Exhibit 4.2
NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS
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 THE 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 FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS.
[$MONTHLY AMOUNT]
NO. ____
PREMIER LASER SYSTEMS, INC.
CONVERTIBLE DEBENTURE
FOR VALUE RECEIVED, Premier Laser Systems, Inc., a California
corporation, having a principal place of business at 0 Xxxxxx, Xxxxxx,
Xxxxxxxxxx 00000 (the "COMPANY") promises to pay to [CREDITOR], a [STATE OF
INCORPORATION] corporation (the"HOLDER"), the principal sum of [MONTHLY AMOUNT]
on December 15, 1999 (the "MATURITY DATE"). The Company shall not be required to
pay interest to the Holder on such principal sum. This Debenture is one of
[REQUIRED NUMBER] debentures in the aggregate amount of [TOTAL AMOUNT]
(hereinafter collectively or individually the "DEBENTURES").
This Debenture is subject to the following additional provisions:
SECTION 1. This Debenture is exchangeable for an equal aggregate
principal amount of Debentures of different authorized denominations, as
requested by the Holder surrendering the same. No service charge will be made
for such registration of transfer or exchange.
SECTION 2. This Debenture has been issued subject to certain investment
representations of the Holder set forth in a separate agreement being entered
into concurrently with this Debenture, and may be transferred or exchanged only
in compliance with applicable securities laws. Prior to due presentment to the
Company for transfer of this Debenture, the Company and any agent of the Company
may treat the Person (as defined in Section 7) in whose name this Debenture is
duly registered on the Company's books as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Debenture is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
Section 3. EVENTS OF DEFAULT.
(a) "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):
(i) any default in the payment of the principal of
any Debentures, free of any claim of subordination, as and
when the same shall become due and payable (whether on the
Maturity Date or by acceleration or otherwise);
(ii) the Company shall fail to observe or perform any
other covenant, agreement or warranty contained in, or
otherwise commit any breach of any of, this Debenture, and
unless otherwise provided herein such failure or breach shall
not have been remedied within 10 days after the date on which
notice of such failure or breach shall have been given;
(iii) the Company or any of its subsidiaries (for
purposes of this subsection (iii), "subsidiary" shall mean a
subsidiary of the Company representing 5% or more of the
consolidated revenues of the Company and its consolidated
subsidiaries for the last fiscal year of the Company prior to
any of the events contemplated in this paragraph) shall
commence, or there shall be commenced against the Company or
any such subsidiary a case under any applicable bankruptcy or
insolvency laws as now or hereafter in effect or any successor
thereto, 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 any subsidiary thereof or there is
commenced against the Company or any subsidiary thereof any
such bankruptcy, insolvency or other proceeding which remains
undismissed for a period of 60 days; or the Company or any
subsidiary thereof is adjudicated insolvent or bankrupt; or
any order of relief or other order approving any such case or
proceeding is entered; or the Company or any subsidiary
thereof 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 60 days; or the
Company or any subsidiary thereof 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 or any subsidiary thereof shall call a meeting of its
creditors with a view to arranging a composition, adjustment
or restructuring of its debts; or the Company or any
subsidiary thereof shall by any act or failure to act
expressly indicate its consent to, approval of or acquiescence
in any of the foregoing; or any corporate or other action is
taken by the Company or any subsidiary thereof for the purpose
of effecting any of the foregoing;
(iv) the Common Stock shall be either delisted from
the NASDAQ or suspended from trading on the NASDAQ without
resuming trading and/or being relisted thereon or on a
Subsequent Market or having such suspension lifted for five
(5) consecutive Trading Days or eight (8) Trading Days in the
aggregate (which need not be consecutive days);
(v) the Company shall fail for any reason to deliver
certificates to a Holder prior to the twelfth (12th) day after
a Conversion Date pursuant to and in accordance with Section
4(b) or the Company shall provide notice to the Holder,
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including by way of public announcement, at any time, of its
intention not to comply with requests for conversions of any
Debentures in accordance with the terms hereof.
(b) If any Event of Default occurs and is continuing, the full
principal amount of this Debenture (and, at the Holder's option, all
other Debentures then held by such Holder), together with other amounts
owing in respect thereof, to the date of acceleration shall become,
immediately due and payable in cash. The aggregate amount payable upon
an Event of Default shall be equal to the entire unpaid principal
amount of this Debenture. The Holder need not provide and the Company
hereby waives any presentment, demand, protest or other notice of any
kind, 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.
(c) If the Company has not registered the resale by Holder of
the Common Stock into which this Debenture is convertible under the
Securities Act of 1933, as amended, on or prior to that date ninety
(90) days from the date of this Debenture, the Holder will have the
option to require the Company to immediately repay upon expiration of
such ninety (90) day period or refusal of registration by the SEC,
whichever is earlier, the outstanding principal balance of the
Debentures in monthly installments. Such payments will be made monthly
commencing ____________, 2000, with each monthly payment being [MONTHLY
AMOUNT] until the principal balance of the Debentures has been fully
paid.
SECTION 4. CONVERSION.
(a) (i) CONVERSION AT OPTION OF HOLDER. This Debenture shall
be convertible into shares of Common Stock at the option of
the Holder, in whole or in part at any time and from time to
time, after the Original Issue Date (subject to the
limitations on conversion set forth in Section 4(a)(ii)
hereof). The number of shares of Common Stock issuable upon a
conversion hereunder shall be determined by dividing the
outstanding principal amount of this Debenture to be
converted, by the Conversion Price. The Holder shall effect
conversions by surrendering the Debentures (or such portions
thereof) to be converted, together with the form of conversion
notice attached hereto as EXHIBIT A (a "CONVERSION NOTICE") to
the Company. Each Conversion Notice shall specify the
principal amount of Debentures to be converted and the date on
which such conversion is to be effected, which date may not be
prior to the date such Conversion Notice is deemed to have
been delivered hereunder (a "CONVERSION DATE"). If no
Conversion Date is specified in a Conversion Notice, the
Conversion Date shall be the date that such Conversion Notice
is deemed delivered hereunder. Subject to Section 4(b), each
Conversion Notice, 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 with
the Conversion Notice, or if a conversion hereunder cannot be
effected in full for any reason, the Company shall honor such
conversion to the extent permissible hereunder and shall
promptly deliver to such Holder (in the manner and within the
time set forth in Section 4(b)) a new Debenture for such
principal amount as has not been converted.
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(ii) CERTAIN CONVERSION RESTRICTIONS
(A) If the Common Stock is then listed for
trading on the NASDAQ or the Nasdaq SmallCap Market
and the Company has not obtained the Shareholder
Approval (as defined below), then the Company may not
issue in excess of ___________ shares of Common Stock
upon conversions of Debentures or as payment of
interest thereon in shares of Common Stock, which
number shall be subject to adjustment pursuant to
Sections 4(c)(ii), (iii), (v), (vi) and (x) (such
number of shares, the "ISSUABLE MAXIMUM"). The
Issuable Maximum equals 19.999% of the number of
shares of Common Stock outstanding immediately prior
to the issuance of this Debenture. If on any
Conversion Date (A) the Common Stock is listed for
trading on the NASDAQ or the Nasdaq SmallCap Market,
(B) the Conversion Price then in effect is such that
the aggregate number of shares of Common Stock that
would then be issuable upon conversion in full of all
then outstanding Debentures held by Holder, together
with any shares of Common Stock previously issued
upon conversion of Debentures would exceed the
Issuable Maximum, and (C) the Company shall not have
previously obtained any vote of shareholders that may
be required by the applicable rules and regulations
of the Nasdaq Stock Market (or any successor entity)
applicable to approve the issuance of shares of
Common Stock in excess of the Issuable Maximum
pursuant to the terms hereof (the "SHAREHOLDER
APPROVAL"), then the Company shall issue to the
Holder requesting a conversion a number of shares of
Common Stock equal to the Issuable Maximum and, with
respect to the remainder of the principal amount of
Debentures then held by such Holder for which a
conversion in accordance with the Conversion Price
would result in an issuance of shares of Common Stock
in excess of the Issuable Maximum (the "EXCESS
PRINCIPAL"), the converting Holder shall have the
option to require the Company to pay cash to the
converting Holder in an amount equal to the
Conversion Price for all shares of Common Stock
constituting the Excess Principal (the "MANDATORY
PREPAYMENT AMOUNT"). If the Company fails to pay the
Mandatory Prepayment Amount in full pursuant to this
Section, the Company will pay interest thereon at a
rate of 15% per annum to the converting Holder,
accruing daily from the Conversion Date until such
amount, plus all such interest thereon, is paid in
full.
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(b) (i) Not later than three (3) Trading Days after
any Conversion Date, the Company will deliver to the Holder
(i) a certificate or certificates which shall be free of
restrictive legends and trading restrictions (other than those
required under applicable securities laws) representing the
number of shares of Common Stock being acquired upon the
conversion of Debentures (subject to the limitations set forth
in Section 4(a)(ii) hereof), and (ii) Debentures in a
principal amount equal to the principal amount of Debentures
not converted; PROVIDED, that the Company shall not be
obligated to issue certificates evidencing the shares of
Common Stock issuable upon conversion of the principal amount
of Debentures until Debentures are delivered for conversion to
the Company, or the Holder notifies the Company that such
Debentures have been lost, stolen or destroyed and provides a
bond (or other adequate security) reasonably satisfactory to
the Company to indemnify the Company from any loss incurred by
it in connection therewith. The Company shall, upon request of
the Holder, if available, use its best efforts to deliver any
certificate or certificates required to be delivered by the
Company under this Section electronically through the
Depository Trust Corporation or another established clearing
corporation performing similar functions. If in the case of
any Conversion Notice such certificate or certificates are not
delivered to or as directed by the applicable Holder by the
third (3rd) Trading Day after the Conversion Date, the Holder
shall be entitled by 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 certificates representing
the principal amount of Debentures tendered for conversion.
(ii) If the Company fails to deliver to the Holder
such certificate or certificates pursuant to Section 4(b)(i),
by the third (3rd) Trading Day after the Conversion Date, the
Company shall pay to such Holder, in cash, as liquidated
damages and not as a penalty, $1,000 for each Trading Day
after such third (3rd) Trading Day until such certificates are
delivered. Nothing herein shall limit a Holder's right to
pursue actual damages for the Company's failure to deliver
certificates representing shares of Common Stock upon
conversion within the period specified herein and such Holder
shall have the right to pursue all remedies available to it at
law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief. The exercise of
any such rights shall not prohibit the Holders from seeking to
enforce damages pursuant to any other Section hereof or under
applicable law. Further, if the Company shall not have
delivered any cash due in respect of conversions of Debentures
by the third (3rd) Trading Day after the Conversion Date, the
Holder may, by notice to the Company, require the Company to
issue shares of Common Stock pursuant to Section 4(c), except
that for such purpose the Conversion Price applicable thereto
shall be the lesser of the Conversion Price on the Conversion
Date and the Conversion Price on the date of such Holder
demand. Any such shares will be subject to the provision of
this Section.
(iii) In addition to any other rights available to
the Holder, if the Company fails to deliver to the Holder such
certificate or certificates pursuant to Section 4(b)(i), by
the third (3rd) Trading Day after the Conversion Date, and if
after such third (3rd) Trading Day the Holder purchases (in an
open market transaction or otherwise) Common Stock to deliver
in satisfaction of a sale by such Holder of the Underlying
Shares which the Holder anticipated receiving upon such
conversion (a "BUY-IN"), then the Company shall (A) pay in
cash to the Holder (in addition to any remedies available to
or elected by the Holder) the amount by which (x) the Holder's
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total purchase price (including brokerage commissions, if any)
for the Common Stock so purchased exceeds (y) the product of
(1) the aggregate number of shares of Common Stock that such
Holder anticipated receiving from the conversion at issue
multiplied by (2) the market price of the Common Stock at the
time of the sale giving rise to such purchase obligation and
(B) at the option of the Holder, either reissue Debentures in
principal amount equal the principal amount of the attempted
conversion or deliver to the Holder the number of shares of
Common Stock that would have been issued had the Company
timely complied with its delivery requirements under Section
4(b)(i). For example, if the Holder purchases Common Stock
having a total purchase price of $11,000 to cover a Buy-In
with respect to an attempted conversion of Debentures with
respect to which the market price of the Underlying Shares on
the date of conversion was a total of $10,000 under clause (A)
of the immediately preceding sentence, the Company shall be
required to pay the Holder $1,000. The Holder shall provide
the Company written notice indicating the amounts payable to
the Holder in respect of the Buy-In. Notwithstanding anything
contained herein to the contrary, if a Holder requires the
Company to make payment in respect of a Buy-In for the failure
to timely deliver certificates hereunder and the Company
timely pays in full such payment, the Company shall not be
required to pay such Holder liquidated damages under Section
4(b)(ii) in respect of the certificates resulting in such
Buy-In.
(c) (i) The conversion price (the "CONVERSION PRICE") in
effect on any Conversion Date shall be the closing sale price
of the Common Stock on the Conversion Date which must be a
Trading Day. Notwithstanding the foregoing, the Conversion
Price shall not be less than the Floor (as defined in Section
7) for so long as the Floor remains in effect in accordance
with Section 6; PROVIDED, that the Floor shall be subject to
reduction due to operation of this Section 4(c).
(ii) In case of any reclassification of the Common
Stock or any compulsory share exchange pursuant to which the
Common Stock is converted into other securities, cash or
property, the Holders shall have the right thereafter to, at
their option, (A) convert the then outstanding principal
amount only into the shares of stock and other securities,
cash and property receivable upon or deemed to be held by
holders of the Common Stock following such reclassification or
share exchange, and the Holders of the Debentures shall be
entitled upon such event to receive such amount of securities,
cash or property as the shares of the Common Stock of the
Company into which the then outstanding principal amount could
have been converted immediately prior to such reclassification
or share exchange would have been entitled or (B) require the
Company to prepay the aggregate of its outstanding principal
amount of Debentures. The entire prepayment price shall be
paid in cash. This provision shall similarly apply to
successive reclassifications or share exchanges.
(iii) All calculations under this Section 4 shall be
made to the nearest cent or the nearest 1/100th of a share, as
the case may be.
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(iv) If (A) the Company shall declare a special
nonrecurring cash dividend on or a redemption of the Common
Stock; (B) 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; (C) the approval of any stockholders of the
Company shall be required in connection with any
reclassification of the 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, of
any compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property; (D) the
Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the
Company; then, in each case, the Company shall give notice to
the Holders as provided in subsection (g) below at least 20
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 the
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 or share exchange is
expected to become effective or close, and the date as of
which it is expected that holders of the Common Stock of
record shall be entitled to exchange their shares of the
Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; 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. The failure to
provide such notice shall constitute an Event of Default under
Section 3(a)(ii) above unless the Holder is otherwise provided
the opportunity, upon conversion, to receive the dividend,
redemption rights, subscription rights or warrants, voting or
approval rights, securities or other consideration that would
be payable or provided to Holder had Holder converted the
Debentures into Common Stock prior to the consummation of any
of the actions or events identified in clauses (A) through (D)
above. Holders are entitled to convert Debentures during the
20-day period commencing the date of such notice to the
effective date of the event triggering such notice.
(v) In case of any (1) merger or consolidation of the
Company with or into another Person that would constitute a
Change of Control Transaction, or (2) sale by the Company of
more than one-half of the assets of the Company (on an as
valued basis) in one or a series of related transactions, or
(3) tender or other offer or exchange (whether by the Company
or another Person) pursuant to which holders of Common Stock
are permitted to tender or exchange their shares for other
securities, stock, cash or property of the Company or another
Person; then a Holder shall have the right to (A) convert its
aggregate principal amount of Debentures then outstanding into
the shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of Common
Stock following such merger, consolidation or sale, and such
Holder shall be entitled upon such event or series of related
events to receive such amount of securities, cash and property
as the shares of Common Stock into which such aggregate
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principal amount of Debentures could have been converted
immediately prior to such merger, consolidation or sales would
have been entitled, (B) in the case of a merger or
consolidation, (x) require the surviving entity to issue
convertible debentures in a principal amount equal to the
aggregate principal amount of Debentures then held by such
Holder, which newly issued debentures shall have terms
identical (including with respect to conversion) to the terms
of this Debenture and shall be entitled to all of the rights
and privileges of a Holder of Debentures set forth herein, and
(y) simultaneously with the issuance of such convertible
debentures, shall have the right to convert such instrument
only into shares of stock and other securities, cash and
property receivable upon or deemed to be held by holders of
Common Stock following such merger or consolidation, or (C) in
the event of an exchange or tender offer or other transaction
contemplated by clause (3) of this Section, tender or exchange
its aggregate principal amount of Debentures for such
securities, stock, cash and other property receivable upon or
deemed to be held by holders of Common Stock that have
tendered or exchanged their shares of Common Stock following
such tender or exchange, and such Holder shall be entitled
upon such exchange or tender to receive such amount of
securities, cash and property as the shares of Common Stock
into which such aggregate principal amount of Debentures could
have been converted immediately prior to such tender or
exchange would have been entitled as would have been issued.
In the case of clause (B), the conversion price applicable for
the newly issued convertible debentures shall be based upon
the amount of securities, cash and property that each share of
Common Stock would receive in such transaction and the
Conversion Price in effect immediately prior to the
effectiveness or closing date for such transaction. The terms
of any such merger, sale, consolidation, tender or exchange
shall include such terms so as to continue to give the Holders
of Debentures the right to receive the securities, cash and
property set forth in this Section upon any conversion or
redemption following such event. This provision shall
similarly apply to successive such events.
(d) The Company covenants that it will at all times reserve
and keep available out of its authorized and unissued shares of Common
Stock solely for the purpose of issuance upon conversion of the
Debentures, free from preemptive rights or any other actual contingent
purchase rights of persons other than the Holders, not less than such
number of shares of the Common Stock as shall be issuable (taking into
account the adjustments and restrictions of Section 4(b)) upon the
conversion of the outstanding principal amount of the Debentures and
payment of interest hereunder. 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, nonassessable and, if a
Registration Statement has been declared effective under the Securities
Act, registered for public sale in accordance with such Registration
Statement.
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(e) Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares
of the Common Stock, but may if otherwise permitted, make a cash
payment in respect of any final fraction of a share based on the market
value of a share of Common Stock at such time. If the Company elects
not, or is unable, to make such a cash payment, the Holder shall be
entitled to receive, in lieu of the final fraction of a share, one
whole share of Common Stock.
(f) The issuance of certificates for shares of the Common
Stock on conversion of the Debentures shall be made without charge to
the Holders thereof 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 of such Debentures so converted 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.
(g) Any and all notices or other communications or deliveries
to be provided by the Holders of the Debentures hereunder, including,
without limitation, any Conversion Notice, shall be in writing and
delivered personally, by facsimile, sent by a nationally recognized
overnight courier service or sent by certified or registered mail,
postage prepaid, addressed to the Company, at 0 Xxxxxx, Xxxxxx,
Xxxxxxxxxx 00000 (facsimile number (000) 000-0000), attention Chief
Financial Officer, or such other address or facsimile number as the
Company may specify for such purposes by notice to the Holders
delivered in accordance with this Section, with a copy to Xxxxx &
Xxxxxx, LLP, 000 Xxxxx Xxxxxxxxx, Xxxxx Xxxx, XX 00000 (facsimile
number (000) 000-0000), attention Xxxxxx X. Xxxxxxxxxxx, Esq. Any and
all notices or other communications or deliveries to be provided by the
Company hereunder shall be in writing and delivered personally, by
facsimile, sent by a nationally recognized overnight courier service or
sent by certified or registered mail, postage prepaid, addressed to
each Holder of the Debentures at the facsimile telephone number or
address of such Holder appearing on the books of the Company, or if no
such facsimile telephone number or address appears, at the principal
place of business of the holder. Any notice or other communication or
deliveries hereunder shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone
number specified in this Section prior to 4:00 p.m. (California time),
(ii) the date after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone
number specified in this Section later than 4:00 p.m. (California time)
on any date and earlier than 11:59 p.m. (California time) on such date,
(iii) four days after deposit in the United States mail, (iv) the
Business Day following the date of mailing, if sent by nationally
recognized overnight courier service, or (v) upon actual receipt by the
party to whom such notice is required to be given. The addresses and
facsimile numbers for any notices or copies of notices required under
this section (g) may be changed by a written notice conforming to the
requirements of this subsection (g).
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SECTION 5. OPTIONAL PREPAYMENT.
(a) The Company shall have the right, exercisable at any time
and from time to time in accordance with the terms hereof, upon five
(5) business day's notice to the Holder, to prepay all or any portion
of the outstanding principal amount of this Debenture which have not
previously been repaid or for which Conversion Notices have not
previously been delivered. The prepayment price shall be paid in cash.
Any such prepayment shall be free of any claim of subordination. The
Holder shall have the right to tender, and the Company shall honor,
Conversion Notices delivered prior to the expiration of such one day
period.
SECTION 6. MANDATORY PREPAYMENT/ELIMINATION OF FLOOR.
(a) If the Conversion Price for twenty-one (21) consecutive
days shall be equal to or below $1.50, the Holder may, at any time
thereafter, deliver a notice to the Company (the "HOLDER NOTICE")
requiring the Company to act in accordance with the immediately
following sentence. Within three (3) Business Days after delivery of
the Holder Notice under this Section 6(a), the Company shall notify the
Holder of its election to either (i) prepay the entire outstanding
principal amount of the Debentures which have not previously been
repaid or for which Conversion Notices have not previously been
delivered no later than ten (10) Business Days from such election, or
(ii) discontinue and remove permanently the Floor. The Company shall
honor Conversion Notices delivered prior to the expiration of the three
(3) Business Day period contemplated by this Section 6(a), provided,
that such conversions shall be subject to the Floor. A failure of the
Company to timely elect under this Section 6(a) shall be deemed an
election to discontinue permanently the Floor.
SECTION 7. DEFINITIONS. For the purposes hereof, the following
terms shall have the following meanings:
"BUSINESS DAY" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking
institutions in the State of California are authorized or required by
law or other government action to close.
"CHANGE OF CONTROL TRANSACTION" means the occurrence of any of
(i) an acquisition after the date hereof by an individual or legal
entity or "group" (as described in Rule 3d-5(b)(1) promulgated under
the Exchange Act) of in excess of 40% of the voting securities of the
Company, (ii) a replacement of more than one-half of the members of the
Company's board of directors which is not approved by those individuals
who are members of the board of directors on the date hereof in one or
a series of related transactions, (iii) the merger of the Company with
or into another entity, consolidation or sale of all or substantially
all of the assets of the Company in one or a series of related
transactions, unless following such transaction, the holders of the
Company's securities continue to hold at least 60% of such securities
following such transaction or (iv) the execution by the Company of an
agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth above in (i), (ii) or (iii).
"COMMISSION" means the Securities and Exchange Commission.
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"COMMON STOCK" means the Class A Common Stock, no par value
per share, of the Company and stock of any other class into which such
shares may hereafter have been reclassified or changed.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FLOOR" means $1.50.
"ORIGINAL ISSUE DATE" shall mean the date of the first
issuance of the Debentures regardless of the number of transfers of any
Debenture and regardless of the number of instruments which may be
issued to evidence such Debenture.
"PERSON" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political
subdivision thereof or a governmental agency.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"TRADING DAY" means (a) a day on which the Common Stock is
traded on the NASDAQ or on such Subsequent Market on which the Common
Stock is then listed or quoted, or (b) if the Common Stock is not
listed on the NASDAQ or a Subsequent Market, a day on which the Common
Stock is traded in the over-the-counter market, as reported by the OTC
Bulletin Board, or (c) if the Common Stock is not quoted on the OTC
Bulletin Board, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the National Quotation Bureau
Incorporated (or any similar organization or agency succeeding its
functions of reporting prices); PROVIDED, HOWEVER, that in the event
that the Common Stock is not listed or quoted as set forth in (a), (b)
and (c) hereof, then Trading Day shall mean any day except Saturday,
Sunday and any day which shall be a legal holiday or a day on which
banking institutions in the State of New York are authorized or
required by law or other government action to close.
"UNDERLYING SHARES" means the shares of Common Stock issuable
upon conversion of Debentures.
SECTION 8. 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 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 only voluntarily prepay the outstanding principal amount on the Debentures
in accordance with Section 5 hereof. The Company represents and warrants that
the issuance of the Debentures to [CREDITOR] is not now, and will not be in the
future, a fraudulent conveyance as defined by applicable law and that the
issuance of the Debentures will not otherwise give rise to a claim by any other
of the creditors of PLSI or affiliated entities to set aside and/or recover the
Debentures for the benefit of such creditors.
-11-
SECTION 9. 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. The Company represents and warrants that the
issuance of the Debentures to [CREDITOR] is not now, and will not be in the
future, a fraudulent conveyance as defined by applicable law and that the
issuance of the Debentures will not otherwise give rise to a claim by any other
of the creditors of PSLI or affiliated entities to set aside and/or recover the
Debentures to the benefit of such creditors.
SECTION 10. 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 evidence of such loss, theft or destruction of such
Debenture, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Company.
SECTION 11. This Debenture shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
conflicts of laws thereof. The Company and the Holder hereby irrevocably submit
to the exclusive jurisdiction of the state and federal courts sitting in the
County of Orange, California for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein. Each of the Company and the Holder hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by receiving a copy thereof sent to the Company at the address in
effect for notices to it under this instrument and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law.
SECTION 12. 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 13. 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 14. 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 15. In the event either the Holder or Company commences
litigation to enforce the provisions of this Debenture, the prevailing party in
such litigation shall be entitled to be reimbursed for all of its reasonable
attorneys' fees and costs incurred in connection with such action.
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IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed by a duly authorized officer as of the date first above indicated.
PREMIER LASER SYSTEMS, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
ATTEST:
By:__________________________________
Name:________________________________
Title:_______________________________
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby elects to convert the attached Debenture into shares of
Class A Common Stock, no par value per share (the "Common Stock"), of Premier
Laser Systems, 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. No fee will be
charged to the holder for any conversion, except for such transfer taxes, if
any.
Conversion calculations:
______________________________________________
Date to Effect Conversion
______________________________________________
Principal Amount of Debentures to be Converted
______________________________________________
Number of shares of Common Stock to be Issued
______________________________________________
Applicable Conversion Price
______________________________________________
DTC# (for electronic transfers)
______________________________________________
Signature
______________________________________________
Name
______________________________________________
Address
