326
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of March 27,
1997, by and among PALOMAR MEDICAL TECHNOLOGIES, INC., a corporation organized
under the laws of the State of Delaware (the "COMPANY"), with headquarters
located at 00 Xxxxxx Xxxx Xxxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000 and each of the
purchasers (the "PURCHASERS") set forth on the execution pages hereof (the
"Execution Pages").
WHEREAS:
A. The Company and each Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the "SECURITIES
ACT");
B. Each Purchaser desires to purchase, upon the terms and conditions stated
in this Agreement, shares (the "PREFERRED SHARES") of the Company's Series H
Convertible Preferred Stock, par value $.01 per share ("PREFERRED STOCK")
convertible into its common stock, par value $.01 per share, of the Company (the
"COMMON STOCK"). The rights, preferences and privileges of the Preferred Stock,
including the terms upon which such Preferred Stock is convertible into shares
of Common Stock are set forth in the form of Certificate of Designations,
Preferences and Rights attached hereto as Exhibit A (the "CERTIFICATE OF
DESIGNATIONS"). The shares of Common Stock issuable upon conversion of the
Preferred Shares or otherwise pursuant to the Certificate of Designations are
referred to herein as the "CONVERSION SHARES". The Preferred Shares and
Conversion Shares are collectively referred to herein as the "SECURITIES."
C. Contemporaneous with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement, in
the form attached hereto as Exhibit B (the "REGISTRATION RIGHTS AGREEMENT"),
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated thereunder,
and applicable state securities laws;
NOW, THEREFORE, the Company and the Purchasers hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
a. Purchase of Preferred Shares. On the Closing Date (as defined
below), subject to the satisfaction (or waiver) of the conditions set forth
in Sections 6 and 7 below, the Company shall issue and sell to each
Purchaser and each Purchaser severally agrees to purchase from the Company,
such number of Preferred Shares as is set forth on such Purchaser's
signature page
327
hereto. The purchase price (the "PURCHASE PRICE") per Preferred Share at
such closing shall be equal to One Thousand Dollars ($1,000.00) and the
aggregate purchase price for all of the Preferred Shares to be purchased by
the Purchasers shall be Six Million Dollars ($6,000,000.00). For the
avoidance of doubt, in no event shall any Purchaser be required to purchase
more than the number of Preferred Shares being subscribed for hereunder by
such Purchaser as set forth on such Purchaser's Execution Page. The Company
may sell up to Fourteen Million Dollars ($14,000,000.00) of additional
Preferred Shares, at One Thousand Dollars ($1,000.00) per Preferred Share
at one additional closing within 60 days of the Closing Date (such closing,
if any, is herein referred to as the "ADDITIONAL CLOSING").
b. Form of Payment. On the Closing Date, each Purchaser shall pay the
aggregate Purchase Price for the Preferred Shares being purchased by such
Purchaser hereunder by wire transfer to the Company, in accordance with the
Company's written wiring instructions, against delivery of duly executed
certificates representing the Preferred Shares being purchased by such
Purchaser hereunder and the Company shall deliver such certificates against
delivery of such aggregate Purchase Price.
c. Closing Date. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and
time of the issuance and sale of the Preferred Shares pursuant to this
Agreement (the "CLOSING DATE") shall be 12:00 noon eastern time on March
27, 1997, (subject to a two (2) business day grace period at either party's
option), or such other time as may be mutually agreed upon by the Company
and the Purchasers. The closing shall occur at the offices of Xxxxx, Xxxx &
Eliot, LLP, Xxx Xxxx Xxxxxx Xxxxxx, Xxxxxx, XX 00000.
2. PURCHASERS' REPRESENTATIONS AND WARRANTIES
Each Purchaser severally represents and warrants to the Company that:
a. Investment Purpose. Purchaser is purchasing the Preferred Shares
for Purchaser's own account for investment only and not with a present view
towards the public sale or distribution thereof, except pursuant to sales
that are exempt from the registration requirements of the Securities Act
and/or sales registered under the Securities Act. Purchaser understands
that Purchaser must bear the economic risk of this investment indefinitely,
unless the Securities are registered pursuant to the Securities Act and any
applicable state securities or blue sky laws or an exemption from such
registration is available, and that the Company has no present intention of
registering any such Securities other than as contemplated by the
Registration Rights Agreement. Notwithstanding anything in this Section
2(a) to the contrary, by making the representations herein, the Purchaser
does not agree to hold the Securities for any minimum or other specific
term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption
under the Securities Act.
b. Accredited Investor Status. Purchaser is an "ACCREDITED INVESTOR"
as that term is
328
defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. Purchaser understands that the Preferred
Shares are being offered and sold to Purchaser in reliance upon specific
exemptions from the registration requirements of United States federal and
state securities laws and that the Company is relying upon the truth and
accuracy of, and Purchaser's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of Purchaser set
forth herein in order to determine the availability of such exemptions and
the eligibility of Purchaser to acquire the Preferred Shares.
d. Information. Purchaser and its counsel, if any, have been furnished
all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Preferred
Shares which have been specifically requested by Purchaser or its counsel.
Purchaser and its counsel, if any, have been afforded the opportunity to
ask questions of the Company and have received what Purchaser believes to
be complete and satisfactory answers to any such inquiries. Neither such
inquiries nor any other due diligence investigation conducted by Purchaser
or its counsel or any of its representatives shall modify, amend or affect
Purchaser's right to rely on the Company's representations and warranties
contained in Section 3 below. Purchaser understands that Purchaser's
investment in the Securities involves a high degree of risk.
e. Governmental Review. Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities.
f. Transfer or Resale. Purchaser understands that (i) except as
provided in the Registration Rights Agreement, the Securities have not been
and are not being registered under the Securities Act or any state
securities laws, and may not be transferred unless (a) subsequently
registered thereunder, or (b) Purchaser shall have delivered to the Company
an opinion of counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to the effect
that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration or (c) sold pursuant to
Rule 144 promulgated under the Securities Act (or a successor rule) ("RULE
144"), or (d) sold or transferred to an affiliate of Purchaser; (ii) any
sale of such Securities made in reliance on Rule 144 may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules
and regulations of the Securities and Exchange Commission (the "SEC")
thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such Securities under the Securities Act or any
state securities laws or to comply with the terms and conditions of any
exemption thereunder (in each case, other than pursuant to the Registration
Rights Agreement).
329
g. Legends. Purchaser understands that the Preferred Shares and, until
such time as the Conversion Shares have been registered under the
Securities Act as contemplated by the Registration Rights Agreement or
otherwise may be sold by Purchaser pursuant to Rule 144 without any
restriction as to the public resale thereof, the certificates for the
Conversion Shares may bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of
the certificates for such Securities):
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The
securities have been acquired for investment and may not be sold,
transferred or assigned in the absence of an effective registration
statement for the securities under said Act, or an opinion of counsel,
in form, substance and scope customary for opinions of counsel in
comparable transactions, that registration is not required under said
Act or unless sold pursuant to Rule 144(k) under said Act.
The legend set forth above shall be removed and the Company shall
issue a certificate without such legend to the holder of any Security upon
which it is stamped, if, unless otherwise required by state securities
laws, (a) the sale of such Security is registered under the Securities Act,
or (b) such holder provides the Company with an opinion of counsel, in
form, substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such Security
may be made without registration under the Securities Act or (c) such
holder provides the Company with reasonable assurances that such Security
has been sold pursuant to Rule 144 or can be sold pursuant to Rule 144
without any restriction as to the number of Securities acquired as of a
particular date that can then be immediately sold. Purchaser agrees to sell
all Securities, including those represented by a certificate(s) from which
the legend has been removed, pursuant to an effective registration
statement and to deliver a prospectus in connection with such sale (if and
to the extent such delivery is required) or in compliance with an exemption
from the registration requirements of the Securities Act. In the event the
above legend is removed from any Security and thereafter the effectiveness
of a registration statement covering such Security is suspended or the
Company determines that a supplement or amendment thereto is required by
applicable securities laws, then upon reasonable advance notice to
Purchaser the Company may require that the above legend be placed on any
such Security that cannot then be sold pursuant to an effective
registration statement or Rule 144 without any restriction as to the number
of Securities acquired as of a particular date that can then be immediately
sold, which legend shall be removed when such Security has been sold
pursuant to Rule 144 or may be sold pursuant to an effective registration
statement or Rule 144 without any restriction as to the number of
Securities acquired as of a particular date that can then be immediately
sold.
h. [Intentionally Omitted]
i. Authorization; Enforcement. This Agreement and the Registration
Rights
330
Agreement have been duly and validly authorized, executed and delivered on
behalf of Purchaser and are valid and binding agreements of Purchaser
enforceable in accordance with their terms.
j. Residency. Purchaser is a resident of the jurisdiction set forth
under such Purchaser's name on the signature page hereto executed by such
Purchaser.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Purchaser that:
a. Organization and Qualification. The Company and each of its
subsidiaries is a corporation duly organized and existing in good standing
under the laws of the jurisdiction in which it is incorporated, and has the
requisite corporate power to own its properties and to carry on its
business as now being conducted. The Company and each of its subsidiaries
is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction where the failure so to qualify would have a
Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any material
adverse effect on the operations, properties, financial condition or
prospects of the Company and its subsidiaries, taken as a whole on a
consolidated basis or on the transactions contemplated hereby. The Company
does not have any significant subsidiaries (as defined in Rule 1-02 of
Regulation S-X under the Securities Act) other than those subsidiaries set
forth on Schedule 3(a).
b. Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform this Agreement and
the Registration Rights Agreement, to issue and sell the Preferred Shares
in accordance with the terms hereof, and to issue the Conversion Shares
upon conversion of the Preferred Shares in accordance with the terms of the
Certificate of Designations; (ii) the execution, delivery and performance
of this Agreement and the Registration Rights Agreement by the Company and
the consummation by it of the transactions contemplated hereby and thereby
(including without limitation the issuance of the Preferred Shares and the
issuance and reservation for issuance of the Conversion Shares) have been
duly authorized by the Company's Board of Directors and no further consent
or authorization of the Company, its Board or Directors, or its
stockholders is required (under Rule 4460(i) promulgated by the National
Association of Securities Dealers or otherwise); (iii) this Agreement has
been duly executed and delivered by the Company; and (iv) this Agreement
constitutes, and, upon execution and delivery by the Company of the
Registration Rights Agreement, such agreement will constitute, valid and
binding obligations of the Company enforceable against the Company in
accordance with their terms.
c. Capitalization. The capitalization of the Company as of the date
hereof, including the authorized capital stock, the number of shares issued
and outstanding, the number of shares reserved for issuance pursuant to the
Company's stock option plans, the number of shares reserved for issuance
pursuant to securities (other than the Preferred Shares) exercisable for,
or convertible into or exchangeable for any shares of Common Stock and the
number of shares to be reserved for issuance upon conversion of the
Preferred Shares is set forth on Schedule 3(c). All of such outstanding
shares of capital stock have been, or upon issuance will be, validly
issued,
331
fully paid and nonassessable. No shares of capital stock of the Company
(including the Preferred Shares and the Conversion Shares) are subject to
preemptive rights or any other similar rights of the stockholders of the
Company or any liens or encumbrances. Except as disclosed in Schedule 3(c)
or as contemplated herein, as of the date of this Agreement, (i) there are
no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or
rights convertible into or exercisable or exchangeable for, any shares of
capital stock of the Company or any of its subsidiaries, or arrangements by
which the Company or any of its subsidiaries is or may become bound to
issue additional shares of capital stock of the Company or any of its
subsidiaries, and (ii) there are no agreements or arrangements under which
the Company or any of its subsidiaries is obligated to register the sale of
any of the Company's securities under the Securities Act (except the
Registration Rights Agreement). The Company has made available to each
Purchaser true and correct copies of the Company's Certificate of
Incorporation as in effect on the date hereof ("CERTIFICATE OF
INCORPORATION"), the Company's By-laws as in effect on the date hereof (the
"BY-LAWS"), and all other instruments and agreements governing securities
convertible into or exercisable or exchangeable for Common Stock of the
Company. The Certificate of Designations, in the form attached hereto, has
been duly filed with the Secretary of State of the State of Delaware and,
upon the issuance of the Preferred Shares in accordance with the terms
hereof, each Purchaser shall be entitled to the rights set forth therein.
The Company shall provide each Purchaser with a written update of this
representation signed by the Company's Chief Executive Officer or Chief
Financial Officer on behalf of the Company as of the Closing Date.
d. Issuance of Shares. The Preferred Shares are duly authorized and,
upon issuance in accordance with the terms of this Agreement, will be
validly issued, fully paid and non-assessable, and free from all taxes,
liens, claims and encumbrances and will not be subject to preemptive rights
or other similar rights of stockholders of the Company. The Conversion
Shares are duly authorized and reserved for issuance, and, upon conversion
of the Preferred Shares in accordance with the terms thereof, will be
validly issued, fully paid and non-assessable, and free from all taxes,
liens, claims and encumbrances and will not be subject to preemptive rights
or other similar rights of stockholders of the Company.
e. No Conflicts. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement by the Company, the
performance by the Company of its obligations under the Certificate of
Designations, and the consummation by the Company of the transactions
contemplated hereby and thereby (including, without limitation, the
issuance and reservation for issuance, as applicable, of the Preferred
Shares and Conversion Shares) will not (i) result in a violation of the
Certificate of Incorporation or By-laws or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its subsidiaries is
a party, or result in a violation of any law, rule, regulation, order,
judgment or decree (including U.S. federal and state securities laws and
regulations) applicable to the Company or any of
332
its subsidiaries or by which any property or asset of the Company or
any of its subsidiaries is bound or affected (except for such conflicts,
defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect). Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or other organizational
documents and neither the Company nor any of its subsidiaries is in default
(and no event has occurred which, with notice or lapse of time or both,
would put the Company or any of its subsidiaries in default) under, nor has
there occurred any event giving others (with notice or lapse of time or
both) any rights of termination, amendment, acceleration or cancellation
of, any agreement, indenture or instrument to which the Company or any of
its subsidiaries is a party, except for possible defaults or rights as
would not, individually or in the aggregate, have a Material Adverse
Effect. The businesses of the Company and its subsidiaries are not being
conducted, and shall not be conducted so long as a Purchaser owns any of
the Securities, in violation of any law, ordinance or regulation of any
governmental entity, except for possible violations the sanctions for which
either singly or in the aggregate would not have a Material Adverse Effect.
Except as specifically contemplated by this Agreement and as required under
the Securities Act and any applicable state securities laws and the filing
of an application with NASDAQ (as defined below) to list or approve for
quotation the Conversion Shares, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration
with, any court or governmental agency or any regulatory or self regulatory
agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or the Registration Rights Agreement or to
perform its obligations under the Certificate of Designations, in each case
in accordance with the terms hereof or thereof. The Company is not in
violation of the listing requirements of the NASDAQ Small Cap Market
("NASDAQ") and does not reasonably anticipate that the Common Stock will be
delisted by NASDAQ in the foreseeable future. The Company does not have any
agreements other than those set forth on Exhibit B to the legal opinion
referred to in Section 7(i) the breach of which would materially adversely
affect the Company's obligations under this Agreement or the Registration
Rights Agreement or the Purchasers' rights under the Certificate of
Designation.
f. SEC Documents, Financial Statements. Since December 31, 1993, the
Company has timely filed all reports, schedules, forms, statements and
other documents required to be filed by it with the SEC pursuant to the
reporting requirements of the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT") (all of the foregoing, filed prior to the date hereof
and after December 31, 1993, and all exhibits included therein and
financial statements and schedules thereto and documents (other than
exhibits) incorporated by reference therein together with any registration
statements or other documents filed by the Company pursuant to the
Securities Act prior to the date hereof and those certain news releases
attached hereto as Schedule 3(f), being hereinafter referred to herein as
the "SEC DOCUMENTS"). The Company has delivered to each Purchaser true and
complete copies of the SEC Documents, except for such exhibits, schedules
and incorporated documents. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Exchange Act
or the Securities Act, as the case may be, and the rules and regulations of
the SEC promulgated thereunder applicable to the SEC Documents, and none of
the SEC Documents, at the time they were filed with the SEC, contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
333
respects with applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with U.S. generally accepted accounting
principles, consistently applied, during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes
thereto, or (ii) in the case of unaudited interim statements, to the extent
they may include footnotes or may not be condensed or summary statements)
and fairly present in all material respects the consolidated financial
position of the Company and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for
the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments). Except as set forth in the financial
statements of the Company included in the SEC Documents, the Company has no
liabilities, contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business subsequent to the date of the most
recent financial statements included in the SEC Documents and (ii)
obligations under contracts and commitments incurred in the ordinary course
of business and not required under generally accepted accounting principles
to be reflected in such financial statements, which, individually or in the
aggregate, are not material to the financial condition or operating results
of the Company.
g. Absence of Certain Changes. Since December 31, 1995, there has been
no material adverse change and no material adverse development in the
business, properties, operations, financial condition, results of
operations or prospects of the Company, except as disclosed in the SEC
Documents.
h. Absence of Litigation. Except for the declaratory judgment action
filed by the Company against XXXX/Biophile in the United States District
Court for the District of Massachusetts in October, 1996 and the
Declaratory judgment action filed by Selvac Acquisitions Corp. against the
Company and other parties in the United States District Court for the
District of New Jersey in March, 1997, or except as disclosed in the SEC
Documents, there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company or any of
its subsidiaries, threatened against or affecting the Company, any of its
subsidiaries, or any of their respective directors or officers in their
capacities as such, wherein an unfavorable decision, ruling or finding
would have a material adverse effect on the properties, business, condition
(financial or other), results of operations or prospects of the Company and
its subsidiaries taken as a whole or the transactions contemplated by this
Agreement or any of the documents contemplated hereby or which would
adversely affect the validity or enforceability of, or the authority or
ability of the Company to perform its obligations under, this Agreement or
any of such other documents.
i. Disclosure. All information relating to or concerning the Company
set forth in this Agreement or provided to the Purchasers pursuant to
Section 2(d) hereof and otherwise in connection with the transactions
contemplated hereby is true and correct in all material respects and the
Company has not omitted to state any material fact necessary in order to
make the statements made herein or therein, in light of the circumstances
under which they were made, not
334
misleading. No event or circumstance has occurred or exists with respect to
the Company or its subsidiaries or their respective businesses, properties,
prospects, operations or financial conditions, which, under applicable law,
rule or regulation, requires public disclosure or announcement by the
Company but which has not been so publicly announced or disclosed (assuming
for this purpose that the Company's Exchange Act Reports are being
incorporated into an effective registration statement filed by the Company
under the Securities Act).
j. Acknowledgment Regarding Purchasers' Purchase of the Securities.
The Company acknowledges and agrees that none of the Purchasers are acting
as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement or the transactions contemplated
hereby, and any advice given by any Purchaser, or any of their
representatives or agents, in connection with this Agreement and the
transactions contemplated hereby is merely incidental to each Purchaser's
purchase of Preferred Shares. The Company further represents to each
Purchaser that the Company's decision to enter into this Agreement has been
based solely on an independent evaluation by the Company and its
representatives.
k. Current Public Information. The Company is currently eligible to
register the resale of its Common Stock on a registration statement on Form
S-3 under the Securities Act.
l. No General Solicitation. Neither the Company nor any distributor
participating on the Company's behalf in the transactions contemplated
hereby (if any) nor any person acting for the Company, or any such
distributor, has conducted any "GENERAL SOLICITATION," as such term is
defined in Regulation D, with respect to any of the Securities being
offered hereby.
m. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers
to buy any security under circumstances that would require registration of
the Securities being offered hereby under the Securities Act.
n. No Brokers. The Company has taken no action which would give rise
to any claim by any person for brokerage commissions, finder's fees or
similar payments by any Purchaser relating to this Agreement or the
transactions contemplated hereby, except for dealings with Xxxxxxx Arnouse
whose commissions and fees will be paid for by the Company.
o. Acknowledgment of Dilution. The number of Conversion Shares
issuable upon conversion of the Preferred Shares may increase substantially
in certain circumstances, including the circumstance wherein the trading
price of the Common Stock declines. The Company acknowledges that its
obligation to issue Conversion Shares upon conversion of the Preferred
Shares in accordance with the Certificate of Designations is absolute and
unconditional, regardless of the dilution that such issuance may have on
the ownership interests of other stockholders.
p. Intellectual Property. Each of the Company and its subsidiaries
owns or possesses
335
adequate and enforceable rights to use all patents, patent applications,
trademarks, trademark applications, trade names, service marks, copyrights,
copyright applications, licenses, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) and other similar rights and
proprietary knowledge (collectively, "INTANGIBLES") necessary for the
conduct of its business as now being conducted and as described in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1995. Neither the Company nor any subsidiary of the Company infringes or is
in conflict with any right of any other person with respect to any
Intangibles which, individually or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a Material Adverse
Effect.
q. Foreign Corrupt Practices. Neither the Company, nor any of its
subsidiaries, nor any director, officer, agent, employee or other person
acting on behalf of the Company or any subsidiary has, in the course of
acting for, or on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977; or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.
4. COVENANTS.
a. Best Efforts. The parties shall use their best efforts timely to satisfy
each of the conditions described in Section 6 and 7 of this Agreement.
b. Blue Sky Laws. The Company shall, on or before the Closing Date take
such action as the Company shall reasonably determine is necessary to qualify
the Securities for sale to the Purchasers pursuant to this Agreement under
applicable securities or "blue sky" laws of the states of the United States or
obtain exemption therefrom, and shall provide evidence of any such action so
taken to the Purchasers on or prior to the Closing Date.
c. Reporting Status. So long as any Purchaser beneficially owns any of the
Securities, the Company shall timely file all reports required to be filed with
the SEC pursuant to the Exchange Act, and the Company shall not terminate its
status as an issuer required to file reports under the Exchange Act even if the
Exchange Act or the rules and regulations thereunder would permit such
termination.
d. Use of Proceeds. The Company shall use the proceeds from the sale of the
Preferred Shares for internal working capital purposes, mergers and
acquisitions, investments and general corporate purposes.
e. Additional Equity Capital; Right of First Offer. The Company agrees that
during
336
the period beginning on the date hereof and ending ninety (90) days
following the later of (i) the Closing Date and (ii) the date of the
Additional Closing, if any (the "LOCK-UP PERIOD"), the Company will not,
without the prior written consent of Purchasers (or their designated
agents) holding at least two thirds (2/3rds) of the then outstanding
Preferred Shares, issue or sell or contract with any party to issue or sell
any Below Market Security (as defined below) ("FUTURE OFFERINGS"). In
addition, the Company will not conduct any Future Offering during the
period beginning on the date hereof and ending 180 days following the later
of (i) the Closing Date and (ii) the Additional Closing, if any, unless it
shall have first delivered to each Purchaser at least five (5) business
days prior to the closing of such Future Offering, written notice
describing the proposed Future Offering, including the terms and conditions
thereof, and providing each Purchaser and its affiliates, an option during
the five (5) business day period following delivery of such notice to
purchase up to the Applicable Portion (as defined below) of the Below
Market Securities being offered in the Future Offering on the same terms as
contemplated by such Future Offering (the limitations referred to in this
and the immediately preceding sentence are collectively referred to as the
"CAPITAL RAISING LIMITATIONS"). The Capital Raising Limitations shall not
apply to the sale of Preferred Shares at the Additional Closing, if any, on
the terms set forth herein or to any transaction involving issuances of
securities in connection with a merger, consolidation, acquisition or sale
of assets, or in connection with any strategic partnership or joint venture
(the primary purpose of which is not to raise equity capital), or in
connection with the disposition or acquisition of a business, product or
license by the Company or exercise of options by employees, consultants or
directors. The Capital Raising Limitations also shall not apply to (i) the
issuance of securities pursuant to an underwritten public offering, (ii)
the issuance of securities upon exercise or conversion of the Company's
options, warrants or other convertible securities outstanding as of the
date hereof or (iii) the grant of additional options or warrants, or the
issuance of additional securities, under any Company stock option or
restricted stock plan for the benefit of the Company's employees, directors
or consultants. The "APPLICABLE PORTION" shall mean the product of (i) a
fraction, the numerator of which is the number of Preferred Shares
purchased by such Purchaser hereunder and the denominator of which is the
total number of Preferred Shares purchased by all of the Purchasers
hereunder (including Preferred Shares issued on the Closing Date and on the
date of the Additional Closing, if any). "BELOW MARKET SECURITIES" shall
mean any Common Stock or any security of the Company which is convertible
into or exercisable or exchangeable for Common Stock and which is sold at a
"gross selling price per share" of Common Stock which is less than the
average of the Closing Bid Prices (as defined in the Certificate of
Designations) for the five (5) trading days immediately preceding the date
of issuance of such security, where the price per share of Common Stock for
any security convertible into or exchangeable or exercisable for Common
Stock shall be determined by dividing (i) the total amount, if any,
received or receivable by the Company as consideration for issuance or sale
of such security, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise, conversion
or exchange thereof by (ii) the maximum total number of shares of Common
Stock issuable upon the exercise, conversion or exchange of such security.
f. Expenses. On the date of the Closing, the Company shall pay Five
Thousand
337
Dollars ($5,000.00) to RGC International Investors, LDC ("RGC") as a
non-accountable expense allowance to be applied by RGC against all expenses
incurred by RGC and its affiliates in connection with the negotiation,
preparation, execution, delivery and performance of this Agreement and the
other agreements to be executed in connection herewith, including, without
limitation, RGC and its affiliates' attorneys' fees and expenses.
g. Financial Information. Upon the written request of any Purchaser
holding any Securities, the Company shall send the following reports to
such Purchaser: a copy of its Annual Report on Form 10-K, its Quarterly
Reports on Form 10-Q, any proxy statements, any Current Reports on Form 8-K
and any press releases issued by the Company or any of its subsidiaries.
h. Reservation of Shares. The Company shall at all times have
authorized and reserved for the purpose of issuance a sufficient number of
shares of Common Stock to provide for the full conversion of the
outstanding Preferred Shares and issuance of the Conversion Shares in
connection therewith and as otherwise required by the Certificate of
Designations. The Company shall not reduce the number of shares reserved
for issuance upon conversion of the Preferred Shares without the consent of
Purchasers holding a majority of the Preferred Shares then held by all
Purchasers.
i. Listing. Promptly (and in no event more than fifteen (15) days)
following the Company's receipt of a Conversion Notice (as defined in the
Certificate of Designations) with respect to any Preferred Share, the
Company shall secure the listing or approval for quotation of all of the
Conversion Shares upon each national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and thereafter shall maintain, so
long as any other shares of Common Stock shall be so listed, such listing
of all Conversion Shares from time to time issuable upon conversion of the
Preferred Shares. The Company will take all action necessary to continue
the listing and trading of its Common Stock on the NASDAQ, the NASDAQ
National Market ("NNM"), the New York Stock Exchange ("NYSE") or the
American Stock Exchange ("AMEX") and will comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules
of the National Association of Securities Dealers ("NASD") and such
exchanges, as applicable.
j. Corporate Existence. So long as a Purchaser beneficially owns any
Preferred Shares, the Company shall maintain its corporate existence,
except in the event of a merger, consolidation or sale of all or
substantially all of the Company's assets, as long as the surviving or
successor entity in such transaction (i) assumes the Company's obligations
hereunder and under the agreements and instruments entered into in
connection herewith regardless of whether or not the Company would have had
a sufficient number of shares of Common Stock authorized and available for
issuance in order to effect the conversion of all Preferred Shares
outstanding as of the date of such transaction and (ii) is a publicly
traded corporation whose common stock is listed for trading on the NASDAQ,
NNM, NYSE or AMEX.
k. [Intentionally Omitted]
338
l. If no Additional Closing occurs, or if it occurs for fewer than 14,000
Preferred Shares, the Company shall promptly amend the Certificate of
Designations to reduce the authorized number of Preferred Shares from 20,000 to
the number actually issued and sold hereunder.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall instruct its transfer agent to issue certificates,
registered in the name of each Purchaser or its nominee, for the Conversion
Shares in such amounts as specified from time to time by such Purchaser to the
Company upon conversion of the Preferred Shares. Prior to registration of the
Conversion Shares under the Securities Act or resale of such Securities under
Rule 144, all such certificates shall bear the restrictive legend specified in
Section 2(g) of this Agreement. The Company warrants that no instruction other
than such instructions referred to in this Section 5, and stop transfer
instructions to give effect to Section 2(f) hereof in the case of the Conversion
Shares prior to registration of the Conversion Shares under the Securities Act,
will be given by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Registration Rights Agreement.
Nothing in this Section shall affect in any way each Purchaser's obligations and
agreement set forth in Section 2(g) hereof to resell the Securities pursuant to
an effective registration statement and to deliver a prospectus in connection
with such sale or in compliance with an exemption from the registration
requirements of applicable securities law. If a Purchaser provides the Company
with an opinion of counsel, which opinion of counsel shall be in form, substance
and scope customary for opinions of counsel in comparable transactions, to the
effect that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from registration, the Company shall permit the
transfer, and, in the case of the Conversion Shares, promptly instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by a Purchaser. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to a
Purchaser by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 will be inadequate and agrees, in
the event of a breach or threatened breach by the Company of the provisions of
this Section 5, that a Purchaser shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity of showing economic loss
and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Preferred
Shares to a Purchaser at the closing is subject to the satisfaction, at or
before the Closing Date, of each of the following conditions thereto, provided
that these conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion.
339
(a) The applicable Purchaser shall have executed the signature page to this
Agreement and the Registration Rights Agreement, and delivered the same to the
Company.
(b) The applicable Purchaser shall have delivered the Purchase Price for
the Preferred Shares purchased in accordance with Section 1(b) above and the
aggregate number of Preferred Shares purchased by all Purchasers hereunder shall
not be less than 6,000.
(c) The representations and warranties of the applicable Purchaser shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as of a
specific date), and the applicable Purchaser shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
applicable Purchaser at or prior to the Closing Date.
(d) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
7. CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE.
The obligation of each Purchaser hereunder to purchase the Preferred Shares
to be purchased by it on the Closing Date is subject to the satisfaction of each
of the following conditions, provided that these conditions are for such
Purchaser's sole benefit and may be waived by such Purchaser at any time in the
Purchaser's sole discretion:
(a) The Company shall have executed the signature page to this
Agreement and the Registration Rights Agreement, and delivered the same to
such Purchaser.
(b) The Certificate of Designations shall have been accepted for
filing with the Secretary of State of the State of Delaware and a copy
thereof certified by the Secretary of State of Delaware shall have been
delivered to such Purchaser.
(c) The Company shall have delivered duly executed certificates (in
such denominations as such Purchaser shall request) representing the
Preferred Shares being so purchased to such Purchaser in accordance with
Section 1(b) above.
(d) The aggregate number of Preferred Shares purchased by all
Purchasers hereunder shall be 6,000 (plus in the case of the Additional
Closing, if any, up to, but not more than, 14,000).
340
(e) The Common Stock shall be authorized for quotation on NASDAQ and
trading in the Common Stock (or NASDAQ generally) shall not have been
suspended by the SEC or NASD.
(f) The representations and warranties of the Company shall be true
and correct as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties that speak as
of a specific date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or
complied with by the Company at or prior to the Closing date. Such
Purchaser shall have received a certificate, executed by the chief
executive officer of the Company, dated as of the Closing Date to the
foregoing effect and as to such other matters as may be reasonably
requested by such Purchaser.
(g) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
(h) Such Purchaser shall have received the officer's certificate
described in Section 3(c) above, dated as of the Closing Date.
(i) Such Purchaser shall have received an opinion of the Company's
counsel, dated as of the Closing Date, in form, scope and substance
reasonably satisfactory to the Purchaser and in substantially the form of
Exhibit C attached hereto.
(j) The Company shall have executed, and shall have delivered evidence
reasonably satisfactory to the Purchasers that the Company's transfer agent
has agreed to act in accordance with the irrevocable instructions in the
form attached hereto as Exhibit D; PROVIDED, HOWEVER, if such evidence is
not delivered on or prior to the Closing Date, the Company shall use its
best efforts to deliver such evidence as soon as practicable thereafter.
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware
applicable to contracts made and to be performed in the State of Delaware.
The Company irrevocably consents to the jurisdiction of the United States
federal courts located in the County of Kent in the State of Delaware in
any suit or proceeding based on or arising under this Agreement and
irrevocably agrees that all claims in respect of such suit or proceeding
may be determined in such courts. The Company irrevocably waives the
defense of an inconvenient forum to the maintenance of such suit or
proceeding. The Company further agrees that service of process upon the
Company mailed by first class mail shall be deemed in every respect
effective service of process upon the Company
341
in any suit or proceeding arising hereunder. Nothing herein shall affect a
Purchaser's right to serve process in any other manner permitted by law.
The Company agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions
by suit on such judgment or in any other lawful manner.
b. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party
and delivered to the other party.
c. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability
shall not affect the validity or enforceability of the remainder of this
Agreement or the validity or enforceability of this Agreement in any other
jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with
respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the
Purchasers make any representation, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived other
than by an instrument in writing signed by the party to be charged with
enforcement and no provision of this Agreement may be amended other than by
an instrument in writing signed by the Company and the Purchasers.
f. Notices. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier or by
confirmed telecopy, and shall be effective five days after being placed in
the mail, if mailed, or upon receipt or refusal of receipt, if delivered
personally or by courier or confirmed telecopy, in each case addressed to a
party. The addresses for such communications shall be:
If to the Company:
Palomar Medical Technologies, Inc.
00 Xxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxx Xxxxxx, Director of Finance
with a copy to each of the Company's General Counsel at the same
address and to:
Xxxxx, Xxxx & Xxxxx, LLP
000
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxx Xxxxxxxx
If to RGC International Investors, LDC:
RGC International Investors, LDC
x/x Xxxx Xxxx Xxxxxxx Xxxxxxxxxx, X.X.
000 X. Xxxxxxxxxx Xxxx
Xxxxx 0000
Xxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx Xxxxx
If to any other Purchaser, to such address set forth under such
Purchaser's name on the signature page hereto executed by such Purchaser.
Each party shall provide notice to the other parties of any change in
address.
g. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns.
Neither the Company nor any Purchaser shall assign this Agreement or any
rights or obligations hereunder without the prior written consent of the
other. Notwithstanding the foregoing, any Purchaser may assign its rights
hereunder to any of its "AFFILIATES," as that term is defined under the
Exchange Act, without the consent of the Company. This provision shall not
limit a Purchaser's right to transfer the Securities pursuant to the terms
of the Certificate of Designations and this Agreement or to assign such
Purchaser's rights hereunder to any such transferee.
h. Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
i. Survival. The representations and warranties of the Company and the
agreements and covenants set forth in Sections 3, 4, 5 and 8 shall survive
the closings hereunder notwithstanding any due diligence investigation
conducted by or on behalf of any Purchasers. The Company agrees to
indemnify and hold harmless each Purchaser and each of such Purchaser's
officers, directors, employees, partners, agents and affiliates for loss or
damage arising as a result of or related to any breach or alleged breach by
the Company of any of its representations or covenants set forth herein,
including advancement of expenses as they are incurred.
343
j. Publicity. The Company and each Purchaser shall have the right to
approve before issuance any press releases, SEC, NASDAQ or NASD filings, or any
other public statements with respect to the transactions contemplated hereby;
PROVIDED, HOWEVER, that the Company shall be entitled, without the prior
approval of the Purchasers, to make any press release or SEC, NASDAQ or NASD
filings with respect to such transactions as is required by applicable law and
regulations (although the Purchasers shall be consulted by the Company in
connection with any such press release prior to its release and shall be
provided with a copy thereof).
k. Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the closing shall not have occurred on or
before March 31, 1997, unless the parties agree otherwise, this Agreement shall
terminate at the close of business on such date.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
344
IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused
this Agreement to be duly executed as of the date first above written.
PURCHASER:
RGC International Investors, LDC
By:
---------------------------
Name:
---------------------------
Title:
---------------------------
RESIDENCE: Cayman Islands
ADDRESS:
RGC International Investors, LDC
x/x Xxxx Xxxx Xxxxxxx Xxxxxxxxxx, X.X.
000 X. Xxxxxxxxxx Xxxx
Xxxxx 0000
Xxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxxx Xxxxx
AGGREGATE SUBSCRIPTION AMOUNT
Number of Preferred Shares: 6,000
Purchase Price: $ 6,000,000
PALOMAR MEDICAL TECHNOLOGIES, INC.
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
