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SUBSCRIPTION AGREEMENT
(GFL Advantage Fund himited)
THIS SUBSCRIPTION AGREEMENT, dated as of the date of acceptance set forth
below, by and between PALOMAR MEDICAL TECHNOLOGIES, INC., a Delaware
corporation, with headquarters located at 00 Xxxxxx Xxxx Xxxxx, Xxxxxxx,
Xxxxxxxxxxxxx 00000 (the "Company"), and the undersigned (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer 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 "1933 Act"); and
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to the
conditions of this Agreement, shares of non-voting, convertible preferred stock
of the Company which will be convertible into shares o Common Stock, $.O1 par
value (the "Common Stock"), of the Company upon the terms and subject to the
conditions of such preferred stock, and in connection therewith to receive
warrants to purchase shares of Common Stock, subject to acceptance of this
Agreement by the Company;
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO SU3SCRIBE; PURCHASE PRICE; WARRANTS.
a. Subscrition. The undersigned hereby agrees to purchase from the
Company the number of shares (the "Preferred Shares") of Series E
Convertible Preferred Stock, $.01 par value (the "Preferred Stock"), of the
Company set forth on the signature page of this Agreement, having the terms
and conditions as set forth in the form of Certificate of Designations
attached hereto as Annex I (the "Certificate of Designations) at the price
per share and for the aggregate purchase price set forth on the signature
page of this Agreement. The purchase price for the Preferred Stock shall be
payable in United States Dollars. In addition to issuance of the Preferred
Shares, the Company shall issue to the Buyer on the Closing Date (as herein
defined) warrants to purchase shares of Common Stock, such warrants to be
in the form attached hereto as Annex II (the "Warrantsn). The number of
shares of Common Stock initially purchasable upon exercise of the Warrants
to be issued by the Buyer on the Closing Date shall be the uotient obtained
by dividing (1) the number of shares of Common Stock into which the number
of Preferred Shares to be issued to the Buyer on the Closing Date would be
convertible on the Closing Date, if the Preferred Shares were convertible
on the Closing Date, by (2) four (4). The shares of Common Stock
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issuable upon conversion of the Preferred Shares are referred to herein as
the "Conversion Shares." The shares of Common Stock issuable upon exercise
of the Warrants are referred to herein as the "Warrant Shares." The
Conversion Shares and the Warrant Shares are referred to herein
collectively as the "Common Shares." The Common Shares and the Preferred
Shares are referred to herein collectively as the "Shares." The Shares and
the Warrants are referred to herein collectively as the "Securities."
b. Form of Payment. The Buyer shall pay the purchase price for the
Preferred Shares by delivering good funds in United States ollars to the
escrow agent identified in the Joint Escrow Instructions attached hereto as
Annex III (the "Escrow Agent"). Such delivery of funds shall be made
against delivery by the Company of the certificates for the Preferred
Shares registered in the name of the Buyer. Promptly following payment by
the Buyer to the Escrow Agent of the purchase price of the Preferred
Shares, but in no event later than the Closing Date, the Company shall
deliver certificates for the Preferred Shares, registered in the name of
the Buyer, to the Escrow Agent. By signing this Agreement, the Buyer and
the Company each agrees to all of the terms and conditions of, and becomes
a party to, the Joint Escrow Instructions attached hereto as Annex III, all
of the provisions of which are incorporated herein by this reference as if
set forth in full.
c. Method of Payment. Payment of the purchase price for the Preferred
Shares shall be made by wire transfer of funds to:
Citibank, N.A.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ABA#000000000
For Further Credit to A/C#37179446
for credit to the account of Xxxxx X. Xxxxx Attorney
Escrow Account
Reference: GFL/Palomar
Not later than 4:00 p.m., New York City time, on the date which is five New
York Stock Exchange trading days after the Company shall have accepted this
Agreement and returned a signed counterpart of this Agreement to the Buyer,
the Buyer shall deposit with the Escrow Agent the aggregate purchase price
for the Preferred Shares.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with, the
Company as follows:
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a. The Buyer is purchasing the Preferred Shares and the Warrants for
its own account for investment only and not with a view towards the public
sale or distribution thereof;
b. The Buyer is an "accredited investor as that term is defined in
Rule 501 of the General Rules and Regulations under the 1933 Act by reason
of Rule 501(a)(3);
c. All subsequent offers and sales of the Securities by the Buyer
shall be made pursuant to registration of the Securities being offered and
sold under the 1933 Act or pursuant to an exemption from registration;
d. The Buyer understands that the Preferred Shares and the Warrants
are being offered and sold, and the Common Shares are being offered, to it
in reliance on 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 the Buyer's compliance with,
the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire
the Preferred Shares and the Warrants and to receive an offer of the Common
Shares;
e. The Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Preferred Shares and
the Warrants and the offer of the Common Shares which have been requested
by the Buyer. The Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and have received complete and
satisfactory answers to any such inquiries. Without limiting the generality
of the foregoing, the Buyer has had the opportunity to obtain and to review
the Company's (1) Annual Report on Form 10- KSB for the fiscal year ended
December 31, 1995 and (2) the Company's definitive Proxy Statement for its
1995 Annual Meeting of StockhoIders, in each case as filed with the SEC.
The Buyer understands that its investment in the Shares involves a high
degree of risk;
f. The Buyer understands that no United States federal or state agency
or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities; and
g. This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Buyer and is a valid and binding agreement of
the Buyer enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium and other similar laws affecting the enforcement of
creditors rights generally.
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3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that:
a. Concerning the Securities. The Securities have been duly authorized
and the Preferred Shares, when issued and paid for in accordance with this
Agreement, and the Common Shares, when issued upon conversion of the
Preferred Shares or eercise of the Warrants, as the case may be, will be
duly and validly issued, fully paid and non-assessable and will not subject
the holder thereof to personal liability by reason of being such holder.
There are no preemptive right,s of any stockholder of the Company, as such,
to acquire any of the Securities. The Common Stock is listed for trading on
the Nasdaq SmallCap Market ("Nasdaq") and (1) the Company and the Common
Stock meet the criteria for continued listing and trading on Nasdaq; (2)
the Company has not been notified since January 1, 1994 by the National
Association of Securities Dealers, Inc. of any failure or potential failure
to meet the criteria for continued listing and trading on Nasdaq and (3) no
suspension of trading in the Common Stock is in effect.
b. Subscription Agreement; Resistration Right Agreement; Warrants.
This Agreement, the Registration Rights Agreement, the form of which is
attached hereto as Annex IV (the "Registration Rights Agreement"), and the
Warrants have been duly and validly authorized by the Company, this
Agreement has been duly executed and delivered on behalf of the Company and
this Agreement is and the Registration Rights Agreement and the Warrants,
when executed and delivered by the Company, will be valid and binding
agreements of the Company enforceable in accordance with their respective
terms, subject as to enforceability to general principles of equity and to
bankruptcy, insolvency, moratorium and other similar laws affecting the
enforcement of creditors' rights generally.
c. Non-contraention. The execution and delivery of this Agreement by
the Company and the consummation by the Company of the issuance of the
Shares and the Warrants and the other transactions contemplated by this
Agreement, the Registration Rights Agreement, the Warrants and the terms of
the Preferred Stock do not and will not conflict with or result in a breach
by the Company of any of the terms or provisions of, or constitute a
default under, the certificate of incorporation or by-laws of the Company,
or any indenture, mortgage, deed of trust or other material agreement or
instrument to which the Company is a party or by which it or any of its
properties or assets are bound, or any applicable law, rule or regulation
or any applicable decree, judgment or order of any court, United States
federal or state regulatory body, administrative agency or other
governmental body having jurisdiction over the Company or any of its
properties or assets.
d. Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-
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regulatory organization, or stock exchange or market or the stockholders of
the Company is required to be obtained by the Company for the issuance and
sale of the Shares and the Warrants as contemplated by this Agreement, the
terms of the Preferred Stoc and the Warrants.
e. Information Proided. The information provided by or on behalf of
the Company to the Buyer and referred to in Section 2(e) of this Agreement
does not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstance under which they are made, not misleading.
f. Absence of Certain Change. 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
documents referred to in Section 2(e) hereof.
g. Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board or body
pending or, to the knowledge of the Company or any of its subsidiaries,
threatened against or affecting the Company or any of its subsidiaries,
wherein an unfavorable decision, ruling or finding would have a material
adverse effect on the properties, business, condition (financial or other),
results of operations or prospects of the Company and its subsidiaries
taken as a whole or the transactions contemplated by this Agreement or any
of the documents contemplated hereby or which would adversely affect the
validity or enforceability of, or the authority or ability of the Company
to perform its obligations under, this Agreement or any of such other
documents.
4. CERTAIN COVENANTS AND ACRNOWLEDGMENTS.
a. Transfer RestrictionS. The Buyer acknowledges that (1) the
Preferred Shares and the Warrants have not been and are not being
registered under the provisions of the 1933 Act and, except as provided in
the Registration Rights Agreement, the Common Shares have not been and are
not being registered under the 1933 Act, and may not be transferred unless
(A) subsequently registered thereunder or () the Buyer shall have delivered
to the Company an opinion of counsel, reasonably satisfactory in form,
scope and substance to the Company, to the effect that the Shares to be
sold or transferred may be sold or transferred pursuant to an exemption
from such registration; (2) any sale of the Shares or the Warrants made in
reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Shares or Warrants under circumstances in
which the seller, or the person through whom the sale is made, may be
deemed to be an underwriter, as that term is used in the 1933 Act, may
require compliance with some other exemption under the 1933 Act or the
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rules and regulations of the SEC thereunder; and (3) neither the Company
nor any other person is under any obligation to register the Shares (other
than pursuant to the Registration Rights Agreement) or the Warrants under
the 1933 Act or to comply with the terms and conditions of any exemption
thereunder.
b. Restrictive Legend. The Buyer acknowledges and agrees that the
certificates for the Preferred Shares, the Warrants, and, until such time
as the Shares have been registered under the 1933 Act as contemplated by
the Registration Rights Agreement, the certificates for the Common 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
the Shares):
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 the Securities
Act of 1933, as amended, or an opinion of counsel that
registration is not required under said Act.
c. Registration Rights Agreement. The parties hereto agree to enter
into the Registration Rights Agreement, in the form attached hereto as
Annex IV, on or before the Closing Date.
d. Authorization for Trading; Reporting Statu. On or before the
Closing Date, the Company shall cause the Common Shares to be authorized
for trading on Nasdaq. So long as the Buyer beneficially owns any of the
Preferred Shares, the Warrants or the Common Shares, the Company shall file
all reports required to be filed with the SEC pursuant to Section 13 or 15
(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act), and
the Company shall not terminate its status as an issuer required to file
reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would permit such termination.
e. Use of Proceeds. The Company will use the proceeds from the sale of
the Preferred Shares and the Warrants for the Company's internal working
capital purposes, mergers and acquisitions, investments and general
corporate purposes.
f. Blue Sky Laws. On or before the Closing Date, the Company shall
take such action as shall be necessary to qualify, or to obtain an
exemption for, the Preferred Shares and the Warrants for sale to the Buyer
pursuant to this Agreement and the Common Shares for sale to the Buyer on
conversion of the Preferred Shares and on exercise of the Warrants under
such of the securities or "blue sky' laws of jurisdictions in the United
States as shall be applicable to the sale of the Shares to the Buyer
pursuant to this Agreement. The Company shall furnish copies of all
filings, applications, orders and grants or
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confirmations of exemptions relating to s.uch securities or "blue sky" laws
on or prior to the Closing Date.
g. Certain Exen-e-. Whether or not any closing occurs, the Company
shall pay or reimburse the Buyer for all reasonable legal fees and expenses
of counsel to the Buyer for the preparation and negotiation of, and closing
under, this Agreement (but not to exceed $15,000). The obligations of the
Company under the provisions of this Section 4(g) shall be in addition to
the obligation of the Company for expenses under the Registration Rights
Agreement.
5. TRANSFER AGENT INSTRUCTIONS; CONVERSION PROCEDURE.
a. Transfer Agent Instruction-. Promptly following the delivery by the
Buyer of the aggregate purchase price for the Preferred Shares in
accordance with Section l(c) hereof, and prior to the Closing Date the
Company will irrevocably instruct its transfer agent to issue certificates
for the Common Shares from time to time upon conversion of the Preferred
Shares and exercise of the Warrants in such amounts as specified from time
to time to the transfer agent in the Conversion Certiicates surrendered in
connection with such conversions and referred to in Section 5(b) of this
Agreement or in the subscription forms attached to the Warrants, as the
case may be, such certificates to bear the restrictive legend specified in
Section 4(b) of this Agreement prior to registration of the Common Shares
under the 1933 Act, registered in the name of the Buyer or its nominee and
in such denominations to be specified by the Buyer in connection with each
conversion of Preferred Shares or exercise of Warrants, as the case may be.
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 4(a) hereof prior to registration of the Common Shares under the
1933 Act will be given by the Company to the transfer agent and that the
Common Shares shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement.
Nothing in this Section 5(a) shall affect in any way the Buyer's
obligations and agreement to comply with all applicable securities laws
upon resale of the Shares. If the Buyer provides the Company with an
opinion of counsel reasonably satisfactory in form, scope and substance to
the Company that registration of a resale by the Buyer of any of the
Securities in accordance with clause (l)(B) of Section 4(a) of this
Agreement is not required under the 1933 Act (which opinion expressly
states that it may be relied upon by the Company and its counsel in
delivering instructions to the Company's transfer agent), the Company shall
permit the transfer of such Securities and, in the case of the Common
Shares, promptly, but in no event later than three days after receipt of
such opinion, instruct the Company's transfer agent to issue one or more
share certificates in such name and in such denominations as specified by
the Buyer. The provisions of Section 3(n) of the Registration Rights
Agreement shall supersede this Section 5(a) once said Section 3(n) becomes
applicable.
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b. Converion Procedure. In connection with the exercise of conversion
rights relating to the Preferred Shares, if the Common Shares issuable upon
conversion of Preferred Shares have not been registered under the 1933 Act
prior to such conversion, the Buyer or any subsequent holder of the
Preferred Shares shall, in addition to any other requirement imposed by the
terms of the Preferred Shares as set forth in the Certificate of
Designation, complete, sign and furnish to the Company a conversion
certificate in the form attached hereto as Annex V.
6. STOCK DEIVERY INSTRUCTIONS.
The certificates for the Preferred Shares and Warrants shall be delivered
by the Company to the Escrow Agent pursuant to Section l(b) hereof on a delivery
against payment basis at the closing.
7. CLOSING DATE.
The date and time of the issuance and sale of the Preferred Shares and
issuance of the Warrants (the "Closing Date") shall be 12:00 noon, New York City
time, on the date which is three New York Stock Exchange trading days after the
date on which the Buyer has deposited the purchase price for the Preferred
Shares with the Escrow Agent in accordance with Section l(c) hereof, or such
other mutually agreed to time. The closing shall occur on the Closing Date at
the offices of the Escrow Agent.
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL AND ISSUE.
The Buyer understands that the Company's obligations to sell the Preferred
Shares and issue the Warrants to the Buyer pursuant to this Agreement is
conditioned upon:
a. The receipt and acceptance by the Company of this Agreement as
evidenced by execution of this Agreement by the Company and delivery of an
executed counterpart of this Agreement to the Buyer or its legal counsel;
b. Delivery by the Buyer to the Escrow Agent of good funds as payment
in full of an amount equal to the purchase price for the Preferred Shares
in accordance with Section l(c) hereof; and
c. The accuracy on the Closing Date of the representations and
warranties of the Buyer contained in this Agreement as if made on the
Closing Date and the performance by the Buyer on or before the Closing Date
of all covenants and agreements of the Buyer required to be performed on or
before such Closing Date.
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9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Preferred Shares and acquire the Warrants is conditioned upon:
a. Delivery by the Company to the Escrow Agent of the certificates for
the Preferred Shares and the Warrants in accordance with this Agreement;
b. The accuracy on the Closing Date of the representations and
warranties of the Company contained in this Agreement as if made on the
Closing Date and the performance by the Company on or before the Closing
Date of all covenants and agreements of the Company required to be
performed on or before such Closing Date; and
c. Receipt by the Buyer on the Closing Date of an opinion of counsel
for the Company, dated the Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer, to the effect set forth in Annex VI
attached hereto.
10. GOVERNING LAW; MISCELLANEOUS. This Agreement shall be governed by and
interpreted in accordance with the laws of the Commonwealth of Massachusetts. A
facsimile transmission of this signed Agreement shall be legal and binding on
all parties hereto. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement. 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. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement. Any notices required or permitted to be given under the terms
of this Agreement shall be sent by mail or delivered personally (which shall
include telephone line facsimile transmission) or by courier and shall be
effective five days after being placed in the mail, if mailed, or upon receipt,
if delivered personally or by courier, in each case addressed to a party at such
party's address shown in the introductory paragraph or on the signature page of
this Agreement (facsimile number 000-000-0000, in the case of the Company, and
000-000-0000, in the case of the Buyer) or such other address as a party shall
have provided by notice to the other party in accordance with this provision
and, in the case of notice to the Company, with a copy to Xxxxx, Xxxx & Xxxxx,
Xxx Xxxx Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, Attention: Xxxxx Xxxxxxxx,
Esq. (facsimile number 617-832-7000) and, in the case of notice to the Buyer,
with a copy to Law Offices of Xxxxx X Xxxxx, Penthouse Suite, 00 Xxxx 00xx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (facsimile number 212-980-7055). The Buyer
shall have the right to assign it rights and obligations under this Agreement
with respect to the purchase of all or any portion of the Preferred Shares to
another
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investment fund, provided such assignee, by written instrument duly executed by
such assignee, assumes all obligations of the Buyer hereunder with respect to
the purchase of the portion of the Preferred Shares so assigned and makes the
same representations and -warranties with respect thereto as the Buyer makes in
this Agreement, whereupon the Buyer shall be relieved of any further
obligations, responsibilities and liabilities with respect to the purchase of
all or the portion of the Preferred Shares so assigned. In the case of any such
assignment, the Company shall agree in writing with such assignee to make
available to such assignee the benefits of the Registration Rights Agreement
with respect to the Common Shares issuable on conversion of the Preferred Shares
with respect to which the purchase under this Agreement has been so assigned.
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IN WITNESS WHEREOF, this Agreemetn has been duly executed by the Buyer or
one of its officers thereunto duly authorized as of the date set forth below
NUMBER OF SHARES 10,000
PRICE PER SHARE: $1,000.00
AGGREGATE PURCHASE PRICE $10,000,000.00
NAME OF BUYER: GFL ADVANTAGE FUND LIMITED
SIGNATURE: /S/
---------------------------
X.X. xx Xxxxx
Title: President
Date: April 12, 1996
Address: x/x XXXXX
Xxxx Xxxxxxxxx 0
Xxxxxxx, Xxxxxxxxxxx Antilles
This Agreement has been accepted as of the date set forth below
PALOMAR MEDICAL TECHNOLOGIES, INC.
By: /s/
-------------------------------
Xxxxxx Xxxxxxxx
Title: Chairman and Chief Executive Officer
Date: 4/12/96
