the number of shares of Series G Preferred
Stock exchanged as shall be determined in accordance herewith and (2) a new
certificate for the balance of shares of Series G Preferred Stock, if any.
(d) CONVERSIONS DEEMED EXCHANGES. On and after March 1, 1998, the Company
shall to treat any request for conversion of Series G Preferred Stock submitted
by a Holder in accordance with the terms and conditions of the Certificate of
Designations as a request for exchange in accordance with the terms and
conditions hereof, subject to Section 4(f). On and after the closing under this
Agreement, any Corporation Conversion Notice submitted by the Company in
accordance with the terms and conditions of the Certificate of Designations
shall be deemed to be a Company Exchange Notice in accordance with the terms and
conditions of Section 4(c).
(e) TRANSFER AGENT INSTRUCTIONS. Prior to the Closing Date, the Company
will (1) execute and deliver the Transfer Agent Instructions substantially in
the form attached hereto as ANNEX I to and thereby irrevocably instruct,
American Stock Transfer & Trust Company, as Transfer Agent and Registrar (the
"Transfer Agent"), to issue certificates for the Common Shares from time to time
upon exchange of the Series G Preferred Shares in such amounts as specified from
time to time to the Transfer Agent in the Exchange Notices surrendered in
connection with such exchanges and (2) appoint the Transfer Agent the exchange
agent for the Series G Preferred Stock. The certificates for the Common Shares
shall be registered in the name of the Buyer or its nominee and in such
denominations to be specified by the Buyer in connection with each exchange of
Series G Preferred Shares. The Company warrants that no instruction other than
such instructions referred to in this Section 4(e) will be given by the Company
to the Transfer Agent and that the Common Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement. Nothing in this Section 4(e) shall limit in any way
the Buyer's obligations and agreement to comply with the registration
requirements of all applicable securities laws upon any resale of Common Shares
by the Buyer. If the Buyer provides the Company with an opinion of counsel
reasonably satisfactory in form, scope and substance to the Company that
registration of a resale by the Buyer of any of the Common Shares in accordance
with clause (1)(B) of Section 3(a) of this Agreement is not required under the
1933 Act, the Company shall permit the transfer
9
of such Common Shares and promptly instruct the Company's transfer agent to
issue upon transfer no later than three days after receipt of such opinion one
or more share certificates in such name and in such denominations as specified
by the Buyer. Nothing in this Section 4(e) shall limit the obligations of the
Company under Section 3(n) of the Registration Rights Agreement.
(f) LIMITATION ON EXERCISE OF CONVERSION RIGHTS. Prior to March 1, 1998,
the Holders shall be entitled to exercise conversion rights in accordance with
the Certificate of Designations. On and after March 1, 1998, so long as the
Company is in compliance in all material respects with its obligations to the
holders of the Series G Preferred Stock (including, without limitation, its
obligations under this Agreement, the Registration Rights Agreement and the
Certificate of Designations), the Buyer and any other holder of shares of Series
G Preferred Stock who is bound by this Section 4(f) shall not exercise the
conversion rights provided in Section 9(a) of the Certificate of Designations.
(g) EXCHANGE NOTICE. Any notice of exchange of shares of Series G Preferred
Stock by a Holder pursuant to Section 4(a) shall be in the form attached hereto
as ANNEX II.
(h) TRANSFERS. The Buyer agrees not to sell, assign or otherwise transfer
any Series G Preferred Shares unless the transferee becomes a party to this
Agreement. The Company agrees to be bound by the terms of this Agreement for the
benefit of each such transferee.
(i) RETIREMENT OF SERIES G PREFERRED STOCK. Upon each exchange of shares of
Series G Preferred Stock pursuant to this Agreement, the Company shall retire
such shares.
5. CLOSING DATE.
The date and time of the closing under this Agreement (the "Closing Date")
shall be 12:00 noon, New York City time, on January 23, 1998. Such closing shall
occur on the Closing Date at the Law Offices of Xxxxx X Xxxxx.
6. CONDITIONS TO THE COMPANY'S OBLIGATIONS.
The Buyer understands that the Company's obligations under this Agreement
are conditioned upon the satisfaction of the following conditions precedent on
or before the Closing Date (any or all of which may be waived by the Company in
its sole discretion):
(a) The receipt and acceptance by the Company of this Agreement as
evidenced by execution of this Agreement by the Company and delivery of an
executed counterpart of this Agreement to the Buyer or its legal counsel;
(b) The accuracy on the Closing Date of the representations and warranties
of the Buyer contained in this Agreement as if made on the Closing Date and the
performance by the Buyer on or before the Closing Date of all covenants and
agreements of the Buyer required to be performed on or before the Closing Date;
and
(c) The Buyer shall have executed and delivered to the Company a General
Release in the form attached hereto as ANNEX III.
10
7. CONDITIONS TO THE BUYER'S OBLIGATIONS.
The Company understands that the Buyer's obligation under this Agreement is
conditioned upon the satisfaction of the following conditions precedent on or
before the Closing Date (any or all of which may be waived by the Buyer in its
sole discretion):
(a) The accuracy on the Closing Date of the representations and warranties
of the Company contained in this Agreement as if made on the Closing Date and
the performance by the Company on or before the Closing Date of all covenants
and agreements of the Company required to be performed on or before the Closing
Date and receipt by the Buyer of a certificate, dated the Closing Date, of the
Chief Executive Officer or the Chief Financial Officer of the Company confirming
such matters and such other matters as the Buyer may reasonably request;
(b) The closing under the Stock Purchase Agreement shall have occurred;
(c) The receipt by the Buyer of a certificate, dated the Closing Date, of
the Secretary of the Company certifying (1) the certificate of incorporation and
by-laws of the Company as in effect on the Closing Date, (2) all resolutions of
the Board of Directors (and committees thereof) of the Company relating to this
Agreement and the transactions contemplated hereby and (3) such other matters as
reasonably requested by the Buyer;
(d) The Company shall have executed and delivered to the Buyer a General
Release in the form attached hereto as ANNEX III; and
(e) Receipt by the Buyer on the Closing Date of an opinion of counsel for
the Company, dated the Closing Date, in form, scope and substance reasonably
satisfactory to the Buyer, to the effect set forth in ANNEX IV attached hereto.
8. MISCELLANEOUS.
(a) This Agreement shall be governed by and interpreted in accordance with
the laws of the Commonwealth of Massachusetts.
(b) This Agreement may be executed in counterparts and by the parties
hereto on separate counterparts, all of which together shall constitute one and
the same instrument. A facsimile transmission of this Agreement bearing a
signature on behalf of a party hereto shall be legal and binding on such party.
Although this Agreement is dated as of the date first set forth above, the
actual date of execution and delivery of this Agreement by each party is the
date set forth below such party's signature on the signature page hereof. Any
reference in this Agreement or in any of the documents executed and delivered by
the parties hereto in connection herewith to the date of execution and delivery
of this Agreement shall be deemed a reference to the later of such dates set
forth below each party's respective signature on the signature page hereof.
(c) The headings, captions and footers of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
(d) 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) This Agreement may be amended only by an instrument in writing signed
by the party to be charged with enforcement.
11
(f) 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,
or any course of dealings between the parties, shall not operate as a waiver
thereof or an amendment hereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or
exercise of any other right or power.
(g) Any notices required or permitted to be given under the
terms of this Agreement shall be sent by mail or delivered personally (which
shall include telephone line facsimile transmission with answer back
confirmation) or by courier and shall be effective five days after being placed
in the mail, if mailed, or upon receipt, if delivered personally or by courier,
in the case of the Company addressed to the Company at its address shown in the
introductory paragraph of this Agreement, Attention: Director of Finance
(telephone line facsimile transmission number (000) 000-0000) or, in the case of
the Buyer, at its address shown on the signature page of this Agreement, with a
copy to Genesee International, Inc., 00000 X.X. 0xx Xxxxxx, Xxxxx 0000,
Xxxxxxxx, Xxxxxxxxxx 00000-0000 (telephone line facsimile transmission number
(000) 000-0000) or such other address as a party shall have provided by notice
to the other party in accordance with this provision. The Buyer hereby
designates as its address and telephone line facsimile transmission number for
any notice required or permitted to be given to the Buyer pursuant to the
Certificate of Designations or the provisions of Section 4 the address and
telephone line facsimile transmission number shown on the signature page of this
Agreement, with a copy to: Advantage Fund Limited, x/x Xxxxxxx Xxxxxxxxxxxxx,
Xxx., 00000 X.X. 0xx Xxxxxx, Xxxxx 0000, Xxxxxxxx, Xxxxxxxxxx 00000-0000
(facsimile number (000) 000-0000), until the Buyer shall designate another
address for such purpose.
(h) The Buyer shall have the right to assign its rights and obligations
under this Agreement to any transferee of all or any portion of the Series G
Preferred Shares, provided any such assignee, by written instrument duly
executed by such assignee, assumes all obligations of the Buyer hereunder with
respect to the Series G Preferred Shares so transferred, whereupon the Buyer
shall be relieved of any further obligations, responsibilities and liabilities
under this Agreement with respect to the Series G Preferred Shares so
transferred.
(i) The respective representations, warranties, covenants and agreements of
the Buyer and the Company contained in this Agreement or made by or on behalf of
them, respectively, pursuant to this Agreement shall survive the closing on the
Closing Date and shall remain in full force and effect regardless of any
investigation made by or on behalf of them or any person controlling or advising
any of them.
(j) This Agreement and its Annexes set forth the entire agreement between
the parties hereto with respect to the subject matter hereof and supersede all
prior agreements and understandings, whether written or oral, with respect
thereto.
(k) The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
12
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto by their respective officers thereunto duly authorized as of the date
first set forth above.
ADVANTAGE FUND LIMITED
By: /s/ X.X. xx Xxxxx
--------------------
X.X. xx Xxxxx
President
Address: x/x XXXXX
Xxxx Xxxxxxxxx 0
Xxxxxxx, Xxxxxxxxxxx Antilles
Facsimile No.: 000-000-0000000
PALOMAR MEDICAL TECHNOLOGIES, INC.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------
Title: Treasurer and Chief Financial
Officer
