Exhibit 4.3
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER RULE 506 OF REGULATION D PROMULGATED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION OR EXCLUSION FROM
THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES LAWS.
No. 1
US$3,000,000
3% CONVERTIBLE DEBENTURE DUE NOVEMBER 8, 2003
THIS DEBENTURE is one of a duly authorized issue of Debentures of
SurgiLight, Inc., a Delaware corporation (the "Company"), designated as its 3%
Convertible Debentures, due November 8, 2003 (the "Debentures"), in an aggregate
principal amount of up to US$3,000,000.
FOR VALUE RECEIVED, the Company promises to pay to GEM Global Yield Fund
Limited, or its registered assigns (the "Holder"), the principal sum of Three
Million Dollars (US $3,000,000), on or prior to November 8, 2003 (the "Maturity
Date") and to pay interest to the Holder on the principal sum, at the rate of
three percent (3%) per annum. Interest shall accrue daily commencing on the date
twelve (12) months after the Original Issue Date (as defined in Section 1) until
payment in full of the principal sum, together with all accrued and unpaid
interest, has been made or duly provided for. If at any time after the original
Issue Date an Event of Default has occurred and is continuing, interest shall
accrue at the rate of fifteen percent (15%) per annum from the date of the Event
of Default and the applicable cure period through and including the date of
payment. Interest due and payable hereunder shall be paid to the person in whose
name this Debenture (or one or more successor Debentures) is registered on the
records of the Company regarding registration and transfers of the Debentures
(the "Debenture Register"); provided, however, that the Company's obligation to
a transferee of this Debenture arises only if such transfer, sale or other
disposition is made in accordance with the terms and conditions hereof and of
the Convertible Debenture Purchase Agreement by and between the Company and the
Holder, dated as of June 30, 2000, as amended from time to time (the "Purchase
Agreement"), executed by the original Holder. A transfer of the right to receive
principal and interest under this Debenture shall be transferable only through
an appropriate entry in the Debenture Register as provided herein.
This Debenture is subject to the following additional provisions:
Section 1. Definitions. Capitalized terms used and not otherwise
defined herein shall have the meanings given such terms in the Purchase
Agreement. As used in this Agreement, the following terms shall have the
following meanings:
"Adjusted Conversion Price" means the lesser of the Fixed Conversion
Price or the Floating Conversion Price one day prior to the record date set for
the determination of stockholders entitled to receive dividends, distributions,
rights or warrants as provided for in Sections 4(c)(ii), (iii) and (iv).
"Attorney-in-Fact" shall have the same meaning as used in the Purchase
Agreement.
"Conversion Date" means the date on which a Notice of Conversion is
dated.
"Conversion Ratio" means, at any time, a fraction, of which the
numerator is the principal amount represented by any Debenture plus accrued but
unpaid interest, and of which the denominator is the Conversion Price at such
time.
"Escrow Agent" means the Escrow Agent as defined in the Purchase
Agreement.
"Junior Securities" means the Common Stock, all other equity
securities of the Company and all other debt that is subordinated to the
Debenture by its terms.
"Original Issue Date" shall mean the date of the first issuance of
this Debenture regardless of the number of transfers hereof.
Section 2. Denominations of Debentures.
The Debentures are issuable in denominations of One Thousand Dollars
(US$1,000.00) and integral multiples of One Thousand Dollars (US$1,000.00) in
excess thereof. The Debentures are exchangeable for an equal aggregate principal
amount of Debentures of different authorized denominations, as requested by the
Holder surrendering the same, but shall not be issuable in denominations of less
than integral multiplies of One Thousand Dollars (US$1,000.00). No service
charge to the Holder will be made for such registration of transfer or exchange.
Section 3. Events of Default and Remedies.
I. "Event of Default", wherever used herein, means any one of the following
events (whatever the reason and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental
body):
(a) any default in the payment of the principal of or interest on this
Debenture as and when the same shall become due and payable either at the
Maturity Date, by acceleration, conversion, or otherwise, and such default shall
not have been remedied within ten (10) Business Days after the date on which
written notice of such default shall have been given;
(b) the Company shall fail to observe or perform any other covenant,
agreement or warranty contained in, or otherwise commit any breach of, this
Debenture, and such failure or breach shall not have been remedied within twenty
(20) Business Days after the date on which written notice of such failure or
breach shall have been given;
(c) the occurrence of any event or breach or default by the Company
under the Purchase Agreement or any other Transaction Document and such failure
or breach shall not have been remedied within twenty (20) Business Days after
the date on which written notice of such failure or breach shall have been given
by the Purchaser;
(d) the Company or any of its subsidiaries shall commence a voluntary
case under the United States Bankruptcy Code as now or hereafter in effect or
any successor thereto (the "Bankruptcy Code"); or an involuntary case is
commenced against the Company under the Bankruptcy Code and the petition is not
controverted within thirty (30) days, or is not dismissed within sixty (60)
days, after commencement of the case; or a "custodian" (as defined in the
Bankruptcy Code) is appointed for, or takes charge of, all or any substantial
part of the property of the Company or the Company commences any other
proceeding under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Company or there
is commenced against the Company any such proceeding which remains undismissed
for a period of sixty (60) days; or the Company is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or the Company suffers any appointment of any custodian
or the like for it or any substantial part of its property which continues
undischarged or unstayed for a period of sixty (60) days; or the Company makes a
general assignment for the benefit of creditors; or the Company shall fail to
pay, or shall state that it is unable to pay, or shall be unable to pay, its
debts generally as they become due; or the Company shall call a meeting of its
creditors with a view to arranging a composition or adjustment of its debts; or
the Company shall by any act or failure to act indicate its consent to, approval
of or acquiescence in any of the foregoing; or any corporate or other action is
taken by the Company for the purpose of effecting any of the foregoing;
(e) the Company shall default in any of its obligations under any
mortgage, indenture or instrument under which there may be issued, or by which
there may be secured or evidenced, any indebtedness of the Company in an amount
exceeding One Hundred Thousand Dollars ($100,000.00), whether such indebtedness
now exists or shall hereafter be created and such default shall result in such
indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise become due and payable;
(f) the Company shall voluntarily have its Common Stock deleted or
delisted, as the case may be, from the OTCBB or other national securities
exchange or market on which such Common Stock is listed for trading or suspended
from trading thereon, and shall not have its Common Stock relisted or have such
suspension lifted, as the case may be, within five (5) Trading Days of such
deletion or delisting;
(g) notwithstanding anything herein to the contrary, the Company shall
fail to deliver to the Escrow Agent share certificates representing the Common
Shares to be issued upon conversion of the Debentures within ten (10) Business
Days pursuant to written notice by the Escrow Agent to the Company that
additional Shares are required in escrow pursuant to Section 4.14 of the
Purchase Agreement, Article 2 of the Escrow Agreement, and Section 4(b) of this
Debenture;
(h) the Company shall issue a press release, or otherwise make
publicly known, that it is not honoring properly executed Holder Notice of
Conversions for any reason whatsoever;
(i) the Registration Statement which is the subject of the
Registration Rights Agreement annexed as Exhibit C to the Purchase Agreement is
no longer effective as required under the Registration Rights Agreement and the
Company does not cause such Registration Statement to become effective within
twenty (20) Business Days of not being effective;
(j) the Company shall issue or enter into an agreement to issue any
equity or equity equivalent security with a floating conversion price
substantially similar to the Debentures.
II. (a) If any Event of Default occurs and continues, beyond any cure
period, if any, then so long as such Event of Default shall then be continuing
the Holder may, by notice to the Company, accelerate all of the payments due
under this Debenture by declaring all amounts of this Debenture, to be,
whereupon the same shall become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
waived by the Company, notwithstanding anything herein contained to the
contrary, and the Holder may immediately and without expiration of any grace
period enforce any and all of its rights and remedies hereunder and all other
remedies available to it under applicable law. Such declaration may be rescinded
and annulled by Xxxxxx at any time prior to payment hereunder. No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon. This shall include, but not be limited to the
right to temporary, preliminary and permanent injunctive relief without the
requirement of posting any bond or undertaking.
(b) Holder may thereupon proceed to protect and enforce its rights
either by suit in equity, or by action at law, or by other appropriate
proceedings whether for the specific performance (to the extent permitted by
law) of any covenant or agreement contained in this Debenture or in aid of the
exercise of any power granted in this Debenture, and proceed to enforce the
payment of any of the Debentures held by it, and to enforce any other legal or
equitable right of such holder.
(c) Except as expressly provided for herein, the Company specifically
waives all rights it may have (i) to notice of nonpayment, demand, presentment,
protest and notice of protest with respect to any of the obligations hereunder
or the shares; (ii) notice of acceptance hereof or of any other action taken in
reliance hereon, notice and opportunity to be heard before the exercise by
Holder of the remedies of self-help, set-off, or other summary procedures and
all other demands and notices of any description except for cure periods; and
(iii) releases Holder, its officers, directors, agents, employees and attorneys
from all claims for loss or damage caused by any act or failure to act on the
part of Holder, its officers, attorneys, agents, directors and employees except
for gross negligence or willful misconduct.
(d) As a non-exclusive remedy, in the Event of a Default, the Holder
can convert the remaining principal amount of the Debenture and accrued interest
at the lesser of the Fixed Conversion Price or the Floating Conversion Price
upon giving a notice of conversion to the Company. The Company shall not have
the right to object to the conversion or the calculation of the applicable
Conversion Price, and the Escrow Agent shall release the shares of Common Stock
from escrow upon notifying the Company of the conversion.
III. To effectuate the terms and provision of this Debenture, the Holder
may send notice of any default to the Company's attorney-in-fact (the
"Attorney-in-Fact") as set forth herein and send a copy of such notice to the
Company and its counsel, simultaneously, and request the Attorney-in-Fact, to
comply with the terms of this Debenture and Purchase Agreement and all
agreements entered into pursuant to the Purchase Agreement on behalf of the
Company.
Section 4. Conversion
(a) The unpaid principal amount of this Debenture and interest due
thereon, shall be convertible into shares of Common Stock at the Conversion
Ratio as defined below, and subject to the Limitation on Conversion in Section
4.19 of the Purchase Agreement, at the option of the Holder in whole or in part,
at any time, commencing on the Original Issue Date. The resale of such shares of
Common Stock has been registered under the Securities Act of 1933, as amended,
pursuant to the Registration Rights Agreement. Any conversion under this Section
4(a) shall be for a minimum principal amount of $10,000.00 of Debentures and the
interest accrued and due on such amount. The Holder shall effect conversions by
surrendering the Debenture (or such portions thereof) to be converted to the
Company, together with the form of conversion notice attached hereto as Exhibit
A (the "Holder Notice of Conversion") in the manner set forth in Section 4(j).
Each Holder Notice of Conversion shall specify the principal amount of
Debentures and related interest to be converted, and the date on which such
conversion is to be effected (the "Holder Conversion Date"). Subject to Section
4, each Holder Notice of Conversion, once given, shall be irrevocable. If the
Holder is converting less than all of the principal amount represented by the
Debenture(s) tendered by the Holder in the Holder Notice of Conversion, the
Company shall deliver to the Holder a new Debenture for such principal amount as
has not been converted within two (2) Business Days of the Holder Conversion
Date. In the event that the Escrow Agent holds the Debentures on behalf of the
Holder, the Company agrees that in lieu of surrendering the Debenture upon every
partial conversion, the Escrow Agent shall give the Company and the Holder
written notice of the amount of the Debenture left unconverted. Upon the entire
conversion of the Debenture or the Maturity Date, the Escrow Agent shall return
the Debenture to the Company for cancellation.
(b) Not later than two (2) Business Days after the Conversion Date,
the Escrow Agent will deliver to the Holder (i) a certificate or certificates
which shall be free of restrictive legends and trading restrictions,
representing the number of shares of Common Stock being acquired upon the
conversion of Debentures and (ii) once received from the Company, Debentures in
principal amount equal to the principal amount of Debentures not converted;
provided, however that the Company shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon conversion of any
Debentures, until the Debentures are either delivered for conversion to the
Escrow Agent or Company or any transfer agent for the Debentures or Common
Stock, or the Holder notifies the Company that such Debentures have been lost,
stolen or destroyed and provides an agreement reasonably acceptable to the
Company to indemnify the Company from any loss incurred by it in connection
therewith. In the case of a conversion pursuant to a Holder Notice of
Conversion, if such certificate or certificates are not delivered by the date
required under this Section 4(b), the Holder shall be entitled by providing
written notice to the Company at any time on or before its receipt of such
certificate or certificates thereafter, to rescind such conversion, in which
event the Company shall immediately return the Debentures tendered for
conversion.
The Company agrees that, at any time the conversion price of the
Debentures is such that the number of shares of Common Stock in escrow (the
"Debenture Escrow Shares") is less than 200% of the number of shares of Common
Stock that would be needed to satisfy full conversion of all of the Debentures
given the then current conversion price (the "Full Conversion Shares"), upon
five (5) days written notice of such circumstance to the Company by the
Purchaser and/or Escrow Agent, it will issue additional share certificates in
the names of each of the Purchasers in denominations of 10,000 shares, and
deliver same to the Escrow Agent, such that the new number of Debenture Escrow
Shares is equal to 200% of the Full Conversion Shares.
(c) (i) The Conversion Price for each Debenture in effect on any
Conversion Date shall be the lesser of (X) US$7.50 (the "Fixed Conversion
Price") or (Y) one hundred percent (100%) of the average of the three (3) lowest
Per Share Market Value prices during the thirty (30) day period immediately
preceding the Conversion Date ("Floating Conversion Price"). The conversion of
the Debentures is subject to the Limitation on Conversion in Section 4.19 of the
Purchase Agreement as set forth below.
"In addition to and not in lieu of the limitations on conversion set
forth in the Debentures, the conversion and exercise rights of each of
the Purchasers set forth in the Debentures and the Warrants, as
applicable, shall be limited, solely to the extent required, from time
to time, such that, unless each of the Purchasers give written notice
75 days in advance to the Company of their intention to exceed the
Limitations of Conversions as defined herein, with respect to all or a
specified amount of the Debentures
and the corresponding number of the Underlying Shares, in no instance
shall the maximum number of shares of Common Stock which the
Purchasers (singularly, together with any Persons who in the
determination of such Purchasers, together with such Purchasers,
constitute a group as defined in Rule 13d-5 of the Exchange Act) may
receive in respect of any conversion of the Debentures, or exercise of
the Warrants, exceed, at any one time, an amount equal to the
remainder of (i) 4.99% of the then issued and outstanding shares of
Common Stock of the Company following such conversion or exercise
minus (ii) the number of shares of Common Stock of the Company then
owned by any of the Purchasers (including any shares of Common Stock
deemed beneficially owned due to ownership of the Debentures and
Warrants) (the foregoing being herein referred to as the "Limitation
on Conversion"); provided, however, that the Limitation on Conversion
shall not apply to any forced or automatic conversion by the Company
pursuant to Section 4(i) and Section 5 of the Debentures and,
provided, further, that if 10 Business Days have elapsed since any of
the Purchasers shall have declared an Event of Default (as that term
is defined in the Convertible Debenture) and the Company shall not
have cured such Event of Default, the provisions of this Section 4.19
shall be null and void from and after such date. The Company shall,
promptly upon its receipt of a notice of conversion tendered by any of
the Purchasers (or its sole designee) under the Debentures, as
applicable, and upon its receipt of a notice of exercise under the
terms of the Warrants, notify such Purchaser by telephone and by
facsimile of the number of shares of Common Stock outstanding on such
date and the number of Underlying Shares which would be issuable to
such Purchaser (or its sole designee, as the case may be) if the
conversion requested in such notice of conversion or exercise
requested in such notice of exercise were effected in full, whereupon,
notwithstanding anything to the contrary set forth in the Debentures
or the Warrants, such Purchaser may within one Trading Day of its
receipt of the Company notice required by this Section 4.19 by
facsimile revoke such conversion or exercise to the extent (in whole
or in part) that it determines that such conversion or exercise would
result in such Purchaser owning shares of Common Stock in excess of
the Limitation on Conversion."
(ii) If the Company, at any time while any Debentures are
outstanding, (a) shall pay a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock payable in shares of its capital
stock (whether payable in shares of its Common Stock or of capital stock of any
class), (b) subdivide outstanding shares of Common Stock into a larger number of
shares, (c) combine outstanding shares of Common Stock into a smaller number of
shares, or (d) issue by reclassification of shares of Common Stock any shares of
capital stock of the Company, the Fixed Conversion Price designated in Section
4(c)(i) shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock of the Company outstanding before such event
and of which the denominator shall be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to this Section
4(c)(ii) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.
(iii) If the Company, at any time while any Debentures are
outstanding, shall issue or sell shares of Common Stock, or options, warrants or
other rights to subscribe for or purchase shares of Common Stock, (excluding
shares of Common Stock issuable upon exercise of options, warrants or conversion
rights granted prior to the date hereof) and at a price per share less than the
Per Share Market Value of Common Stock at the issue date mentioned below, the
Fixed Conversion Price designated in Section 4(c)(i) shall be multiplied by a
fraction, of which the denominator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding on the date of issuance of such
rights or warrants plus the number of additional shares of Common Stock offered
for subscription or purchase, and of which the numerator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding on the
date of issuance of such shares, options, warrants or rights plus the number of
shares which the aggregate offering price of the total number of shares so
offered would purchase at such Per Share Market Value. Such adjustment shall be
made whenever such rights or warrants are issued, and shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such rights or warrants. However, upon the expiration of any right or
warrant to purchase Common Stock the issuance of which resulted in an adjustment
in the Conversion Price designated in Section 4(c)(i) pursuant to this Section
4(c)(iii), if any such right or warrant shall expire and shall not have been
exercised, the Fixed Conversion Price designated in Section 4(c)(i) shall
immediately upon such expiration be recomputed and effective immediately upon
such expiration be increased to the price which it would have been (but
reflecting any other adjustments in the Conversion Price made pursuant to the
provisions of this Section 4 after the issuance of such rights or warrants) had
the adjustment of the Conversion Price made upon the issuance of such rights or
warrants been made on the basis of offering for subscription or purchase only
that number of shares of Common Stock actually purchased upon the exercise of
such rights or warrants actually exercised.
(iv) If the Company, at any time while Debentures are outstanding,
shall distribute to all holders of Common Stock (and not to holders of
Debentures) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security (excluding those referred to in Section
4(c)(iii) above) then in each such case the Conversion Price at which each
Debenture shall thereafter be convertible shall be determined by multiplying the
Fixed Conversion Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the Per Share Market Value of Common
Stock determined as of the record date mentioned above, and of which the
numerator shall be such Per Share Market Value of the Common Stock on such
record date less the then fair market value at such record date of the portion
of such assets or evidence of indebtedness so distributed applicable to one
outstanding share of Common Stock as determined by the Board of Directors in
good faith; provided, however that in the event of a distribution exceeding ten
percent (10%) of the net assets of the Company, such fair market value shall be
determined by a nationally recognized or major regional investment banking firm
or firm of independent certified public accountants of recognized standing
(which may be the firm that regularly examines the financial statements of the
Company) (an "Appraiser") selected in good faith by the holders of a majority of
the principal amount of the Debentures then outstanding; and provided, further
that the Company, after receipt of the determination by such Appraiser shall
have the right to select an additional Appraiser, in which case the fair market
value shall be equal to the average of the determinations by each such
Appraiser. In either case the adjustments shall be described in a statement
provided to the Holder and all other holders of Debentures of the portion of
assets or evidences of indebtedness so distributed or such subscription rights
applicable to one share of Common Stock. Such adjustment shall be made whenever
any such distribution is made and shall become effective immediately after the
record date mentioned above.
(v) All calculations under this Section 4 shall be made to the
nearest 1/1000th of a cent or the nearest 1/1000th of a share, as the case may
be. Any calculation over .005 shall be rounded up to the next cent or share and
any calculation less than .005 shall be rounded down to the previous cent or
share.
(vi) In the event the Conversion Price is not adjusted pursuant to
Section 4(c)(ii), (iii), (iv), or (v), within two (2) Business Days following
the occurrence of an event described therein, the Holder shall have the right to
require the Company to redeem the Debentures at 135% of par value and
simultaneously pay such amount and all accrued interest and dividends to the
Holder pursuant to the written instructions provided by the Holder.
(vii) Whenever the Fixed Conversion Price is adjusted pursuant to
Section 4(c)(ii),(iii), (iv) or (v), or redeemed pursuant to Section 4(c)(vi),
the Company shall within two (2) days after the determination of the new Fixed
Conversion Price mail and fax to the Holder and to each other holder of
Debentures, a notice ("Company Notice of Conversion") setting forth the Fixed
Conversion Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment.
(viii) In case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person, the sale or
transfer of all or substantially all of the assets of the Company or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, then each holder of Debentures then
outstanding shall have the right thereafter to convert such Debentures only into
the shares of stock and other securities and property receivable upon or deemed
to be held by holders of Common Stock following such reclassification,
consolidation, merger, sale, transfer or share exchange (except in the event the
property is cash, then the Holder shall have the right to convert the Debentures
and receive cash in the same manner as other stockholders), and the Holder shall
be entitled upon such event to receive such amount of securities or property as
the shares of the Common Stock into which such Debentures could have been
converted immediately prior to such reclassification, consolidation, merger,
sale, transfer or share exchange would have been entitled. The terms of any such
consolidation, merger, sale, transfer or share exchange shall include such terms
so as to continue to give to the Holder the right to receive the securities or
property set forth in this Section 4(c)(viii) upon any conversion following such
consolidation, merger, sale, transfer or share exchange. This provision shall
similarly apply to successive reclassifications, consolidations, mergers, sales,
transfers or share exchanges.
(ix) If:
(A) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
(B) the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
(C) the Company shall authorize the granting to all holders
of the Common Stock rights or warrants to subscribe for
or purchase any shares of capital stock of any class or
of any rights; or
(D) the approval of any stockholders of the Company shall
be required in connection with any reclassification of
the Common Stock of the Company (other than a
subdivision or combination of the outstanding shares of
Common Stock), any consolidation or merger to which the
Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, or any
compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property; or
(E) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding-up of
the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Debentures, and shall cause to be mailed and faxed
to the Holder and each other holder of Debentures at their last addresses as it
shall appear upon the Debenture Register, at least thirty (30) calendar days
prior to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined, or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, share exchange, dissolution, liquidation or winding-up
is expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding-up; provided, however, that the failure to
mail such notice or any defect therein or in the mailing thereof shall not
affect the validity of the corporate action required to be specified in such
notice.
(d) If at any time conditions shall arise by reason of action or
inaction taken by the Company which in the opinion of the Board of Directors are
not adequately covered by the other provisions hereof and which might materially
and adversely affect the rights of the Holder and all other holders of
Debentures (different than or distinguished from the effect generally on rights
of holders of any class of the Company's capital stock), the Company shall, at
least thirty (30) calendar days prior to the effective date of such action, mail
and fax a written notice to each holder of Debentures briefly describing the
action contemplated and the material adverse effects of such action on the
rights of such holders and an Appraiser selected by the holders of majority in
principal amount of the outstanding Debentures shall give its opinion as to the
adjustment, if any (not inconsistent with the standards established in this
Section 4), of the Conversion Price (including, if necessary, any adjustment as
to the securities into which Debentures may thereafter be convertible) and any
distribution which is or would be required to preserve without diluting the
rights of the holders of Debentures; provided, however, that the Company, after
receipt of the determination by such Appraiser, shall have the right to select
an additional Appraiser, in which case the adjustment shall be equal to the
average of the adjustments recommended by each such Appraiser. The Board of
Directors shall make the adjustment recommended forthwith upon the receipt of
such opinion or opinions or the taking of any such action contemplated, as the
case may be; provided, however, that no such adjustment of the Conversion Price
shall be made which in the opinion of the Appraiser(s) giving the aforesaid
opinion or opinions would result in an increase of the Conversion Price to more
than the Conversion Price then in effect.
(e) The Company covenants that it will at all times reserve and keep
available out of its authorized and unissued Common Stock solely for the purpose
of issuance upon conversion of Debentures as herein provided, free from
preemptive rights or any other actual contingent purchase rights of persons
other than the holders of Debentures, such number of shares of Common Stock as
shall be issuable (taking into account the adjustments and restrictions of
Section 4(c) and Section 4(d) hereof) upon the conversion of the aggregate
principal amount of all outstanding Debentures. The Company covenants that all
shares of Common Stock that shall be so issuable shall, upon issue, be duly and
validly authorized, issued and fully paid and nonassessable.
(f) No fractional shares of Common Stock shall be issuable upon a
conversion hereunder and the number of shares to be issued shall be rounded up
to the nearest whole share. If a fractional share interest arises upon any
conversion hereunder, the Company shall eliminate such fractional share interest
by issuing Holder an additional full share of Common Stock.
(g) The issuance of certificates for shares of Common Stock on
conversion of Debentures shall be made without charge to the Holder for any
documentary stamp or similar taxes that may be payable in respect of the issue
or delivery of such certificate, provided that the Company shall not be required
to pay any tax that may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate upon conversion in a name other
than that of the Holder and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
(h) Debentures converted into Common Stock shall be canceled upon
conversion.
(i) On the Maturity Date, the unconverted principal amount of the
Debentures and all interest due thereon shall either be paid off in full by the
Company or, if payment in full is not received within ten (10) Business Days
after the Maturity Date, convert automatically into shares of Common Stock at
the lesser of the Fixed Conversion Price or the Floating Conversion Price as set
forth in Section 4(c)(i).
(j) Each Holder Notice of Conversion shall be given by facsimile to
the Escrow Agent no later than 4:00 pm New York Time. Upon receipt of such
Notice of Conversion, the Escrow Agent shall forward such Notice of Conversion
to the Company by facsimile by the end of the Business Day, on which received,
assuming received by 6:00 pm New York Time and if thereafter on the next
Business Day, at the facsimile telephone number and address of the principal
place of business of the Company. Each Company Notice of Conversion shall be
given by facsimile addressed to each holder of Debentures at the facsimile
telephone number and address of such holder appearing on the books of the
Company as provided to the Company by such holder for the purpose of such
Company Notice of Conversion, with a copy to the Escrow Agent. Any such notice
shall be deemed given and effective upon the transmission of such facsimile at
the facsimile telephone number specified in this Section 4(j) (with printed
confirmation of transmission). In the event that the Escrow Agent receives the
Notice of Conversion after 4:00 p.m. New York Time, the Conversion Date shall be
deemed to be the next Business Day. In the event that the Notice of Conversion
is sent after the end of the Business Day, notice will be deemed to have been
given the next Business Day.
Section 5. Redemption of Debentures (i) At any time thirteen (13)
months after the Closing Date and prior to the Maturity Date, or at any time
subsequent to the thirtieth (30th) Trading Day if for thirty (30) consecutive
Trading Days the Per Share Market Value of the Company's Common Stock is less
than $3.25 ("Minimum Stock Price") and (ii) so long as there has not occurred an
Event of Default or an Event of Default has occurred but has been cured, then
the Company may redeem the unconverted principal amount of the Debentures in
accordance with the following:
(a) The Company may, upon no less that thirty (30) days written notice
to the Holder, with a copy to the Escrow Agent, redeem the Debentures at one
hundred thirty-five percent (135%) of the par value per Debenture plus accrued
interest (the "Redemption Price").
(b) Within five (5) Business Days of sending the notice of redemption,
the Company shall deposit the Redemption Price by wire transfer to the XXXX
account of the Escrow Agent. Upon receipt of the Redemption Price, the Escrow
Agent shall release the Redemption Price to the Holder and return the remaining
Debentures and Underlying Shares to the Company.
(c) In the event that the Company fails to deposit the Redemption
Price in the Escrow Agent's XXXX account within the time allocated in section
(b) above, then the redemption shall be declared null and void.
(d) The Minimum Stock Price shall be subject to adjustment as provided
in Section 4(c).
Section 6. Except as expressly provided herein, no provision of this
Debenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, and interest on, this Debenture at
the time, place, and rate, and in the coin or currency, herein prescribed. This
Debenture is a direct obligation of the Company. This Debenture ranks pari passu
with all other Debentures now or hereafter issued under the terms set forth
herein. The Company may not prepay any portion of the outstanding principal
amount on the Debentures.
Section 7. This Debenture shall not entitle the Holder to any of the
rights of a stockholder of the Company, including without limitation, the right
to vote, to receive dividends and other distributions, or to receive any notice
of, or to attend, meetings of stockholders or any other proceedings of the
Company, unless and to the extent converted into shares of Common Stock in
accordance with the terms hereof.
Section 8. If this Debenture shall be mutilated, lost, stolen or
destroyed, the Company shall execute and deliver, in exchange and substitution
for and upon cancellation of a mutilated Debenture, or in lieu of or in
substitution for a lost, stolen or destroyed debenture, a new Debenture for the
principal amount of this Debenture so mutilated, lost, stolen or destroyed but
only upon receipt of an affidavit of such loss, theft or destruction of such
Debenture, and reasonably acceptable indemnity, if requested, by the Company.
Section 9. This Debenture shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof. Any action to enforce the
terms of this Debenture, the Purchase Agreement or any other Transaction
Document shall be exclusively brought in the state and/or federal courts in the
State and County of New York. Service of process in any action by the Holder to
enforce the terms of this Debenture may be made by serving a copy of the summons
and complaint, in addition to any other relevant documents, by commercial
overnight courier to the Company at its principal address set forth in the
Purchase Agreement.
Section 10. All notices or other communications hereunder shall be
given, and shall be deemed duly given and received, if given, in the manner set
forth in Section 4(j).
Section 11. Any waiver by the Company or the Holder of a breach of any
provision of this Debenture shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Debenture. The failure of the Company or the Holder to insist upon strict
adherence to any term of this Debenture on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Debenture. Any waiver
must be in writing.
Section 12. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances.
Section 13. Whenever any payment or other obligation hereunder shall
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day.
Section 14. This Debenture may not be transferred or assigned, in
whole or in part, at any time, except in compliance with applicable federal and
state securities laws by the transferor and the transferee.
Section 15. In the event any Party commences legal action to enforce
its rights under this Debenture, the non-prevailing party shall pay all
reasonable costs and expenses (including but not limited to reasonable
attorney's fees, accountant's fees, appraiser's fees and investigative fees)
incurred in enforcing such rights.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized as of the date first above
indicated.
SurgiLight, Inc.
Attest: ______________________ By:______________________________
Name:
Title:
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder
in order to Convert the Debenture)
Except as provided by Section 4(b) of the Debenture, the undersigned hereby
irrevocably elects to convert the above Debenture No. 1 into shares of Common
Stock, no par value per share (the "Common Stock"), of SurgiLight, Inc. (the
"Company") according to the conditions hereof, as of the date written below. If
shares are to be issued in the name of a person other than undersigned, the
undersigned will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates and opinions as reasonably requested by
the Company in accordance therewith. A fee of $350 will be charged to the Holder
for any conversion by the Escrow Agent. No other fees will be charged to the
Holder, except for such transfer taxes, if any.
Conversion calculations:
Date to Effect Conversion
Principal Amount of Debentures to be Converted
Interest to be Converted or Paid
Applicable Conversion Price (Pursuant to Section
4(c)(v))
Number of Shares to be Issued Upon Conversion
Signature
Name
Address
