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