FIRST ALLONGE AND AMENDMENT TO 4.5% SUBORDINATED
CONVERTIBLE DEBENTURE (ORIGINALLY) DUE 2003
Issuer: Palomar Medical Technologies, Inc.
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Purchaser: Banque SCS Alliance S.A.
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Date of Original Debenture: on or about July 3, 1996
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Original Principal Amount: SF 3,000,000
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Original Due Date: 2003
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1. This First Allonge and Amendment shall be and remain attached to and shall
constitute an integral part of the above-described Debenture ("Debenture")
issued pursuant to the original Indenture dated as of June 24, 1996
("Indenture"), as amended by the Second Supplemental Indenture dated as of
April 21, 1999 (the "Second Supplemental Indenture"). Terms capitalized but
not otherwise defined herein shall have the meaning given to them in the
Second Supplemental Indenture and in the Indenture.
2. The Debenture is hereby amended in the following particulars:
(a) The Debenture is hereby amended by the deletion of the section
captioned "Redemption at the Option of the Company," and the
substitution of the following in lieu thereof:
Debentures Redeemable.
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The Debentures may be redeemed by the Company, as a whole or from
time to time in part, at any time, if the Nasdaq closing price per
share of Company stock (or, if the Company is listed or quoted over
the counter or on an exchange in the United States other than Nasdaq,
the closing price on such exchange) on the date of notice of
redemption is (a) $5.00 or less (subject to equitable adjustments for
stock splits, stock dividends, combinations, recapitalizations,
reclassifications and similar events), the Debentures may be redeemed
by the Company, in whole or in part, in cash and at a redemption price
equal to 100% of the principal amount to be redeemed plus accrued and
unpaid interest to the date fixed for redemption; or (b) over $5.00
(subject to equitable adjustments for stock splits, stock dividends,
combinations, recapitalizations, reclassifications and similar
events), the Debentures may be redeemed by the Company, in whole or in
part, in cash and at a redemption price equal to 100% of the principal
amount to be redeemed plus accrued and unpaid interest to the date
fixed for redemption (i) provided that in such case the Company shall
pay to each debentureholder an additional amount equal to the profit
each
debentureholder would have realized had it converted its Debentures
into Company stock at a price of $5.00 per share and sold said stock
on the business day prior to that set for redemption, and (ii)
provided further that said payment shall in no event exceed the amount
of $1.50 per share.
Notwithstanding the provisions of Section 3. 1 (a) and (b) set
forth above, within thirty (30) business days after consummation of
the sale by Palomar of its majority-owned subsidiary, Star Medical
Technologies, Inc. ("Star"), or the sale of all or substantially all
of the assets held by Star, Palomar shall redeem in cash, without
premium, Debentures in the principal amount of SF 6,000,000 plus
accrued and unpaid interest to the date fixed for redemption. (The
Company's redemption of Debentures having a face value of 1,375,000
Swiss francs, per paragraph 2 of the Settlement Agreement dated April
21, 1999, shall be counted towards the face value SF 6,000,000
redemption.)
Should the Company or any of its wholly owned subsidiaries decide
to sell or pledge or convey any other assets (other than sales or
pledges or conveyances of inventory or accounts receivable in the
ordinary course of business), or make any loans or advances, having an
aggregate value over any twelve (12) month period of $2,500,000 or
above, it will, prior to doing so, inform the Trustee and Paying Agent
and agree upon an additional redemption of Debentures, in cash and at
a redemption price equal to 100% of the principal amount to be
redeemed plus accrued and unpaid interest to the date fixed for
redemption. (Only transactions having a value of over $25,000 will be
counted towards the aggregate.) The amount of said redemption shall be
negotiated by the Company and the Debentureholders in good faith and
shall be based on the consideration received by the Company for assets
pledged, conveyed, or sold, or the amount of any loan. Furthermore,
the terms "loan" and "advance" as used in this Section 3.1 shall not
be deemed to include any investments listed in Section 5.9 (i) through
(v) of the Indenture.
(b) The Debenture is hereby amended by the deletion of the section
captioned "Sinking Fund" and the substitution of the following in lieu
thereof:
Dates and Amounts of Sinking Fund Payments.
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As and for a mandatory sinking fund, the Company covenants and
agrees that it shall pay to the Trustee, not less than one Business
Day on or before each of September 30, 2000, December 31, 2000, March
31, 2001 and June 30, 2001 (each a "Sinking Fund Payment Date") an
amount of money equal to 25% of the aggregate amount of Debentures
outstanding on September 30, 2000 at 100% of their principal amount
with accrued and unpaid interest thereon to the applicable Sinking
Fund Payment Date.
The cash amount of any sinking fund payment shall be subject to
reduction as provided in Section 3.6(b). The Trustee shall apply cash
sinking fund payments to the redemption of Debentures on the
applicable Sinking Fund Payment Date. In no event shall the Company's
Sinking Fund payments exceed 100% of the aggregate principal amount of
the Debentures then outstanding plus accrued and unpaid interest
thereon.
In lieu of making all or any part of any mandatory sinking fund
payment in cash, the Company may at its option deliver to the Trustee
any Debentures theretofore acquired by the Company or redeemed by the
Company after September 30, 2000 (other than pursuant to this Section
3.6) and the principal amount of such Debentures shall be credited
against the principal amount portion of the mandatory sinking fund
payment (and the interest portion shall be reduced as well, provided
that the Company shall receive credit for any such Debenture only
once).
(c) The Debenture is hereby amended by the deletion of the first paragraph
of the section captioned "Right of Debentureholders to Convert
Debenture into Common Stock" and the substitution of the following in
lieu thereof:
The Debentures may be converted by Holders, in whole or in part,
from time to time, commencing ninety days following the Initial
Closing Date and on or before the close of the business on June 29,
2001, or the date of redemption (or if that day is not a Business Day,
on the preceding Business Day), at any time on at least five days'
written notice to the Company (except that at least eight days'
written notice will be required prior to any date for early redemption
of which the Company has given notice pursuant to Section 3.2, and at
least forty-five days written notice will be required prior to any
Sinking Fund Payment Date) at the conversion prices described herein
(except that, in respect of any Debenture or Debentures, or portion
thereof, called for redemption before such date pursuant to Article
Three hereof, such right shall terminate at the close of business on
the date fixed for such redemption unless the Company shall default in
payment due upon redemption thereof). The Holders may exercise said
right to convert, subject to the terms and provisions of this Article
IV, the principal amount of any such Debenture or Debentures, or
portion thereof as hereinafter provided, into (a) such whole number of
duly authorized, validly issued, fully paid and non-assessable shares
of Common Stock (the "Debenture Conversion Shares") as determined by
dividing (y) the principal amount of Debentures to be converted by (z)
the Holder Conversion Price, (b) an amount of money payable in Swiss
Francs equal to the accrued and unpaid interest thereon to the date of
conversion, and (c) an amount of money equal to the value of the
fractional share remainder, if any, resulting from the calculation
described in clause (a) above, to be paid in Swiss Francs based on the
Holder Conversion Price per share.
(d) The Debenture is hereby amended by the deletion of the definition of
"Stock Price Factor" from the section captioned "Right of
Debentureholders to Convert Debentures into Common Stock" and the
substitution of the following in lieu thereof:
"Stock Price Factor" means a factor, to be calculated by the
Company with respect to each December 15, February 15, April 15, June
15, August 15, and October 15 (each a "Reset Date"), and to be
applicable in the two full calendar months following the Reset Date,
and equal to the average daily Nasdaq closing price per Share (or, if
the Company is listed or quoted on an exchange in the United States
other than Nasdaq, the closing price on such exchange), for the thirty
trading days immediately preceding the applicable Reset Date; provided
that in no event shall the Stock Price Factor be less than U.S. $5.00
(as adjusted, if required, as provided in Section 4.5), regardless of
the actual Stock Price Factor otherwise determined.
(e) The Debenture is hereby amended by the deletion of the section
captioned "Right of Company to Convert Debentures into Common Stock of
Company."
(f) The Debenture is hereby amended by the substitution of the words
"Indenture, as amended by the Second Supplemental Indenture" for the
word "Indenture" in the section captioned "Event of Default."
(g) The Debenture is hereby amended by the deletion of the words from "At
the option of the Company . . ." to "product so achieved by 75%" in
the section captioned "Right to Require Repurchase."
(h) The Debenture is hereby amended by the deletion of the section
captioned "Indentures and Debentures to be Construed in Accordance
with the laws of State of New York" and the substitution of the
following in lieu thereof:
The Indenture and each Debenture shall be governed by and
construed in accordance with the internal laws of the State of
Delaware, without regard to its principles of conflicts of law.
3. Except as expressly amended by the Second Supplemental Indenture, the
Indenture dated as of June 24, 1996 (the "Indenture") is hereby ratified,
confirmed and approved.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
undersigned has caused this First Allonge and Amendment to be executed by its
duly authorized officer on this ____ day of April, 1999.
PALOMAR MEDICAL TECHNOLOGIES, INC.
By: /S/ XXXXX X. XXXXXXX
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Name: Xxxxx X. Xxxxxxx
Title: Chief Executive Officer
and President
ATTEST:
By: /S/ XXXXX XXXXXXX XXXX
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Assistant Secretary
