Company name: SurgiLight, Inc. Ticker Symbol: SRGL
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
OCTORBER 3, 2000
REGISTRATION NO. 333- _______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
SURGILIGHT, INC.
DELAWARE 3845 35-1990562
(State or other jurisdiction (Primary Standard (IRS
of incorporation or Employer) Industrial Identification
Number) Number)
12001 SCIENCE DRIVE, SUITE 140, ORLANDO, FL 32826
(407) 482-4555
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Dr. J. T. Lin
12001 SCIENCE DRIVE, SUITE 140, ORLANDO, FL 32826
(407) 482-4555
(NAME OF AGENT FOR SERVICE)
COPIES TO:
J. Bennett Grocock
205 East Central Blvd., Suite 601, Orlando, FL 32801
(407) 835-1234
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED
SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS
REGISTRATION STATEMENT.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, check the following box. [X]
If this Form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities
Act of 1933, check the following box and list the Securities
Act registration number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule
462(c)under the Securities Act of 1933, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule
462(d)under the Securities Act of 1933, check the following box and list
the Securities Act registration statement number of
the earlier effective registration statement for the same offering. [_]
____________________________________________________________________
CALCULATION OF REGISTRATION FEE
==========================================================================
TITLE OF SECURITIES AMOUNT TO BE PROPOSED PROPOSED MAXIMUM AMOUNT
TO BE RESISTERED REGISTERED MAXIMUM AGGREGATE OF
OFFERING OFFERING REGIS.
PRICE PER PRICE FEE
SHARE (1)
--------------------------------------------------------------------------
Common Stock, 2,186,600 $7.25 $15,852,850 $4,406
$0.0001 par value
------------------------------------------------------------------------
Common Stock
Underlying Warrants (2) 528,500 $7.25 $ 3,831,625 $1,066
------------------------------------------------------------------------
Total (3) 2,715,100 $7.25 $19,684,475 $5,472
========================================================================
(1) Estimated solely for the purpose of computing the amount of
registration fee pursuant to Rule 457(c) under the Securities Act of 1933
based on the closing prices of registrant's common stock on September 25,
2000.
(2) The warrants may be exercised to purchase shares of common stock.
Pursuant to Rule 416 under the Securities Act of 1933, as amended, we are
also registering such indeterminable number of additional shares of common
stock as may be sellable upon conversion of some of these warrants pursuant
to the warrant provisions governing conversion price.
(3) Including 2,173,600 common stock registered for GEM Global Yield Fund
(GYF) and 13,000 common stock for Continental Capital Equity & Equity
(CCEC) and 508,500 warrants to GYF and 20,000 warrants to CCEC.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
____________________________________________
SUBJECT TO COMPLETION, DATED October 3, 2000
PROSPECTUS
SURGILIGHT, INC.
2,186,600 SHARES
COMMON STOCK
The selling stockholders identified in this prospectus are offering
2,186,600 shares of common stock, 528,500 of which underlie warrants to
purchase common stock which have not yet been exercised. All of these
securities are being registered for resale only. SurgiLight will not
receive any of the proceeds from the sale of shares by the selling
stockholders.
SurgiLight's common stock is traded on the over-the-counter (OTC:BB)
securities market, and quoted on the OTC Electronic Bulletin Board under
the symbol "SRGL". On August 11, 2000, the last reported sales price for
the common stock on the Electronic Bulletin Board was $8.50 per share.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 4.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is October 3, 2000.
You may rely on the information contained in this prospectus. We have not
authorized anyone to provide information different from that contained in
this prospectus. Neither the delivery of this prospectus nor sale of common
stock means that information contained in this prospectus is correct after
the date of this prospectus. This prospectus is not an offer to sell or
solicitation of an offer to buy these shares of common stock in any
circumstances under which the solicitation is unlawful.
TABLE OF CONTENTS
Page
Summary Information 4
Risk Factors 7
Use of Proceeds 17
Selling Stockholders 18
Plan of Distribution 18
Legal Proceedings 19
Directors, Executive Officers, Promoters and
Control Persons 19
Security Ownership of Certain Beneficial
Owners and Management 22
Description of Securities 23
Interest of Named Experts and Counsel 25
Disclosure of Commission Position on
Indemnification for Securities Act Liabilities 25
Description of Business 26
Management's Discussion and Analysis of
Plan of Operation 38
Description of Property 41
Certain Relationships and Related Transactions 41
Market for Common Equity and Related 43
Stockholder Matters 43
Executive Compensation 43
Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure 44
Legal Matters 44
Where You Can Find More Information 45
Consolidated Financial F-1
SUMMARY INFORMATION
To understand this offering fully, we encourage you to read the entire
prospectus carefully, including the financial statements, the notes to the
consolidated financial statements of the company appearing elsewhere in
this prospectus. References in this document to "we", "us" and "our" refer
to SurgiLight, Inc.
This prospectus contains forward-looking statements. The outcome of the
events described in these forward-looking statements is subject to risks
and actual results could differ materially. The section entitled "risk
factors", "management's discussion and analysis of financial condition and
results of operations" and "business", as other sections in this
prospectus, contains a discussion of some of the factors that could
contribute to those differences.
The Company currently has two divisions: (1) the Laser Technology and (2)
the Laser Eye Centers. The Company also receives income from two of the
divisions it spun-off of at the beginning of 2000. Advanced Marketing
Technologies, Inc. (AMTI), the Cosmetic Mobile Laser Centers and EMX, Inc.
the Thermal Infrared Technology.
In the Laser Technology division, we develop and conduct research for
lasers in the ultraviolet (UV) and infrared (IR) spectra for applications
including vision correction dermatology and microsurgery. We also conduct
clinical trials outside the U.S. for various new technologies and
applications. The Company currently operates 20 Laser Eye Centers (LEC)
internationally and owns one Laser Eye Center in Florida. The
international Laser Eye Centers provide an ongoing "per use royalty"
revenue stream for the Company and the only wholly owned center in
Plantation, Florida that provides services for over 30 physicians has
recently become very profitable.
The primary focus of research and development for the Company is in the
ophthalmic field. The IR-3000 infrared laser has been designed for
presbyopia correction and the Company is currently performing the clinical
trials in Venezuela and Argentina. The Company expects to start the
clinical trials in Japan within a few weeks and in Europe and US in a few
months. Presbyopia is a natural aging phenomena where we loose the ability
to focus properly. It has been estimated that approximately 95% of the
world population will be affected by presbyopia by the age of 46.
The Company believes its new method of LASA (Laser Sclera Ablation) using a
laser for presbyopia correction, will be less complicated, more stable, and
may provide less regression than the mechanical, non-laser methods. The
clinical results from 35 patients were presented at the Summer World
Refractive Surgery Symposium (Miami, FL, July 21-23, 2000). The Company
believes that it is the first and the only company offering LASA and this
procedure is currently limited to the international market due to the fact
that the Company does not have FDA clearance to begin the studies here in
the United States yet. The Company currently has four pending patents
relating to LASA and new IR-laser technologies. However, there can be no
assurance that the Company will be successful in protecting its proprietary
technologies or in completing its market approval in the U.S. on schedule.
In addition to the IR lasers for vision correction, the Company has
recently obtained the 510(K) approval to market its EX-308 laser for the
treatment of psoriasis. The Company is diligently working on manufacturing
Agreements for the EX-308 and expects to have these negotiations completed
within the next few weeks.
The Company has recently concluded a Joint Venture Agreement to assemble
the MicraLight Escan 2020 (formerly the Company's Scan-195 scanning excimer
laser) in the United Kingdom. The Company believes that this Agreement
should enhance its sales in countries that require the CE mark outside the
Untied States and create opportunities that were not available prior to
this Agreement. The Company is also considering expanding this assembly
Agreement to include other products that would be sold in the international
market.
In July, 2000, the United Kingdom based firm, Global Emerging Markets, Inc.
(GEM), an investment group specializing in private equity investments, has
entered into a commitment with the Company to fund capital of $3 million
under a convertible debenture and warranty the purchase Agreement. A copy
of the Agreement is attached in the Exhibits.
The Company's principal executive office is located at 12001 Science Drive,
Suite 140, Orlando, FL 32826. The telephone number at our executive office
is (407) 482-4555.
Securities offered for resale by certain stockholders of our Company
consist of:
- up to 2,186,600 shares of Common stock
- up to 528,500 shares of Common Stock underlying warrants
The Company will not receive any of the proceeds from the resale of these
securities, although if all the warrants are exercised, we could receive
up to $860,000 from the exercise of the warrants.
OTC:BB Stock Symbol: SRGL
SUMMARY OF SELECTED FINANCIAL DATA
The following selected financial data of the Company is qualified by
reference to and should be read in conjunction with the financial
statements of the Company, including the notes thereto, and Management's
Discussion and Analysis of Results of Operations and Financial Condition
included elsewhere herein. The Statement of Income Data and Balance Sheet
Data for (i) the audited year ended December 31, 1998 and 1999; (ii) the
six months ended June 30, 1999 (audited) and June 30, 2000 (unaudited);
which are derived from the financial statements included elsewhere in this
Prospectus which financial statements have been audited (for year ended
December, 1998 and 1999) or compiled (for six months ended June 30, 2000)
by Rachel L. Siu, CPA, and Parks, Tschopp, Whitcomb & Orr, independent
auditors, whose report with respect thereto appears elsewhere in this
Prospectus, (See "FINANCIAL STATEMENTS")
SELECTED STATEMENT OF OPERATION
(in 000s except per share data)
Year Ended Six Months Ended
12-31/99 12/31/98 6/30/99 6/30/00
Total Revenue $ 2,858 $ 842 $ 1,776 $ 1,434
Cost of Revenue 1,118 238 772 548
Gross Profit 1,740 604 1,004 886
Total Operating Expenses 1,670 751 976 774
Operating Income (Loss) 690 (147) 28 112
Other Income (Expenses) (3) (7) (16) -
Net Income(Loss) $ 66 $(154) $ 12 $ 112
Net Income(Loss) $ 0.01 $0.24 $ 0.001 $ 0.01
per share
Weighted Average 10,396 624 10,129 21,341
Share outstanding
SELECTED BALANCE SHEET DATA (in 000s)
12/31/99 12/31/98 6/30/00 6/30/99
----------- ----------- ---------- --------
--
Cash $ 578 $ 38 $ 1,203 $ 532
Accounts Receivable, Net 348 142 700 232
Investments 150 -
Inventory 837 758 1,193 948
Other current assets 20 - 175 -
------- ------- ------- -------
Total Current Assets 1,783 934 3,421 1,712
Total Assets $3,561 2,200 4,727 3,164
Total Current Liabilities 146 428 422 501
Long-term Liabilities 146 - 66 91
-------- ------- ------- ------
Total Liabilities 660 428 487 592
Total Stockholders' Equity 2,901 1,772 4,240 2,572
RISK FACTORS
You should carefully consider the risks and uncertainties described below
before making an investment decision. If any f the following risks
actually occur, our business, financial condition or operating results
could be materially harmed. This could cause the trading price of our
common stock to decline, and you may lose all or part of your investment.
You should not rely on these forward-looking statements words such as
"anticipate," "believe," "plan," "expect," "future," "intend," "could" and
similar expressions indicate forward-looking statements. You should not
place undue reliance on these forward-looking statements. These statements
involve a number of risks and uncertainties and our actual results could
differ materially from those anticipated in these forward-looking
statements for many reasons, including the factors described in "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business' and elsewhere
in this prospectus. We caution you not to place undue reliance on these
forward-looking statements. Such forward-looking statements speak only as
of today's date and we disclaim any obligation to update forward-looking
statements.
The Warrants offered hereby are speculative in nature, involve a high
degree of risk, and should be considered only by persons who can afford the
loss of their entire investment. In addition to other information in this
Memorandum, each prospective investor should carefully consider the
following factors in evaluating the Company and its business before
purchasing the Warrants offered hereby. This Memorandum contains forward-
looking statements that involve risks and uncertainties. The Company's
actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including those
set forth in the following risk factors and elsewhere in this Memorandum.
WE ARE UNPROFITABLE TO DATE
You might not receive a Return on your Investment. THERE IS NO ASSURANCE
THAT A UNIT HOLDER WILL REALIZE A RETURN ON HIS INVESTMENT OR THAT HE WILL
NOT LOSE HIS ENTIRE INVESTMENT IN THE COMPANY. The Company is in the
development stage and has not achieved profitable operations to date. We
had gained approximately $39,000 net profit for the six-month end of 2000.
We cannot be certain that we will be able to regain or sustain
profitability or positive operating cash flow.
There can be no assurance that the Company will ever achieve profitable
operations or generate sufficient cash flow to cover interest or principal
payments on the Notes on a timely basis, if at all. There can be no
assurance that the proceeds from this Offering will be sufficient to
achieve profitable operations or that additional capital will not be
required in excess of the proceeds of this Offering and, if required, that
the Company will be able to raise such additional capital. PROSPECTIVE
INVESTORS SHOULD READ THIS MEMORANDUM AND ALL EXHIBITS CAREFULLY AND SHOULD
CONSULT WITH THEIR OWN ATTORNEY OR BUSINESS ADVISOR PRIOR TO MAKING ANY
INVESTMENT DECISION CONCERNING THE NOTES.
WE ARE A DEVELOPMENT STAGE COMPANY
The Company is subject to all of the risks, expenses, delays, problems, and
difficulties typically encountered in the establishment of a new business
as well as those encountered in the shift from development to
commercialization of new software systems based on innovative concepts.
Throughout this development stage, the Company has generated limited
revenues from operations. As a result, the Company has a limited relevant
operating history on which an evaluation of the Company's prospects and
performance can be made.
The likelihood of the success of the Company must be considered in light of
the problems, expenses, difficulties, complications, and delays frequently
encountered in connection with the formation of a new business and the
competitive environment in which the Company operates. It is likely that
the Company will continue to incur additional losses in the future.
Accordingly, there can be no assurance that the Company will be able to
achieve increased levels of revenue in the future or that the Company's
future operations will be profitable. See "The Company," and the Company's
Financial Statements included as Exhibit "A."
WE FACE SIGNIFICANT COMPETITION
The medical laser industry, including the vision correction and the
dermatology segments, is subject to intense, increasing competition. There
can be no certainty that the Company will be able to compete successfully
against its current and future competitors. Many of the Company's
competitors have existing products and distribution systems in the
marketplace and are substantially larger, better financed, and better
known. Two of our principal competitors, Summit Technology/Autonomous
Technology and VISX have greater capital resources, market presence,
technology base, and distribution capabilities. MANY OF THE COMPANY'S
COMPETITORS HAVE RECEIVED BROADER REGULATORY APPROVALS AND ARE CURRENTLY
MARKETING COMPETING PRODUCTS WHICH MAY PREVENT US FROM MARKETING OUR
PRODUCTS ONCE WE RECEIVE REGULATORY APPROVAL. The Company has not yet
received the Good Manufacturing Practices ("GMP") clearance from the U.S.
Food and Drug Administration ("FDA") that is required for the commercial
manufacturing and sale of its medical laser systems. Based on the current
status of development efforts, the Company believes that it is reasonable
to expect such FDA clearance in 2000 for its dermatology lasers and after
2004 for its vision correction lasers. However, there can be no certainty
as to the actual receipt or the timing of receipt of such clearance. A
number of lasers manufactured by other companies have either received, or
are in the process of receiving, FDA approval for specific procedures, and,
accordingly, may have or develop a higher level of acceptance in some
markets than our lasers. In addition to laser systems of Summit Technology,
Inc., Visx, Inc. and others already approved for commercial sale in the
U.S., Nidek Co., Ltd. obtained FDA approval of its EC-5000 excimer laser
system in December 1998. Other manufacturers, including LaserSight and
Bausch & Lomb, also obtained approval during 1999-2000, giving them the
right to market their systems commercially in the U.S. The established
market presence in the U.S. of previously-approved laser systems, as well
as the entry of new competitors into the market upon receipt of regulatory
approvals, could impede the Company's ability to successfully introduce its
laser systems and have a material adverse effect on the Company's business,
financial condition and results of operations. For laser for psoriasis,
there is one other company, Photomedex, which has obtained the 510K
approval earlier this year. See "The Company - Competition."
NEW PRODUCTS OR TECHNOLOGIES COULD ERODE DEMAND FOR OUR PRODUCTS OR MAKE
THEM OBSOLETE
In addition to competing with eyeglasses, contact lenses and excimer laser
vision correction, our infrared laser systems compete or may compete with
technologies such as intra ocular lenses, corneal rings and surgical
techniques using different types of lasers.
Two products that may become competitive within the next one to three years
are intraocular lenses and corneal rings. Both of these procedures involve
lens implants that require an invasive surgical procedure, unlike a laser,
and their ultimate market acceptance is unknown at this time. To the extent
that any of these or other new technologies are perceived to be clinically
superior or economically more attractive than our laser vision correction
devices, they could erode demand for our laser products, cause a reduction
in selling prices of such products or render such products obsolete. In
addition, if one or more competing technologies achieve broader market
acceptance or render our laser procedures obsolete, it could have a
material adverse effect on our business, financial condition and results of
operations. While we do not anticipate that technical difficulties will
delay or prevent the successful development, introduction and marketing of
our laser systems, we cannot be certain that difficulties will not arise.
Unanticipated logistical issues, such as our suppliers' failure to meet
expected production goals, could delay the commercialization of our
products. As is typical in the case of new and rapidly evolving industries,
demand and market for recently introduced technology and products is
uncertain, and we cannot be certain that our laser systems or future new
products and enhancements will be accepted in the marketplace. In addition,
announcements of new products, whether for sale in the near future or at
some later date, may cause customers to defer purchasing our existing
products.
MARKET RISK
Because the sale of our products is dependent on market acceptance, the
lack of broad market acceptance of laser-based eye or skin treatments will
have an adverse effect on our business.
We believe that whether we achieve profitability and growth will depend, in
part, upon broad acceptance of LASIK and other optical laser surgical
techniques in the U.S. and other countries. We cannot be certain that these
types of procedures will be accepted by either the ophthalmologists or the
public as an alternative to existing methods of treating refractive vision
disorders. The acceptance of these procedures may be adversely affected by:
(i) the cost of the procedure; (ii) possible concerns relating to safety
and efficacy; (iii) the public's general resistance to surgery; (iv) the
effectiveness and lower cost of alternative methods of correcting
refractive vision disorders; (v) the lack of long-term follow-up data; (vi)
the possibility of unknown side effects; (vii) the lack of third-party
reimbursement for the procedures; (viii) possible future unfavorable
publicity involving patient outcomes; and (ix) the possible shortages of
ophthalmologists trained in the procedures. The failure of laser vision
correction to achieve broad market acceptance could have a material adverse
effect on our business, financial condition and results of operations.
LACK OF LIQUIDITY
We will experience liquidity problems if we are unable to collect our
receivable in a timely manner and if additional financing is not available
when we need it.
We expect that any improvements in cash flow from operations will depend
on, among other things, our ability to market, produce and sell our new
laser systems in larger quantities on a commercial basis.
Our belief regarding future working capital requirements is based on
various factors and assumptions, including the anticipated timely entry
into the international marketplace with our vision correction lasers. These
factors and assumptions are subject to certain contingencies and
uncertainties, some of which are beyond our control. If we experience
delays in the FDA clearance and entry into the U.S. market of our new laser
systems or experience less market demand for our products than we
anticipate, our liquidity could be materially and adversely affected.
Similarly, our long-term liquidity will be dependent on the successful
entrance into the U.S. market with our laser systems and our success in
collecting our receivable on a timely basis. We cannot be certain that we
will not seek additional debt or equity financing in the future to
implement our business plan or any changes thereto in response to future
developments or unanticipated contingencies. We cannot be certain that
additional financing will be available in the future to the extent required
or that, if available, it will be on acceptable terms. If we raise
additional funds by issuing equity or convertible debt securities, the
terms of the new securities could have rights, preferences and privileges
senior to those of our common stock. If we raise additional funds through
debt financing, the terms of the debt could require a substantial portion
of our cash flow from operations to be dedicated to the payment of
principal and interest and may render us more vulnerable to competitive
pressures and economic downturns.
VOLATILITY OF STOCK
The market price of our common stock may continue to experience extreme
fluctuations due to market conditions that are unrelated to our operating
performance.
The volatility of our common stock imposes a greater risk of capital losses
on stockholders as compared to less volatile stocks. In addition, such
volatility makes it difficult to ascribe a stable valuation to a
stockholder's holdings of our common stock. Factors such as announcements
of technological innovations or new products by SurgiLight or its
competitors, changes in domestic or foreign governmental regulations or
regulatory approval processes, developments or disputes relating to patent
or proprietary rights, public concern as to the safety and efficacy of the
procedures for which the laser system is used, and changes in reports and
recommendations of security analysts, have and may continue to have a
significant impact on the market price of our common stock. Moreover, the
possibility exists that the stock market, and in particular the securities
of technology companies such as SurgiLight, could experience extreme price
and volume fluctuations unrelated to operating performance.
Variations in our sales and operating results may cause our stock price to
fluctuate.
OPERATIONAL FLUCTUATIONS
Our operating results have fluctuated in the past and may continue to
fluctuate in the future as a result of a variety of factors, many of which
are outside of our control. For example, we have historically operated with
little or no backlog because our products are generally shipped as orders
are received, and a significant portion of orders for a particular quarter
have been received and shipped near the end of the quarter.
As a result, our operating results for any quarter often depend on orders
received and laser systems shipped late in that quarter.
Other factors that may cause our operating results to fluctuate include:
timing of regulatory approvals and the introduction of new products;
reductions, cancellations or fulfillment of major orders; the addition or
loss of significant customers; our relative mix of business; changes in
pricing by us or our competitors; changes in personnel and employee
utilization rates; costs related to expansion of our business; increased
competition; and budget decisions by our customers. As a result of these
fluctuations, we believe that period-to-period comparisons of our operating
results cannot necessarily be relied upon as indicators of future
performance. In some quarters our operating results may fall below the
expectations of securities analysts and investors due to any of the factors
described above. In such event, the trading price of our common stock would
likely decline.
EFFECT OF CORPORATE MEASURES
Certain anti-takeover measures may have an adverse effect on our stock
price and may also discourage takeovers that might be beneficial to
stockholders.
Certain provisions of our Certificates of Incorporation, by-laws and
Delaware law could delay or frustrate the removal of incumbent directors,
discourage potential acquisition proposals and delay, defer or prevent a
change in control of SurgiLight, even if such events could be beneficial,
in the short-term, to the interests of our stockholders. For example, our
Certificates of Incorporation allows us to issue preferred stock with
rights senior to those of the common stock without stockholder action. We
also are subject to provisions of Delaware corporation law that prohibit a
publicly-held Delaware corporation from engaging in a broad range of
business combinations with a person who, together with affiliates and
associates, owns 15% or more of the corporation's common stock (an
"interested stockholder") for three years after the person became an
interested stockholder, unless the business combination is approved in a
prescribed manner.
THE LOSS OF KEY PERSONNEL COULD ADVERSELY AFFECT OUR BUSINESS
Our ability to maintain our competitive position depends in part upon the
continued contributions of our executive officers and other key employees,
especially Dr. J.T. Lin, our President and Chief Executive Officer and
Timothy J. Shea our Senior Vice President and Chief Operating Officer. A
loss of one or more such officers or key employees could have an adverse
effect on our business. We do not carry "key man" insurance on Dr. Lin
or Mr. Shea or any other officers or key employees. As we continue the
clinical development of our lasers and other products and prepare for
regulatory approvals and other commercialization activities, we will need
to continue to implement and expand our operational, financial and
management resources and controls. While to date we haven't experienced
problems recruiting or retaining the personnel necessary to implement such
plans, we cannot be certain that problems won't arise in the future. If we
fail to attract and retain qualified individuals for necessary positions,
and if we are unable to effectively manage growth in our domestic and
international operations, these could have an adverse effect on our
business, financial condition and results of operations.
GOVERNMENT REGULATIONS AND REGULATORY DECISIONS MAY RESTRICT OR DELAY THE
MANUFACTURE AND MARKETING OF OUR PRODUCTS
Our laser products are subject to strict governmental regulations which
materially affect our ability to manufacture and market these products and
directly impact our overall prospects. All laser devices marketed in
interstate commerce are subject to the laser regulations imposed by the
Radiation Control for Health and Safety Act, as administered by the FDA.
The regulations mandate design and performance standards, labeling and
reporting requirements, and submission conditions in advance of marketing
for all medical laser products. Our ophthalmic laser systems produced for
medical use require Pre-Market Approval ("PMA") by the FDA before we can
ship our laser systems for use in the U.S. Each separate medical device
requires a separate FDA submission, and specific protocols have to be
submitted to the FDA for each claim made for each medical device. If and
when our ophthalmic laser systems receive PMA by the FDA, we will be
required to obtain GMP clearance with respect to our manufacturing
facilities, the final step of the approval process, which is not expected
until 2004. These regulations impose certain procedural and documentation
requirements with respect to our manufacturing and quality assurance
activities. Our facilities will be subject to inspections by the FDA, and
if any material noncompliance with GMP guidelines is noted during facility
inspections, the marketing of our laser products may be adversely affected.
In addition, if any of our suppliers of significant components or sub-
assemblies cannot meet our specification requirements, we could be delayed
in producing commercial systems for the U.S. market. Additionally, product
and procedure labeling and all forms of promotional activities are subject
to examination by the FDA, and current FDA enforcement policy prohibits the
marketing of approved medical devices for unapproved uses. Noncompliance
with these requirements may result in warning letters, fines, injunctions,
recall or seizure of products, suspension of manufacturing, denial or
withdrawal of PMAs, and criminal prosecution. Laser products marketed in
foreign countries are often subject to local laws governing health product
development processes, which may impose additional costs for overseas
product development. In particular, all member countries of the European
Economic Union ("EU") require CE Mark certification of compliance with the
EU medical directives as the standard for regulatory approval for sale of
laser systems in EU member countries. We cannot determine the costs or time
it will take to complete the approval process and the related clinical
testing for our medical laser products. Future legislative or
administrative requirements, in the U.S., or elsewhere, may adversely
affect our ability to obtain or retain regulatory approval for our laser
products. Failure to obtain required approvals on a timely basis could have
an adverse effect on our business, financial condition and results of
operations.
PATENT INFRINGEMENT ALLEGATIONS MAY IMPAIR OUR ABILITY TO MANUFACTURE AND
MARKET OUR PRODUCTS
There are a number of U.S. and foreign patents covering methods and the
apparatus for performing corneal surgery that we do not own or have the
right to use. If we were found to infringe a patent in a particular market,
we and our customers may be enjoined from making, using and selling that
product in the market and be liable for damages for any past infringement
of such rights. In order to continue using such rights, we would be
required to obtain a license, which may require us to make royalty, per
procedure or other fee payments. We cannot be certain if we or our
customers will be successful in securing licenses, or that if we obtain
licenses, such licenses will be on acceptable terms. Alternatively, we
might be required to redesign the infringing aspects of these products. Any
redesign efforts that we undertake could be expensive and might require
regulatory review. Furthermore, the redesign efforts could delay the
reintroduction of these products into certain markets, or may be so
significant as to be impractical. If redesign efforts were impractical, we
could be prevented from manufacturing and selling the infringing products,
which would have a material adverse effect on our business, financial and
results of operations. On March 15, 2000 the Company was notified that
Presby Corp of Dallas, Texas had filed suit in the United States Court for
the Middle District of Florida Orlando Division. Presby Corp and its
parent company RAS Holding Corp own multiple patents directed to methods,
devices and systems for the treatment of presbyopia and allege that the
Company is violating their patents. On June 20, 2000, the Company was
notified that Photomedex, Inc. of California had filed a lawsuit against
the Company in Orange County, Florida for misappropriation and use of trade
secrets and other confidential information. The Company believes that there
is no basis for either of these suits and that these allegations are
without merit and completely false. However, there can be no assurance that
the Company will successfully defend these lawsuits or may have to
negotiate a licensing fee payable to Presby Corp or Photomedex. The Company
has hired a legal counsel and will start to negotiate and investigate the
validity of the patents claimed by Presby Corp and the allegations involved
with the lawsuit from Photomedex.
WE ARE SUBJECT TO CERTAIN RISKS ASSOCIATED WITH OUR INTERNATIONAL SALES
Our international sales accounted for approximately 30% of our total
revenues during the year ended December 31, 1999. We expect sales to
international accounts will continue to represent a comparable percentage
of our total sales unless and until our systems are cleared for commercial
distribution in the U.S., or with respect to those products that do not
require regulatory approval, otherwise enter the U.S. market. The majority
of our international sales for the twelve months ended December 31, 1999
were to customers in Venezuela, China and Korea. Our business, financial
condition and international results of operations may be adversely affected
by present economic instability in certain Asian and South American
countries, future economic instability in other countries in which we have
sold or may sell, increases in duty rates, difficulties in obtaining export
licenses, ability to maintain or increase prices, and competition. In
addition, international sales may be limited or disrupted by: The
imposition of government controls; Export license requirements; Political
instability; Trade restrictions; Changes in tariffs; Difficulties in
staffing and coordinating communications among and managing international
operations. Because all of our sales have been denominated in U.S. dollars,
we do not have exposure to typical foreign currency fluctuation risk.
However, due to our significant export sales, we are subject to currency
exchange rate fluctuations in the U.S. dollar, which could increase the
effective price in local currencies of our products. This could in turn
result in reduced sales, longer payment cycles and greater difficulty in
collecting receivable.
INADEQUACY OR UNAVAILABILITY OF INSURANCE MAY EXPOSE US TO SUBSTANTIAL
PRODUCT LIABILITY CLAIMS
Our business exposes us to potential product liability risks that are
inherent in the development, testing, manufacture, marketing and sale of
medical devices for human use. We have agreed in the past, and we will
likely agree in the future, to indemnify certain medical institutions and
personnel who conduct and participate in our clinical studies. While we
maintain product liability insurance, we cannot be certain that any such
liability will be covered by our insurance or that damages will not exceed
the limits of our coverage. Even if a claim is covered by insurance, the
costs of defending a product liability, malpractice, negligence or other
action, and the assessment of damages in excess of insurance coverage,
could have a material adverse effect on our business, financial condition
and results of operations. Further, product liability insurance may not
continue to be available, either at existing or increased levels of
coverage, on commercially reasonable terms.
OUR SUPPLY OF CERTAIN CRITICAL COMPONENTS AND SYSTEMS MAY BE INTERRUPTED
BECAUSE OF RELIANCE ON A LIMITED NUMBER OF SUPPLIERS
We currently purchase certain components used in the production; operation
and maintenance of its laser systems and related products from a limited
number of suppliers and certain key components are provided by a single
vendor. Any interruption in the supply of critical laser components could
have a material adverse effect on our business, financial condition and
results of operations. If any of our key suppliers cease providing us with
products of acceptable quality and quantity in a timely fashion, we would
have to locate and contract with a substitute supplier. We do not know if
such substitute suppliers could be located and qualified in a timely manner
or could provide required products on commercially reasonable terms.
PAST AND POSSIBLE FUTURE ACQUISITIONS THAT ARE NOT SUCCESSFULLY INTEGRATED
WITH OUR EXISTING OPERATIONS MAY ADVERSELY OUR BUSINESS
We have made two significant acquisitions since 1999, including EMX and
Advanced Marketing Technologies, Inc. (the mobile Cosmetic Laser Centers),
both of which were spun off in January 2000, to focus our business on
medical laser systems. Although we are currently focusing on our existing
operations, we may in the future selectively pursue strategic acquisitions
of, investments in, or enter into joint ventures or other strategic
alliances with, companies whose business or technology complement our
business. We may not be able to identify suitable candidates to acquire or
enter into joint ventures or other arrangements with or we may not be able
to obtain financing on satisfactory terms for such activities. In addition,
with respect to our recent acquisitions as well as any future transactions,
we could have difficulty assimilating the personnel, technology and
operations of the acquired company, which would prevent us from realizing
expected synergies, and may incur unanticipated liabilities and
contingencies. This could disrupt our ongoing business and distract our
management and other resources. We cannot be certain that we would succeed
in overcoming these risks or any other problems in connection with any
acquisitions we may make or joint ventures or arrangements we may enter
into.
AMORTIZATION AND CHARGES RELATING TO OUR SIGNIFICANT INTANGIBLE ASSETS
COULD ADVERSELY AFFECT OUR STOCK PRICE AND REPORTED NET INCOME OR LOSS
Goodwill is an intangible asset that represents the difference between the
total purchase price of acquisitions and the amount of such purchase price
allocated to the fair value of the net assets acquired. Goodwill and other
intangible assets are amortized over a period of time, with the amount
amortized in a particular period constituting a non-cash expense that
reduces our net income or increases our net loss. A reduction in net income
resulting from the amortization of goodwill and other intangible assets may
have an adverse impact upon the market price of our common stock. In
addition, in the event of a sale or liquidation of SurgiLight or our
assets, we cannot be certain that the value of such intangible assets would
be recovered. In accordance with SFAS 121, we review intangible assets for
impairment whenever events or changes in circumstances, including a history
of operating or cash flow losses, indicate that the carrying amount of an
asset may not be recoverable. If we determine that an intangible asset is
impaired, a non-cash impairment charge would be recognized.
WE MAY EXPERIENCE RISKS IN TRYING TO GROW THROUGH ACQUISITIONS
A significant element of the Company's growth strategy and the use of a
portion of the proceeds from this Offering involve the expansion of our
laser products systems and markets through the acquisition of other
companies which offer certain specialized laser products or components.
Although we are currently exploring a possible acquisition or merger with
several companies, there can be no assurance that any of these
opportunities will prove feasible. In addition, there can be no assurance
that we will be successful in identifying other appropriate acquisition
candidates, can acquire such firms at reasonable prices, can finance such
acquisitions, or will be successful in integrating such acquired firms, if
any, or their product lines, into its existing operations on a profitable
basis.
Acquisitions involve a number of risks which could adversely affect the
Company's operating results including, among others, diverting management
attention, payments for goodwill, and the potential loss of key employees
of the acquired companies. See "Use of Proceeds" and "The Company
Acquisitions."
WE MAY HAVE LIMITED INTELLECTUAL PROPERTY PROTECTION
Our ability to compete effectively depends in part on our ability to
maintain the proprietary aspects of our laser products. In this regard, we
rely on a combination of patents, copyright, trade secret, and trademark
law, together with non-disclosure agreements with our employees and
confidentiality agreements with third parties, to protect our proprietary
rights. Despite these precautions, it may be possible for its existing or
new competitors to copy aspects of our products and their future
enhancements and to obtain and use information that we regard as
proprietary. Moreover, the laws of some foreign countries do not protect
our proprietary rights to the same extent as do the laws of the United
States. We cannot be certain that others will not independently develop
substantially equivalent or superseding laser products directed toward our
targeted markets or that equivalent products will not be marketed in
competition with our products thereby substantially reducing the value of
our proprietary rights. See "The Company - Proprietary Rights" and
"Management - Employment Agreements."
OUR MANAGEMENT WILL HAVE BROAD DISCRETION IN THE USE OF THE PROCEEDS OF
THIS OFFERING
The proceeds of the sale of the Warrants offered hereby are allocated only
generally to working capital. Management of the Company has broad
discretion to adjust the application and allocation of the net proceeds of
this Offering in order to address changed circumstances and opportunities.
As a result of the foregoing, the success of the Company will be
substantially dependent upon the discretion and judgment of Management with
respect to the application and allocation of the net proceeds hereof. See
"Use of Proceeds."
WE HAVE ARBITRARILY DETERMINED THE OFFERING PRICE OF THE WARRANTS
The offering price of the Warrants has been determined arbitrarily by the
Company and does not necessarily bear any relationship to the Company's
assets, net worth, results of operations, or any established criteria of
value. The offering price set forth on the cover page of this Memorandum
should not be considered an indication of the actual value of the
securities offered hereby.
WE DON'T EXPECT TO PAY ANY DIVIDENDS
To date, the Company has paid no cash dividends or made any stockholder
distributions. The payment of dividends on the Company's Common Stock is
within the discretion of the Board of Directors and will depend upon the
Company's earnings, its capital requirements, financial condition, and
other relevant factors. For the foreseeable future, however, it is not
anticipated that the Company will pay any dividends. Currently, the
Company plans to retain any earnings it receives for the continued
development of its business operations.
SURGILIGHT IS PRESENTLY CONTROLLED BY A SMALL GROUP OF SHAREHOLDERS
On the closing of this Offering, Dr. J.T. Lin, the founder, Director,
President, and Chief Executive Officer of the Company will beneficially own
approximately 70% of the outstanding capital stock of the Company. As a
result, following the closing of the Offering, he will continue to be in a
position to control the Company, elect all of the Company's directors,
appoint officers, control the policies and operations of the Company, and
generally direct the affairs of the Company. See "Management," "Principal
Shareholders," "Description of the Securities."
POTENTIAL LIABILITY CLAIM
We maintain corporate liability insurance, including products liability,
auto, fire, and extended coverage, with limits it considers reasonable and
prudent, as well as worker's compensation insurance with limits prescribed
by law or state regulation. There can be no assurance however, that we
will not be subject to a claim that would exceed our insurance coverage or
to a loss that is not covered. In addition, there can be no assurance that
adequate liability insurance will be available in the future or available
at premiums which are economically feasible. See "The Company -
Insurance."
WE WILL NEED ADDITIONAL CAPITAL
We believe, based on currently-proposed plans and assumptions relating to
our operations, that the net proceeds from this Offering, together with
existing capital and anticipated funds from operations, should be
sufficient to fund our current operations and other capital needs for the
next 12 months. However, in the event that our plans change or our
assumptions and estimates change or prove to be inaccurate, we could be
required to seek additional financing in order to sustain operations or
achieve future expansion. We have made no arrangements to obtain future
additional financing, and there can be no assurance that such additional
funds will be available or that if available, such additional funds will be
on terms acceptable to us. See "Use of Proceeds."
THERE HAS BEEN NO PRIOR MARKET FOR THE NOTES OR WARRANTS
No prior market has existed for the securities being offered hereby, and no
assurance can be given that a market will develop subsequent to this
offering. Prospective investors must be fully aware of the long-term
nature of an investment in the Company. The Warrants have been offered and
sold by reason of an exemptions afforded by Section 4(2) of the Securities
Act of 1933, as amended (the "Act") and Rule 506 under Regulation D
promulgated by the Securities and Exchange Commission under the Act, and
similar provisions under state securities laws. The Warrants are not, and
are never intended to be, registered under the Act and applicable state
securities laws. The availability of an exemption from registration for
resale depends, in part, upon the investment intent of the investor, and
such intention further restricts the transferability of the Warrants. The
Company has no obligation to register the Warrants, the Notes, or the
Warrants. Accordingly, purchasers of Warrants will need to bear the
economic risk of the investment for an indefinite period of time.
Ownership of the Warrants must be considered a long-term, non-liquid
investment. Prospective investors will be required to represent in writing
that they are purchasing the Warrants for their own account, for long-term
investment only, and not with a view towards resale, division, or
distribution.
USE OF PROCEEDS
We will not receive any proceeds from the sale of common stock by the
selling stockholders except for the exercise price of the warrants. If the
warrants are exercised in full, we will receive approximately $860,000,
although we can neither assure nor predict that any or all or the warrants
will be exercised. We intend to use any proceeds from the exercise of the
warrants for general corporate purposes including 10% for R&D, 15% for
clinical trials and 75% for working capital.
DIVIDENDS POLICY
To date, the Company has paid no cash dividends or made any stockholder
distributions. The payment of dividends on the Company's Common Stock is
within the discretion of the Board of Directors and will depend upon the
Company's earnings, its capital requirements, financial condition, and
other relevant factors. For the foreseeable future, however, it is not
anticipated that the Company will pay any dividends. Currently, the
Company plans to retain any earnings it receives for the continued
development of its business operations.
SELLING STOCKHOLDERS
In January, 2000 the Company signed a 12-month consultant agreement with
Continental Capital & Equity Corporation (CCEC). Pursuant to this
Agreement, CCEC will be compensated with 26,000 shares of common stock and
40,000 shares of stock option. The Company agrees to register 50% of the
amounts specified in the Agreement. A copy of the Agreement is attached in
the Exhibit.
In July, 2000, the United Kingdom based firm, Global Emerging Markets, Inc.
(GEM), an investment group specializing in private equity investments,
entered into a commitment with the Company to fund capital of $3 million
under a convertible debenture and warranty purchase Agreement. A copy of
the Agreement is attached in the Exhibits.
The common stock offered hereby consists of:
(a) 13,000 shares to be issued to Continental Capital and Equity Corp.
(CCEC) at a par value of 0.0001 per share. In addition, 20,000 shares of
warrants at $5.00 per shares granted.
(b) 543,400 shares issuable upon the conversion of the 3,000,000 in
aggregate principal amount of convertible debentures to be issued to GEM
Global Yield Fund Limited by SurgiLight, Inc., based on a conversion price
calculated as of June 30, 2000. The number of these shares registered as
required by the Registration Rights Agreement is 2,173,600, which
represents approximately 4 times the amount of shares that will be issuable
upon cover of the debenture. The difference in these two calculations
(1,630,200 shares) is the difference between the total shares we are
contractually required to register under the terms of the registration
rights agreement and the total shares that would actually be available for
sale if the debentures were converted. The underlying warrants are 25% of
the common shares at a price defined by 100% of the average closing bid
price for the five trading days immediately prior to the closing date.
The conversion price for the debenture in effect on any conversion date
shall be the lesser of (X) $0.8125 or 125% of the average closing bid price
for the five trading days immediately prior to the closing date, or (Y)
100% of the average of the three lowest closing bid prices during the
thirty day period immediately preceding the conversion date.
The following table provides, as of September 29, 2000 information
regarding the beneficial ownership of our common stock held by each of the
selling shareholders; their shares owned prior to this offering; the total
number of shares that are to be offered for each based on a conversion of
their convertible debentures; the total number of shares that will be owned
by each upon completion of the offering.
The following table sets forth information as of September 29, 2000 about
GEM and CCEC and the number of shares of common stock beneficially owned by
them, all of which are offered by this prospectus.
Shares Being Name of
Selling Shares Owned Prior Registered inStockholder
to This Offering This Offering
(Percentages)(1)
--------------- ------------------ ------------------------
GEM Global Yield
Fund Limited
Common Stock 0 2,173,600 (9%)
Warrant 0 508,000 (2.1%)
Continental Capital
& Equity Corp.
Common Stock 0 13,000 (*)
Warrant 0 20,000 (*)
______________
* Less than 1%
(1) Assumes that none of the selling shareholders sells shares of common
stock not being offered hereunder or purchases additional shares of common
stock or exercise their warrants. Based on 21,490,000 shares of common
stock issued and outstanding before this offering and 24,205,100 shares
after this offering.
None of the selling shareholders have had a material relationship with
SurgiLight, Inc., other than as a shareholder as noted above at any time
within the past three years.
PLAN OF DISTRIBUTION
The selling stockholders may offer their shares at various times in one or
more of the following transactions
(1) in the over-the-counter market
(2) in any exchange on which the shares may hereafter be listed;
(3) in negotiated transactions other than on such exchanges;
(4) by pledge to secure debts and other obligations;
(5) in connection with the writing of non-traded and exchange-
traded call options, in hedge transactions, in covering
previously established short positions and in settlement of
other transactions in standardized or over-the-counter options;
or
(6) in a combination of any of the above transactions.
The selling stockholders may sell their shares at market prices prevailing
at the time of sale, at prices related to such prevailing market prices,
at negotiated prices or at fixed prices. The selling stockholders
may use broker-dealers to sell their shares. The broker-dealers will
either receive discounts or commissions from the selling stockholders,
or they will receive commissions from purchasers of shares. In
addition, some of the Selling Shareholders may be eligible and may elect to
sell some or all of their shares pursuant to additional exemptions to the
registration requirements of the Securities Act, including but not
limited to Rule 144 promulgated under the Securities Act, rather than
pursuant to this Registration Statement. Under certain circumstances the
selling stockholders and any broker-dealers that participate in the
distribution may be deemed to be "underwriters" within the meaning of the
Securities Act. Any commissions received by such broker-dealers and any
profits realized on the resale of shares by them may be considered
underwriting discounts and commissions under the Securities Act. The
selling stockholders may agree to indemnify such broker-dealers against
certain liabilities, including liabilities under the Securities Act.
In addition, The Company has agreed to indemnify the selling stockholders
with respect to the shares offered hereby against certain liabilities,
including certain liabilities under the Securities Act. Under the rules and
regulations of the Exchange Act, any person engaged in the distribution of
the resale of shares may not simultaneously engage in market making
activities with respect to The Company's common stock for a period of two
business days prior to the commencement of such distribution. The selling
stockholders will also be subject to applicable provisions of the Exchange
Act and regulations under the Exchange Act which may limit the timing of
purchases and sales of shares of The Company's common stock by the selling
stockholders. The selling stockholders will pay all commissions, transfer
taxes, and other expenses associated with the sale of securities by them.
The shares offered hereby are being registered pursuant to contractual
obligations of The Company, and The Company has paid the expenses of the
preparation of this prospectus. We have not made any underwriting
arrangements with respect to the sale of shares offered hereby.
LEGAL PROCEEDINGS
RAS Holding Corp. ("RAS") and Presby Corp. ("Presby") filed a lawsuit on
March 16, 2000, against SurgiLight, Inc. in the United States District
Court for the Middle District of Florida for patent infringement. RAS and
Presby are alleging that SurgiLight is using laser technology that
infringes certain patents held by RAS and Presby for the treatment of
presbyopia. RAS and Presby are seeking to enjoin SurgiLight's continued
use of the allegedly infringing technology and are seeking to recover
damages, including punitive damages, for the alleged infringement.
SurgiLight has denied the allegations of patent infringement and is
continuing to defend the ongoing litigation.
Laser Photonics, Inc., Laser Analytics, Inc, and Acculase, Inc.
(collectively "plaintiffs") filed a lawsuit in June of 2000 against
SurgiLight and its Chief Operation Officer, Tim Shea ("Shea"), alleging
misappropriation of trade secrets, breach of a confidentiality agreement
and breach of fiduciary duty. The lawsuit is filed in Circuit Court in
Orlando, Orange County, Florida. The plaintiffs are alleging that Shea,
who was a former employee, misappropriated trade secrets, disclosed them to
SurgiLight and that SurgiLight used the information to unfairly compete
with Plaintiff is seeking damages and to enjoin SurgiLight's alleged use of
the trade secrets. SurgiLight has moved to dismiss plaintiffs' complaint
and denies the allegations of the complaint. SurgiLight intends to
vigorously defend against allegations of the lawsuit.
While SurgiLight denies the allegations of the lawsuits and does not
believe that is a basis for either lawsuit, there can be no assurance that
SurgiLight will prevail in the lawsuits. SurgiLight will continue to
commit resources to the defense of these lawsuits.
The Company has recently signed a Purchase and Sale Agreement with Premier
Laser Systems, Inc., which is subject to a binding process in a Bankruptcy.
Court.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The term for Directors is 12 month and re-elected in each Annual Meeting.
Officers and key employees have a 2 to 5 year term and a 5-year non-
competing agreement.
Name Age Position
-------- ----- -----------------------------------
J.T. Lin, Ph.D. 52 President and CEO, Chairman of the
Board
Timothy J. Shea. 43 Senior VP, Chief Operating Officer,
Secretary of the Board
Rachel L. Siu, CPA 52 Chief Financial Officer
Ming-yi Hwang, Ph.D. 45 Vice President and Director of R&D
Richard Reffner 54 Vice President Laser Centers, Director
Robert Clements, Esq. 40 Director
J.S. Yuan, Ph.D. 43 Director
Lee Chow, Ph.D. 50 Director
Richard Ajayi, Ph.D. 52 Director
Raymond Gailitis, MD. 40 Medical Director, Plantation Center
J. T. Lin, Ph.D. Dr. Lin is the founder of the Company and has been the
Chairman of the Board, President and CEO of the Company since it was
founded in 1998. Dr. Lin was also the co-founder of LaserSight, Inc.
(NASDAQ:LASE) and served as its Chairman, President and CEO (1991-94). He
is a US citizen and obtained a Ph.D. in Chemical Physics from the
University of Rochester, NY in 1981. He became the Director of Research and
Development for Quantum Technology for the development of nonlinear
crystals before he joined the Center for Research in Electro-optics and
Lasers (CREOL), University of Central Florida as an Associate Professor
(1987-91). He was the inventor of the world's most compact refractive
excimer laser, the "Mini-Excimer" and a pioneer of the scanning laser (US
patented) which now has been used in more than 400 hospitals worldwide. He
has more than 25 years experience in laser technologies and 12 years
experience in marketing in Asia and Latin America. Dr. Lin has published
more than 70 scientific papers and book chapters and has 3 US patents
granted and many patents pending. He is a member of AAO, ASCRS, ISRS, ASD
and Honor Member of Who's Who of the Leading American Executives (1993).
Dr. Lin was elected as the 1997 Model of Overseas Chinese Young
Entrepreneurs, the highest honor for overseas Chinese awarded by President
Lee of R.O.C. Taiwan. Dr. Lin has been a Board Director of Color Image,
Inc. (OTC:BB) since June, 2000.
Timothy Shea. Mr. Shea was appointed to the Board of Directors in August,
1999. He was hired as the Senior Vice President and Chief Operating
Officer (COO) and was appointed as Secretary of the Board of Directors in
January 2000. Prior to joining SurgiLight, he was a member of the Board of
Directors and President of the Medical and Research & Development Divisions
of Laser Analytics, Inc. From 1995 to 1998 he was the Corporate Director
of Business Development at Schwartz Electro-Optics, Inc. (SEO). Prior to
1997, Mr. Shea was the Senior Director of the Solid State Laser Division at
SEO and was responsible for product design and development, all FDA
submissions, implementation of Good Manufacturing Practices (GMP), all
division operations, sales and marketing activities, clinical support and
authored the first Standard Operating Procedure (SOP) manual. He was
Director of Clinical Design and Development at SurgiLase (1986-89 and 1993-
95), at Laser Photonics (1989-93). From 1983 to 1986 he was a Senior
Director and Principal Partner of InfraMed, Inc. From 1981 to 1983 he was
a Clinical Design Engineer at Advanced Biomedical Instruments, Inc. He owns
one U.S. patent on a medical device, he has consulted on many more devices
that were patented, and has more than 15 publications in the area of
medical laser research and application in medicine. Mr. Shea has traveled
worldwide teaching and lecturing on the use of lasers in medicine, laser
physics, and conducting research. Mr. Shea has over 18 years experience in
medical systems and their clinical approvals. He is a member of the
American Society of Lasers in Medicine and Surgery (ASLMS), Florida
Electro-Optic Industry Association (FEOIA) and the International Society
for Optical Engineering and Florida Electro Optic Association.
Rachel L. Siu, CPA. Mrs. Siu became the CFO for the Company in May, 2000.
She received her B.A. in Accounting from National Taiwan University, Master
of Business Administration from University of Central Florida and has been
a Certified Public Accountant since 1983. In 1991, she prepared the
financial statement for LaserSight (a public company on Nasdaq) for the
audited report. She has been very active in community services, was
President of Asian Pacific American Heritage Council (APAHC) in 1987;
Chairperson, of Asian American Advisory Board to Mayor Frederick, City of
Orlando in 1988; President of Chinese American Association of Central
Florida (CAACF) in 1992; President of Rotary Club of UCF/Research Park in
1995; has been a member of President's Minority Advisory Board -UCF since
1995; has been President of Asian American Heritage Council since 1999.
Rachel L. Siu, CPA has received the following awards since 1998: Business
Person of the Year; Rotary Club of Goldenrod, Goldenrod Community
Outstanding Member Award, Goldenrod Historical Society and Paul Harris
Fellow Award by Rotary Club of UCF/Research Park
Ming-yi Hwang, Ph.D. Dr. Hwang, has served as the Director of Research and
Development for the Company since May, 1998. He obtained his Ph.D. in
Electrical Engineering from the Univ. of Central Florida in 1992. He has
more than 15 years experience in laser systems (hardware and software).
Previously he was the Research and Development Director of LaserSight
(1992-95) and PDI (1995-98). He was one of the key people involved in the
development of the Mini-Excimer, Compak-300, LaserScan-2000 for LaserSight.
At SurgiLight he provides technical support for SurgiLight's Laser Centers
and also develops new IR lasers using the Company's proprietary
technologies. Dr. Hwang and Dr. J.T. Lin designed the world's first
software that can perform presbyopia reversal using the Company's lasers.
In addition to new product development, he is also responsible for all
software and system control of the Company's products.
Richard Reffner. Mr. Reffner joined the Company as the Clinic Director of
the Plantation Vision Center and as the Vice President of the Laser Centers
in September, 1998. He is responsible for the day-to-day operation of the
Plantation Center, FL. Clinic. His duties include laser room operation and
maintenance, to oversee of clinical operations, management of staff,
develop and implementation of surgical training programs for physicians.
Prior to his position with the Company, he was the Clinic director of LCA-
Vision, Plantation, FL (April-September, 1998); Assistant Administrator at
Tampa Eye Clinic (1997-98); Director of Technical Service at Hawaiian Eye
Center (1985-1997); The ophthalmic Technician at Mary Imogene Bassett
Hospital (1975 -1985); Refractionist at Donald L. Praeger, MD, PC (1973 -
1976); Physicians' Specialist at Mary Imogene Hospital (1971-73).
Robert G. Clements, Attorney. Mr. Clements was appointed as a Director in
October,1999. He obtained his BS degree Business and a Doctorate and Master
degree in Business Administration from Samford University. He also
obtained his Diploma in Advanced International Legal Studies from the
McGeorge School of Law in Austria. Mr. Clements is currently an attorney
at law and a member of Florida and District of Columbia Bar Association.
J. S. Yuan, Ph.D. Dr. Yuan was appointed as a Director in October, 1999.
Prof. Yuan is currently an Associate Professor of the Univ. of Central
Florida. He obtained his Ph.D. in Electrical Engineering from the
University of Florida in 1988 and he was an employee of Texas Instruments
(1988-91) and Visiting Researcher of Motorola (1991). He has been
consulting with many high-tech companies including National Semiconductor
Corp., Healthydyne Tech, Grasby Infrared, Harris Semiconductors and NEC.
Dr. Yuan was awarded as Graduate Teaching and Distinguished Researcher by
UCF and listed in Who's Who in American Education, Who's Who in Science and
Engineering. Dr. Yuan has more than 100 publications in semiconductor
device and modeling, digital and analog IC design.
Lee Chow, Ph.D. Dr. Chow was appointed as a Director in March, 2000 and is
currently a Professor at Physics Department, University of Central Florida
(UCF). He obtained his Ph.D. degree in Physics from Clark University in
1981. He was also faculty at the University of North Carolina prior to
becoming a faculty member at the University of Central Florida. Dr. Chow
has been the Technical Member of American Physical Society, Material
Research Society, and American Association for the Advancement of Science.
He served as the President of Chinese-American Association of Central
Florida (1985-1986), Chinese-American Scholar Association of Florida (1997-
1998). His had received many research awards including the Teaching
Incentive Award (1996), NSF Grant(1991-93), Florida High Tech Research
Council Grant (1989-91) and I-4 Florida Research Council Grant (1997-2000).
He is serving in the Committee of Radiation and Safety, College Personal
and Promotion (UCF). Dr. Chow also served as Technical Consultant for KEI,
Inc., Quantum Nuclearnic, Inc. and a Director of LaserSight (1991-92). Dr.
Chow has published more than 50 papers in professional refereed research
journals.
Richard Ajayi, Ph.D. Dr. Ajayi joined the Company as a Board Member in May
of 2000 and is currently an Associate Professor of Finance at the
University of Central Florida. He obtained his Ph.D. in Business
Administration while majoring in Finance and International Business from
Temple University in 1989. Dr. Ajayi is a founding member of the African
Finance and Economics Association and served as the association's program
manager from 1990-1995 and President from 1996-1998. Dr. Ajayi is
currently serving as the Chairperson of the SurgiLight Audit Committee.
Raymond Gailitis, M.D. Dr. Gailitis, joined the Company as Medical Director
of the Plantation Vision Center in September, 1998. Dr. Gailitis received
his M.D. from Northwestern University followed by internship and residency
at Northwestern University Medical Center and University of Minnesota
Hospital and Clinics of Department of Ophthalmology, Fellowship at
Department of Ophthalmology of Emory University. He has been Chief of
Ophthalmology at LBJ Tropical Medical Center, Director of Corneal and
Refractive Surgery at Eye Care and Surgery Center, Medical Director of New
Vision Refractive Surgery Center. Dr. Gailitis is a Board Certified
Ophthalmologist. He is a member of ASCRS, AAO, ISRS. He has been elected
the President of Broward County Ophthalmologic Society. Dr. Gailitis has
more than 16 important publications in the ophthalmology field.
There is no family relationship among Directors or Officers. None of the
officers, directors or person has filed for bankruptcy, been convicted of
crime, subject to any court order restricting his involvement in business.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the company
with respect to beneficial ownership of the Company's Common Stock as of
August 11, 2000. Regarding the beneficial ownership of the Company's Common
Stock the table lists: (i) each stockholder known by the Company to be the
beneficial owner of more than five percent (5%) of the Company's Common
Stock, (ii) each Director and Executive Officer and (iii) all Directors and
Executive Officer(s), of the Company as a group. Each of the persons named
in the table has sole voting and investment power with respect to Common
Stock beneficially owned.
Percent of Shares
Outstanding
-----------------
Name of Beneficial Owner Number of Before After
------------------------ Shares Offering Offering
---------- -------- --------
J. T. Lin (1) 15,064,000 70% 62.2%
Timothy Shea (3) 35,000 * *
Senior V.P. and COO
Rachel Siu (4) 2,000 * *
CFO
Ming-yi Hwang (5) 16,000 * *
V.P. - R&D
Richard L. Reffner (6) 28,000 * *
V.P. - Laser Vision Centers
J.S. Yuan (7) 20,000 * *
Board Director
Lee Chow (8) 4,000 * *
Board Director
Richard Ajayi (9) 4,000 * *
Board Director
All Officers and Directors(10) 15,173,000 70.6% 62.7%
(8 persons) ___________________ * Less than 1%
(1) Includes: (a) 1,064,000 shares owned by Dr. J.T. Lin, Chairman,
President and CEO of the Company, (b) 4,000,000 shares owned by Lin Family
Partners, Ltd., and (c) 10,000,000 shares owned by other members of Dr.
Lin's family. Dr. Lin has the sole power and discretion to act as, and to
exercise the voting rights and powers of the Company's common stock held by
his family members. Dr. Lin's address is 4532 Old Carriage Trail, Oviedo,
FL 32765.
(2) Include 2,173,600 shares of common stock and 508,500 shares of
Warrants. The address of GEM Global Yield Fund, Limited is Hunkins
Waterfront Plaza, P.O. Box 556, Main Street Nevis, West indies.
(3) Includes 31,000 shares of restricted common stock and 4,000 shares of
stock options. Mr. Shea's address is 189 Winding Oaks Lane, Oviedo, FL
32765.
(4) Mrs. Rachel Siu's address is 5100 Old Howell Branch Road, Winter Park,
FL 32792.
(5) Dr. Hwang's address is 5366 Goldenwood Dr., Orlando, FL 32817.
(6) Includes 20,000 common shares owned by Mr. Reffner and 4,000 shares
owned by his wife, Georgeann Reffner and the 4,000 shares of stock option.
Mr. And Mrs. Reffner's address is 1101 N.W. 94th Ave. Plantation, FL 33322.
(7) Dr. Yuan's address is 8227 Riviera Shore Ct., Orlando, FL 32817.
(8) Dr. Chow's address is 8603 Butternut Blvd., Orlando, FL 32817.
(9) Dr. Ajyai's address is Dept. of Finance, UCF, Orlando, FL 32816.
(10) Based on a fully diluted total outstanding of 24,205,100 shares,
including 23,656,000 shares of common stocks and 528,500 shares of Warrants
after the offering. The registered shares include 2,173,600 common stock
registered for GEM Global Yield Fund (GYF) and 13,000 common stock for
Continental Capital Equity & Equity (CCEC) and 508,500 warrants to GYF and
20,000 warrants to CCEC.
DESCRIPTION OF SECURITIES
The Company is authorized to issue 30,000,000 shares of Common Stock, and
5,000,000 shares of preferred stock, both at $0.0001 par value per share.
Immediately prior to this registration rights, 21,490,000 shares of Common
Stock were issued and outstanding.
Common Stock Rights
The holders of Common Stock have one vote per share on all matters
(including election of directors) without provision for cumulative voting.
Thus, holders of more than 50% of the shares voting for the election of
directors can elect all of the directors, if they choose to do so. The
Common Stock is not redeemable and has no conversion or pre-emptive rights.
There are no sinking fund provisions. The Common Stock currently
outstanding and the Common Stock to be issued pursuant to this Offering
will be validly issued, fully paid and non-assessable. In the event of
liquidation of the Company, the holders of Common Stock will share equally
in any balance of the Company's assets available for distribution to them
after satisfaction of creditors and Preferred shareholders. The Company
may pay dividends, in cash or in securities or other property when and as
declared by the Board of Directors from funds legally available therefore,
but has paid no cash dividends on its Common Stock to date.
The Common Stock is listed on the OTC:BB under the symbol SRGL.
Transfer Agent and Registrar
The transfer agent and registrar for the Common Stock of the Company are
the Signature Stock Transfer, Inc. of 14675 Midway Road, Dallas, Texas,
phone (972)-788-4193.
Shares Eligible for Future Sale
Approximately 70% of the 21,490,000 shares of the Common Stock currently
outstanding have not been registered under the Securities Act of 1933, as
amended, (the "Securities Act), and will be eligible for future sale under
Rule 144 of the Securities Act. Future sales of the Common Stock under
Rule 144 may have a depressive effect on the market price of the Common
Stock if a public market develops for such stock and could impair the
Company's ability to raise capital through the sale of its equity
securities.
All executive officers and directors of the Company and stockholders
beneficially owning greater than 5% of the Company's Common Stock prior to
the offering are subject to "lock-up" agreements providing that they will
not, directly or indirectly, offer, sell, contract to sell or grant any
option to purchase or otherwise dispose of any Common Stock or any
securities convertible into or exercisable or exchangeable for such Common
Stock or, in any manner, transfer all or a portion of the economic
consequences associated with the ownership of any such securities.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who has beneficially
owned restricted shares for at least two years is entitled to sell, within
any three-month period commencing 90 days after the Effective Date, a
number of shares that does not exceed the greater of (i) 1% of the then
outstanding shares of Common Stock (approximately 12,900,000 shares
immediately after this offering) or (ii) the average weekly trading volume
in the Common Stock during the four calendar weeks preceding such sale,
subject to the filing of a Form 144 with respect to such sale and certain
other limitations and restrictions. In addition, a person who is not
deemed to have been an affiliate of the Company at any time during the 90
days preceding a sale and who has beneficially owned the shares proposed to
be sold for at least three years, would be entitled to sell such shares
under Rule 144(k) without regard to the requirements described above.
INTEREST OF NAMED EXPERTS AND COUNSEL
The Consolidated Financial Statements of the Company for the fiscal year
ended December 31, appearing in the Registration Statement have been
audited by Rachel Siu, CPA (for the year of 1997 and 1998) and Parks,
Tschopp, Whitcomb & Orr (for year of 1999), independent certified public
accountants, as set forth in their report appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of said
firm as experts in accounting and auditing. However, neither Ms. Siu nor
Parks, Tschopp, Whitcomb & Orr, P.A. will receive contingent compensation
or an interest in the Company.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
The Company reincorporated in Delaware in September, 1998, in part, to take
advantage of certain provisions in Delaware's corporate law relating to
limitations on liability of corporate officers and directors. The Company
believes that the re-incorporation into Delaware, the provisions of its
Certificate of Incorporation and Bylaws and the separate indemnification
agreements outlined below are necessary to attract and retain qualified
persons as directors and officers. The Company's Certificate of
Incorporation limits the liability of directors to the maximum extent
permitted by Delaware law. This provision is intended to allow the
Company's directors the benefit of Delaware General Corporation Law which
provides that directors of Delaware corporations may be relieved of
monetary liabilities for breach of their fiduciary duties as directors,
except under certain circumstances, including breach of their duty of
loyalty, acts or omissions not in good faith or involving intentional
misconduct or a knowing violation of law, unlawful payments of dividends or
unlawful stock repurchases or redemption or any transaction from which the
director derived an improper personal benefit. The Company's Bylaws
provide that the Company shall indemnify its officers and directors to the
fullest extent provided by Delaware law. The Bylaws authorized the use of
indemnification agreements and the Company has entered into such agreements
with each of its directors and executive officers.
DESCRIPTION OF BUSINESS
GENERAL
The Company was incorporated in the State of Delaware in September, 1988
and acquired Photon Data, Inc. ("PDI") in March, 1999. PDI was
incorporated in the State of Florida in 1994. See greater detail in CERTAIN
RELATIONSHIP AND RELATED TRANSACTIONS. The Company currently has two
divisions: (1) the Laser Technology and (2) the Laser Eye Centers. The
Company also receives income from two of the divisions it spun-off at the
beginning of 2000: Advanced Marketing Technologies, Inc. (AMTI), the
Cosmetic Mobile Laser Centers and EMX, Inc. the Thermal Infrared
Technology.
In the Laser Technology division, we develop and conduct research for
lasers in the ultraviolet (UV) and infrared (IR) spectra for applications
including vision correction dermatology and microsurgery. We also conduct
clinical trials outside the U.S. for various new technologies and
applications. The Company currently operates 20 Laser Eye Centers (LEC)
internationally and owns one Laser Eye Center in Florida. The
international Laser Eye Centers provide an ongoing "per use royalty"
revenue stream for the Company and the only wholly owned center in
Plantation, Florida that provides services for over 30 physicians has
recently become very profitable.
The primary focus of research and development for the Company is in the
ophthalmic field. The IR-3000 infrared laser has been designed for
presbyopia correction and the Company is currently performing the clinical
trials in Venezuela and Argentina. The Company expects to start the
clinical trials in Japan within a few weeks and in Europe and US in a few
months. Presbyopia is a natural aging phenomena where we loose the ability
to focus properly. It has been estimated that approximately 95% of the
world population will be affected by presbyopia by the age of 46.
The Company believes its new method of LASA (Laser Sclera Ablation) using a
laser for presbyopia correction, will be less complicated, more stable, and
may provide less regression than the mechanical, non-laser methods. The
clinical results from 35 patients were presented at the Summer World
Refractive Surgery Symposium (Miami, FL, July 21-23, 2000). The Company
believes that it is the first and the only company offering LASA and this
procedure is currently limited to the international market due to the fact
that the Company does not have FDA clearance to begin the studies here in
the United States yet. The Company currently has four pending patents
relating to LASA and new IR-laser technologies. However, there can be no
assurance that the Company will be successful in protecting its proprietary
technologies or in completing its market approval in the U.S. on schedule.
In addition to the IR lasers for vision correction, the Company has
recently obtained the 510(K) approval to market its EX-308 laser for the
treatment of psoriasis. The Company is diligently working on manufacturing
Agreements for the EX-308 and expects to have these negotiations completed
within the next few weeks.
The Company has recently concluded a Joint Venture Agreement to assemble
the MicraLight Escan 2020 (formerly the Company's Scan-195 scanning excimer
laser) in the United Kingdom. The Company believes that this Agreement
should enhance its sales in countries that require the CE mark outside the
Untied States and create opportunities that were not available prior to
this Agreement. The Company is also considering expanding this assembly
Agreement to include other products that would be sold in the international
market.
The Company believes that it is the only company currently owning both the
ultraviolet (UV) and infrared (IR) laser technologies for vision
correction. For vision correction using UV lasers, there are several
existing patents which may prohibit our sales of the UV lasers without
obtaining a license. The Company has three pending patents for the use of
IR lasers which has the potential of replacing the existing UV lasers
currently used by most of its competitors including Visx, Summit, Bausch &
Lomb, LaserSight, Nidek, Schwind and Meditec. The Company believes that IR
lasers will be have less mutagenic effects and are safer than the UV lasers
which may have potential risk of long-term biological complications.
However, prior to the market approval in US the Company's new products will
be limited to international sales. The Company believes that its Infrared
(IR) lasers for vision correction will be protected by its proprietary
technology and its pending patents. In addition, the users of the Company's
IR lasers will not have to pay the licensing fee or royalty fee which are
required for the use of UV lasers. Currently, the UV laser royalty fee in
the U.S. is about $100 per case that must be paid to the patent owners Visx
and Summit. The UV laser manufacturers also need to pay the IBM-patent fee
of about 3%-7% of their sale price. Without paying these fees, the Company
believes that its IR lasers will have advantages in both profit margin and
the market potential. However, there can be no assurance that the Company
will be successful in protecting its proprietary and pending patents to
avoid these license and or royalty fees.
The medical laser industry needs the approval from FDA prior to
manufacturing and marketing in the U.S. Our competitors are significantly
larger and their financial condition has allowed several of them receive
FDA approval to perform LASIK procedures for vision correction using
excimer lasers. We will also face increased competition from manufacturers
of vision correction lasers and from companies operating laser centers in
the U.S. and internationally. The Company's medical lasers will need either
510(K) approval, which takes only 6-12 months, or PMA and IDE approvals
which may take a 4-8 years to complete prior to the market approval in the
U.S. Prior to these market approvals, the Company's medical products will
be limited to international sales and these products need to be
manufactured outside U.S. The Company believes that its UV-laser for
dermatology and the Waterjet system (made by VisiJet and marketed by the
Company in certain countries) will only need 510(K) approval. The other new
products of the Company will require IDE/PMA approval. However there can
be no assurance that the Company will be successful in obtaining these
market approvals as scheduled. The Company has submitted a 510(K)
application for its UV-308 laser for the treatment of psoriasis and has
recently obtained the approval.
The Company's Plantation Eye Center currently has over 30 surgeons using
the excimer laser facility. These existing surgeons may leave the Company
if they decide to operate their own Center or join other Centers offering
better terms than the Company. All of these factors may influence our
systems sales and income from laser centers. Accordingly, our past results
may not be useful in predicting our future results.
The IR-3000 Infrared laser has been designed for presbyopia correction, the
Company expects to start the clinical trials in Japan within a few weeks
and in Europe and US in a few months.
The Company will continue its research and development efforts on several
new products including the new infrared lasers for microsurgery and vision
correction. The models IR-3000 and IR-5000 will take several years for the
U.S. market approval. International marketing for these new products,
however, may start during the third quarter of year 2000. These product
will be sold in addition to our existing UV lasers market. The Company had
signed an Agreement with MicraUS for a joint venture in UK to obtain the
CE-mark approval, assemble and market its products in Europe. However there
can be no assurance that the Company will be successful in completing the
clinical trials and obtaining necessary approvals as scheduled.
The Company is currently conducting clinical trials in Caracas, Venezuela
for the treatment of presbyopia patients using the Company's patent pending
technology. Laser presbyopia correction has a worldwide potential procedure
revenue of over $1,500 billion. The Company believes that it is the first
Company to successfully develop this technology and the only Company
currently conducting clinical trials. The Company hopes to begin the first
clinical trials in the US for laser presbyopia correction soon. A royalty
fee policy will apply to the users of the Company's new technology, which
will allow the Company to earn long-term recurring income.
The Company's strategy is to focus on recurring revenue and income from
Laser Centers operation and the procedure royalty fees charged to the
users. The Company, however, will continue to develop new products for
markets mainly outside the US prior to the market approval for use of the
Company's products within the US. The Company's revenues will come from
both Laser Center procedure income and the sale of medical systems.
The address of the Company headquarters is: SurgiLight, Inc. 12001 Science
Drive, Suite 140, Orlando, Florida 32826, phone number: (407) 482-4555, Fax
number: (407)482-0505, e-mail:[email protected]. Web site:
www.surgilight.com.
Industrial Background
Lasers have been used in various medical and industrial applications over
the past twenty years. The recent application of lasers with wavelengths
ranging from ultraviolet to infrared have been emphasized in the areas
related to surgery involved in ophthalmology and dermatology due to their
highest potential growth markets and the significant clinical efficacy of
the laser technologies. For recurring revenues and increased long-term
profits, company-operated Laser Centers have been recognized as a fast
growing industry. In addition to the above-described medical lasers and
centers, the Company also owns a portion of a company in the infrared
thermal imaging market that has applications in security, law enforcement
and military surveillance. Greater details for those industries are
described as follows.
Refractive Lasers and Laser Centers
Vision correction is one of the largest medical markets, with approximately
136 million people in the United States using eyeglasses or contact lenses.
Within this group, approximately 60 million people are myopic and 30
million are hyperopic. Another 45 million are presbyopic. Industry sources
estimate that Americans spend approximately $13 billion, at retail prices,
on eyeglasses, contact lenses and other vision correction products and
services each year. The international market is approximately 3 to 5 times
higher than the US market with at least 500 million people using eyeglasses
or contact lenses.
At the present time most ophthalmologists are charging $1,000 to $1,500 per
eye for LASIK. In addition, since there is currently no insurance or
Medicare coverage for this procedure, the patients are paying cash and
there are no administrative costs dealing with complex paperwork. The above
patient charges may be reduced when competition increases.
According to the Market Scope report (May 1997), the major Laser Center
companies include the public companies of TLC Laser Centers Inc., Laser
Vision Centers, LCA Vision, Lasik, Inc. and ICON, Inc. The Company believes
that it is the only Laser Center company which has the in-house technology
with the advantageous position of providing up to date technologies at low
start-up cost for its Centers. The Company's competitors buy systems from
other manufacturers and have high start-up and facility costs for their
Centers. Being a laser equipment manufacturer, the Company's start-up
system costs of its international Centers is about 30% of that of its
competitors.
Product Uses
The Company products include lasers for medical, dermatology, ophthalmology
and commercial uses. The Company's laser systems cover laser spectra (or
wavelengths) ranging from ultraviolet (UV) to infrared (IR) which are
designed to meet the optimal response and clinical outcome of the surgeries
and the needs for cost efficiency.
Products
Vision Correction Lasers
The Company has developed scanning laser systems for corneal reshaping, or
the correction of myopia, hyperopia and astigmatism. These excimer systems
are much more compact (only 50% in size and weight) than most of its
competitor's systems and they are portable and easy to maintain. Moreover,
the manufacturing cost of this new generation of systems is lower than the
older generation of systems made by others. The Company currently owns
patents pending in both UV and IR laser technologies.
For refractive surgeries, the Company is currently developing three new
systems, Model IR-3000, IR-3001 and IR-5000. The mid-infrared (IR)
wavelength of these systems may have many advantages over the UV lasers and
other existing systems in the market. The unique features of these IR
systems include: (i) a compact system designed for mobile laser centers;
(ii) system operated at high repetition rate (for fast procedures) and at a
short pulse width (for reduced thermal effects); (iii) wavelength matching
the tissue (water) absorption peak for precise tissue ablation and accurate
vision correction; and finally, (v) the IR wavelength eliminating the
potential risk of mutanagenic side effects which may be a concern in UV
lasers.
New Laser for Presbyopia Corrections
The Company's second new system under clinical trials and in US patent
pending is the model IR-3000 which represents the unique feature of
combining both ablation and coagulation effects for the treatment of
presbyopic patients. This new technology will offer the only system capable
of conducting presbyopia correction based upon the new concept of sclera
expansion to increase the patient's accommodation for both far and near
vision. This new procedure will resolve the ciliary muscle relaxation
problems caused by age. The current treatments for presbyopia include
implants (called Scleral Expansion Band, SEB) and diamond-knife incisions
which have drawbacks of being a complex surgical procedure and require a
lot of surgeon's experience. Another method is to use a Holmium:YAG laser
for monovision correction, a clinical trial system made by Sunrise
Technology. This method however can only treat one eye for near view and
requires that the second eye remain un-treated for distance viewing.
The IR-3000 and IR-3001 are protected by the Company's four pending
patents. The Company believes that significant recurring revenues may be
generated from the royalty fee collected from the IR systems used for
presbyopic corrections. The presbyopia market is much bigger than all the
other vision corrections (myopia and hyperopia) with a worldwide potential
procedure revenue over $1,500 billion and over $150 billion in US. The
world's first presbyopia-reversal surgeries have been performed with the
Company's laser recently at Caracas, Venezuela and clinical data were
presented in the 1999 Fall World Refractive Surgery Symposium (Orlando,
October 21-23, 1999).
The Company's new method of using laser for presbyopia reversal has
advantages of a precise, fast, and simple procedure that does not require a
surgeon's experience. The LPR procedure will have less complication and be
more stable than the mechanical, non-laser methods. The Company believes
that it is the first and the only company that offers LPR, which is now
limited to the international market prior to US approval. However there can
be no assurance that the Company will be successful in protecting its
proprietary technologies or completing its market approval in US on
schedule.
SmartScan Software
The Company has pioneered the development of software for corneal
topography-assisted, or corneal linked laser systems, for vision correction
since 1995. SmartScan, the Company's patent pending technology was designed
to further extend the precision and flexibility of Laser Systems by
incorporating corneal topography, the eye measurement technology. The
SmartScan software, when integrated into the Company's scanning lasers,
will offer unique, customized corrections. Such corrections offer the
promise of increasing improved night vision, uncorrected visual acuity and
the flexibility beyond what current technology can provide. The customized
correction can also offer great enhancement for second treatments in off-
centered or irregularly corrected patients. Extension of the SmartScan
software will be the "real time" monitoring of the patient topography for
the most accurate vision correction. The company had reported in several
Ophthalmic Conferences the results based on its SmartScan for pre-operative
computer simulation and post-operative enhancement. However there can be no
assurance that the Company will be successful in completing its final
development for clinical trials.
Dermatology Lasers
For dermatology uses, the Company has developed the EX-308 excimer laser,
for phototherapy of psoriasis which has the potential to substitute the
conventional UVB light non-laser system, the "PUVB". Model EX-308 offers
the advantages of: (i) fiber-coupled for friendly use in any portion of
the treated areas; (ii) less total dose and numbers of treatment needed (6
times less) than the UVB light; (iii) safer than UVB light, only the
localized area is treated to eliminate the risk of cancer on normal skin;
(iv) controllable accurate dose applied to the target unlike the UVB light
which may degrade in dose without control; and (v) cost effective in terms
of time spent by the surgeon and patient. In addition, the Company has on-
going clinical trials for the EX-308 model for the treatment of vitiligo.
The Company has submitted 510K application and expects to obtain the
market approval in USA this year. The Company's UV-308 model is designed
for the treatment of psoriasis and vitiligo. The Company has recently
obtained the 510K approval for the treatment of psoriasis.
Other Medical Systems (WaterJet Devise)
In addition to the above described products, the Company has obtained the
exclusive marketing right for China, Hong-Kong, Taiwan, and all Latin
American countries for the WaterJet devices: Model HK-300 and Model CT-300
systems made by VisiJet (CA). Model HK-300 may replace the mechanical
microkeratome currently used for corneal reshaping. A microkeratome is a
device that is used in all LASIK procedures. The model CT-300 is designed
for cataract treatment and it is believed to be safer and more efficient
than laser or ultrasound devices. Both of these WaterJet devices may only
require 510(K) clearance and VisiJet has already submitted the 510(K)
application for the HK-300.
Laser Centers
The Company's start-up system costs for international Laser Eye Centers, in
which systems were manufactured by the Company, is only 30% of that of its
competitors, which purchase systems from other manufacturers. The only
obligation the Company has to the international Laser Eye Centers is to
maintain the laser system over the period of our contract, which is
typically 3 to 5 years or a minimum of 7,000 eye surgeries. Therefore
approximately 85 to 90% of the revenue the Company receives from these
centers is profit. However there can be no assurance that the Company will
be successful in operating both types of Centers without suffering future
competition from those that may operate Centers in both areas and also own
in-house technology.
The Company currently has 21 Laser Eye Centers (LEC) in operation including
18 in Asia, 2 in Latin America and one in Florida. The Company also
receives income from Cosmetic Mobil Laser Centers operated by Advanced
Marketing Technology, Inc. (AMTI), where AMTI pays 45% of its net profit to
the Company under the spin-off Agreement. The Company intends to establish
a total of 80 worldwide Laser Centers (for both Eye Centers and Cosmetic
Centers) by year 2005. However there can be no assurance that the Company
will be successful in establishing the targeted number of Centers as
scheduled.
The Company's strategy is to expand its Laser Centers mainly
internationally, where a typical Eye Center will have a 5-year contract and
allow the Company to collect a per procedure fee of $100 - $150 per eye for
LASIK procedures. The Company's Plantation Laser Eye Center currently has
over 30 surgeons using the excimer laser facility and paying the Company a
facility fee of about $500-$750 per eye. These existing surgeons however
may leave the Company if they decide to operate their own Center or join
other Centers offering better terms than the Company. There can be no
assurance, however, that the Company may charge the patient fees at the
current rate due to price competitions. All of these factors may influence
the Company's income from laser centers.
Technology, Patents and Licensing Rights
The Company intents to protect its development work and products by means
of proprietary technology, licensing rights, trademark and patents pending,
covering various phases of the products in ophthalmology, and dermatology
applications. The Company currently has four patents in pending status and
plans to file more patents to protect its new technologies. The Company
believes its international sales of vision correction systems assembled in
our Panama facility will not require a license from a third party. The
Company also believes that its proprietary technology and the pending
patents in the following subjects will protect many of its newly developing
products:
* Apparatus for efficient laser corneal ablation.
* Apparatus and methods for dual beam laser treatment of presbyopia.
* New infrared lasers for vision correction and presbyopia.
* Apparatus and methods for non-invasive IR laser for presbyopia
correction.
There are several patents involving the use of UV lasers in refractive
surgeries including the IBM patents, LaserSight scanning patents, patents
owned by Visx and Summit. These prior patents, however, all are limited to
lasers using an UV wavelength. The Company believes that its systems,
IR-3000, IR-3001, and IR-5000 using infrared wavelengths would not be
covered by any of the prior patents and will be protected by the Company's
pending patents.
Process and apparatus patents relating to shaping the cornea with various
lasers have also been issued to others. Because patent applications are
maintained in secrecy in the United States until such patents are issued,
and are maintained in secrecy for a period of time outside the United
States, the Company can conduct only limited searches to determine whether
its technology infringes any patent or patent applications. Any claims for
patent infringement could be time-consuming, result in costly litigation,
divert technical and management personnel, or require the Company to
develop non-infringing technology or to enter into royalty or licensing
agreements. There can be no assurance that the Company will not be subject
to one or more claims for patent infringement, that the Company would
prevail in any such action or that its patents will afford protection
against competitors with similar technology. In the event the Company's
systems are judged to infringe a patent in a particular market, the Company
and its customers may be enjoined from making, selling and using such
system or be required to obtain a royalty-bearing license, if available, on
acceptable terms.
Although the Company believes that the use of a scanning device for IR
lasers in vision correction will be protected by its pending patents. From
time-to-time the Company may receive in the future, notice of claims of
infringement of other parties' proprietary rights. The resolution of
intellectual property disputes is often fact intensive and, therefore,
inherently uncertain. If any claims or actions are asserted against the
Company, the Company may seek to obtain a license under a third party
intellectual property rights. There can be no assurance, however, that
under such circumstances, a license would be available on reasonable terms,
or at all. Alternatively, in the event a license is not offered or
available, the Company might be required to redesign those aspects of the
Company's systems held to infringe so as to avoid infringement.
The failure to obtain a license to a third party intellectual property
right on commercially reasonable terms could have a material adverse effect
on the Company's business and results of operations.
Sales and Marketing
The Company supports its sales and marketing efforts by actively
participating in medical trade shows and conferences. The Company seeks to
increase the market visibility of its products by serving with customers on
technical and organizing committees for such conferences and trade shows,
presenting technical papers at such conferences, and publishing in
technical and trade journals. The Company distributes new product
announcements and literature through direct mailings as well as advertising
in trade journals. The Company maximizes profits by offering system based
on the per procedure fee which allows the Company to receive recurring
revenues rather than one-time revenue from sales.
The Company has established a strong international marketing infrastructure
and intends to continue emphasizing its international marking activities,
while some of its products are waiting for the approval for domestic sales.
The Company has distributors in most Asian and Latin American countries and
intends to add new distributors in European countries. The Company has
recently formed a joint venture with MicraUS for the approval, assembling
and marketing of its products in Europe.
The Company's international distributors and representatives are generally
operating under letter agreements that allow for termination by either
party upon 90 days' notice. There can be no assurance that such
distributors and representatives will not terminate any formal or informal
agreement, or that the Company would be able to find an acceptable
replacement distributor or representative on acceptable terms.
Research and Product Development
The Company currently has several new products under development:
(a) IR-3000 for presbyopia correction, (b) IR-5000 for LASIK procedures,
(c) IR-3001 for LASIK and glaucoma, (d) EX-308 for skin treatment
(vitiligo), (e) other new diode lasers with wavelength range of (980 -
2100) nm for microsurgery. The Company will be continuing the development
efforts for product improvement in both system design, software and
hardware aspects. The Company will also invest efforts in the clinical
aspects for the uses of these products.
Competition
The Company faces current or potential competition from direct competitors,
suppliers of potential new and alternative technologies and existing
domestic and international joint ventures for laser centers. While the
Company believes that its IR products for vision correction offer several
distinct advantages over the use of excimer lasers for treating hyperopia
and presbyopia, its competitors such as Visx and Summit have significantly
greater financial resources than the Company and have received FDA approval
for their excimer lasers for the LASIK procedures. In addition, certain of
the Company's competitors such as Sunrise Technology International, have
developed a laser device for the treatment of hyperopia using an IR laser.
Another company in Texas, Preby Corp, has been using mechanical device
Scleral Expansion Band (SEB) for corneal implantation to achieve presbyopia
corrections.
The Company believes that its Laser Centers have lower operating overhead
and system start-up costs than its competitors such as TLC Laser Centers,
LCA Vision and Laser Vision Centers, which however, have significantly
greater financial resources than the Company. Furthermore, there can be no
assurance that the Company will be successful in expanding its Laser
Centers and continuing profitable operation.
The Company believes that it is the only company that currently owns both
the ultraviolet (UV) and infrared (IR) laser technologies for vision
correction. For vision correction using UV lasers, there are several
existing patents that may prohibit our sales of the UV lasers without
obtaining a license. The Company has three pending patents for the use of
IR lasers which has the potential to replace the existing UV lasers used by
most of its competitors, including Visx, Summit, Bausch & Lomb, LaserSight,
Nidek, Schwind and Meditec. The Company believes the IR lasers, will be
safer than the UV lasers, which may have potential risk of long-term
mutanagenic complication. However, prior to market approval in US the
Company's new products will be limited to international sales.
The Company believes that its Infrared (IR) lasers for vision correction
will be protected by its proprietary technology and its pending patents. In
addition, the users of the Company's IR lasers will not have to pay the
license fee or royalty fee, which are required for the use of UV lasers.
Currently, the UV laser royalty fee in US is about $100 per case paid to
the patent owners Visx and Summit. The UV laser manufacturers also need to
pay the IBM-patent fee of about 3%-7% of their sale price. Without paying
these fees, the Company believes that its IR lasers will have advantages in
both profit margin and market competition. However there can be no
assurance that the Company will be successful in protecting its proprietary
pending patents to avoid these license and or royalty fees. In addition,
the Company has recently been sued by Presby Corp. for a potential patent
infringement of its patents. The Company believes that this lawsuit has no
basis and without merit. However, the Company may need to pay a licensing
fee to Presby Corp., if the Company can not defend this lawsuit.
For laser for psoriasis treatment, the Company will be in direct
competition with Photomedex which has also obtained the 510K approval and
has started marketing the device.
The Company believes the potential use of its patent pending laser sclera
expansion is more attractive than competitive methods of treating
presbyopia. There can be no assurance, however, that the method can be
reduced to practice using a reliable laser system, or that the Company will
receive regulatory approvals or successfully market such a product. There
can be no assurance the FDA will approve the pre-market approval
application ("PMA") which summarizes the results of continued clinical
trials, or that the Company will successfully develop or market the
refractive lasers systems.
Government Regulations
The Company's products are subject to significant government regulation in
the United States and other countries. In order to test clinically, produce
and market products for human diagnostic and therapeutic use, the Company
must comply with mandatory procedures and safety standards established by
the U.S. Food and Drug Administration (FDA) and comparable state and
foreign regulatory agencies.
Typically, such standards require products to be approved by the government
agency as safe and effective for their intended use before being marketed
for human applications. The clearance process is expensive and time
consuming, and no assurance can be given that any agency will grant
clearance to the Company to sell its products for routine clinical
applications or that the time for the clearance process will not be
extensive.
There are two principal methods by which FDA-regulated products may be
marketed in the United States. One method is a FDA pre-market notification
filing under Section 510(k) of the Food, Drug and Cosmetics Act. Applicants
under the 510(k) procedure must demonstrate the device for which clearance
is sought is substantially equivalent to devices on the market before May
1976. The review period for a 510(k) application is 90 days from the date
of filing the application. Applications filed pursuant to 510(k) are often
subject to questions and requests for clarification that often extend the
review period beyond 90 days. Marketing of the product must be deferred
until written clearance is received from the FDA. In some instances, an
Investigational Device Exemption (IDE)is required for clinical trials for a
510(k) notification.
The alternate method, when Section 510(k) is not available, is to obtain a
Pre-Market Approval (PMA) from the FDA. Under the PMA procedure, the
applicant must obtain an IDE before beginning the substantial clinical
testing required to determine the safety, efficacy and potential hazards of
the products. The preparation of a PMA is significantly more complex and
time consuming than the 510(k) application. The review period under a PMA
is 180 days from the date of filing. The FDA often responds with requests
for additional information or clinical reports that can extend the review
period substantially beyond 180 days.
FDA also imposes various requirements on manufacturers and sellers of
products under its jurisdiction, such as labeling, manufacturing practices,
record keeping and reporting requirements. The FDA also may require post-
market testing and surveillance programs to monitor a product's effects.
All of the Company's products will require filing of an IDE, and a 510(k)
application or PMA. There can be no assurance that the appropriate
approvals from the FDA will be granted for the Company's products, the
process to obtain such approvals will not be excessively expensive or
lengthy or the Company will have sufficient funds to pursue such approvals.
The failure to receive requisite approvals for the Company's products or
processes, when and if developed, or significant delays in obtaining such
approvals, will prevent the Company from commercializing its products as
anticipated and will have a material, adverse effect on the business of the
Company.
The Company is also subject to regulation under the Radiation Control for
Health and Safety Act administered by the FDA which requires laser
manufacturers: (i) to file new product and annual reports; (ii) to maintain
quality control, product testing and sales records; (iii) to incorporate
certain design and operating features in lasers sold to end-users; and (iv)
to certify and label each laser sold to an end-user as belonging to one of
four classes based on the level of radiation from the laser that is
accessible to users. Various warning labels must be affixed and certain
protective devices installed, depending on the class of the product. The
Center for Devices and Radiological Health is empowered to seek fines and
other remedies for violations of the regulatory requirements.
Foreign sales of the Company's medical laser systems are subject, in each
case, to clearance by the FDA for export to the recipient country.
Regulatory requirements vary widely among the countries, from electrical
approvals to clinical applications similar to the PMA filed with the FDA
for sales in the United States.
The Company is currently conducting clinical trials in Caracas, Venezuela
for the treatment of presbyopia patients using the Company's patent pending
technology. The Company believes that it is the first Company to
successfully develop this technology and the only Company that has begun
clinical trial treatment using lasers for presbyopia. The clinical results
were reported at the World Refractive Surgery Symposium in October 1999 and
May 2000.
The regulation approval schedules for the Company's products are outlined
as follows. For models IR-3000, IR-5000 and IR-3001, the Company will need
PMA approval in US which typically will take 4-6 years. For other model
EScan-2020, the Company expects to obtain the European CE-mark approval
within 8-12 months. The Company has obtained the 510K approval for its EX-
308 model for the treatment of psoriasis and expects to obtain the approval
for vitiligo application within 6-12 months. The WaterJet devices, made by
VisiJet, will also obtain 510(K) approval shortly and will be marketed by
the Company in certain countries. However there can be no assurance that
the Company will be successful in obtaining these market approvals as
scheduled. The Company also expects to start the clinical trials for the
IR-3000 system in US, Europe and Japan within 3-6 months.
The Company's objectives are multifold: (1) replace the currently used
medical laser systems with the more advanced lasers which represent
substantial improvement in safety, precision, time and cost effectiveness
over the existing laser technologies; (2) maximize profits by offering the
systems based on the 'per procedure' fee which allows the Company to
receive recurring revenues rather than one-time revenue from the sales; and
(3) expand to other areas of medicine for the existing Company's centers.
To achieve these objectives, the Company has the following key elements of
its strategy:
Expand Technology Leadership: The Company will continue to pursue its
leadership position in advanced laser technologies in areas of
ophthalmology and dermatology. In addition to the licensing agreements, the
Company will pursue patents aggressively for any newly-created
technologies, adding to its current pending patent applications.
Focus on High-growth Markets: The Company focuses on what it perceives as
the highest potential growth markets, such as laser resurfacing, laser
vision correction and phototherapy.
Integration of Product Line: The Company has plans to acquire technologies
from its OEM suppliers to increase the vertical integration and value-added
systems products. The Company is also seeking to capitalize on its advanced
manufacturing capability with an assembly factory outside the country for
cost reduction purposes and ease of export.
Expand Worldwide markets: The Company has an established strong
international marketing infrastructure and intends to continue emphasizing
its international marketing activities, while its products are waiting the
approval for sales within the US. The Company has distributors in most
Asian and Latin American countries and intends to add new distributors in
European countries.
International Laser Centers: For recurring revenue and increased long-term
profit, the Company plans to expand its existing Laser Centers in the
Pacific Rim and Latin America.
New Technologies for Laser Centers: The systems to be used in the Company's
Centers include ophthalmic and cosmetic lasers that will be up-dated to the
newest current technologies to strengthen the market and secure revenue
growth. Being a manufacturer of laser systems, the Company has the
advantageous position of being able to provide system updates and low
start-up costs for its centers.
Competitive Edge
The Company views its competitive edge as follows:
High Operating Profit in Centers: As a manufacturer of the laser systems,
the Company has a lower start-up and system cost for its international
Centers than its competitors.
New Technology & New Procedures: The Company is in a unique position using
its in-house technologies for system upgrades for new procedures to
increase recurring revenue and profit for its Centers. These new procedures
are not available to most of the Company's competitors.
Sales Growth from New Products: The Company foresees the introduction of at
least two new products every two to three years to increase sales and
reduce competition. In addition, most of the software and system control
developed by the Company are "multiple-use" and can be cost effectively
integrated to various of the Company's existing and future systems for eye
surgeries (vision correction, cataract treatment).
Employees
The Company has eighteen (18) full-time employees, including 10 at the
technology division in Orlando, Florida, 2 at the Plantation Laser Centers
and 6 in Asian Centers. In addition, there are approximately 30
ophthalmologists using the Company's laser facilities in Plantation. The
Company also hires, from time-to-time, part-time employees for system
assembly tasks, delivery and consultants on a contract basis for regulatory
clinical trials, and system maintenance. None of the Company's employees
is represented by a labor union. The Company has very good relations with
its employees.
Backlog
As of August 10, 2000 the Company had no significant backlog, other than
three new international Centers in which systems needed to be installed
before October, 2000.
Reports to Security Holders and the SEC
The Company files annual and quarterly reports with the Securities and
Exchange Commission ("SEC"). In addition, the Company may file additional
reports for matters such as material developments or changes within the
Company, changes in beneficial ownership of officers, directors, or
significant shareholders. These filings are matters of public record and
any person may read and copy any materials filed with the SEC at the SEC's
public Reference Room at 560 Fifth Street, N.W., Washington, DC 20549. The
public may obtain information on the operation of the public Reference Room
by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet site
that contains reports, proxy and information statements, and other
information regarding issues that file electronically with the SEC which
site can be found at http://www.sec.gov. The Company internet site can be
found at www.surgilight.com.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION
RESULTS OF OPERATION
In above selected financial data, the 1997 revenue was attributed to the
business of Photon Data, Inc. which was acquired by the Company in March,
1999. The 1998 data was the consolidated data of Photon Data, Inc. and
SurgiLight. The 1999 data was the consolidated data for all its acquired
divisions, excluding the first quarter of AMTI and EMX.
1999 as compared with 1998
Revenues: Revenues in 1999 increased 139% to $2,858,089 from $842,005 in
1998. The increase of revenue of 1999 mainly due to the revenue increase of
Plantation Laser Eye Center and the revenue from two new divisions of
Advanced Market Technology (AMT, for cosmetic lasers) and EMX (for night
vision sales). The revenue of 1999 excluding the first quarter revenue
generated from EMX and AMT, approximately $90,000, where these two
divisions were acquired with an effective date of April 1, 1999.
Cost of Revenue: Cost of revenues as a percentage of revenues increased to
39% in 1999 from 28.3% in 1998. This increase was mainly attributable to
the cost of revenue of Plantation Laser Eye Center which had a profit
margin approximately 25% based on a facility fee of $900 per eye collected
from surgeons. The cost of revenue for laser system sales is lower than
30%.
Operating Expenses: Selling, general and administrative (GNA) expenses in
1999 were $1,1,670,478 compared to $750,519 in 1998. The GNA as a
percentage of revenues was 58.4% and 89% in 1998 and 1999. The increase of
GNA in 1999 was mainly attributable to higher payroll costs associated with
new employees in the acquired AMT, EMX and Plantation Center. Research,
development and regulation expenses increased to approximate $65,000 in
1999 from $30,000 in 1998, primarily as result of increase spending in the
new products development and the regulatory efforts for the clinical trials
in Mt. Sinai Hospital and in Caracas, Venezuela for the UV-laser for
psoriasis and laser for presbyopia correction, respectively.
Net Income: Income from operation, prior to the depreciation and
amortization (DNA) were $322,605 and the net income after DNA , was
$65,705, or $0.01 per basic and diluted share compared to a net loss of
$154.343, or $0.24 per share in 1998.
Segment information: Below are the distribution of revenues in various
areas and each of the business of Centers and systems. See also Notes to
Financial Statement.
1999 1998
Revenue (% of total)
Plantation Center (USA) 60% 27%
China Centers 19% 2%
Laser System sales 6% 35%
Advanced Market Tech, 9% -
EMX, Inc. 11% -
Other Centers 2% 5%
As shown above, the system sales changed from 35% in 1998 to 6% in 1999.
This resulted from the emphasis of Centers in 1999 in which the China
Center revenue increased to 19% in 1999 from 2% of 1998. The Plantation
Center revenue for 1998 was only counted for 4 months of operation, since
it started in September, 1998. Both revenues of Advanced Market Technology
and EMX were only for 1999, since these two divisions were acquired by the
Company in March 1999. The Company believes that the systems sales will
increase when its EX-308 laser for psoriasis receives the 510K approval for
market in US and Europe. The Company also expects to have more revenue in
its Centers in 2000 by the increase the number of Laser Centers
internationally.
The Company's liquidity requirements have been met through external debt
and financing. During August, 1998 to March 8, 2000, the Company has raised
a gross cash proceeds of approximately $2.28 millions by private placements
offered to accredited investors. The prices offered for these private
placements were from $1.50 to $11.20 per share after the 2-for-1 split
adjustment. All the Common Stock issued by these private placements were
non-registered restricted shares and had a 12 months restriction starting
from the date of stock certificates were printed, April 1, 1999. As of
December 31, 1999, the Company has cash increase to $577,594 from $38,366
as of December of 1998. The net increase of $539,258 as of December, 1999
was mainly resulted from the proceeds from sale of stock. However, net cash
decrease of $554,343 was reported in December 31, 1999 for purchasing of
equipment. On May 12, 2000, the Company had signed an Agreement with an
investment group by offering convertible prefer stock to raise $3.0
millions. The Company believes that its existing corporate resources are
adequate for at least the next twelve months to meet working capital needs
and to fund corporate requirements. As of May 25, the Company has a total
outstanding and issued common stock of 21,490,000 shares including the
reserved stock options.
Comparison of six months ended June 30 of 1999 and 2000
Revenues for the six month ended June 30, 2000 increased 23.8% to $1.78
million from $1.43 million for the same period of 1999. The Company
reported a six-month net income of $12,000 or $0.001 per share, compared to
a net income of $112,000 or $0.01 per share for the same period of 1999.
The growth of revenues is attributed to the Company's growth in system
sales and procedure income from the Laser Centers.
For the second quarter of 2000, the Company reported an operation income of
$84,000, excluding the facility depreciation of $45,000. The net income
(after the facility depreciation) of the second quarter 2000 is $39,000
compared to a net loss of $27,000 of the first quarter 2000. Revenue for
the second quarter 2000 increased 32.6% to $1,009,000 from $761,000 for the
first quarter of 2000, attributed to the growth of Eye Centers and system
sales.
Revenues for the three- and six-month periods ended June 30, 2000 were
$761,000 and $1,776,000, respectively, compared to $566,000 and $1,434,000,
for the same periods in 1999. The total revenue for the second quarter is
attributed to the Company's two divisions: the Laser Eye Centers and the
Technology. In addition, the Company also gained income from the Cosmetic
Laser Centers.
In this quarter, the Company had added 2 new international Eye Laser
Centers and one Cosmetic Mobile Laser Center in Venezuela. The Company
currently has a total of 23 Laser Eye Centers and Cosmetic Centers.
Operating expenses for the three- and six-month periods ended June 30, 2000
were $551,000 and $976,000 respectively. Prior year comparative periods
showed operating expense levels of $398,000 and $774,000 respectively. The
increase in operating expenses is proportional to the total revenue and
increased R&D and clinical trial efforts. The six-month R&D and clinical
trial costs increased from $90,000 in 1999 to $134,000 in 2000. These costs
will continue to increase in the future quarters to support our focus on
the Company's new infrared lasers and the related on-going clinical trials
in Latin America, Japan, Europe and US.
LIQUIDITY AND CAPITAL RESOURCES
The total current assets of the Company increased to $3,421,000 as of June
30, 2000, compared with $1,712,000 of the end of June, 1999. This increase
in current assets is mainly attributed to the additional paid in capital of
$1,232,000 from an accredited investor. The Company recently has obtained a
commitment of additional funds of $3.0 million from an investment group
Global Emerging Markets, Inc. (GEM), a United Kingdom-based firm. The
Company will use this addition funding to continue its on-going new product
development, clinical trials and to expand its international Laser Eye
Centers. In particular, these additional funds will accelerate the
worldwide market of our to-be-approved new products.
The inventory for the second quarter increased from $573,000 of the first
quarter to $1,193,000 because the need to meet the growth of system sales
In the next few quarters and the IR-3000 systems invested for clinical
trials. Account receivable increase from $601,000 in the first quarter to
$700,000 in the second quarter because of the financing program offered to
the Cosmetic Laser Center in Venezuela.
The net cash increased from $1,334,000 on March 31, 1999 to $1,353,000 on
June 30, 2000 mainly from the net operational profits.
The Company anticipates that its current cash, cash equivalents, as well as
anticipated cash flows from operations and additional capital contribution
from private placements, will be sufficient to meet its working capital and
capital equipment needs at least through the next 12-18 months.
THE RECAPITALIZATION
During August, 1998 to May, 2000 the Company has raised gross cash proceeds
of approximately $2.28 millions by private placements offered to accredited
investors. The prices offered for these private placements were from $1.50
to $11.20 per share after the 2-for-1 split adjustment. All the Common
Stock issued by these private placements are restricted shares and had a
minimum of 12 months restriction starting from the date of stock
certificates were printed, April 1, 1999. The Company's stock was 2-for-1
forward split effective on January 27, 2000. As of August 11, 2000, the
Company has a total outstanding and issued (post-split) shares of
21,490,000 shares including the reserved 164,000 stock option for employees
an consultants. As of August 11, 2000 the Company has a total outstanding
common shares of 21,490,000 including the reserved shares for employees
stock options and consultants.
The Company plans to file an SB2 application to register additional common
shares related to the $3 million investment from the GEM group.
PLAN OF OPERATION
The Company's plan of operation for the next 12 months is to continue the
development of new products of IR-3000 and the clinical trials for
presbyopia and laser for vitiligo. The Company plans to acquire additional
new technologies, which may require additional funds in the next 12 months.
The Company may increase its number of employees for marketing and
assembling of its approved EX-308 model and the clinical trial efforts for
IR-3000 model. The Company has recently signed a Purchase and Sale
Agreement with Premier Laser Systems, Inc., which is subject to a binding
process in a Bankruptcy Court.
DESCRIPTION OF PROPERTY
MANUFACTURING AND FACILITIES
Using proprietary technology, the Company designs and manufactures the
electronic boards, circuits and system control assemblies, in-house. The
Company also develops all the software used in its products. System
mechanical parts and frames are supplied by local subcontractors. The light
sources, laser heads, small parts, and small optics parts are purchased
from various sources. The Company performs system final integration,
testing, and quality control. For new product developments, the Company
designs and produces prototypes for evaluation and product improvement.
For medical lasers, the Company currently has leased an assembly facility
in Panama, the ZPED (a free zone in Colon), where laser systems are
integrated, tested, and packed for delivery to customers. There is no
import duty for goods imported to ZPED when they are intended for export.
The Company believes that the ZPED facility is beneficial for the Company
in terms of labor cost, customs duty, and regulatory requirements for its
international market.
The Company has plans to establish a "good manufacturing production" (GMP)
environment to meet the US Federal and State regulations in the future.
Prior to the GMP environment, the Company needs to assemble its products
outside the country. In addition to the ZPED facility, the Company is
seeking other manufacturing facilities in the United Kingdom, Taiwan and
European countries to explore its market in Asia and Europe.
Facilities
The Company leases headquarters space comprising approximate 4,200 square
feet of office and new product development space at 12001 Science Drive,
Suite 140, Orlando, FL 32826. For Laser Centers, the Company currently
operates one Laser Vision Correction Center and three Mobile Cosmetic Laser
Centers in Florida.
The Plantation Laser Eye Center has a leased space of approximately 5,200
square feet at 7900 Peters Road, Suite B-101, Plantation, FL 33324. The
total rental fee paid by the Company in both Orlando and Plantation offices
is about $11,000. For the mobile cosmetic lasers, the Company has three
vans that deliver the lasers to the clinic locations. The Company also has
a maintenance facility in Beijing, PRC owned by its contractor who supplies
the spare parts and gas tanks for the Company's users in China.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company was incorporated in the State of Delaware in September, 1998 to
purchase the assets of a Laser Eye Laser at Plantation, Florida and signed
an agreement to sub-lease one Excimer laser system from LCA Visions, Inc.
The Plantation Vision Center has two full time employees and has more 30
ophthalmologists performing the surgeries. Dr. Raymond Gailitis was
appointed as the Medical Director of the Center in Plantation, Florida.
In March, 1999 the Company acquired all shares, technologies, assets and
business of Photon Data, Inc. ("PDI"), a Florida company, by a stock swap
of issuing 8,145,000 shares of the Company's common shares to the
shareholders of PDI.
In March, 1999, the Company acquired all shares of Advanced Marketing
Technology, Inc. ("AMTI") a Florida company by issuing 1,180,000 common
stocks, which will to be delivered, based on some performance criteria. Mr.
Paul Miano, the president of AMTI, was appointed as Vice President of
Cosmetic Laser Centers and Board Member of the Company. As of August, 1999,
only 20% of these shares were delivered to the shareholders of AMTI and the
remaining 80% are escrow by the Company until AMTI meets certain
performance.
In March, 1999, the Company acquired EMX, Inc. ("EMX"), a Florida company,
by issuing 115,000 common shares, where 80,000 shares were delivered at the
closing. 20,000 shares are being held in escrow and will be delivered to
EMX based upon their ability to meet certain performance criteria and
15,000 shares are reserved for the key employees of EMX. After the
acquisition, Mr. Timothy Arion, the president and sole owner of EMX, Inc.
was appointed as the Vice President of Infrared Systems and to the Board of
Directors.
In March, 1999 the Company entered into a 15 year Agreement for the
exclusive licensing rights for all medical applications using a new
infrared laser with GAM Associates, Inc. ("GAM"), a Florida company. In
exchange of these exclusive licensing rights, the Company agreed to issue
50,000 shares of the Company Common Stocks to Gordon Murray, the owner of
GAM.
On March 31, 1999, the Company entered into a merger agreement with MAS
Acquisition III Corp. As result of the Agreement, the Company has merged
into MAS Acquisition III and MAS Acquisition III has changed its name to
SurgiLight, Inc. See the Company's SEC filing 14f-1 filed in March, 1999
for greater detail.
On December 28, 1999 the Board of Directors approved the spin-off AMTI and
EMX (effective January 1, 2000) in order to focus its business on the core
technology of vision lasers. Pursuant to the Agreements, the Company will
still obtain 45% of the net profit generated from AMTI for unlimited years,
and 15% of the gross profit from EMX up to an amount of $300,000 in three
years. The Company also has the option to re-acquire the business of AMTI
and EMX in the future.
In July, 2000, the Company concluded a Joint Venture Agreement with MicraUS
to assemble and obtain the CE-mark approval in the United Kingdom.
The Company's stock was 2 for 1 forward split effective on January 27,
2000. As of March 30, 2000 the Company has a total outstanding and issued
(post-split) shares of 21,490,000 shares including the reserved 164,000
stocks.
In July, 2000, the Company announced that it had confirmed a $3 million
investment by the United Kingdom-based firm, Global Emerging Markets, Inc.
GEM is an investment group specializing in private equity investments, has
entered into a commitment with the Company to fund additional capital of $3
million under a convertible debenture and warranty the purchase Agreement.
A copy of the Agreement is attached in the Exhibits. GEM sources its
investments from its three operating offices based in New York, London and
Beijing and specialize in opportunities offered by selected emerging
technologies and economies on a global basis. GEM's activities are based on
a thorough knowledge and understanding of market conditions on both the
macro and micro level. Since March, 2000 the Company has raised a total of
$4.2 million, which includes $1.2 million from an accredited investor and
the $3 Million from GEM.
The Company has recently signed a Purchase and Sale Agreement with Premier
Laser Systems, Inc., which is subject to a binding process in a Bankruptcy.
Court.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
The Company's Common Stock $0.001 par value (Common Stock) is traded on
OTC:BB under the symbol "SRGL". The following chart sets forth the high
and low closing price for the Common Stock during the indicated periods.
Note all prices have been adjusted for 2 for 1 forward split effective date
1/27/00.
High Low
4-th Quarter of 1999 11.00 2.25
first Quarter of 2000 25.50 10.50
second quarter of 2000 10.375 5.75
third quarter of 2000 10.625 5.75
The Company's stock started to trade on OTCBB on November 1, 1999 and was
split on January 27, 2000. The foregoing quotations represent prices
between dealers and do not include retail mark up, mark down, or commission
and may not necessarily represent actual transactions. As of March 30, 2000
approximate 1,400 persons and entities held the Common Stock of record,
including significant amounts of stock held in "street name."
EXECUTIVE COMPENSATION
Name and Principal Position Annual Salary
---------------------------- --------------------
1999 2000
------ ------
J. T. Lin, Chairman, President & CEO $105,000 $120,000
Timothy Shea, Senior VP and COO * $ 65,000
Rachel Siu, CFO * $ 20,760
M. Y. Hwang, V.P. of R&D $ 63,000 $ 63,000
Richard L. Reffner, V.P. of Laser Centers $ 51,000 $ 51,000
____________
* Employment starts in 2000.
Board Compensation
We reimburse Board Directors for their reasonable expenses associated with
attending meetings of the Board of Directors and a fixed cash compensation
of $200 for each meeting for those of the Board Directors who attend the
Board meetings. In addition, each Board Directors will receive an stock
option of 4,000 shares for each of their 12-month service, where the stock
option price is defined by the fair market price at the time options are
granted and approved by the Stock Option Committee.
Employment Agreements and Bonus Compensation
In October, 1999 the Company entered into an agreement with the Chief
Executive Officer, President and Chairman of the Board, at an initial
annual base salary of $120,000. If the Company terminates Dr. Lin's
employment without cause, as defined in the agreement, he is entitled to
receive a lump sum payment equal to 12 months of his current base salary
and an amount payable monthly for 12 months equal to 30 % of his current
base salary. Additional compensation in Common Stock Options and cash bonus
of 15% of the gross royalty collected will be paid to Dr. Lin for his
contributions in patented technologies and the royalty income generated
from these technologies. The Company also agreed to pay Mr. And Mrs.
Richard Reffner, VP of Laser Centers, a bonus of 2% the net profit
generated from the Plantation Eye Center. In January, 2000 the Company also
entered into an employment agreement with Mr. Timothy Shea. As a part of
this agreement Mr. Shea is to receive bonuses of up to 3% of the pre-tax
net profit generated from the EX-308 system for two years (2000-2001). Each
of the Company's officers have executed a two to five year employment
agreements and all of the Company key employees had agreed a five-year non-
competing agreements. The Company's officers also agreed the "lock-up"
agreements for their 144 restricted Common Stocks.
2000 Stock Option Plan
In December, 1999 the Company approved an aggregate of 164,000 shares of
the Company's Common Stock reserved for issuance pursuant to the 2000 Stock
Option Plan and for shared to be issued for the Company's employees and
consultants. The Stock Option Plan Committee has approved the terms and
distribution of these shares. The exercise price for this option will be
the fair market price at the time the option is granted. No stock options
were awarded in 1999. There were no unregistered securities sold by the
Company within the last 3 years.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
In January, 2000 the Company terminated its independent accountant Rachel
Siu, CPA (who performed the auditing for the Company in 1997 and 1998). The
Company engaged PARKS, TSCHOPP, WHITCOMB AND ORR, P.A. as its new principal
accountant to audit its financial effective February, 2000. There were no
disagreements with the former accountant on any matter of accounting
principle or practices, financial statement disclosure, or auditing scope
or procedure. The decision to change accountants was recommended and
approved by the Company's Board of Directors.
LEGAL MATTER
The Business Law Group, 205 E. Central Blvd., Suite 601, Orlando, FL 32801,
has rendered their opinion that the Common Stock registered pursuant to
this Prospectus will, when sold, be legally issued, validly issued, fully
paid and non-assessable shares of the Company.
WHERE YOU CAN FIND MORE INFORMATION
Prospective investors may direct questions to the officers of the Company
with respect to the Offering and may obtain additional information from the
Company's SEC filings including the 14f, 15c, 10K and quarterly reports.
Prospective investors may direct questions to the officers of the Company
with respect to the Offering or the proposed business of the Company and
may obtain additional information, to the extent the Company possesses such
information or can acquire it without unreasonable effort or expense, as
may be necessary to verify the accuracy of the information furnished in
this Prospectus. Any document relating to the company in the possession of
the Company or which may be obtained without unreasonable effort, may be
inspected at the office of the Company by any prospective investor or his
advisor upon advance notice.
CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
SURGILIGHT, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report F-1
Consolidated Balance Sheets as of December 31, 1999, 1998
June 30, 2000 F-2
Consolidated Statements of Operations for the Years
Ended December 31, 1999, 1998, June 30, 2000, 1999 F-3
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and June 30, 2000, 1999 F-4
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1999, 1998, and June 30, 2000 F-5
Notes to Consolidated Financial Statements F-6
PARKS, TSCHOPP, WHITCOMB & ORR
Certified Public Accountants
2600 Maitland Center Parkway
Suite 330
Maitland, Florida 32751
Telephone: 407 875-2760
Fax: 407 875-2762
Independent Auditors' Report
To the Board of Directors and Stockholders of SurgiLight, Inc. We have
audited the accompanying consolidated balance sheet of SurgiLight,
Inc. and subsidiaries as of December 31, 1999, and the related consolidated
statements of operations, stockholders' equity and cash flows for the year
then ended. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit. The
accompanying 1998 and 1997 financial statements of SurgiLight, Inc.
(formerly known as Photon Data, Inc.) were audited by other auditors whose
report dated February 28, 1999 expressed an unqualified opinion on those
statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standard require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
SurgiLight, Inc. and subsidiaries as of December 31, 1999, and the results
of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/ Thomas Tschopp
March 10,2000
Maitland, Florida
F-l
SURGILIGHT, INC.
BALANCE SHEET
DECEMBER 31, 1999, 1998 and June 30, 2000
ASSETS
Current Assets: 1999 1998 6/30/00
Cash $577,594 $ 38,336 $ 1,203,000
accounts receivable 347,676 141,829 700,000
Inventories (note 3) 837,489 757,792 1,193,000
Other Current Assets 20,000 - 325,000
--------- --------- ---------
Total currents assets 1,782,759 937,957 3,421,000
--------- --------- ---------
Property and equipment,
net (note 4) 1,613,626 1,009,380 1,052,000
Other assets:
Deposit (note 5) 27,366 102,671 -
Other Assets - - 127,000
Intangible Assets,
Net 137,258 150,027 127,000
--------- ---------- ---------
Total Assets $ 3,561,009 2,200,035 $ 4,727,000
========== ========== =========
Liabilities and Stockholders Equity
Current liabilities:
Accounts payable $ 309,025 74,190 296,000
Accrued Interest 22,493 19,938 20,000
Current portion of
long-term debt
(note 6) 156,132 102,500 105,000
Loans from shareholders
(note 8) 26,000 231,000 -
--------- --------- ---------
Total current
Liabilities 513,650 427,628 421,000
--------- --------- ---------
Long-term debt less
current installments
(note 6) 146,132 - 66,000
--------- --------- ---------
Total liabilities 659,782 427,628 487,000
Stockholders' equity:
Common stock 1,140 4,048,301 22,000
Additional paid in
capital 5,110,276 - 6,334,000
Retained earnings (2,210,189) (2,275,894) (2,116,000)
---------- ---------- ---------
Total stockholders' equity 2,901,227 1,772,407 4,240,000
---------- ---------- ---------
Total liabilities
and stockholders
equity $ 3,561,009 2,200,035 4,727,000
=========== ========== =========
F-2
See accompanying note to financial statements.
SURGILIGHT, INC.
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999, 1998, and June 30, 2000, 1999
Year Ending Year Ending 6 Months Ending June
1999 1998 2000 1999
Sales $ 2,858,089 842,005 1,776,000 1,434,000
Cost of Sales 1,118,344 238,419 772,000 548,000
--------- --------- -------- --------
Gross profit 1,739,745 603,586 1,004,000 886,000
General and
Administrative
expenses 1,670,478 750,519 976,000 774,000
--------- --------- -------- --------
Operating income
(loss) 69,267 (146,933) 28,000 112,000
Other income/expenses
Interest income 13,971 3,375 16,000 6,000
Interest expense (17,533) (10,785) (32,000) (6,000)
---------- --------- -------- --------
Net income (loss)
before income
taxes 65,705 (154,343) 12,000 112,000
Income tax expense
(note 7) - - - -
Net income (loss) $65,705 (154,343) 12,000 112,000
========= ========= ========= ========
Net Income (loss)
Per share $ 0.01 (0.24) 0.001 0.01
========= ========= ========= ========
Weighted average
number of shares
outstanding 10,395,724 623,630 21,341,000 10,129,000
========= ========== ========== =========
F-3
See accompanying notes to financial statements.
SURGILIGHT, INC.
STATEMENT OF CASH FLOWS
YEARS ENEDED DECEMBER 31, 1999, 1998, and June 30, 2000, 1999
Year Ended Year Ended 6 Month Ending June
1999 1998 2000 1999
Cash flows from
Operating activities:
Net income (loss) $65,705 (154,353) 12,000 112,000
Adjustments to reconcile
net operating (loss) to net
cash provided by (used in)
operating activities:
Depreciation 244,139 125,574 84,000 105,000
Amoritization 12,769 13,357 7,000 7,000
Loss on disposal of
Equipment 16,629 - - -
Increase (decrease) in:
Receivables (205,847) (141,829) (209,000) (65,000)
Inventories (79,697) 437,581 6,000 (171,000)
Other assets (20,000) - - -
Deposits 75,305 (100,000)
Accounts payable 234,835 (16,518) 3,000 17,000
Accrued interest 2,555 (32,997) - -
Loans receivable - - (155,000) 15,000
-------- -------- -------- --------
Net cash provided
by (used in)
operating
activities 346,393 130,825 (252,000) (20,000)
-------- -------- -------- --------
Cash flows from investing
activities:
Purchases of equipment (554,343) (620,982) (92,000) -
Purchase of investment - - (150,000) -
-------- -------- -------- --------
(554,343) (620,982) (242,000) -
Cash flows from financing
activities:
Proceeds from long-term
debt 223,961 15,000 - -
Repayment of long-term
debt (24,197) (948,251) (103,000) (13,000)
Loans from shareholders (205,000) 231,000 (26,000) (57,000)
proceeds from sale of
stock 789,482 1,149,853 1,247,000 430,000
Stock issuance cost (37,038) - - -
-------- -------- -------- -------
Net cash provided
by financing
activities 747,208 447,602 1,118,000 360,000
--------- -------- --------- -------
Net increase (decrease)
in cash 539,250 (42,555) 624,000 389,000
Cash, beginning of year or
Period 38,336 80,891 579,000 152,000
-------- -------- -------- --------
Cash, end of period $ 577,594 38,336 1,203,000 532,000
========= ======== ========= =======
F-4
See accompanying notes to financial statements.
SURGILIGHT, INC.
STATEMENT OF STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998, and June 30, 2000
Additional Total
Common Paid-in Accumulated
Stockholder's
Shares Stock Capital Deficit Equity
Balances at
12/31/97 623,630 2,898,448 - (2,121,551) 776,897
Net loss - - - (154,343) (154,343)
Capital con-
tributions - 1,149,853 - - 1,149,853
---------- ---------- ---------- ----------- -----------
Balances at
12/31/98 623,630 4,048,301 - (2,275,894) 1,772,407
Recapitalization,
including impact of
reversal
acquisition 1,105,670 (4,048,128) 4,048,128 - -
Acquire/SLI 8,145,000 815 193,655 - 194,470
Acquire/AMTI 1,180,000 118 93,393 - 93,511
Acquire/EMX 115,000 11 22,656 - 22,667
Sale of Common
stock thru
private
placement 230,700 23 494,977 - 495,000
Stock Issuance
Costs - - (37,038) - (37,038)
Common stock
subscribed - - 294,505 - 294,505
Net income - - - 65,705 65,705
---------- ---------- ------------ ---------- ---------
Balances at
12/31/99 11,400,000 $ 1,140 5,110,276 (2,210,189) 2,901,227
Sale of
Common Stock
Thru private
Placement, net - 22,000 1,202,000 - 1,224,000
Net income - - - 12,000 12,000
Balances at
6/30/00 21,490,000 $ 22,000 6,334,000 (2,116,000 4,240,000
========== ========== ============ ========== =========
F-5
See accompanying notes to financial statements.
SURGILIGHT, INC.
Notes to Financial Statements
Years ended December 31, 1999, 1998 and 1997
(1) Organization and Summary of Significant Accounting Policies
(a) Organization
SurgiLight, Inc. (SLI or the Company) and its wholly-owned subsidiaries
develop, manufacturer and sell ophthalmic lasers and related products
primarily for use in photorefractive keratectomy (PRK) and laser in-situ
keratomileusis (LASIK) procedures. The Company also operates a laser
vision correction center in Plantation, Florida.
MAS Acquisition Corp. was incorporated in Delaware on July 31, 1996.
SurgiLight, Inc. (formerly known as Photon Data, Inc.) was incorporated
under the laws of the State of Florida in October 1998.
On March 31, 1999, SLI agreed to exchange shares with MAS Acquisition
Corp., a Delaware public company. Accordingly, SLI exchanged 10,394,330
shares of the company stock for 10,394,330 shares of MAS Acquisition Corp.
stock in a business combination accounted for as a reverse acquisition.
During the period MAS Acquisition Corp. was in existence, prior to the
reverse acquisition, its only activity was to raise equity capital. For
accounting purposes, the reverse acquisition is reflected as if SLI issued
its stock (10,394,330 shares) for the net assets of MAS Acquisition Corp.
The nets assets of MAS Acquisition Corp. adjusted in connection with the
reverse acquisition since they were monetary in nature. Coincident with
the reverse acquisition, MAS changed its name to SurgiLight, Inc.
(b) Basis of Presentation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant inter-company balances and
transactions have been eliminated in consolidation.
(c) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements. Estimates also affect the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
(d) Cash and Cash Equivalents
For financial reporting purposes, the Company considers short-term, highly
liquid investments with original maturities of three months or less to be
cash equivalents.
(e) Marketable Securities
The Company classifies all of its marketable securities as available-for-
sale. Available-for-sale securities are carried at fair value, with the
unrealized gains and losses, net of income taxes, reported as a component
of stockholders' equity.
(f) Credit Risks
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade accounts and
notes receivable. The Company sells its products to customers, at times
extending credit for such sales. Exposure to losses on receivable is
principally dependent on each customer's financial condition and their
ability to generate revenue from the Company's products. The Company
monitors its exposure for credit losses and maintains allowances for
anticipated losses.
(g) Income Taxes
The Company recognizes deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the
consolidated financial statements or tax returns. Deferred tax liabilities
and assets are determined based on the differences between the financial
statement and tax bases of assets and liabilities using enacted tax rates
in effect for the year in which the differences are expected to reverse.
(h) Inventory
Inventory, which consists primarily of laser systems parts and components,
is stated at the lower of cost or market. Cost is determined using the
first-in first-out method.
(i) Property and Equipment
Property and equipment are stated at cost. Furniture and equipment are
depreciated using the straight-line method over the estimated lives (three
to seven years) of the assets. Leasehold improvements are amortized on a
straight-line basis over the shorter of the lease term of the useful life
of the asset. Such depreciation and amortization is included in other
general and administrative expenses on the consolidated statements of
operations.
(j) Goodwill
Goodwill represents the excess of cost over the fair value of net assets
acquired and is amortized on a straight-line basis over estimated useful
lives up to 20 years. Management evaluates the carrying value of goodwill
using projected future undiscounted operating cash flows of the acquired
businesses.
(k) Research and Development
Research and development costs are charged to operations in the year
incurred. The cost of certain equipment used in research and development
activities which have alternative uses is capitalized as equipment and
depreciated using the straight-line method over the estimated lives (five
to seven years) of the assets.
(l) Product Warranty Costs
Estimated future warranty obligations related to the Company's products,
typically for a period of one year, are provided by charges to operations
in the period in which the related revenue is recognized.
(m) Extended Service Contracts
The Company sells product service contracts covering periods beyond the
initial warranty period. Revenues from the sale of such contracts are
deferred and amortized on a straight-line basis over the life of the
contracts. Service contract costs are charged to operations as
incurred.
(n) Revenue Recognition
The Company recognizes revenue from the sale of its products in the period
that the products are shipped to the customers.
Royalty revenues from the license of patents owned are recognized in the
period earned.
Service revenues from consulting clients are recognized in the period that
the services are provided.
(o) Cost of Revenues
Cost of revenues consist of product cost and cost of services. Product
cost relates to the cost from the sale of its product in the period that
the products are shipped to the customers.
Cost of services consists of the costs related to servicing consulting
clients, managing an ophthalmic practice and an ambulatory surgery center
and provider payments. Provider payments consist of benefit claims and
capitation payments made to providers.
(p) Loss per Share
Basic loss per common share is computed using the weighted average number
of common shares and contingently issuable shares (to the extent that all
necessary contingencies have been satisfied), if dilutive. Diluted loss
per common share is computed using the weighted average number of common
shares, contingently issuable shares, and common share equivalents
outstanding during each period. Common share equivalents include options,
warrants to purchase common stock, and convertible preferred stock and are
included in the computation using the treasury stock method if they would
have a dilutive effect. Diluted loss per share for the years ended
December 31, 1999, 1998 and 1997 is the same as basic loss per share.
(q) Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed
Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying
amount of an asset to the future undiscounted net cash flows expected to be
generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value
less costs to sell.
(r) Stock Option Plans
The Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation", which permits entities to recognize as expense over the
vesting period the fair value of all stock-based awards on the date of
grant. Alternatively, SFAS No. 123 allows entities to continue to apply
the provisions of APB Opinion No. 25 and provide pro forma net income and
pro forma earnings per share disclosures for employees stock option grants
made in 1995 and future years as if the fair-valued based method defined
in SFAS No. 123 had been applied. The Company has elected to continue to
apply the provisions of APB Opinion No. 25 and provide the pro forma
disclosure pursuant to the provisions of SFAS No. 123.
(s) Comprehensive Income
The Company adopted the provisions of SFAS No. 130, "Reporting
Comprehensive Income", on January 1, 1998. SFAS No. 130 requires companies
to classify items defined as "other comprehensive income" by their nature
in a financial statement and to display the accumulated balance of other
comprehensive income separately from retained earnings and additional
paid-in-capital in the equity section of the consolidated balance sheet.
(t) Operating Segments
The Company adopted the provisions of SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information", on December 31, 1998.
SFAS No. 131 requires companies to report financial and descriptive
information about its reportable operating segments. Operating segments
are components of an enterprise for which separate financial information
is available that is evaluated regularly by the chief operating decision
maker in assessing performance. This statement also requires that public
companies report certain information about their products and services,
the geographic areas in which they operate and their major customers.
(u) Foreign Currency Translations
Translation gains and losses that arise from exchange rate fluctuations
on transactions denominated in a currency other than U.S. dollars are
included in the results of operations as incurred.
(2) Acquisitions
Photon Data, Inc., Inc.
In February 1999, the Company acquired 100% of the stock of Photon Data,
Inc. in exchange for 8,145,000 shares of the Company's common stock.
The value of the acquisition was $194,470. SurgiLight, Inc. owned and
operated the laser vision correction center located in Plantation,
Florida. The acquisition was accounted for using the purchase method.
Accordingly, SurgiLight's results of operations are included in the
Company's consolidated financial statements subsequent to the acquisition
date.
AMTI
In March 1999, the Company acquired 100% of the stock of Advanced Marketing
Technologies, Inc. (AMTI) in exchange for 1,180,000 shares of the Company's
common stock. The value of the acquisition was $93,511. The acquisition
was accounted for using the purchase method. Accordingly, AMTI's results
of operations are included in the Company's consolidated financial
statements subsequent to the acquisition date.
EMX
In March 1999, the Company acquired 100% of the stock of EMX, Inc. in
exchange for 115,000 shares of the Company's common stock. The value
of the acquisition was $22,667. The acquisition was accounted for using
the purchase method. Accordingly, EMX's results of operations are
included in the Company's consolidated financial statements subsequent
to the acquisition date.
(3) Inventories
The components of inventories at December 31, 1999 and 1998 are
summarized as follows:
1999 1998
Raw materials $ 554,489 $ 225,392
Finished goods 190,000 487,400
Test equipment-clinical Trials 105,000 45,000
--------- ---------
$ 837,489 757,792
========= =========
As of December 31, 1999, the Company had two laser systems being used
under arrangements for clinical trials in various countries.
At December 31, 1998, one laser system was in use under similar
arrangements.
(4) Property and Equipment
Property and equipment at December 31, 1999 and 1998 are as follows:
1999 1998
Laser equipment in remote locations $ 1,553,225 $ 1,146,860
Laser equipment 238,189 -
Furniture and equipment 72,527 25,836
Laboratory equipment 146,735 9,327
Vehicles 16,961 -
----------- ----------
2,027,637 1,182,023
Less accumulated depreciation 414,011 172,643
----------- ----------
$ 1,613,626 1,009,380
=========== ==========
(5) Other Assets
The Federal Food and Drug Administration (FDA) requires that all lasers
must receive FDA approval before they can be used in the United States.
The Company has not yet received this certification. Consequently, all
systems produced in the United States by the Company prior to September,
1997 were surrendered to the FDA.
In December 1998, the Company entered into a Consent Decree with the FDA
to post a bond in the amount of $100,000 to secure the destruction of the
laser devices and compliance with regulations. In addition, the Company
deposited $100,000 into an escrow account to be maintained for a period
of five years. The escrow funds will be returned to the Company after
that time if no violations of the Federal Food, Drug & Cosmetic Act occur
during the five years. The bond was returned during 1999 and the escrow
account is included in deposits and other assets in the accompanying
balance sheet. In order to sell their products, the Company started a
plant in Panama to assemble laser systems in late 1997.
(6) Notes Payable
Notes payable consist of the following at December 31, 1999 and 1998:
1999 1998
Notes payable to individual,
bearing interest at 8% to 12%,
due in demand $ 102,500 $ 102,500
Notes payable to finance company,
due in monthly payments of
$838 including interest at
13% through December 2000.
Collateralized by vehicles. 8,639 -
Notes payable to equipment
finance company, due in
monthly installments of $2,412
including interest at 15%
through January 2002. 53,217 -
Notes payable to equipment
finance company, due in
monthly installments of
2,788, including interest at
10% through 2005.
Collateralized by laser equipment. 134,008 -
Other 3,900 -
--------- ---------
Total long-term debt 302,264 102,500
Less current portion 156,132 102,500
--------- ----------
Long-term debt, less current portion $ 146,132 $ -
========== =========
(7) Income Taxes
Income tax expense (benefit) attributable to income from continuing
operations differed from the amount computed by applying the U.S. federal
income tax rate of 34% to income (loss) from continuing operations before
income taxes primarily as a result of utilization of a net operating loss
carry forward, and changes in the valuation allowance.
The Company has available net operating loss carry forwards totaling
approximately $150,000 which expire in the year 2012.
Realization of deferred tax assets is dependent upon generating
sufficient taxable income prior to their expiration. Management believes
that there is a risk that certain of these deferred tax assets
may expire unused and, accordingly, has established a valuation allowance
against them.
(8) Related Party Transactions
At December 31, 1999, the Company was indebted to one of its controlling
shareholders in the amount of $126,000. These notes are non interest
bearing and are due on demand.
(9) Net Income Per Share
Net income per share is based on the weighted average shares outstanding
of 10,395,724, 623,630 and 623,630 at December 31, 1999, 1998 and 1997,
respectively.
(10) Segment Information
The following table presents the Company's technology related net
revenues and assets by geographic area for the years ended December 31,
1999 and 1998. The individual countries shown generated net revenues of
at least ten percent of the total segment net revenues for at least one
of the years presented.
1999 1998 1997
Geographic area:
Revenue:
China $ 543,000 780,000 980,000
Venezuela 42,000 60,000 60,000
1999 1998
Assets:
China $ 1,259,000 1,006,680
Venezuela 130,000 80,000
Panama 190,000 40,000
Japan 140,000 340,000
(11) Commitments and Contingencies
Lease Obligations
The Company leases office space and certain equipment under operating
lease arrangements.
Future minimum payments under non-cancelable operating leases, with
initial or remaining terms in excess of one year, as of December 31,
1999, are approximated as follows:
2000 $ 57,448
2001 59,172
2002 60,947
2003 62,775
2004 64,658
Thereafter 66,592
Rent expense during 1999, 1998 and 1997 was $86,185, $28,809 and 30,231,
respectively.
(12) Subsequent Event
Stock Split
In January 2000, the Company effected a 2 for 1 stock split for
shareholders of record as of January 25, 2000.
Adjustments
In February, 2000 the Company discovered that it had improperly
consolidated the acquired companies (AMT and EMX) mentioned in Note 2 by
including in the Company's financial statement the results of operations
of the acquired companies for the entire year. Therefore, a fourth
quarter adjustment has been made to correct the reporting of the
acquired companies and to include their results of operations from the
date of acquisition. The result of this adjustment was to decrease
revenue by approximately $ 100,000. The earlier announced un-audited
results included the first quarter results of AMTI and EMX.
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company reincorporated in Delaware in September, 1998, in part, to take
advantage of certain provisions in Delaware's corporate law relating to
limitations on liability of corporate officers and directors. The Company
believes that the re-incorporation into Delaware, the provisions of its
Certificate of Incorporation and Bylaws and the separate indemnification
agreements outlined below are necessary to attract and retain qualified
persons as directors and officers. The Company's Certificate of
Incorporation limits the liability of directors to the maximum extent
permitted by Delaware law. This provision is intended to allow the
Company's directors the benefit of Delaware General Corporation Law which
provides that directors of Delaware corporations may be relieved of
monetary liabilities for breach of their fiduciary duties as directors,
except under certain circumstances, including breach of their duty of
loyalty, acts or omissions not in good faith or involving intentional
misconduct or a knowing violation of law, unlawful payments of dividends or
unlawful stock repurchases or redemption or any transaction from which the
director derived an improper personal benefit. The Company's Bylaws
provide that the Company shall indemnify its officers and directors to the
fullest extent provided by Delaware law.
The Bylaws authorized the use of indemnification agreements and the Company
has entered
into such agreements with each of its directors and executive officers.
ORGANIZATION WITHIN LAST FIVE YEARS
Photon Data, Inc. (PDI) was incorporated in the state of Florida in 1994.
Advanced Marketing Technolgies, Inc. (AMTI) in the State of Florida.in
1998. SurgiLight, Inc. was incorporated in the State of Delaware in 1998.
In March, 1999, SurgiLight, Inc. acquired PDI, AMTI and EMX, where AMTI and
EMX were spun off in Dec. 1999.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The Company will spend approximate $25,000 relating to the preparation
and legal council reviewing of this filing.
RECENT SALES OF UNREGISTERED SECURITIES:
None
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements of filing on Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned, in
the City of Orlando, State of Florida, on October 3, 2000
(Registrant)
/s/ J. T. Lin
------------------
J.T. Lin, Ph.D.
President & CEO
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the
capacities and on the dates stated:
SurgiLight, Inc.
Date: October 3, 2000
By: /s/ J. T. Lin
--------------------
J. T. Lin, Ph.D.
President, Chief Executive Officer, and Chairman of the Board Director
/s/ Timothy Shea
-----------------------
Timothy J. Shea, COO, Director And Secretary of the Board
/s/ Rachel Siu
------------------
Rachel Siu, CPA
Chief Financial Officer
/s/ Richard Reffner
------------------------
Richard Reffner, Director
/s/ Robert Clements
------------------------
Robert Clements
Director
/s/ Lee Chow
------------------
Director
/s/ J.S. Yuan
----------------
Director
Richard Ajayi
---------------------
Director
EHHIBITS
Exhibits listed below with an asterisk have been filed in the Company's 10K
and 10Q of 1999 and are incorporated herein by reference.
*1. Merger Agreement with Photon Data, Inc. (PDI)
*2. Merger Agreement with Adv. Market Technology, Inc.(AMTI)
*3. Merger Agreement with EMX, Inc.
*4. Merger Agreement with MAS Acquisition III
*5. Spin off Agreement with AMTI and EMX
(See 8-K filed on January 18, 2000)
6. Legal opinion of the Business Law Group
7. Letter of consent of independent auditors
8. Certificates of Incorporation
9. Bylaws
10. Agreement with Continental Capital & Equity Corp.
11. Agreement with GEM Global Yield Fund Limited
EXHIBIT 6. Legal opinion of the Business Law Group
SurgiLight, Inc.
Orlando, FL 32826
Dear Members of the Board of Directors:
You have asked us to provide you our legal opinion with regard to the
legality of certain securities of SurgiLight, Inc., (the "Company"),
covered by a Form SB-2 Registration Statement (the "Registration
Statement") to be filed with the Securities and Exchange Commission by the
Company in electronic form on or about October 2, 2000, for the purpose of
registering such securities under the Securities Act of 1933.
In connection with this opinion, we have examined the corporate records of
the Company, including the Certificate of Incorporation and Amendments
thereto, the By-laws, and the Minutes of the Board of Directors and
Shareholders meetings, the Registration Statement and such other documents
and records as we have deemed relevant in order to render this opinion. In
addition, the opinion expressed herein is limited to federal law and the
laws of the State of Delaware. In forming this opinion, we have relied
upon the documents submitted to us by the Company and the representations
made to us by its officers and directors.
Based upon the foregoing our opinion is as follows:
The Company is duly and validly organized and is validly existing and in
good standing under the laws of the State of Delaware.
The Registered Securities, when sold and issued in accordance with the
Registration Statement and the final prospectus thereunder, and for the
consideration therein referred to, will be legally issued, fully paid and
non-assessable.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement and further
consent to statements made therein regarding our office and the use of our
name under the heading of "Legal Matters" in the prospectus constituting a
part of such Registration Statement.
Very truly yours,
/S/ THE BUSINESS LAW GROUP
October 2, 2000
EXHIBIT 7. Letter of consent of independent auditors
The Board of Directors
SurgiLight, Inc.:
We consent to the use of our report dated March 10, 2000 in the
Registration Statement on Form SB-2 and related Prospectus of SurgiLight,
Inc., and to the reference to our firm under the heading "Experts" therein.
/S/ PARKS, TSCHOPP, WHITCOMB & ORR, P.A.
Maitland, Florida
September 28, 2000
EXHIBIT 8. Certificates of Incorporation
CERTIFICATE OF INCORPORATION
OF
SURGILIGHT INC
FIRST. The name of the corporation is SurgiLight, Inc.
SECOND. The address of the corporation's registered office in the State of
Delaware is 1209 Orange Street, City of Wilmington, County of New Castle,
Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD. The purpose of the corporation is to engage in any lawful activity
for which corporations may be organized under the General Corporation Law
of the State of Delaware.
FOURTH.
1. Authorized Stock. This corporation is authorized to issue the following
shares of capital stock:
(a) Common Stock. The aggregate number of shares of Common Stock
which the corporation shall have authority to issue is 100,000,000 with a
par value of $.0001 per share.
(b) Preferred Stock. The aggregate number of shares of Preferred Stock
which the corporation shall have authority to issue is 10,000,000 with a
par
value of $.0001 per share.
2. Description of Common Stock. Holders of Common Stock are entitled
to one vote for each share held of record on all matters submitted to a
vote of stockholders and may not cumulate their votes for the election of
Directors. Shares of Common Stock are not redeemable, do not have any
conversion or preemptive rights, and are not subject to further calls or
assessments once fully paid. Holders of Common Stock will be entitled to
share pro rata in such dividends and other distributions as may be declared
from time to time by the board of Directors out of funds legally available
therefore, subject to any prior rights accruing to any holders of preferred
stock of the Company. Upon liquidation or dissolution of the Company,
holders of shares of Common Stock will be entitled to share proportionally
in all assets available for distribution to such holders
3. Description of Preferred Stock. The terms, preferences, limitations and
relative rights of the Preferred Stock are as follows:
(a) The Board of Directors is expressly authorized at any time and from
time to time to provide for the issuance of shares of Preferred Stock in
one or more series, with such voting powers, full or limited, but not to
exceed one vote per share, or without voting powers, and with such
designations, preferences and relative participating, optional or other
special rights and qualifications, limitations or restrictions, as shall be
fixed and determined in the resolution or resolutions providing for the
issuance thereof adopted by the Board of Directors, and as are not stated
and expressed in this Certificate of Incorporation or any amendment hereto,
including (but without limiting the generality of the foregoing) the
following:
(i) the distinctive designation of such series and the number of
shares which shall constitute such series, which number may be increased
(but not above the total number of authorized shares of Preferred Stock
and, except where otherwise provided by the Board of Directors in creating
such series) or decreased (but not below the number of shares thereof then
outstanding) from time to time by resolution by the Board of Directors;
(ii) the rate of dividends payable on shares of such series, the times
of payment, whether dividends shall be cumulative, the conditions upon
which and the date from which such dividends shall be cumulative;
(iii) whether shares of such series can be redeemed, the time or times
when, and the price or prices at which shares of such series shall be
redeemable, the redemption price, terms and conditions of redemption, and
the sinking fund provisions, if any, for the purchase or redemption of such
shares;
(iv) the amount payable on shares of such series and the rights of
holders of such shares in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the corporation;
(v) the rights, if any, of the holders of shares of such series to convert
such shares into, or exchange such shares for, shares of Common Stock or
shares of any other class or series of Preferred Stock and the terms and
conditions of such conversion or exchange; and
(vi) the rights, if any, of the holders of shares of such series to vote.
(b) Except in respect of the relative rights and preferences that may
be provided by the Board of Directors as herein before provided, all shares
of Preferred Stock shall be of equal rank and shall be identical, and each
share of a series shall be identical in all respects with the other shares
of the same series
FIFTH. The names and mailing addresses of the persons who will serve as the
initial directors of the corporation, until the first annual meeting of
stockholders or until their successors are elected and qualified are:
Name Address
J.T. Lin 7055 University Blvd.
Winter Park, FL 32792
SIXTH. The corporation shall indemnify to the fullest extent permitted by
law any person made or threatened to be made a party to any action or
proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that he, his testator or intestate is or was a director,
officer or employee of the corporation or any predecessor of the
corporation or serves or served any other enterprise as a director, officer
or employee at the request of the corporation or any predecessor of the
corporation.
SEVENTH. To the fullest extent permitted by the General Corporation Law of
the State of Delaware as the same now exists or may hereafter be amended in
a manner more favorable to directors, a director of the Corporation shall
not be personally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director.
EIGHTH. The Board of Directors of the corporation is expressly authorized
to make, alter or repeal by-laws of the corporation, but the stockholders
may make additional by-laws and may alter or repeal any by-law whether
adopted by them or otherwise.
NINTH. The name of the incorporator of this corporation is J. T. Lin whose
address 7055 University Blvd., Winter Park, FL 32792.
I, J.T. Lin, being the incorporator, for the purpose of forming a
corporation under the laws of the State of Delaware, do hereby make, file
and record this Certificate of Incorporation, do certify that the facts
herein stated are true, and, accordingly, have hereto set my hand and seal
this 18th day of September, 1998.
/s/J. T. Lin, Incorporator
SurgiLight, Inc.
7055 University Blvd.
Winter Park. PL 32792
NOT:
Amendment of Article of Incorporation was filed by 14c-101 attached below.
Company Name: SURGILIGHT INC Ticker Symbol: SRGL
SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities
Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
{ } Preliminary Information Statement { } Confidential, for Use of
the
Commission only (as permitted
by Rule 14c-5(d) (2)
{X} Definitive Information Statement
SURGILIGHT, INC.
(Name of Registrant as Specified in Charter)
Payment of Filing Fee (Check the appropriate box)
{X} No fee required.
{ } $125 per Exchange Act Rules 0-ll(c)l(ii), or 14c-5(g)
{ ) Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies;
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
{ } Fee paid previously with preliminary materials.
{ } Check box if any part of the fee is offset as provided by Exchange Act
Rule0-11 (a) (2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement:
(3) Filing Party:
(4) Date Filed:
SURGILIGHT, INC.
12001 Science Drive, Suite 140
Orlando, Florida 32826
INFORMATION STATEMENT
(Dated January 14, 2000)
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.THE AMENDMENT, DEFINED BELOW, HAS ALREADY BEEN APPROVED BY WRITTEN
CONSENT OFTHE SHAREHOLDERS HOLDING A MAJORITY OF THE COMPANY'S OUTSTANDING
SHARES OFCOMMON STOCK. A VOTE OF THE REMAINING STOCKHOLDERS IS NOT
NECESSARY.
GENERAL
This Information Statement is first being furnished on or about January 14,
2000, to holders of record of the common stock, $.0001 par value per share
("Common Stock"), of SurgiLight, Inc., a Delaware corporation (the
"Company"), in connection with the amendment (the "Amendment") of the
Company's Certificate of Incorporation, (the "Certificate of
Incorporation"), to increase the number of authorized shares of Common
Stock of the Company to 30,000,000 shares and to effect a two-for-one
forward split of the issued and outstanding shares of Common Stock.
The Board of Directors of the Company (the "Board") has approved, and the
shareholders owning a majority of the issued and outstanding shares of
Common Stock outstanding as of January 14, 2000, have consented in writing
to the Amendment. Such approval and consent are sufficient under Section
228 of the Delaware General Corporation Law and the Company's Bylaws to
approve the Amendment. Accordingly, the Amendment will not be submitted to
the other Company stockholders for a vote, and this Information Statement
is being furnished to stockholders solely to provide them with certain
information concerning the Amendment in accordance with the requirements of
Delaware law and the Securities Exchange Act of 1934, as amended, and the
regulations promulgated thereunder, including particularly Regulation 14C.
The Amendment will be effective as of January 25, 2000. The principal
executive offices of the Company are located at 12001 Science Drive, Suite
140, Orlando, Florida 32826, and the Company's telephone number is (407)
482-4555.
AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES
OF THE COMPANY AND
TO EFFECT A 2-FOR-1 FORWARD SPLIT
OF THE OUTSTANDING COMMON STOCK
The Board has approved the Amendment to increase the number of
authorized shares of Common Stock of the Company and to effect a two-for-
one forward split ("Forward Split") of the issued and outstanding shares of
Common Stock, par value $.0001 per share ("Existing Common"). A copy of the
Certificate of Amendment effecting the increase in shares and Forward
Split, in substantially the form to be filed with the Department of State
of Delaware, is provided below. The majority stockholders of the Company as
of January 14, 2000, the date of this Information Statement, have consented
to the increase in authorized shares and Forward Split and to the
Amendment, which is expected to become effective as of January 25, 2000
(the "Effective Date"). Pursuant to the Forward Split, each one share of
Existing Common
issued and outstanding immediately prior to the Effective Date will be
reclassified as, and exchanged for, two shares of newly issued Common
Stock, par value $.0001 ("New Common"). The Forward Split will not
materially affect the proportionate equity interest in the Company of any
holder of Existing Common or the relative rights, preferences, privileges
or priorities of any such stockholder. In addition, the approximately
82,000 shares issuable upon exercise of the Company's outstanding options,
and the exercise price per share, will be proportionately adjusted, and the
parvalue per share of the Common Stock will not be changed.
PURPOSE AND EFFECT OF THE FORWARD SPLIT
The primary purpose of the Forward Split is to increase the tradability
of the Company's Common Stock by increasing the number of shares
outstanding, thereby reducing the price per share at which the Common Stock
is trading. The Company does not anticipate any change in the Company's
status as a reporting company for federal securities law purposes as a
result of the Forward Split. The New Common issued pursuant to the Forward
Split will be fully paid and non-assessable. All shares of New Common will
have the same par value, voting rights and other rights as shares of the
Existing Common have. Stockholders of the Company do not have preemptive
rights to acquire additional shares of Common Stock that may be issued. The
Company has no definitive plans or commitments to issue additional shares
of Common Stock.
STOCK CERTIFICATES AND FRACTIONAL SHARES
The Forward Split will occur on the Effective Date without any further
action on the part of stockholders of the Company and without regard to the
date or dates on which certificates representing shares of Existing Common
actually are surrendered by each holder thereof for certificates
representing the number of shares of the New Common which each such
stockholder is entitled to receive as a consequence of the Forward Split.
After the Effective Date of the Forward Split, each certificate
representing shares of Existing Common will be deemed to represent two
shares of New Common. Certificates representing shares of New Common will
be issued in due course as old certificates are tendered for exchange or
transfer to Signature Stock Transfer, 14675 Midway Road, Suite 221, Dallas,
TX 75244, (the "Exchange Agent" or "Transfer Agent"), telephone number:
972-788-4193.
SOURCE OF FUNDS; NUMBER OF HOLDERS
The funds required to purchase the fractional shares are available and
will be paid from the current cash reserves of the Company. The Company
cannot predict with certainty the number of fractional shares or the total
amount that the Company will be required to pay for fractional share
interests. However, it is not anticipated that the funds necessary to
effect the cancellation of fractional shares will be material. As of
January 14, 2000, there were approximately 250 holders of record of
Existing Common. The Company does not anticipate that, as a result of the
Forward Split, the number of holders of record or beneficial owners of
Existing Common or New Common will change significantly
EXCHANGE OF STOCK CERTIFICATES
On or around the Effective Date, the Company will send to each
stockholder of record as of the Effective Date a transmittal form (the
"Transmittal Form") that each such stockholder of record should use to
transmit certificates representing shares of Existing Common ("Old
Certificates") to the Exchange Agent for exchange or transfer. The
Transmittal Form contains instructions for the surrender of Old
Certificates to the Exchange Agent in exchange for certificates
representing the appropriate number of whole shares in New Common. No new
certificates will be issued to a stockholder until such stockholder has
surrendered all Old Certificates together with a properly completed and
executed Transmittal Form to the Exchange Agent. Upon proper completion and
execution of the Transmittal Form and its return to the Exchange Agent
together with all of a stockholder's Old Certificates and/or an Affidavit
of Loss for any lost or destroyed certificates, as applicable, that
stockholder will receive a new certificate or certificates representing the
number of whole shares of New Common into which the shares of Common Stock
represented by the Old Certificates are being converted as a result of the
Forward Split. Until surrendered to the Exchange Agent,
Old Certificates retained by stockholders will be deemed for all purposes,
including voting and payment of dividends, if any, to represent the number
of whole shares of New Common to which such stockholders are entitled as a
result of the Reverse Split. Stockholders should not send their Old
Certificates to the Exchange Agent until after the Effective Date. Shares
of Existing Common surrendered after the Effective Date will be replaced by
certificates representing shares of New Common as soon as practicable after
such surrender. Certificates representing shares of Existing Common which
contain a restrictive legend will be exchanged for New Common with the same
restrictive legend. As applicable, the time period during which a
stockholder has held the Existing Common will be included in the time
period during which such stockholder actually holds the New Common received
in exchange for such Existing Common for the purposes of determining the
term of the restrictive period applicable to the New Common.
OPTIONS
The Company has outstanding various options to acquire up to an
aggregate of approximately 82,000 shares of Common Stock at various
exercise prices. The amount of Common Stock issuable pursuant to these
options will be increased to two times the previous amounts and the per
share exercise prices will be decreased accordingly.
FEDERAL INCOME TAX CONSEQUENCES
Except as described below with respect to cash received in lieu of
fractional share interests, the receipt of New Common in the Forward Split
should not result in any taxable gain or loss to stockholders for federal
income tax purposes. The tax basis of New Common received as a result of
the Forward Split (when added to the basis for any fractional share
interests to which a stockholder is entitled) will be equal, in the
aggregate, to the basis of the Existing Common exchanged for New Common.
The per share tax basis of the New Common is based on the tax basis of the
Existing Common for which the New Common is exchanged. For purposes of
determining whether short-term or long-term capital gains treatment will be
applied to a stockholder's disposition of New Common subsequent to the
Forward Split, a stockholder's holding period for the shares of Existing
Common will be included in the holding period for the New Common received
as a result of the Reverse Split. A stockholder who receives cash in lieu
of fractional shares of New Common will be treated as first
receiving such fractional shares and then receiving cash as payment in
exchange for such fractional shares of New Common and, except for dealers,
will recognize capital gain or loss in an amount equal to the difference
between the amount of cash received and the adjusted basis of such
fractional shares.
THE DISCUSSION SET FORTH ABOVE CONCERNING CERTAIN FEDERAL INCOME TAX
CONSEQUENCES OF THE FORWARD SPLIT IS INCLUDED HEREIN FOR GENERAL
INFORMATIONONLY. ALL STOCKHOLDERS ARE ADVISED TO CONSULT THEIR OWN TAX
ADVISORS AS TO ANY FEDERAL, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES
APPLICABLE TO THEM WHICH COULD RESULT FROM THE REVERSE SPLIT.
EFFECTIVENESS
The Company reserves the right, upon notice to stockholders, to abandon
or modify the proposed Amendment and the Forward Split at any time prior to
the filing of the Amendment upon consent of the Board and the holders of a
majority of the Existing Common then issued and outstanding.
APPROVAL REQUIRED
The approval of a majority of the outstanding stock entitled to vote
will be necessary to approve the proposed amendment. At the date of this
Information Statement, there were approximately 10,718,000 shares of Common
Stock outstanding. As discussed above, the Company's Board of Directors has
obtained written consents for the amendment to the Certificate of
Incorporation from stockholders owning approximately 7,432,000 shares voted
for the Amendment, representing approximately 69% of the votes of the
Company's outstanding stock. The Board of Directors does not intend to
solicit any proxies or consents from any other stockholders in connection
with the Amendment.
By Order of the Board of Directors,
J.T. Lin, President
Dated January 14, 2000
EXHIBIT A AMENDMENT TO CERTIFICATE OF INCORPORATION .
1. Section I (a) of the Fourth Article is amended as follows:
(a) COMMON STOCK. The aggregate number of shares of
Common Stock which the corporation shall have authority to issue is
30,000,000 with a par value of $.0001 per share.
2. Section 2 of the Fourth Article of the Certificate of
Incorporation is amended by adding the following paragraph at the end
thereof: Effective as of January 25, 2000 (the "Effective Date"), all
outstanding shares of Common Stock of the Corporation automatically
shall be subdivided at the rate of two-for-one (the "Forward Split")
without the necessity of any further action on the part of the holders
thereof or the Corporation, provided, however, that the Corporation
shall, through its transfer agent, exchange certificates representing
Common Stock outstanding immediately prior to the Effective Date of the
Forward Split (the "Existing Common") into new certificates representing
the appropriate number of shares of Common Stock resulting from the
subdivision ("New Common"). No fractional shares, but only whole shares of
New Common, shall be issued to any holder of any number of shares which,
when divided by two (2), does not result in a whole number. In lieu of
fractional shares, the Corporation has arranged for its transfer agent (the
"Exchange Agent") to remit payment therefor on the following terms and
conditions: The par value of the Common Stock shall remain as otherwise
provided in the Fourth Article of this Certificate of Incorporation and
shall not be modified as a result of the Forward Split. From and after the
Effective Date, the term "New Common" as used in this Fourth Article shall
mean Common Stock as provided in the Certificate of Incorporation.
EXHIBIT 9. Bylaws
BYLAWS
OF
SURGILIGHT, INC.
ARTICLE I
Shareholders
Section 1. Annual Meeting. The annual meeting of the Shareholders of
the Corporation shall be held at such place and at such time and date as
may be fixed by the Board of Directors. The annual meeting of Shareholders
for any year shall be held no later than thirteen (13) months after the
last preceding annual meeting of Shareholders. Business transacted at the
annual meeting shall include the election of directors of the Corporation.
Section 2. Special Meetings. Special meetings of the Shareholders of
the Corporation shall be held when directed by the President or the Board
of Directors. A meeting shall be called for a date not less than ten (10)
nor more than sixty (60) days after the written request setting forth the
purpose of the meeting is made. The call for the meeting shall be issued by
the Secretary unless the President or the Board of Directors requesting the
call of the meeting shall designate another person to do so.
Section 3. Place. Meetings of the Shareholders of the Corporation
may be held at any place designated by the Board of Directors and may be
held either within or without the State of Delaware.
Section 4. Notice. Written notice stating the place, day and hour of
the meeting and, in the case of a special meeting, the purpose or purposes
for which the meeting is called shall be delivered to each Shareholder of
record entitled to vote at such meeting not less than ten (10) nor more
than sixty (60) days before the date set for the meeting. Such notice shall
be delivered either personally or by first-class mail, by or at the
direction of the Secretary or the person calling the meeting. If mailed,
such notice shall be deemed to be delivered when deposited in the United
States mail addressed to the Shareholder at his address as it appears on
the stock transfer books of the Corporation, with postage thereon prepaid.
Section 5. Notice of Adjourned meetings. When a meeting is adjourned
to another time or place, it shall not be necessary to give any notice of
the adjourned meeting if the time and place to which the meeting is
adjourned are announced at the meeting at which the adjournment
is taken, and at the adjourned meeting any business may be transacted that
might have been transacted on the original date of the meeting. If the
adjournment is for more than thirty (30) days, or if, after the
adjournment, the Board of Directors fixes a new record date for the
adjourned meeting, then a notice of the adjourned meeting shall be given as
provided in the above Section 4 of these Bylaws to each Shareholder of
record of the new record date entitled to vote at such meeting.
Section 6. Closing of Transfer Books and Fixing Record Date.
(1) For the purpose of determining Shareholders entitled to notice of or to
vote at any meeting of Shareholders or any adjournment thereof, or entitled
to receive payment of any dividend, or in order to make the determination
of Shareholders for any other purpose, the Board of Directors of the
Corporation may provide that the stock transfer book shall be closed for a
stated period not to exceed, in any case, sixty (60) days. If the stock
transfer book shall be closed for the purpose of determining Shareholders
entitled to notice of, or to vote at, a meeting of Shareholders, such book
shall be closed for at least ten (10) days immediately preceding such
meeting.
(2) In lieu of closing the stock transfer' books, the Board of Directors
may fix in advance a date as the record date for any such determination of
Shareholders, such date in any case to be not more than sixty (60) days
and, in case of a meeting of Shareholders, not less than ten (10) days
prior to the date on which the particular action requiring such
determination of shares is to be taken.
(3) If the stock transfer books are not closed and no record date is fixed
for the determination of Shareholders entitled to notice of or to vote at a
meeting of Shareholders or Shareholders entitled to receive payment of a
dividend, the date on which notice of the meeting is mailed or the date on
which the resolution of the Board of Directors declaring such dividend is
adopted, as the case may be, shall be the record date for such
determination of Shareholders.
(4) When a determination of Shareholders entitled to vote at any meeting of
Shareholders has been made as provided in this section, such determination
shall apply to any adjournment thereof, unless the Board of Directors fixes
a new record date under this section for the adjourned meeting.
Section 7. Waiver of Notice. Whenever any notice is required to be
given to any Shareholder under the provisions of the Certificate of
Incorporation or Bylaws of the Corporation, a waiver thereof in
writing signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be equivalent to the giving
of such notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting
for the express purpose of objecting, at the beginning of the meeting, to
the transaction of any business because the meeting is not lawfully called
or convened. Neither the business to be transacted at, nor the purpose of,
any regular or special meeting of the Shareholders need be specified in any
written waiver of notice.
Section 8. Record of Shareholders Having Voting Rights.
(1) The officers or agents having charge of the stock transfer books or
shares of the Corporation shall make, at least ten (10) days before each
meeting of Shareholders, a complete list of the Shareholders entitled to
vote at such meeting or any adjournment thereof, with the address of and
the number and class and series, if any, of shares held by each. The list,
for a period of ten (10) days prior to such meeting, shall be kept on file
at the registered office of the Corporation, at the principal place of
business of the Corporation or at the office of the transfer agent or
registrar of the Corporation, and any Shareholder shall be entitled to
inspect the list at anytime during usual business hours. The list shall
also
be produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any Shareholder at any time during the
meeting.
(2) If the requirements of this section have not been substantially
complied with, the meeting on demand of any Shareholder in person or by
proxy shall be adjourned until the requirements are complied with. If no
such demand is made, failure to comply with the requirements of this
section shallnot affect the validity of any action taken at such meeting.
Section 9. Quorum.
(1) Except as otherwise provided herein, or by Statute, or in the
Certificate of Incorporation (such Certificate and any amendments thereof
being hereinafter collectively referred to as the "Certificate
of Incorporation"), at all meetings of Shareholders of the Corporation, the
presence at the commencement of such meetings in person or by proxy of
Shareholders holding of record a majority of the total number of
shares of the Corporation then issued and outstanding and entitled to vote,
but in no event less than one-third of the shares entitled to vote at the
meeting, shall be necessary and sufficient to constitute a quorum
for the transaction of any business. The withdrawal of any Shareholder
after the commencement of a meeting shall have no effect on the existence
of a quorum, after a quorum has been established at such meeting.
(2) Despite the absence of a quorum at any annual or special meeting of
Shareholders, the Shareholders, by a majority of the votes cast by the
holders of shares entitled to vote thereon, may SurgiLight, Inc.
adjourn the meeting. At any such adjourned meeting at which a quorum is
present, any business may be transacted at the meeting as originally called
if a quorum had been present.
Section 10. Voting of Shares.
(1) Every Shareholder having the right and entitled to vote at a meeting of
Shareholders shall be entitled upon each matter submitted to a vote at the
meeting of Shareholders to one (1) vote for each share of voting stock
recorded in his name on the books of the Corporation on the record date
fixed as provided in Section 6, or if no such record date was fixed, on the
date of the meeting.
(2) Treasury shares, shares of stock of the Corporation owned by another
corporation, the majority of the voting stock of which is owned or
controlled by the Corporation, and shares of stock of the corporation held
by it in a fiduciary capacity shall not be voted, directly or indirectly,
at any meeting, and shall not be counted in determining the total number of
outstanding shares at any given time.
(3) At each election of directors, every Shareholder entitled to vote at
such election shall have the right to vote, in person or by proxy, the
number of shares owned by him for as many persons as there are directors to
be elected at that time and for whose election he has a right to vote.
Cumulative voting is not allowed. All elections of directors shall be by
written ballot.
(4) Shares standing in the name of another corporation, domestic or
foreign, may be voted by the officer, agent or proxy designated by the
Bylaws of the corporate shareholder; or in the absence of any applicable
bylaw, by such person as the Board of Directors of the corporate
shareholder may designate. Proof of such designation may be made by
presentation of a certified copy of the Bylaws or other instrument of the
corporate shareholder. In the absence of any such designation, or in the
case of conflicting designation by the corporate shareholder, the chairman
of the board, president, any vice president, secretary or treasurer of the
corporate Shareholder shall be presumed to possess, in that order,
authority to vote such shares.
(5) Shares held by an administrator, executor, guardian, or conservator may
be voted by him, either in person or by proxy, without a transfer of such
shares into his name. Shares standing in the name of a trustee may be voted
by him, either in person or by proxy, but no trustee shall be entitled to
vote shares held by him without a transfer of such shares into his name.
(6) Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be
voted by such receiver without the transfer thereof into his name, if
authority to do so be contained in an appropriate order of the court by
which such receiver was appointed.
(7) A Shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee,
and thereafter the pledgee or his nominee shall be entitled to vote the
shares so transferred.
(8) On and after the date on which written notice of redemption of
redeemable shares has been mailed to the holders thereof and a sum
sufficient to redeem such shares has been deposited with a
bank or trust company with irrevocable instruction and authority to pay the
redemption price to the holders thereof upon surrender of certificates
therefor, such shares shall not be entitled to vote on any matter and
shall not be deemed to be outstanding shares.
Section 11. Proxies.
(1) Every Shareholder, or his duly authorized attorney-in-fact, entitled to
vote at a meeting of Shareholders or to express consent or dissent without
a meeting, may authorize another person or persons to act for him by proxy.
Every proxy must be signed by the Shareholder or his attorney-in fact. No
proxy shall be valid after the expiration of eleven (11) months from the
date thereof unless otherwise provided in the proxy.
Every proxy shall be revocable at the pleasure of the Shareholder
executing it, except as otherwise provided by law.
(2) If a proxy for the same shares confers authority upon two or more
persons and does not otherwise provide, a majority of them present at the
meeting, or if only one is present then that one, may exercise all the
powers conferred by the proxy; but if the proxy holders present at the
meeting are equally divided as to the right and manner of voting in any
particular case, the voting of such shares shall be
prorated.
(3) The authority of the holder of a proxy to act shall not be revoked by
the incompetence or death of the Shareholder who executed the proxy unless,
before the authority is exercised, written notice of adjudication of such
incompetence or of such death is received by the corporate officer
responsible for maintaining the list of Shareholders.
(4) If a proxy expressly provides, any proxy holder may appoint in writing
a substitute to act in his place.
Section 12. Action by Shareholders Without a Meeting. Any action
required by law, the Bylaws or the Certificate of Incorporation of the
Corporation to be taken at any annual or special meeting of
Shareholders of the Corporation, or any action which may be taken at any
annual or special meeting of such Shareholders, may be taken without a
meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than a minimum number of
shares that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and
voted. If any class of shares is entitled to vote thereon as a class, such
written consent shall be required of the holders of a majority of the
shares of each class of shares entitled to vote as a class thereon and of
the total shares entitled to vote thereon. Promptly after obtaining such
authorization by written consent, notice shall be given to those
Shareholders who have not consented in writing. The notice shall fairly
Summarize the material features of the authorized action and, if the action
be a merger, consolidation, sale or exchange of assets or other matter for
which dissenters' rights are provided under law, the notice shall contain a
clear statement of the right of Shareholders dissenting therefrom to be
paid the fair value of their shares upon compliance with further provision
of the law regarding the rights of dissenting Shareholders.
ARTICLE II
Directors
Section 1. Function. All corporate powers shall be exercised by and under
the authority of, and the business and affairs of the Corporation shall be
managed under the direction of, the Board of Directors.
Section 2. Number, Election and Term of Directors.
(1) The exact number of directors making up the Board of Directors shall be
the number from time to time fixed by resolution adopted by the Board of
Directors, but there shall always be at least one director. The number of
directors may also be either increased or diminished from time to time by
the holders of a majority of the stock entitled to vote thereon.
(2) The directors shall be elected at each annual meeting by a majority of
the votes cast at such election and shall hold office until the next
succeeding annual meeting. Each director shall hold office for the term
for which he is elected and until his successor shall have been elected and
qualified or until his earlier resignation, removal from office, or death.
The Board may provide for staggered terms for directors by resolution.
Section 3. Vacancies. In case one or more vacancies shall occur in
the Board of Directors by reason of death, resignation, or otherwise, or in
the event the number of directors is increased by resolution of the Board
of Directors prior to the next annual meeting of shareholders, the vacancy
shall be filled by the remaining directors of this Corporation at a special
meeting called for the purpose of filling such vacancies.
Section 4. Annual and Regular Meetings of the Board. The annual
meeting of the Board of Directors shall be held in each year immediately
after the annual meeting of Shareholders. Regular meetings of the Board
shall be held at such time thereafter during the year as the Board of
Directors may fix. Annual or regular meetings of the Board of Directors
may be held within or without the State of Delaware, and no notice need be
given any director concerning any annual or regular meeting.
Section 5. Special Meetings of the Board. Special meetings of the
Board of Directors may be called at any time by the President or by any
member of the Board of Directors. Notice of each special meeting shall be
given by the person or persons calling the meeting to each director upon
not less than twenty-four (24) hours written or verbal notice (telephone or
otherwise) before the meeting. However, notice of a special meeting of the
Board need not be given to any director who signs a waiver of notice
either before or after the meeting. Attendance of a director at a special
meeting shall constitute a waiver of notice of such meeting and waiver of
any and all objections to the place of the meeting, the time of the
meeting or the manner in which it has been called or convened, except when
a director states, at the beginning of the meeting, any objection to the
transaction of business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of,
any special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting. Special meetings of the Board
of Directors may be held within or without the State of Delaware.
Section 6. Quorum and Adjournments.
(1) At all meetings of the Board, the presence of a majority of the entire
Board shall be necessary and sufficient to constitute a quorum for the
transaction of business, except as otherwise provided by law, by the
Certificate of Incorporation, or by these Bylaws.
(2) A majority of the directors present at the time and place of any
regular or special meeting, although less than a quorum, may adjourn the
same from time to time without notice, until a quorum shall be present.
Section 7. Executive and Other Committees.
(1) The Board of Directors, by resolution adopted by a majority of the full
Board of Directors, may designate three voting members and one non-voting
member of its Board to constitute an Executive Committee, and designate two
or more of its members to one or more other committees, each of which, to
the extent provided in such resolution, shall have and may exercise all the
authority of the Board of Directors, except that no committee shall have
authority to:
(a) approve or recommend to Shareholders actions or proposals required by
law to be approved by Shareholders;
(b) designate the candidates for the office of director, for
purposes of proxy solicitation or otherwise;
(c) fill vacancies on the Board of Directors or any committee thereof;
(d) amend the Bylaws;
(e) authorize or approve the reacquisition of shares unless pursuant to a
general formula or method specified by the Board of Directors; or
(f) authorize or approve the issuance or sale of, or any contract to issue
or sell, shares or designate the terms of a series of a class of shares,
except that the Board of Directors, having acted regarding general
authorization for the issuance or sale of shares, or any contract therefor,
and, in the case of a series, the designation thereof, may, pursuant to a
general formula or method specified by the Board of Directors, by
resolution or adoption of a stock option or other plan, authorize a
committee to fix the terms of any contract for the sale of the shares and
to fix the terms upon which such shares may be issued or sold, including,
without limitation, the price, the rate or manner of payment of dividends,
provisions for redemption, sinking funds, conversion, voting or
preferential rights, and provisions for other features of a class of
shares, or a series of a class of shares, with full power in such committee
to adopt any final resolution setting forth all the terms thereof and to
authorize the statement of the terms of the series for filing with the
Department of State.
(2) The Chairman of the Executive Committee shall be designated by the
Board
of Directors. Meetings of the Executive Committee shall be held pursuant to
written or verbal notice (telephone or otherwise) at least twenty-four (24)
hours prior to the meeting subject to waiver of such notice by the
members of the Executive Committee or attendance at the meeting in such a
manner as to waive the notice requirement. As soon as reasonably possible
after every Executive Committee meeting, the Executive Committee shall
distribute minutes of the actions taken by the Executive Committee to all
members of the Board of Directors. The Chairman of the Executive Committee
or any voting member of the Executive Committee may call a meeting of the
Executive Committee.
(3) The Board, by resolution adopted in accordance with this section, may
designate one or more directors as alternate members of any committee who
may act in the place and stead of any absent member or members at any
meeting of such committee. In the absence or disqualification from voting
of a member of any such committee, the member or members thereof present at
any meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of such absent or disqualified
member.
(4) Unless the Board of Directors otherwise provides, each committee
designated by the Board of Directors may make, alter and repeal rules for
the conduct of its business. In the absence of such rules, each committee
shall conduct its business in the same manner as the Board of Directors
conducts its business pursuant the this Article II of the by-laws.
Section 8. Removal of Directors. Any director may be removed with or
without cause at any time by the affirmative vote of shareholders holding
of record in the aggregate at least a majority of the outstanding shares of
the Corporation at a special meeting of the Shareholders called for that
purpose and may be removed for cause by action of the Board.
Section 9. Board and Committee Action Without a Meeting. Any action
required to be taken at a meeting of the directors of the Corporation, or
any action which may be taken at a meeting of the directors or a committee
thereof, may be taken without a meeting if they consent in writing setting
forth the action so to be taken signed by all of the directors or all the
members of the committee, as the case may be, and filed in the minutes of
the proceedings of the Board or of the committee. Such consent shall have
the same effect as a unanimous vote.
ARTICLE III
Officers
Section 1. Officers. The officers of this Corporation shall consist of
a President, a Vice President, a Secretary and a Treasurer, each of whom
shall be elected by the Board of Directors at the annual meeting of the
Board which shall be held immediately following the annual meeting of the
Shareholders, and shall hold office for the term of one year, and until
their successors are elected and qualified, unless sooner removed by the
Board of Directors. Such other officers and assistant officers and agents
as maybe deemed necessary may be elected or appointed by the Board of
Directors from time to time. Any two or more offices may be held by the
same person. The failure to elect a President, Vice President, Secretary
or Treasurer shall not affect the existence of the Corporation.
Section 2. President. The President shall be the chief executive
officer of the Corporation, shall have general supervision of the
operations of the Corporation, shall make reports to the directors, shall
execute all instruments in the name of the Corporation and inscribe the
seal where necessary or required, and perform all such other duties as are
incident to his office or are properly required of him by the Board
of Directors.
Section 3. Vice President. The Vice President, in the absence or
disability of the President, shall exercise the power and shall perform the
duties of the President and shall exercise such other power and
perform such other duties as the board of directors may prescribe.
Section 4. Secretary. The Secretary shall have custody of and
maintain all of the corporate records except the financial records, shall
record the minutes of the meetings of the Shareholders and of the Board of
Directors, send out all notices of meetings, attest to the seal of the
Corporation where necessary or required, and perform such other duties as
may be prescribed by the Board of Directors or the President.
Section 5. Treasurer. The Treasurer shall have custody of corporate
funds and financial records, shall keep full and accurate accounts of
receipts and disbursements and render accounts thereof at the annual
meeting of Shareholders and whenever else required by the Board of
Directors or the President, and shall perform such other duties as may be
prescribed by the Board of Directors or the President.
Section 6. Removal of Officers. Any officer or agent elected or
appointed by the Board of Directors may be removed from office with or
without cause by a vote of not less than a majority of the whole membership
of the Board of Directors at any regular or special meeting of the Board
whenever, in its judgment, the best interests of the Corporation will be
served thereby. Any officer or agent elected, by the Shareholders may be
removed only by a majority vote of the Shareholders, unless the
Shareholders shall have authorized the directors to remove such officer or
agent. Any vacancy, however occurring, in any office may be filled by the
Board of Directors.
ARTICLE IV
Stock Certificates
Section 1. Authorized Issuance. This Corporation may issue the shares
of stock authorized by the Certificate of Incorporation and none other.
Section 2. Issuance. Every holder of shares in this Corporation shall
be entitled to have, for each kind, class or series of stock held, a
certificate representing all shares to which he is entitled. No
certificate shall be issued for any share until such share is fully paid.
Section 3. Form.
(1) Certificates representing shares in this Corporation shall be
signed by the President or a Vice President and the Secretary or an
Assistant Secretary and shall be sealed with the seal of this Corporation
or a facsimile thereof. The signatures of the President or a Vice President
and the Secretary or Assistant Secretary may be facsimiles if the
certificate is manually signed on behalf of a transfer agent or a
registrar, other than the Corporation itself or an employee of the
Corporation. In case of any officer who signed or whose facsimile signature
has been placed upon such certificate who shall have ceased to be such
officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer at the date of
its issuance.
(2) Every certificate representing shares which are restricted as to
the sale, disposition or other transfer of such shares shall state upon the
face or back of the certificate that such shares are restricted as to
transfer and shall set forth or fairly summarize upon the certificate, or
shall state that the Corporation will furnish to any Shareholder upon
request and without charge a full statement of such restrictions.
(3) Each certificate representing shares shall state upon the face
thereof: the name of the Corporation; that the Corporation is organized
under the laws of this state; the name of the person or persons to whom
issued; the number and class of shares and the designation of the series,
if any, which such certificate represents; and the par value of each share
represented by such certificate, or a statement that the shares are without
par value.
Section 4. Transfer. Transfer of stock on the books of this
Corporation shall be made only by the person named in the certificate, or
by an attorney lawfully constituted therefor, or in the case of a
certificate alleged to have been lost, stolen or destroyed, upon compliance
with the provisions of Section 5 of this Article IV.
Section 5. Lost or Destroyed Certificate. When a certificate has been
lost or destroyed, this Corporation shall issue a new certificate in the
place of any certificate previously issued if the holder of record of the
certificate: makes proof in affidavit form that it has been lost, destroyed
or wrongfully taken, or provides such other proof of loss or destruction
satisfactory to the Board of Directors: requests the issue of a new
certificate before the Corporation has notice that the certificate has been
acquired by a purchaser for value in good faith and without notice of any
adverse claim; if required by the Board of Directors, gives bond with a
sufficient surety approved by the Board of Directors to protect the
Corporation or any person injured by the issue of a new certificate from
any liability or expense which may be incurred by reason of the original
certificate remaining outstanding; and satisfies any other reasonable
requirements imposed by the Corporation.
ARTICLE V
Books and Records
Section 1. Books and Records. This Corporation shall keep correct and
complete books and records of account and shall keep minutes of the
proceedings of the Shareholders, Board of Directors and committees of
directors. This Corporation shall keep at its registered office or
principal place of business, or at the office of its transfer agent or
registrar, a record of its Shareholders, giving the names and addresses of
all Shareholders, and the number, class and series, if any, of the shares
held by each. If the stock book is kept in the office of the transfer
agent, the Corporation shall keep at its registered office or principal
place of business, in the State of Florida, copies of the stock list
prepared from the stock book and sent to it from time to time by the
transfer agent. The stock book, or books, shall show the current status,
but if the transfer agent is located elsewhere, a reasonable time shall be
allowed for transmittal by mail. Any books, records and minutes may be in
written form or in any other form capable of being converted into written
form within a reasonable time.
Section 2. Financial Information. Unless modified by resolution of the
Shareholders, not later than four (4) months after the close of each fiscal
year, this Corporation shall prepare a balance sheet showing in reasonable
detail the financial condition of the Corporation as of the close of its
fiscal year and a profit and loss statement showing the results of the
operations of the Corporation during its fiscal year. Upon the written
request of any Shareholder or holder of voting trust certificates for
shares of the Corporation, the Corporation shall mail to such Shareholder
or holder of voting trust certificates a copy of the most recent balance
sheet and profit and loss statement. The balance sheet and profit and loss
statements shall be filed in the registered office of the Corporation,
shall be kept for at least five (5) years, and shall be subject to
inspection during business hours by any Shareholder or holder of voting
trust certificates, in person or by agent.
ARTICLE VI
Dividends
Section 1. Payment. The Board of Directors of this Corporation may,
from time to time, declare and the Corporation may pay dividends on its
shares in cash, property or its own shares, except when the Corporation is
insolvent or the payment thereof would render the Corporation insolvent or
when the declaration or payment thereof would be contrary to any
restrictions contained in the Certificate of Incorporation, subject to the
following provisions:
(1) Dividends in cash or property may be declared and paid, except as
otherwise provided in this section, only out of the unreserved and
unrestricted earned surplus of the Corporation or out of capital
surplus of the Corporation, howsoever arising, but each dividend paid out
of a capital surplus shall be identified as a distribution of capital
surplus, and the amount per share paid from such surplus shall be disclosed
to the Shareholders receiving the same concurrently with the distribution.
(2) Dividends may be declared and paid in the Corporation's own treasury
shares.
(3) Dividends may be declared and paid in the Corporation's own authorized
but unissued shares or out of any unreserved and unrestricted surplus of
the Corporation upon the following conditions:
(a) If a dividend is payable in shares having a par value, such shares
shall be issued at not less than the par value thereof and there shall be
transferred to stated capital at the time such dividend is paid an amount
of surplus equal to the aggregate par value of the shares to be issued as a
dividend.
(b) If a dividend is payable in shares without par value, such shares shall
be issued at such stated value as shall be fixed by the Board of Directors
by resolution adopted at the time such dividend is declared, and there
shall be transferred to stated capital at the time such dividend is paid an
amount of surplus equal to the aggregate stated value so fixed in respect
of such shares; and the amount per share so transferred to stated capital
shall be disclosed to the Shareholders receiving such dividend
concurrently with the payment thereof.
(4) No dividend payable in shares of any class shall be paid to the holders
of shares of any other class unless the Certificate of Incorporation so
provides or such payment is authorized by the affirmative vote or the
written consent of the holders of at least a majority of the outstanding
shares of the class in which the payment is to be made.
(5) A division of the issued shares of any class into a greater number of
shares of the same class without increasing the stated capital of the
Corporation shall not be construed to be a share dividend within the
meaning of this section.
ARTICLE VII
Seal
The corporate seal shall have the name of the Corporation between two
concentric circles and the words "Corporate Seal 1998 Delaware" in the
center of that circle.
ARTICLE VIII
Amendment
These Bylaws may be repealed or amended, and new bylaws may be adopted,
by a majority o the Board of Directors at any meeting thereof, except that
the Board shall have no power to change the quorum for meetings of
Shareholders or of the Board, or to change any provisions of the Bylaws
with respect to the removal of directors or the filling of vacancies in the
Board resulting from the removal by the Shareholders. If any bylaw
regulating an impending election of directors is adopted, amended or
repealed by the Board, there shall be set forth in the notice of the next
meeting of the Shareholders for the election of directors, the Bylaw so
adopted, amended or repealed, together with a concise statement of the
changes made.
These Bylaws were originally adopted on September 18 , 1998, by SurgiLight,
Inc.
/s/J. T. Lin, President and Secretary
SurgiLight, Inc.
7055 University Blvd.
Winter Park. FL 32792
EXHIBIT 10. Agreement with Continental Capital and Equity Corp.
MARKET ACCESS PROGRAM MARKETING AGREEMENT
THIS AGREEMENT (the "Agreement") made and entered into this 12th day of
January 2000, by and between CONTINENTAL CAPITAL & EQUITY CORPORATION,
located at 195 Wekiva Springs Road, Suite 200, Longwood, FL 32779
(hereinafter referred to as "CCEC,") and SURGILIGHT, INC., located at 12001
Science Drive, Suite 140, Orlando, Florida 32826, (hereinafter referred to
as "Company.")
WITNESSETH:
For and consideration of the mutual promises and covenants contained
herein, the parties hereto agree as follows:
1. EMPLOYMENT. Company hereby hires and employs CCEC as an independent
contractor; and CCEC does hereby accept its position as an independent
contractor to the Company upon the terms and conditions hereinafter set
forth.
2. TERM. The term of this Agreement shall be for 12 months.
3. DUTIES AND OBLIGATIONS OF CCEC. CCEC shall have the following duties and
obligations under this Agreement:
3.1 Establish a financial public relations methodology designed to increase
awareness of the Company within the investment community.
3.2 Assist the Company in the implementation of its business plan and in
accurately disseminating information to the marketplace, which information
has been provided by the Company.
3.3 To expose the Company to a broad network of active retail brokers,
financial analysts, institutional fund managers, private investors and
active financial newsletter writers.
3.4 Prepare Company due diligence reports, corporate profile and fact
sheets.
3.5 Conduct a tele-marketing campaign to the investment community and
brokerage community and conduct tele-conferences with a CCEC moderator,
Company executive(s), and brokers, financial analysts, fund managers and
the like.
3.6 Feature the Company1s corporate profile or fact sheet on CCEC1s web
site(s).
3.7 Assist the Company in the preparation of all press releases and
coordinate the releases via a Company paid account with PR NewsWire or
BusinessWire.
3.8 Fax broadcast press releases, broker updates, Company newsletters to
brokers, institutional fund managers, financial analysts, and accredited
investors.
3.9 E-mail press releases, corporate announcements, broker updates, Company
news developments to a targeted e-mail database of brokers, institutional
fund managers, financial analysts, and accredited investors.
3.10 Serve as the Company's external publicist and endeavor to obtain media
coverage on the Company in both trade and industry press, on local and
national radio and/or TV programming, in subscription-based financial
newsletters, and on the worldwide web.
3.11 Strive to obtain the Company institutional analyst coverage and
investment banking sponsorship.
3.12 Deliver to the Company a monthly progress report detailing activities
and information performed by CCEC1s Broker Relations and Operations
Departments.
ALL OF THE FOREGOING CCEC PREPARED DOCUMENTATION CONCERNING THE COMPANY,
INCLUDING, BUT NOT LIMITED TO, DUE DILIGENCE REPORTS, CORPORATE PROFILE,
FACT SHEETS, AND QUARTERLY NEWSLETTERS, SHALL BE PREPARED BY CCEC FROM
MATERIALS SUPPLIED TO IT BY THE COMPANY AND SHALL BE APPROVED BY THE
COMPANY PRIOR TO DISSEMINATION BY CCEC.
4. CCEC1S COMPENSATION. Upon the execution of this Agreement, Company
hereby covenants and agrees to pay CCEC as follows (adjusted for 2-for-1
split) :
4.1 Twenty-six thousand (26,000) common shares of the Company's stock
restricted pursuant to Rule 144; said shares shall be delivered to CCEC
within ten (10) days following execution of this Agreement. Upon the 26,000
shares becoming fully registered and free trading shares, CCEC agrees to
not sell or liquidate into the market more than two thousand (2,000) shares
per day.
4.2 An Option to purchase forty thousand (40,000) common shares with an
exercise price of five dollars ($5.00) per share. The Company agrees to
issue CCEC piggyback registration rights for the common shares underyling
the option listed above, whereby these shares will be registered for resale
by CCEC on the first applicable S-3 Registration Statement, or other
applicable registration statement filed by the Company with the
U.S.Securities and Exchange Commission; said underlying common shares shall
be held by the Company until such time as CCEC elects to exercise its
option or warrant to purchase the common shares. The term of the
option/warrant shall expire eighteen (18) months from the date the
Registration Statement is deemed effective by the U.S. Securities and
Exchange Commission.
5.CCEC1S EXPENSES AND COSTS. Company shall pay all reasonable costs and
expenses incurred by CCEC, its directors, officers, employees and agents,
in carrying out its duties and obligations pursuant to the provisions of
this Agreement, excluding CCEC1s general and administrative expenses and
costs, but including and not limited to the following costs and expenses;
provided all costs and expense items in excess of $200.00 (Two Hundred U.S.
Dollars)
must be approved by the Company in writing prior to CCEC1s incurrence of
the same:
5.1Travel expenses, including but not limited to transportation, lodging
and food expenses, when such travel is conducted on behalf of the Company.
5.2 Seminars, expositions, money and investment shows.
5.3 Radio and television time and print media advertising costs, when
applicable.
5.4 Subcontract fees and costs incurred in preparation of research reports,
when applicable.
5.5 Cost of on-site due diligence meetings, if applicable.
5.6 Printing and publication costs of brochures and marketing materials
which are not supplied by the Company.
5.7 Corporate web site development costs.
5.8 Printing and publication costs of Company annual reports, quarterly
reports, and/or other shareholder communication collateral material which
are not supplied by Company.
6. COMPANY1S DUTIES AND OBLIGATIONS. Company shall have the following
duties and obligations under this Agreement:
6.1 Cooperate fully and timely with CCEC so as to enable CCEC to perform
its obligations under this Agreement.
6.2 Within ten (10) days of the date of execution of this Agreement to
deliver to CCEC the last twelve months of press releases on the Company,
corporate reports, brochures, and the like.
6.3 The Company will act diligently and promptly in reviewing materials
submitted to it from time to time by CCEC and inform CCEC of any
inaccuracies contained therein prior to the dissemination of such
materials.
6.4 Immediately give written notice to CCEC of any change in Company1s
financial condition or in the nature of its business or operations which
had
or might have an adverse material effect on its operations, assets,
properties or prospects of its business.
6.5 Pay all costs and expenses incurred by CCEC under the provisions of
this Agreement when presented with invoices for the same by CCEC within
fifteen (15) days.
6.6 Give full disclosure of all material facts concerning the Company to
CCEC and update such information on a timely basis.
6.7 Promptly pay the compensation due CCEC under the provisions of this
Agreement.
7. NONDISCLOSURE. Except as may be required by law, Company, its officers,
directors, employees, agents and affiliates shall not disclose the contents
and provisions of this Agreement to any individual or entity without CCEC1s
expressed written consent subject to disclosing same further to Company
counsel, accountants and other persons performing investment banking,
financial, or related functions for Company.
8. COMPANY1S DEFAULT. In the event of any default in the payment of CCEC1s
compensation to be paid to it pursuant to this Agreement, or any other
charges or expenses on the Company1s part to be paid or met, or any part or
installment thereof, at the time and in the manner herein prescribed for
the payment thereof and as when the same becomes due and payable, and such
default shall continue for twenty five (25) days after CCEC1s notice
thereof is received by Company; in the event of any default in the
performance of any of the other covenants, conditions, restrictions,
agreements, or other provisions herein contained on the part of the Company
to be performed, kept, complied with or abided by, and such default shall
continue for twenty five (25) days after CCEC has given Company written
notice thereof, or if a petition in bankruptcy is filed by the Company, or
if the Company is adjudicated bankrupt, or if the Company shall compromise
all its debts or assign over all its assets for the payment thereof, or if
a receiver shall be appointed for the Company1s property, then upon the
happening of any of such events, CCEC shall have the right, at its option,
forthwith or thereafter to accelerate all compensation, costs and expenses
due or coming due hereunder and to recover the same from the Company by
suit or otherwise and further, to terminate this Agreement. The Company
covenants and agrees to pay all reasonable attorney fees, paralegal fees,
costs and expenses of CCEC, including court costs, (including such attorney
fees, paralegal fees, costs and expenses incurred on appeal) if CCEC
employs an attorney to collect the aforesaid amounts or to enforce other
rights of CCEC provided for in this Agreement in the event of any default
as set forth above and CCEC prevails in such litigation. Further, until
CCEC has received the first cash payment as described above in Section 4.1,
CCEC shall not be required to commence performing hereunder.
9. COMPANY1S REPRESENTATIONS AND WARRANTIES. Company represents and
warrants to CCEC for the purpose of inducing CCEC to enter into and
consummate this Agreement as follows:
9.1 Company has the power and authority to execute, deliver and perform
this Agreement.
9.2 The execution and delivery by the Company of this Agreement have been
duly and validly authorized by all requisite action by the Company. No
license, consent or approval of any person is required for the Company1s
execution and delivery of this Agreement.
9.3 This Agreement has been duly executed and delivered by the Company.
This Agreement is the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its respective terms,
subject to the effect to any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting creditors1 rights
generally and to general principles of equity.
9.4 The execution and delivery by the Company of this Agreement do not
conflict with, constitute a breach of or a default under: (i) any
applicable law, or any applicable rule, judgment, order, writ, injunction,
or decree of any court; (ii) any applicable rule or regulation of any
administrative agency or other governmental authority; (iii) the
certificate of incorporation and By-Laws of the Company; (iv) any
agreement, indenture, instrument or contract to which the Company is now a
party or by which it is bound.
9.5 No representation or warranty by the Company in this Agreement and no
information in any statement, certificate, exhibit, schedule or other
document furnished, or to be furnished by the Company to CCEC pursuant
hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits
or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading. There is no fact which the
Company has not disclosed to CCEC, in writing, or in SEC filings or press
releases, which materially adversely affects, nor, so far as the Company
can now reasonably foresee, may adversely affect the business, operations,
prospects, properties, assets, profits or condition (financial or
otherwise) of the Company.
10. MISCELLANEOUS
10.1 Notices. Any notice or other communication required or permitted to be
given hereunder shall be in writing, and shall be deemed to have been duly
given when delivered personally or sent by registered or certified mail,
return receipt requested, postage prepaid to the parties hereto at
their addresses indicated hereinafter. Either party may change his or its
address for the purpose of this paragraph by written notice similarly
given. Parties1 addresses are as follows:
COMPANY: Suite 140
12001 Science Drive
Orlando, Florida 32826
CCEC: Suite 200
195 Wekiva Springs Road
Longwood, Florida 32779
10.2 Entire Agreement. This Agreement represents the entire agreement
between the Parties in relation to its subject matter and supersedes and
voids all prior agreements between such Parties relating to such subject
matter.
10.3 Amendment of Agreement. This Agreement may be altered or amended, in
whole or in part, only in a writing signed by both Parties. 10.4 Waiver. No
waiver of any breach or condition of this Agreement shall be deemed to be a
waiver of any other subsequent breach or condition,
whether of a like or different nature, unless such shall be signed by the
person making such waiver and/or which so provides by its terms. 10.5
Captions. The captions appearing in this Agreement are inserted as a matter
of convenience and for reference and in no way affect this Agreement,
define, limit or describe its scope or any of its provisions. 10.6 Situs.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Florida. Venue shall be in the Federal Courts of the
United States located in Seminole County, Florida.
10.7 Benefits. This Agreement shall inure to the benefit of and be inding
upon the Parties hereto, their heirs, personal representatives, successors
and assigns.
10.8 Severability . If any provision of this Agreement shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall attach
only to such provision and shall not in any way affect or render invalid or
unenforceable any other provision of this Agreement, and this Agreement
shall be carried out as if such invalid or unenforceable provision were not
contained herein.
10.9 Arbitration. Except as to a monetary default by Company hereunder,
any controversy, dispute or claim arising out of or relating to this
Agreement or the breach thereof shall be settled by arbitration.
Arbitration proceedings shall be conducted in accordance with the rules
then prevailing of the American Arbitration Association or any successor.
The award of the Arbitration shall be binding on the Parties. Judgment may
be entered upon an arbitration award of in a court of competent
jurisdiction and confirmed by such court. Venue for Arbitration proceedings
shall be Seminole County, Florida. The costs of arbitration, reasonable
attorneys1 fees of the Parties, together with all other expenses, shall be
paid as provided in the Arbitration award.
10.10 Currency. In all instances, references to monies used in this
Agreement shall be deemed to be United States dollars.
10.11 Multiple Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, and all of such
counterparts shall constitute one (1) instrument.
11. This Agreement may be executed in counterparts and by fax transmission,
each counterpart being deemed an original.
IN WITNESS WHEREOF, the Parties have executed this Agreement on the day and
year first above written.
CONFIRMED AND AGREED ON THIS 12-th DAY OF January, 2000.
CONTINENTAL CAPITAL & EQUITY CORPORATION
/s/Scott A-B Gibson
Corporate Officer
CONFIRMED AND AGREED ON THIS 12-th DAY OF January, 2000.
SURGILIGHT, INC.
/s/ J. T. Lin
Corporate Officer
EXHIBIT 11. Agreement with GEM Global Yield Fund Limited
Void after 5:00 p.m., New York Time on [Date], 2003
Warrant to Purchase [Number] Shares of Common Stock
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
By and Among
GEM GLOBAL YIELD FUND LIMITED
(the "Purchaser")
and
SURGILIGHT, INC.
(the "Company")
Dated as of June 30, 2000
TABLE OF CONTENTS Page
Article I Certain Definitions 1
Article II Purchase of Debentures and Warrants 5
Article III Representations and Warranties 7
Article IV Other Agreements of the Parties 12
Article V [Reserved] 21
Article VI Termination 21
Article VII Legal Fees and Default Interest Rate 22
Article VIII Miscellaneous 22
Exhibit A Form of Convertible Debenture
Exhibit B Form of Warrant
Exhibit C Form of Registration Rights Agreement
Exhibit D Conversion Procedures
Exhibit E Form of Escrow Agreement
Exhibit F Form of Power of Attorney
Exhibit G Form of Legal Opinion
Exhibit H Form of Termination Warrant
Schedule 1 List of Purchasers
Schedule 3.1(a) Subsidiaries
Schedule 3.1(c) Capitalization
Schedule 3.1(e) Conflicts
Schedule 3.1(f) Required Consents and Approvals
Schedule 3.1(g) Litigation
Schedule 3.1(h) No Defaults of Violations
Schedule 6.1 Form 8-K Disclosure Obligations
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
THIS AGREEMENT, dated as of June 30, 2000 (this "Agreement"), is by and
among SurgiLight, Inc., a Delaware corporation with its executive offices
at 12001 Science Drive, Suite140, Orlando, Florida (the "Company"), and the
purchasers listed on Schedule 1 hereof (each individually, the "Purchaser"
and collectively, the "Purchasers").
WHEREAS, the Company desires to issue and sell to the Purchasers and the
Purchasers desire to acquire the Company's 3% Convertible Debentures, due
June 2003 (the "Debentures").
IN CONSIDERATION of the mutual covenants, promises and agreements set forth
herein, and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. Certain Definitions. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"Affiliate" means, with respect to any Person, any Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with") shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities by contract or
otherwise.
"Agreement" shall mean this Convertible Debenture Purchase Agreement and
the Exhibits and Schedules annexed hereto.
"Business Day" means any day except Saturday, Sunday and any day which is 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 actions to
close, between the hours of 9:30 a.m. and 6:00 p.m. New York Time.
"Closing" shall have the meaning set forth in Section 2.2(b).
"Closing Date" shall mean the date of Closing, as set forth in Section
2.2(b).
"Code" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations thereunder as in effect on the date hereof.
"Commission" means the United States Securities and Exchange Commission.
"Common Stock" means shares now or hereafter authorized of the class of
common stock, no par value, of the Company and stock of any other class
into which such shares may hereafter have been reclassified or changed.
"Company" shall have the meaning set forth in the introductory paragraph.
"Debentures" means the 3% Convertible Debentures of the Company, due June
2003, which are annexed hereto as Exhibit A and made a part hereof.
"Debenture Escrow Shares" shall have the meaning set forth in Section
2.2(c).
"Disclosure Documents" means the disclosure package consisting of the
Company's Annual Report on Form 10-KSB for the fiscal year ended January
31, 1999, the Quarterly Report on Form 10-QSB for the quarter ended April
30, 1999, the Quarterly Report on Form 10-QSB for the quarter ended July
31, 1999, the Quarterly Report on Form 10-QSB for the quarter ended October
31, 1999 (each as filed with the Commission), delivered to the Purchasers
in connection with the offering by the Company of the Debentures and the
Schedules to this Agreement furnished by or on behalf of the Company
pursuant to Section 3.1.
"Effective Date" shall have the meaning set forth in Section 2.2(b).
"Escrow Agent" means Kaplan, Gottbetter & Levenson, LLP, 630 Third Avenue,
5th
Floor, New York, NY 10017; Tel: 212-983-6900; Fax: 212-983-9210.
"Event of Default" shall have the meaning set forth in the Debentures.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GEM" means Global Emerging Markets, Ltd. with its registered address at
712 Fifth Avenue, 7th Floor, New York, NY 10019; Phone: 212-582-3400; Fax:
212-265-4035.
"GEMA" means GEM Advisors, Inc., with its registered address at 712 Fifth
Avenue, 7th Floor, New York, NY 10019; Phone: 212-582-3400; Fax: 212-265-
4035.
"Indemnified Party" shall have the meaning set forth in Section 4.16(b).
"Indemnifying Party" shall have the meaning set forth in Section 4.16(b).
"KGL" shall have the meaning set forth in Section 4.28.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
encumbrance, charge or security interest of any kind in or on such asset or
the revenues or income thereon or therefrom.
"Limitations on Conversion" shall have the meaning set forth in Section
4.19.
"Losses" shall have the meaning set forth in Section 4.16(a).
"Material" shall mean having a financial consequence in excess of $100,000.
"Material Adverse Effect" shall have the meaning set forth in Section
3.1(a).
"Minimum Stock Price" shall have the meaning set forth in Section 5.1(h).
"Minimum Stock Price Determination Date" shall have the meaning set forth
in
Section 5.1(h).
"NASD" means the National Association of Securities Dealers, Inc.
"Nasdaq" shall mean the Nasdaq Stock Market, Inc.
"OTCBB" shall mean the OTC Bulletin Board.
"Per Debenture Consideration" shall have the meaning set forth in Section
2.2(a).
"Per Share Market Value" of the Common Stock means on any particular date
(a) the last sale price of shares of Common Stock on such date or, if no
such sale takes place on such date, the last sale price on the most recent
prior date, in each case as officially reported on the principal national
securities exchange on which the Common Stock is then listed or admitted to
trading, or (b) if the Common Stock is not then listed or admitted to
trading on any national securities exchange, the closing bid price per
share as reported by Nasdaq, or (c) if the Common Stock is not then listed
or admitted to trading on the Nasdaq, the closing bid price per share of
the Common Stock on such date as reported on the OTCBB or if there is no
such price on such date, then the last bid price on the date nearest
preceding such date, or (d) if the Common Stock is not quoted on the OTCBB,
the closing bid price for a share of Common Stock on such date in the over-
the-counter market as reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions
of reporting prices) or if there is no such price on such date, then the
last bid price on the date nearest preceding such date, or (e) if the
Common Stock is no longer publicly traded, the fair market value of a share
of Common Stock as determined by an Appraiser (as defined in Section
4(c)(iv) of the Debenture) selected in good faith by the holders of a
majority of principal amount of outstanding 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
fair market value shall be equal to the average of the determinations by
each such Appraiser.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding,
such as a deposition), whether commenced or threatened.
"Purchase Price" shall have the meaning set forth in Section 2.2(a).
"Purchaser" and "Purchasers" shall have the meaning set forth in the
introductory paragraph.
"Required Approvals" shall have the meaning set forth in Section 3.1(f).
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiaries" shall have the meaning set forth in Section 3.1(a).
"Termination Warrants" means the common stock purchase warrants issued to
the Purchasers and/or their assigns, in the form annexed hereto as Exhibit
H.
"Trading Day" means (a) a day on which the Common Stock is quoted on
Nasdaq, the OTCBB or the principal stock exchange on which the Common Stock
has been listed, or (b) if the Common Stock is not quoted on Nasdaq, the
OTCBB or any stock exchange, 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).
"Transaction Documents" means this Agreement, the Registration Rights
Agreement annexed hereto as Exhibit C, the Escrow Agreement annexed hereto
as Exhibit E, the Power or Attorney annexed hereto as Exhibit F, and all
other documents, instruments and writings requirred to have been delivered
by the Company at the Execution Date pursuant to this Agreement.
"Underlying Shares" means the shares of Common Stock into which the
Debentures are convertible in accordance with the terms hereof and the
Debenture.
"Warrant" means the common stock purchase warrant issued to the Purchasers
and/or their assigns, in the form annexed hereto as Exhibit B.
"Warrant Escrow Shares" shall have the meaning as set forth in Section
2.2(c).
"Warrant Shares" means the shares of Common Stock for which the Warrants
can be exercised in accordance with the terms hereof and the Warrant.
ARTICLE II
PURCHASE OF DEBENTURES AND WARRANTS
Section 2.1. Execution of Documents; Delivery of Termination Warrants.
(a) As soon as practicable after the execution by all parties (the
"Execution Date") of the Transaction Documents and the execution and
delivery by the Company of the Termination Warrants, the Company shall, in
accordance with the Registration Rights Agreement, file a duly completed
registration statement on the appropriate form with the Commission to
register the resale of the Underlying Shares and the Warrant Shares under
the Securities Act.
(b) As consideration for entering into this Agreement, in the event this
Agreement is terminated for any reason pursuant to Section 6.1 herein, (i)
the Company shall pay the Purchasers, within three
(e) Business Days of the date of termination, an aggregate of Two Hundred
Thousand Dollars (US $200,000) in such allocation as set forth in Schedule
1, and (ii) the Purchasers shall retain the Termination Warrants and any
and all rights and privileges thereunder without condition or obligation
to the Company.
Section 2.2. Purchase of Debentures and Delivery of Warrants; Closing.
(a) Subject to the terms and conditions set forth in this Agreement, the
Company hereby agrees to issue and sell to the Purchasers, and the
Purchasers hereby agree to purchase from the Company on the
Closing Date the amount of Debentures and the number of Warrants listed
opposite each of the Purchasers' names on Schedule 1. The Debentures shall
have the respective rights, preferences and privileges set forth in the
form of Debenture annexed as Exhibit A, at a price per Debenture of One
Thousand Dollars (US$1,000) (the "Per Debenture Consideration"). The Per
Debenture Consideration multiplied by the number of Debentures to be
purchased by the Purchasers hereunder is hereinafter referred to as the
"Purchase Price". The total principal amount of Debentures to be purchased
by the Purchasers and the total Purchase Price shall be Three Million
Dollars (US$3,000,000). The Warrants shall have the respective terms and
conditions as set forth in the form of Warrant annexed as Exhibit B.
(b) The closing of the purchase and sale of the Debentures and issuance
of the Warrants (the "Closing") shall take place at the offices of the
Escrow Agent no later than five (5) Business Days after the registration
statement, in accordance with and subject to the Registration Rights
Agreement, the form of which is annexed as Exhibit C, is granted
effectiveness by the Commission, time being of the essence, unless the
parties agree in writing to extend such date. The effective date of the
Registration Statement (the "Effective Date") shall occur no later than one
hundred-eighty (180) days after the Execution Date (unless such day is not
a Business Day, then the next Business Day), unless all of the Purchasers
agree in advance in writing to extend such 180 day period and set forth the
new effective date deadline.
The date of the Closing is hereinafter referred to as the "Closing Date".
(c) At the Closing, the Company shall deliver to the Escrow Agent the
following:
(i) original and duly executed Debentures registered in the names of the
Purchasers in the amounts set forth in Schedule 1;
(ii) original and duly executed Warrants registered in the names of the
Purchasers in the amounts proportionate to the principal amount of
Debentures purchased by each Purchaser as set forth in Schedule 1;
(iii) The number of shares of duly issued Common Stock of the Company
equal to four (4) times the number of shares of Common Stock otherwise
issuable as if the Debentures were converted in their entirety on the
Closing Date, in share denominations of ten thousand (10,000)
shares registered in the name of each of the Purchasers in the amounts
proportionate to the principal amount of Debentures purchased by each
Purchaser set forth in Schedule 1 for use in the conversion of the
Debentures (the "Debenture Escrow Shares");
(iv) The number of shares of duly issued Common Stock of the Company
equal to four (4) times the number of shares of Common Stock otherwise
issuable as if the Warrants were exercised in their entirety on the Closing
Date in share denominations of ten thousand (10,000) shares registered in
the name of each of the Purchasers in the amounts proportionate to the
principal amount of Debentures purchased by each Purchaser set forth in
Schedule 1 for use in the exercise of the Warrants (the "Warrant Escrow
Shares");
(5) the legal opinion in substantially the form annexed hereto as Exhibit
G, addressed to the Purchasers and dated the Closiing Date from the Counsel
for the Company;
(vi) a certificate, dated the Closing Date, signed by the Secretary or an
Assistant Secretary of the Company and certifying (i) that attached thereto
is a true, correct and complete copy of (A) the Company's Articles of
Incorporation, as amended to the date thereof, (B) the Company's By-Laws,
as amended to the date thereof, (C) resolutions duly adopted by the Board
of Directors of the Company authorizing the execution and delivery of this
Agreement, the issuance and sale of the Debentures, Warrants and the
Underlying Shares and the appointment of the Attorney-in-Fact pursuant to
Section 4.15 attached hereto as Exhibit F, and (D) a
certificate of good standing from the Secretary of State of Colorado and
(ii) the incumbency of officers executing this Agreement;
(vii) a certificate, dated the Closing Date, signed by the President,
certifying that the Company's representations and warranties in Article III
are true and correct in all material respects on the Closing Date.
(viii) all other documents, instruments and writings required to have been
delivered or necessary at or prior to Closing by the Company pursuant to
this Agreement.
(d) Upon receipt by the Escrow Agent of those items set forth above, the
Purchasers shall deliver the following to the Escrow Agent:
(i) the Purchase Price in United States dollars in immediately available
funds by wire transfer to an account designated in writing by the Escrow
Agent prior to the Closing;
(ii) the Termination Warrants; and
(iii) all documents, instruments, and writings required to have been
delivered or necessary at or prior to Closing by the Purchasers pursuant to
this Agreement.
(e) Upon receipt of all of the items set forth in subparagraphs (c) and
(d) of this Section, the Escrow Agent shall deliver the Purchase Price,
less the fees set forth in Section 4.28 to the Company in accordance with
its written instructions, and shall deliver the items set forth in
subparagraph (c), with the exception of the Debenture Escrow Shares and
Warrant Escrow Shares which shall be held in accordance with the terms of
this Agreement, the Debenture and the Escrow Agreement,
to the Purchasers.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Purchasers as follows, all of which
survive Closing:
(a) Organization and Qualification. The Company is a corporation, duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with the requisite corporate power and
authority to own and use its properties and assets and to carry on its
business as currently conducted. The Company has no subsidiaries other
than as set forth in Schedule 3.1(a) (collectively, the "Subsidiaries").
Each of the Subsidiaries is a corporation, duly incorporated, validly
existing and in good standing under the laws of the jurisdiction
of its incorporation, with the full corporate power and authority to own
and use its properties and assets and to carry on its business as currently
conducted. Each of the Company and the Subsidiaries is duly qualified to
do business and is in good standing as a foreign corporation in each
jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to
be so qualified or in good standing, as the case may be, could not
reasonably be expected to have, individually or in the aggregate, a
material adverse effect on (a) the results of operations, assets,
prospects, or financial condition of the Company and the Subsidiaries, or
(b) the Purchasers' rights under this Agreement, the Escrow Agreement, the
Debenture and the Warrants (a "Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transacttions
contemplated hereby and other wise to carry out its obligations hereunder
and thereunder. The execution and delivery of this Agreement by the
Company and the consummation by it of the transactions contemplated hereby
and thereby have been duly authorized by all necessary action on the part
of the Company. This Agreement has been duly executed and delivered by the
Company and constitutes the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium, liquidation or similar
laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general
application.
(c) Capitalization. The authorized, issued and outstanding capital stock
of the Company and each of the Subsidiaries is set forth in Schedule
3.1(c).
No shares of Common Stock are entitled to preemptive or similar rights.
Except as specifically set forth in Schedule 3.1(c), there are no
outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or, except as a result
of the purchase and sale of the Debentures hereunder, securities, rights or
obligations convertible into or exchangeable for, or giving any person any
right to subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common
Stock, or securities or rights convertible or exchangeable into shares of
Common Stock.
Neither the Company nor any Subsidiary is in violation of any of the
provisions of its respective articles of incorporation, bylaws or other
charter documents or resolutions.
(d) Issuance of Debentures and Warrants. The Debentures and Warrants have
been duly and validly authorized for issuance, offer and sale pursuant to
this Agreement and, when issued and delivered as provided hereunder against
payment in accordance with the terms hereof, shall be valid and binding
obligations of the Company enforceable in accordance with their terms. The
Company has and at all times while the Debentures and Warrants are
outstanding has and will continue to maintain an adequate reserve of shares
of Common Stock to enable it to perform its obligations under this
Agreement, the Debentures and Warrants. When issued in accordance
with the terms hereof and the Debentures and the Warrants, the Underlying
Shares will be duly authorized, validly issued, fully paid and
nonassessable. There are not outstanding any equity or equity
equivalent security substantially similar to the Debentures, including any
security with a floating conversion price substantially similar to the
Debentures.
(e) No Conflicts. Except as set forth in Schedule 3.1(e), the execution,
delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby and
thereby do not and will not (i) conflict with or violate any provision of
its or its Subsidiaries' articles of incorporation, resolutions or bylaws
or (ii) be subject to obtaining the consents referred to in Section 3.1(f),
conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company is a party,
or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company is subject (including
Federal and State securities laws and regulations), or by which any
property or asset of the Company is bound or affected, except in the case
of each of
clauses (ii) and (iii), such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or
in the aggregate, have a Material Adverse Effect. The business of the
Company is not being conducted in violation of any law, ordinance or
regulation of any governmental authority.
(f) Consents and Approvals. Except as set forth in Schedule 3.1(f),
neither the Company nor any Subsidiary is required to obtain any consent,
permit, waiver, authorization or order of, or make any filing or
registration with, any court or other federal, State, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of this Agreement, other than the
applicable filings under State and federal securities laws (collectively,
the "Required Approvals").
(g) Litigation; Proceedings. Except as set forth in Schedule 3.1(g),
there is no action, suit, notice of violation, proceeding, inquiry or
investigation pending or threatened against or affecting the Company or
any of its Subsidiaries or any of their respective properties before or by
any court, governmental or administrative agency or regulatory authority
(Federal, State, county, local or foreign) which (i) relates to or
challenges the legality, validity or timely enforceability of this
Agreement or the Debentures and Warrants, (ii) could, individually or in
the aggregate, have a Material Adverse Effect or (iii) could, individually
or in the aggregate, materially impair the ability of the Company to
perform fully on a timely basis its obligations under this Agreement.
(h) No Default or Violation. Except as set forth in Schedule 3.1(h),
neither the Company nor any Subsidiary (i) is in default under or in
violation of any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it or any
of its properties is bound, except such conflicts or defaults as do not
have a Material Adverse Effect, (ii) is in violation of any order of any
court, arbitrator or governmental body, except for such violations as do
not have a Material Adverse Effect, or (iii) is in violation of any
statute, rule or regulation of any governmental authority which could
(individually or in the aggregate) (x) adversely affect the legality,
validity or enforceability of this Agreement, (y) have a Material Adverse
Effect or (z) adversely impair the Company's ability or obligation to
perform fully on a timely basis its obligations under this Agreement.
(i) Certain Fees. No fees or commission will be payable by the Company
to any investment banker, broker, placement agent or bank with respect to
the consummation of the transactions contemplated hereby except as provided
in Section 4.28.
(j) Disclosure Documents. The Disclosure Documents are accurate in all
material respects and do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they
were made, not misleading.
(k) Reporting Company. The Company's Common Stock is registered under
the Exchange Act, the Company is subject to the reporting requirements of
Section 13 or Section 15(d) of the Exchange Act, and the Company is current
in its reporting requirements.
Each of the Purchasers acknowledge and agree that the Company makes no
representation or warranty with respect to the transactions contemplated
hereby other than those specifically set forth in Section 3.1 herein.
Section 3.2. Representations and Warranties of the Purchasers. The
Purchasers hereby represent and warrant to the Company as follows:
(a) Organization and Qualification. Each of the Purchasers is a
corporation duly incorporated and validly existing and in good standing
under the laws of the jurisdiction of its incorporation.
(b) Authorization; Enforcement. Each of the Purchasers has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated hereby and otherwise to carry out its obligations
hereunder and thereunder.
The execution and delivery of this Agreement and the purchase of the
Debentures and the Warrants by the Purchasers hereunder
have been duly authorized by all necessary action on the part of each of
the Purchasers.
This Agreement has been duly executed and delivered by each of the
Purchasers or on its behalf and constitutes the valid and legally binding
obligation of the Purchasers, enforceable against each of
the Purchasers in accordance with its terms; except as such enforceability
may be limited by applicable bankruptcy, insolvency, liquidation,
fraudulent transfer, reorganization, moratorium and remedies or by other
equitable principles of general application or similar laws relating to or
affecting generally the enforcement of creditors' rights.
(c) Investment Intent. Each Purchaser is acquiring the Debentures,
Warrants, Underlying Shares and the Warrant Shares for its own account for
investment purposes only and not with a view to or for distributing or
reselling such Debentures, Warrants, Underlying Shares or Warrant Shares or
any part thereof or interest therein, without prejudice, however, to the
Purchasers' right, subject to the provisions of this Agreement, at all
times to sell or otherwise dispose of all or any part of such Debentures,
Warrants, Underlying Shares or Warrant Shares in compliance with applicable
federal and State securities laws.
(d) Purchasers' Status. At the time each of the Purchasers was offered
the Debentures and/or the Warrants, it was, and at the date hereof, it is,
and at the Closing Date, it will be, an "accredited investor" as defined in
Rule 501(a) under the Securities Act.
(e) Experience of Purchasers. Each of the Purchasers, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the
Debentures, and has so evaluated the merits and risks of such investment.
(f) Ability of Purchaser to Bear Risk of Investment. Each of the
Purchasers is able to bear the economic risk of an investment in the
Debentures and, at the present time, is able to afford a complete loss of
such investment.
(g) Prohibited Transactions. The Debentures to be purchased by each of
the Purchasers are not being acquired, directly or indirectly, with the
assets of any "employee benefit plan", within the meaning of Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended.
(h) Access to Information. Each of the Purchasers acknowledges receipt
of the Disclosure Documents and further acknowledges that it has been
afforded
(i) the opportunity to ask such questions as it has deemed necessary of,
and to receive answers from, representatives of the Company concerning the
terms and conditions of the offering of the Debentures and the Warrants and
the merits and risks of investing in the Debentures and the Warrants; (ii)
access to information about the Company and the Company's financial
condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment in the
Debentures and the Warrants; and (iii) the opportunity to obtain such
additional information which the Company possesses or can acquire which is
necessary to make an informed investment decision with respect to the
Debentures and the Warrants.
(i) Reliance. Each of the Purchasers understands and acknowledges that
(i) the Debentures and the Warrants are being offered and sold, and the
Underlying Shares and Warrant Shares are being offered, to it without
registration under the Securities Act in a transaction that is
exempt from the registration provisions of the Securities Act and (ii) the
availability of such exemption, depends in part on, and that the Company
will rely upon the accuracy and truthfulness of, the foregoing
representations and each of the Purchasers hereby consents to such
reliance.
(j) Corporate Domicile. Each of the Purchasers is a foreign corporation
and has its residence or corporate domicile outside the United States.
(k) Current Funds. Purchasers have, and will have at Closing, readily
available the current funds required to purchase the Debentures.
The Company acknowledges and agrees that each of the Purchasers makes no
representation or warranty with respect to the transactions contemplated
hereby other than those specifically set forth in Section 3.2 herein.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
Section 4.1. Manner of Offering. The Debentures and Warrants are being
issued pursuant to Rule 506 of Regulation D of the Securities Act. The
Debentures, Warrants, Underlying Shares and the Warrant Shares will bear
restrictions on transfer, and will carry a restrictive legend with respect
to the exemption from registration under the Securities Act. The transfer
and resale of the Debentures, the Warrants and the Underlying Shares may be
made only pursuant to registration under the Securities Act or an exemption
from such registration.
Section 4.2. Furnishing of Information. As long as each of the Purchasers
owns Debentures, the Warrants, Underlying Shares or the Warrant Shares, the
Company will furnish to it, promptly after they have been prepared all
annual, quarterly reports and other reports and filings required by Section
13(a) or 15(d) of the Exchange Act.
Section 4.3. Notice of Certain Events. The Company shall on a continuing
basis (i) advise each of the Purchasers promptly after obtaining knowledge
thereof, and, if requested by any of the Purchasers, confirm such advice in
writing, of (A) the issuance by any State securities commission of
any stop order suspending the qualification or exemption from qualification
of the Debentures, the Warrants the Underlying Shares or the Warrant Shares
for offering or sale in any jurisdiction, or the initiation of any
proceeding for such purpose by any State securities commission or other
regulatory authority, or (B) any event that makes any statement of a
material fact made in the Disclosure Documents untrue or that requires the
making of any additions to or changes in the Disclosure Documents in order
to make the statements therein, in the light of the circumstances under
which they are made, not misleading,
(ii) use its best efforts to prevent the issuance of any stop order or
order suspending the qualification or exemption from qualification of the
Debentures, the Underlying Shares or the Warrant Shares under any State
securities or Blue Sky laws, and
(iii) if at any time any State securities commission or other regulatory
authority shall issue an order suspending the qualification or exemption
from qualification of the Debentures, the Warrants or the Common Stock
under any such laws, use its best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time.
Section 4.4. Copies and Use of Disclosure Documents. The Company shall
furnish each of the Purchasers, without charge, as many copies of the
Disclosure Documents, and any amendments or supplements thereto, as each of
the Purchasers may reasonably request. The Company consents to the
use of the Disclosure Documents, and any amendments and supplements
thereto, by each of the Purchasers in connection with resales of the
Debentures, the Warrants, Underlying Shares or the Warrant Shares other
than pursuant to an effective registration statement.
Section 4.5. Modification to Disclosure Documents. If any event shall
occur as a result of which, in the reasonable judgment of the Company or
any of the Purchasers, it becomes necessary or advisable to amend or
supplement the Disclosure Documents in order to make the statements
therein, in the light of the circumstances at the time the Disclosure
Documents were delivered to any of the Purchasers, not misleading, or if it
is necessary to amend or supplement the Disclosure Documents to comply with
applicable law, the Company shall promptly prepare an appropriate amendment
or supplement to the Disclosure Documents (in form and substance reasonably
satisfactory to both the Purchasers and Company) so that (i) as so amended
or supplemented the Disclosure Documents will not include an untrue
statement of material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
existing at the time it is delivered to any of the Purchasers, not
misleading and (ii) the Disclosure Documents will comply with applicable
law.
Section 4.6. [Reserved].
Section 4.7. Integration. The Company shall not and shall use its best
efforts to ensure that no Affiliate shall sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined
in Section 2 of the Securities Act) that would be integrated with the offer
or sale of the Debentures, the Warrants, Underlying Shares, or the Warrant
Shares in a manner that would require the registration under the Securities
Act of the sale of the Debentures and the Warrants to the Purchasers.
Section 4.8. Furnishing of Rule 144A Materials. The Company shall, for
so long as any of the Debentures, the Warrants, Underlying Shares or
Warrant Shares remain outstanding and during any period in which it is not
subject to Section 13 or 15(d) of the Exchange Act, make available to any
registered holder of Debentures, the Warrants, Underlying Shares or Warrant
Shares in connection with any sale thereof and any prospective purchaser of
such Debentures, Warrants, Underlying Shares or Warrant Shares from such
Person, the following information in accordance with Rule 144A(d)(4) under
the Securities Act: a brief statement of the nature of the business of the
Company and the products and services it offers and the Company's most
recent audited balance sheet and profit and loss and retained earnings
statements, and similar audited financial statements for such part of the
two preceding fiscal years as the Company has been in operation.
Section 4.9. Solicitation Materials. The Company shall not (i)
distribute any offering materials in connection with the offering and sale
of the Debentures, the Warrants, Underlying Shares or Warrant Shares other
than the Disclosure Documents and any amendments and supplements thereto
prepared in compliance herewith or (ii) solicit any offer to buy or sell
the Debentures, the Warrants, Underlying Shares or Warrant Shares by means
of any form of general solicitation or advertising.
Section 4.10 Subsequent Financial Statements. The Company shall furnish
to the Purchasers, promptly after they are filed with the Commission, a
copy of all financial statements for any period subsequent to the period
covered by the financial statements included in the Disclosure Documents
until the earlier of the full conversion of the Debentures or the Maturity
Date of the Debentures.
Section 4.11. Prohibition on Certain Actions. From the date hereof
through the Closing Date, the Company shall not and shall cause the
Subsidiaries not to, without the prior written consent of the Purchasers,
(i) amend its Articles of Incorporation, bylaws or other charter documents
so as to adversely affect any rights of the Purchasers; (ii) split, combine
or reclassify its outstanding capital stock; (iii) declare, authorize, set
aside or pay any dividend or other distribution with respect to
the Common Stock; (iv) redeem, repurchase or offer to repurchase or
otherwise acquire shares of its Common Stock; or (v) enter into any
agreement with respect to any of the foregoing.
Section 4.12. Listing of Common Stock. The Company shall use its best
efforts to maintain the quote for its Common Stock on the OTCBB (or
listing
on a national securities exchange or market on which the Common Stock is
listed) during the period that the Debentures may be converted hereunder by
the Purchasers or the Warrants may be exercised, and shall provide to the
Purchasers evidence of such listing.
Section 4.13. Escrow. The Company and the Purchasers agree to enter into,
simultaneous with the execution of this Agreement, the escrow agreement
attached hereto and made part hereof as Exhibit E (the "Escrow Agreement").
Section 4.14. Conversion and Exercise Procedures and Maintenance of
Escrowed Shares for Conversions and Exercises. Exhibit D attached hereto
and made a part hereof sets forth the procedures with respect to the
conversion of the Debentures and the exercise of the Warrants, including
the forms of Notice of Conversion and Notice of Exercise to be provided
upon conversion or exercise, instructions as to the procedures for
conversion or exercise, the form of legal opinion, if necessary, that shall
be rendered to the Company and such other information and instructions as
may be reasonably necessary to enable any of the Purchasers to exercise its
right of conversion or exercise smoothly and expeditiously. The Company
agrees that, at any time the conversion price of the Debentures is such
that the number of 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 ten (10) Business Days written notice of such
circumstance to the Company by the Purchasers 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.
Section 4.15 Attorney-in-Fact. To effectuate the terms and provisions
of this Agreement, the Escrow Agreement, the Debenture and the Warrants,
the Company hereby agrees to give a power of attorney as is evidenced by
Exhibit F attached hereto. All acts done under such power of attorney are
hereby ratified and approved and neither the Attorney-in-Fact nor any
designee or agent thereof shall be liable for any acts of commission or
omission, for any error of judgment or for any mistake of fact or law, as
long as the Attorney-in-Fact is operating within the scope of the power of
attorney and this Agreement and its exhibits. The power of attorney being
coupled with an interest shall be irrevocable while any amount of the
Debenture remains unpaid, any amount of the Warrants remain unexercised or
any portion of this Agreement or the Escrow Agreement remains
unsatisfied. In addition, the Company shall give the Attorney-in-Fact a
corporate resolution executed by the Board of Directors of the Company
which authorizes future issuances of the Underlying Shares for the
Debentures, and which resolution states that it is irrevocable while any
amount of the Debenture remains unpaid, any amount of the Warrants remain
unexercised or any portion of this Agreement or the Escrow Agreement
remains
unsatisfied.
Section 4.16 Indemnification.
(a) Indemnification.
(i) The Company shall, notwithstanding termination of this Agreement
and without limitation as to time, indemnify and hold harmless GEM, GEMA
and each Purchaser, their respective officers, directors, agents and
employees of each of them, each Person who controls GEM, GEMA or each such
Purchaser (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent permitted
by applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, costs of preparation and
attorneys' fees) and expenses (collectively, "Losses"), as incurred,
arising out of, or relating to, a breach or breaches of any representation,
warranty, covenant or agreement by the Company under this Agreement, the
other Transaction Documents, the Debentures or the Warrants.
(2) Each Purchaser, severally and not jointly, shall notwithstanding
termination of this Agreement and without limitation as to time, indemnify
and hold harmless the Company, its officers, directors, agents and
employees, each Person who controls the Company (within the meaning of
Section 15 of the Securities Act of Section 20 of the Exchange Act) and the
officers, directors, agents and employees of each such controlling Person,
to the fullest extent permitted by application law, from and against any
and all Losses, as incurred, arising out of, or relating to, a breach or
breaches of any representation, warranty, covenant or agreement by such
Purchaser under this Agreement, the other Transaction Documents, the
Debentures or the Warrants.
(b) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party promptly shall notify the
Person from whom indemnity is sought (the "Indemnifying Party") in writing,
and the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and
the payment of all fees and expenses incurred in connection with defense
thereof; provided, that the failure of any Indemnified Party to give such
notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent
that it shall be finally determined by a court of competent jurisdiction
(which determination is not subject to appeal or further review) that such
failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in any
such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (1) the Indemnifying Party has agreed to pay such fees
and expenses; or (2) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the
named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and
such Indemnified Party shall have been advised by counsel that a conflict
of interest is likely to exist if the same counsel were to represent such
Indemnified Party and the Indemnifying Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects
to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense of the
claim against the Indemnified Party but will retain the right to control
the overall Proceedings out of which the claim arose and such counsel
employed by the Indemnified Party shall be at the expense of the
Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party, effect
any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on
claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party to which the Indemnified
Party is entitled hereunder (including reasonable fees and expenses to the
extent incurred in connection with investigating or preparing to defend
such Proceeding in a manner not inconsistent with this Section) shall be
paid to the Indemnified Party, as incurred, within ten (10) Business Days
of written notice thereof to the Indemnifying Party.
No right of indemnification under this Section 4.16 shall be available as
to a particular Indemnified Party if there is a non-appealable final
judicial determination that such Losses arise solely out of the negligence
or bad faith of such Indemnified Party in performing the obligations of
such Indemnified Party under this Agreement or a breach by such Indemnified
Party of its obligations under this Agreement.
(c) Contribution. If a claim for indemnification under Section 4.16(a)
is unavailable to an Indemnified Party or is insufficient to hold such
Indemnified Party harmless for any Losses in respect of which this Section
4.16 would apply by its terms (other than by reason of exceptions provided
in this Section 4.16(c)), then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses in such
proportion as is appropriate to reflect the relative benefits received by
the Indemnifying Party on the one hand and the Indemnified Party on the
other and the relative fault of the Indemnifying Party and Indemnified
Party in connection with the actions or omissions that resulted in such
Losses as well as any other relevant equitable considerations. The
relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether there was a
judicial determination that such Losses arise in part out of the negligence
or bad faith of the Indemnified Party in performing the obligations of such
Indemnified Party under this Agreement or the Indemnified Party's breach of
its obligations under this Agreement. The amount paid or payable by a
party as a result of any Losses shall be deemed to include any attorneys'
or other fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such
fees or expenses if the indemnification provided for in
this Section was available to such party.
(d) Nonexclusive. The indemnity and contribution agreements contained in
this Section are in addition to any liability that the Indemnifying Parties
may have to the Indemnified Parties.
Section 4.17 Exclusivity. For a period of one (1) year from the date of
this Agreement, the Company shall not offer or issue any equity or equity
equivalent securities substantially similar to the Debentures, including
any security with a floating conversion price substantially similar to the
Debentures.
Section 4.18 Blue Sky Qualification. In accordance with the Registration
Rights Agreement annexed hereto as Exhibit C, the Company shall qualify the
Underlying Shares and the Warrant Shares under the securities or Blue Sky
laws of such jurisdictions as any of the Purchasers may reasonably request
and shall continue such qualification at all times through the second
anniversary of the last Closing Date; provided, however, that neither the
Company nor its Subsidiaries shall be required in connection therewith to
qualify as a foreign corporation where they are not now so qualified or to
take any action that would subject the Company to general service of
process in any such jurisdiction where it is not then so subject or subject
the Company to any material tax in any such jurisdiction where it is not
then so subject.
Section 4.19 Purchasers' Ownership of Common Stock. 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 Limitation on 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 ten (10)
Business Days have elapsed since any of the Purchasers shall have declared
an Event of Default (as that term is defined in the 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 (1) Business
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.
Section 4.20 Purchasers' Rights if Trading in Common Stock is Suspended.
In the event that at any time after the Closing and during the period when
the Registration Statement is to remain effective under the Securities Act
in accordance with the Registration Rights Agreement, trading in the shares
of the Common Stock is suspended (and not reinstated within ten (10)
Trading Days) on such stock exchange or market upon which the Common Stock
shall then be listed for trading (other than as a result of the suspension
of trading in securities on such market generally or temporary suspensions
pending the release of material information), or the Common Stock is
deleted from the OTCBB (and not reinstated within ten (10) Trading Days),
then, at any of the Purchasers' option exercisable by written notice to the
Company, the Company shall redeem, as applicable, all of the Debentures,
Warrants, Underlying Shares and Warrant Shares owned by such Purchaser at
an aggregate purchase price equal to the sum of:
(i) the product of (1) the average Per Share Market Value for the five (5)
Trading Days immediately preceding (a) the day of such notice, (b) the date
of payment in full of the repurchase price calculated under this Section
4.20, or (c) the day when the Common Stock was suspended, delisted or
deleted from trading, whichever is greater, multiplied by (2) the aggregate
number of Underlying Shares and Warrant Shares owned by such Purchaser;
(ii) the greater of (A) the outstanding principal amount and accrued and
unpaid interest on the Debentures owned by such Purchaser and (B) the
product of (1) the average Per Share Market Value for the five (5) Trading
Days immediately preceding (a) the day of such notice, (b) the date of
payment in full of the repurchase price calculated under this Section 4.20,
or (c) the day when the Common Stock was suspended, delisted or deleted
from trading, whichever is greater, multiplied by (2) the aggregate number
of Underlying Shares issuable upon the conversion of the outstanding
Debentures owned by the Purchaser;
(iii) the product of (A) the difference, but not below zero, between (1)
the average Per Share Market Value for the five (5) Trading Days
immediately preceding (a) the day of such notice, (b) the date of payment
in full of the repurchase price calculated under this Section 4.20, or (c)
the day when the Common Stock was suspended, delisted or deleted from
trading, whichever is greater, and (2) the then-current exercise price of
the Warrant, multiplied by (B) the number of Warrant Shares issuable upon
exercise of the Warrant owned by the Purchaser; and
(iv) interest on such amounts set forth in (i) - (iii) above accruing from
the seventh (7th) day after such notice until the repurchase price under
this Section 4.20 is paid in full, at the rate of fifteen percent (15%) per
annum.
Section 4.21 No Violation of Applicable Law. Notwithstanding any
provision of this Agreement to the contrary, if the redemption of the
Debentures, the Warrants, the Underlying Shares or the Warrant Shares
otherwise required under this Agreement, the Debenture, the Warrant, or the
Registration Rights Agreement would be prohibited by the relevant
provisions of Delaware law, such redemption shall be effected as soon as it
is permitted under such law; provided, however, that interest payable by
the Company with respect to any such redemption shall continue to accrue in
accordance with Section 4.20.
Section 4.22 Redemption Restrictions. Notwithstanding any provision of
this Agreement to the contrary, if any redemption of Debentures, the
Warrants, Underlying Shares or the Warrant Shares otherwise required under
this Agreement, the Debenture, the Warrant, or the Registration
Rights Agreement would be prohibited in the absence of consent from any
lender of the Company or any of the Subsidiaries, or by the holders of any
class of securities of the Company, the Company shall use its best efforts
to obtain such consent as promptly as practicable after
the redemption is required.
Interest payable by the Company with respect to any such redemption shall
continue to accrue in accordance with Section 4.20 until such consent is
obtained. Nothing contained in this Section 4.22 shall be construed as a
waiver by any of the Purchasers of any rights it may have by virtue of any
breach of any representation or warranty of the Company herein as to the
absence of any requirement to obtain any such consent.
Section 4.23 No Other Registration Rights. During the period commencing
the date hereof and ending on the earlier to occur of (i) the one year
anniversary of the Closing and (ii) the date the Registration Statement
required to be filed by the Company in accordance with the Registration
Rights Agreement is declared effective under the Securities Act by the
Commission, the Company may not file any registration statement that
provides for the registration of shares of Common Stock to be sold by other
shareholders of the Company without the prior written consent of the
Purchasers or their assigns. Such registration rights shall not apply to
registration statements relating solely to (i) employee benefit plans
notwithstanding the inclusion of a resale prospectus for securities
received under such employee benefit plan, or (ii) business combinations.
Section 4.24. Merger or Consolidation. Until the earlier of the full
conversion of the Debentures or the Maturity Date of the Debentures (as
that term is defined in the Debenture), the Company and each Subsidiary
will not, in a single transaction or a series of related transactions, (i)
consolidate with or merge with or into any other Person, or (ii) permit any
other Person to consolidate with or merge into it, unless (w) either (A)
the Company shall be the survivor of such merger or consolidation or (B)
the surviving Person shall expressly assume by supplemental agreement all
of the obligations of the Company under the Debentures and the Warrants and
this Agreement; (x) immediately before and immediately after giving effect
to such transaction (including any indebtedness incurred or anticipated to
be incurred in connection with the transaction), no Default or Event of
Default shall have occurred and be continuing; (y) if the Company is not
the surviving entity, such surviving entity's common shares shall be listed
on either The New York Stock Exchange, American Stock Exchange, or Nasdaq
National Market or Nasdaq SmallCap Market and
(z) the Company has delivered to the Purchasers an officers' certificate
and opinion of counsel, each stating that such consolidation, merger or
transfer complies with this Agreement, that the surviving Person agrees to
be bound thereby and that all conditions precedent in this Agreement
relating to such transactions have been satisfied.
Section 4.25 Registration of Underlying Shares and Warrant Shares.
Pursuant to the terms of the Registration Rights Agreement between the
Company and the Purchasers, the Company shall cause the Underlying Shares
and Warrant Shares to be registered under the Securities Act, and so
long as any Debentures remain outstanding or any Warrants remain
unexercised, the Company agrees to keep such registration current with the
Commission and with such states of the United States as the Holders (as
that term is defined in the Debenture) of the Debenture or
Warrants shall reasonably request in writing. All costs and expenses of
registration shall be borne by the Company.
Section 4.26 Liquidated Damages. The Company understands and agrees that
an Event of Default as contained in this Agreement, the Transaction
Documents and/or the Debenture will result in substantial economic loss to
the Purchasers which will be extremely difficult to calculate with
precision. Therefore, after the Closing, if for any reason the Company
fails to cure any Event of Default within the time given to cure such Event
of Default, if any, as compensation and liquidated damages for such
default, and not as a penalty, the Company agrees to pay liquidated damages
to the Purchasers in an amount equal to the two times (2x) the Purchase
Price. The Company shall upon demand pay the Purchasers, such liquidated
damages by wire transfer in immediately available funds to an account
designated by the Purchasers. Nothing herein shall limit the right of any
of the Purchasers to pursue actual damages (less the amount of any
liquidated damages received pursuant to the foregoing) for the Company's
failure to cure an Event of Default, consistent with the terms of
this Agreement. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN
THIS AGREEMENT, THE COMPANY'S OBLIGATIONS UNDER THIS SECTION SHALL
SURVIVE ANY TERMINATION OF THIS AGREEMENT.
Section 4.27 Selling Restrictions; Short Sales. On any day, each Purchaser
shall not sell Debenture Shares and Warrant Shares which in the aggregate
for such Purchaser on such day exceeds fifteen percent (15%) of the average
of the Common Stock's previous five (5) Trading Days' daily trading volume.
The Purchaser shall not use shares issued upon conversion
of the Debentures to cover any short sale by the Purchaser of the Company's
Common Stock.
Section 4.28. Fees. The Company will pay the following fees and expenses
in connection with this transaction: (a) US$15,000 to Kaplan Gottbetter &
Levenson, LLP ("KGL") for document production fees, receipt of which is
acknowledged, (b) $500 to KGL for expenses, receipt of which is
acknowledged, (c) US$5,000 to KGL as escrow agent fee, and (d) a commission
to GEMA equal to three percent (3%) of the Purchase Price. All fees and
expenses will be paid at Closing and the Escrow Agent shall deduct such
fees and expenses directly from escrow.
Section 4.29. Additional Fees. If the Company or any of its Affiliates
enters into any future financing with any Purchaser within a period of one
(1) year from the date hereof, the Company agrees to pay to GEM or GEMA,
respectively, simultaneously with the closing of such financing and
amount equal to three percent (3%) of the aggregate amount of the portion
of such financing purchased by or for the account of such Person.
ARTICLE V
[RESERVED]
ARTICLE VI
TERMINATION
Section 6.1. Termination by the Company or the Purchasers. This
Agreement
shall be automatically terminated prior to Closing if:
(a) there shall be in effect any statute, rule, law or regulation,
including an amendment to Regulation D or an interpretive release
promulgated or issued thereunder, that prohibits the consummation of the
Closing or if the consummation of the Closing would violate any
non-appealable final judgment, order, decree, ruling or injunction of any
court of or governmental authority having competent jurisdiction;
(b) the Closing shall not have occurred by 5:30 Eastern Time one hundred-
eighty (180) days after the Execution Date (unless such day is not a
Business Day, then the next Business Day);
(c) the Company's Common Stock is not registered under Section 12 of the
Exchange Act;
(d) the Company is not current in its reporting obligations under Section
13 or 15(d) of the Exchange Act;
(e) an event occurs prior to the Closing requiring the Company to report
such event to the SEC on Form 8-K and not otherwise set forth in Schedule
6.1 provided however such events shall only include the following items
under Form 8-K: Item 1; Item 2; Item 3; or Item 4 (however, as to Item 4,
only if requiring disclosure under Item 304 (a)(1)(iv) under Regulation on
S-K); or
(6) trading in the Common Stock has been suspended, delisted, or
otherwise ceased by the Commission or the NASD or other exchange or market
on which the Common Stock is listed or quoted (except for any suspension of
trading of limited duration solely to permit dissemination of material
information regarding the Company) and not reinstated within ten
(10) Trading Days.
Section 6.2. Termination by the Company. This Agreement may be
terminated prior to Closing by the Company, by giving written notice of
such termination to the Purchasers, if any of the Purchasers have
materially breached any representation, warranty, covenant or agreement
contained in this Agreement or the Registration Rights Agreement and such
breach is not cured within ten (10) Business Days following receipt by such
Purchaser of notice of such breach and the other Purchasers decline to be
substituted for the breaching Purchaser's investment.
ARTICLE VII
LEGAL FEES AND DEFAULT INTEREST RATE
In the event any Party commences legal action to enforce its rights under
this Agreement, the Debentures, the Warrants or the Escrow Agreement, 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 the event of an uncured Default by any party hereunder, interest shall
accrue on all unpaid amounts due the aggrieved party at the rate of 15% per
annum, compounded annually.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Fees and Expenses. Except as set forth above, each party
shall pay the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party
incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay the fees of the
Escrow Agent and all stamp and other taxes and duties levied in connection
with the issuance of the Debentures and Warrants (and upon conversion or
exercise thereof, the Underlying Shares and Warrant Shares) pursuant
hereto. Each of the Purchasers shall be responsible for its own tax
liability that may arise as a result of the investment hereunder or the
transactions contemplated by this Agreement. Whether or not the
transactions contemplated by this Agreement are consummated or this
Agreement is terminated, the Company shall pay (i) all costs, expenses,
fees and all taxes incident to and in connection with: (A) the preparation,
printing and distribution of the Registration Statement and all amendments
and supplements thereto (including, without limitation, financial
statements and exhibits), and all preliminary and final Blue Sky memoranda
and all other agreements, memoranda, correspondence and other documents
prepared and delivered in connection herewith, (B) the issuance and
delivery of the Debentures and Warrants and, upon conversion or exercise
thereof, the Underlying Shares and the Warrant Shares, (C) the exemption
from registration of the Debentures and Warrants and, upon conversion or
exercise thereof, the Underlying Shares and Warrant Shares for offer and
sale to the Purchasers under the securities or Blue Sky laws of the
applicable jurisdiction, (D) furnishing such copies of the Registration
Statement and all amendments and supplements thereto, as may reasonably
be requested for use in connection with resales of the Debentures and
Warrants and, upon conversion or exercise thereof, the Underlying Shares
and the Warrant Shares, and (E) the preparation of certificates for the
Debentures and Warrants and, upon conversion or exercise thereof, the
Underlying Shares and Warrant Shares (including, without limitation,
printing and engraving thereof), (ii) all fees and expenses of the counsel
and accountants of the Company and (iii) all expenses and listing fees
on securities exchanges, if any.
Section 8.2. Entire Agreement; Amendments. This Agreement, together
with the Exhibits, Annexes and Schedules hereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with
respect to such matters.
This Agreement shall be deemed to have been drafted and negotiated by both
parties hereto and no presumptions as to interpretation, construction or
enforceability shall be made by or against either party in such regard.
Section 8.3. Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed to
have been made upon facsimile transmission (with transmission confirmation
report) at the number designated below (if delivered on a Business
Day during normal business hours where such notice is to be received), or
the first Business Day following such delivery (if delivered other than on
a Business Day during normal business hours where such notice is to be
received) whichever shall first occur. The addresses for such
communications shall be:
If to the Company: SurgiLight, Inc.
12001 Science Drive, Suite 140
Orlando, Florida 32826
Attn: J. T. Lin
Tel: 407-482-4555
Fax: 407-482-0505
With copies to: The Business Law Group
126 E. Jefferson St., Suite 200
Orlando, Florida 32801
Attn: J. Bennett Grocock
Tel: 407-422-0300
Fax: 407-425-0032
If to the Purchasers: See Schedule 1 - Schedule of Purchasers (attached
hereto)
With copies to: Kaplan Gottbetter & Levenson, LLP
630 Third Avenue
New York, NY 10017-6705
Attn: Adam S. Gottbetter, Esq.
Tel: (212) 983-6900
Fax: (212) 983-9210
If to Escrow Agent: Kaplan Gottbetter & Levenson, LLP
630 Third Avenue
New York, NY 10017-6705
Attn: Adam S. Gottbetter, Esq.
Tel: (212) 983-6900
Fax: (212) 983-9210
or such other address as may be designated in writing hereafter, in the
same manner, by such person.
Section 8.5 Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by both the Company and the Purchasers, or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought.
No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in
the future or a waiver of any other provision, condition or requirement
hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right
accruing to it thereafter.
Section 8.6. Headings. The headings herein are for convenience only,
do not constitute a part of this Agreement and shall not be deemed to limit
or affect any of the provisions hereof.
Section 8.7. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and
permitted assigns. The assignment by a party of this Agreement or any
rights hereunder shall not affect the obligations of such party under this
Agreement.
Section 8.8. No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted
successors and assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
Section 8.9. Governing Law; Venue; Service of Process. The parties
hereto acknowledge that the transactions contemplated by this Agreement and
the exhibits hereto bear a reasonable relation to the State of New York.
The parties hereto agree that the internal laws of the State of
New York shall govern this Agreement and the exhibits hereto, including,
but not limited to, the enforcement of the amount of interest to be charged
on the outstanding principal amount of the Debentures and as to all issues
related to usury. Any action to enforce the terms of this Agreement
or any of its exhibits shall be exclusively brought in the State and/or
federal courts in the City, County and State of New York. Service of
process in any action by Purchasers to enforce the terms of this
Agreement 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 this Agreement.
Section 8.10. Survival. The representations and warranties of the Company
and the Purchasers contained in Article III and the agreements and
covenants of the parties contained in Article IV and this Article VIII
shall survive the Closing (or any earlier termination of this Agreement).
Section 8.11. Counterpart Signatures. This Agreement may be executed in
two or more counterparts, all of which when taken together shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other
party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of
the party executing (or on whose behalf such signature iss executed) the
same with the same force and effect as if such facsimile signature page
were an original thereof.
Section 8.12. Publicity. The Company and the Purchasers shall consult
with each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and neither
party shall issue any such press release or otherwise make any such
public statement without the prior written consent of the other, which
consent shall not be unreasonably withheld or delayed, unless counsel for
the disclosing party deems such public statement to be required by
applicable federal and/or State securities laws. Except as otherwise
required by applicable law or regulation, the Company will not disclose to
any third party the names of the Purchasers.
Section 8.13. Severability. In case any one or more of the provisions of
this Agreement shall be invalid or unenforceable in any respect, the
validity and enforceability of the remaining terms and provisions of this
Agreement shall not in any way be affected or impaired thereby and the
parties will attempt to agree upon a valid and enforceable provision which
shall be a reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Agreement.
Section 8.14. Limitation of Remedies. With respect to claims by the
Company, or persons acting by or through the Company, for remedies at law
or at equity, relating to or arising out of a breach of this Agreement,
liability, if any, shall, in no event, include loss of profits, or
incidental, indirect, exemplary, punitive, special or consequential damages
of any kind.
[ SIGNATURE PAGE FOLLOWS ]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly
executed as of the date first indicated above.
Company:
SURGILIGHT, INC.
By:/s/ J. T. Lin
Name: J. T. Lin
Title: President
Purchasers:
GEM GLOBAL YIELD FUND LIMITED
By: /s/ Pierce Loughran
Name: Pierce Loughran
Title: Authorized Signatory
Director
SCHEDULE 1
Name and Address of Purchaser
GEM Global Yield Fund Limited
Hunkins Waterfront Plaza
P.O. Box 556, Main Street
Nevis, West Indies
Tel: 44.171.355.2051
Fax: 44.171.355.4975
Full Amount of
Debentures to be
Purchased $3,000,000
Number of Termination
Warrant Shares
Exercisable 200,000
Termination
Amount US $200,000
Insert all Schedules from Agreement with relevant information, even if the
substance is "none"
EXHIBIT A DEBENTURE
EXHIBIT B WARRANT
EXHIBIT C REGISTRATION RIGHTS AGREEMENT
EXHIBIT D Conversion and Exercise Procedures
1. At any time, and from time to time during the term of this Agreement,
any Purchaser may deliver to the Escrow Agent written notice (a "Notice of
Conversion" or "Notice of Exercise") that it has elected to convert the
Debentures or exercise the Warrants, registered in the names of such
Purchaser, in whole or in part, in accordance with the terms of the
Debenture or Warrants, and the Notice of Conversion to be in the form
annexed to Exhibit A, and the Notice of Exercise to be in the form annexed
to Exhibit B hereto. A fee of $350 shall accompany every Notice of
Conversion or Notice of Exercise delivered to the Escrow Agent.
2. Holder shall send by fax the executed Holder Notice of Conversion or
Notice of Exercise to the Escrow Agent by 4:00 p.m. New York Time on the
date of the Conversion or Exercise. The Escrow Agent shall send the Holder
Notice of Conversion or Notice of Exercise by facsimile to the Company by
the end of the Business Day.
3. The Company shall have two (2) Business Days from the transmission of
the
Notice of Conversion by the Escrow Agent to object only to the calculation
of the number of Debenture Escrow Shares and Warrant Escrow Shares
(collectively the "Escrow Shares") to be released. If the Company fails to
object to the calculation of the number of Escrow Shares to be released
within said time, then the Company shall be deemed to have waived any
objections to the calculation of the number of Escrow Shares set forth in
the Purchaser's Notice and directed Escrow Agent to release same. The
Company's only basis for any objection hereunder shall be to the
calculation of the number of Escrow Shares to be released. In the event of
such an objection, the Parties shall have one (1) Business Day to agree on
the number of Escrow Shares to be released pursuant to said Conversion.
In the event that the Parties cannot agree on the number of Escrow Shares
to be released in said time, then the Company shall commence a legal action
in the appropriate State or federal court in the State and County of New
York, within five (5) Business Days of the transmittal of the Notice of
Conversion by the Escrow Agent to the Company. If the Company does not
commence such legal action within said five (5) Business Days, the Escrow
Agent shall release the number of shares stated in the Notice of Conversion
to the Purchaser and the Company's objection shall be deemed withdrawn and
waived with prejudice. If the Escrow Agent does not receive said objection
notice within the time period set forth above from the Company, the Escrow
Agent shall release from escrow and deliver to the Purchaser certificates
or instruments representing the number of Escrow Shares issuable to the
Purchaser in accordance with such conversion on the second Business Day
from the transmittal to the Company of the Notice of Conversion. In the
event that the certificates evidencing the Escrow Shares held by the Escrow
Agent are not in denominations appropriate for such delivery to the
Purchaser, the Escrow Agent shall request the Company to cause its transfer
agent and registrar to reissue certificates in smaller denominations. The
Escrow Agent shall, however, immediately release to the Purchaser
certificates representing such lesser number of shares as the denominations
in its possession will allow that is closest to but no more than the actual
number to be released to the Purchaser. Upon receipt of the reissued
shares in lesser denominations from the Company's transfer agent, the
Escrow Agent shall release to the Purchaser the balance of the shares due
to the Purchaser.
4. Holder shall send the original Debenture and Holder Notice of
Conversion to the Escrow Agent via FedEx or other commercial overnight
courier, along with a fee of $350, with instructions regarding names and
amount of certificates for the issuance of the Underlying
Shares, and instructions as to the re-issuance of the balance of the
Debentures, if conversion is not in full. However, if the Escrow Agent is
holding the Debenture, the Notice of Conversion may be faxed to the Escrow
Agent and the fee may be transmitted via wire transfer. In the event that
the Escrow Agent has custody of the Debenture, the Escrow Agent
shall notify the Company and the Holder in writing of the balance of the
Debenture remaining and the Company and the Holder shall acknowledge such
notice in writing, in lieu of a new Debenture being issued for the balance.
5. Company will issue the new Debentures (if any) and will send such new
Debentures by overnight courier within five (5) Business Days to the Escrow
Agent. The Escrow Agent shall send the Common Shares to the Holder in
accordance with Holder's instructions within two (2) Business Days of
receipt of the Notice of Conversion and will send the new Debentures (if
any) to the Holder upon receipt.
6. The Escrow Agent agrees to notify in writing by facsimile the Company
each time it releases Escrow Shares to the Purchaser. Until any such
release and notification to the Company, the Escrow Shares shall not be
deemed to be validly issued and outstanding shares of capital stock of the
Company. Such notification shall be given when the Escrow Agent delivers
the Notice of Conversion to the Company.
7. Upon receipt of a Notice of Exercise for the Warrants, the Warrants and
exercise price for the Warrants, the Escrow Agent shall notify the Company
of the exercise of the Warrants pursuant to paragraph 2.
Within two (2) Business Days of the receipt of the Notice of Exercise, the
Escrow Agent shall wire the exercise price to the Company pursuant to the
instructions provided by the Company and shall release the Warrant Shares
to the Holder. The Escrow Agent shall return the original Warrants to the
Company for cancellation, or re-issuance for the balance if applicable.
The Company will issue the new Warrants (if any) and will send such new
Warrants by overnight courier within five (5) Business Days to the Escrow
Agent.
8. The Company agrees that, at any time the conversion price of the
Debentures is such that the number of 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 Purchaser, 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.
EXHIBIT E ESCROW AGREEMENT
EXHIBIT F POWER OF ATTORNEY
EXHIBIT G OPINION LETTER
EXHIBIT H TERMINATION WARRANT
WARRANT TO PURCHASE COMMON STOCK
OF
SURGILIGHT, INC.
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE 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.
FOR VALUE RECEIVED, SurgiLight, Inc., a Delaware corporation (the
"Company"), grants the following rights to [name], a [jurisdiction]
corporation, with an office at [address] and/or its assigns ("Holder"):
ARTICLE 1. DEFINITIONS.
Capitalized terms used and not otherwise defined herein shall have the
meanings given such terms in the Convertible Debenture Purchase Agreement
by
and between the Company and the Holder (the "Purchase Agreement") and
entered into on June 30, 2000. As used in this Agreement, the following
terms shall have the following meanings:
"Closing" shall have the same meaning as defined in the Purchase Agreement.
"Corporate Office" shall mean the office of the Company (or its successor)
at which at any particular time its principal business shall be
administered.
"Escrow Agent" shall mean Kaplan, Gottbetter & Levenson, LLP, 630 Third
Avenue, 5th Floor, New York, NY 10017, as the Company's escrow agent, or
its authorized successor, as such.
"Escrow Agreement" means the escrow agreement by and among the Company, the
Holder and Kaplan Gottbetter & Levenson, LLP, annexed as Exhibit E to the
Purchase Agreement.
"Exercise Date" shall mean [to be determined in accordance with Purchase
Agreement], any date upon which the Holder shall give the Company a Notice
of Exercise.
"Exercise Price" shall mean [the lower of US$7.50 or one hundred twenty
five percent (125%) of the average closing bid price of the Common Stock
for the five (5) Trading Days immediately prior to the Closing Date] per
share of Common Stock, subject to adjustment as provided herein.
"Expiration Date" shall mean 5:00 p.m. (New York time) on [third
anniversary of the Closing Date] 2003.
"SEC" shall mean the United States Securities and Exchange Commission.
"Warrant Shares" shall mean the shares of the Common Stock issuable upon
exercise of the Warrant.
ARTICLE 2. EXERCISE AND AGREEMENTS.
2.1 Exercise of Warrant. This Warrant shall entitle Holder to purchase up
to [number equal to twenty-five percent (25%) of the Purchase Price (as
defined in the Purchase Agreement) divided by a number which is equal to
the average Per Share Market Value of the Common Stock for the five (5)
Trading Days immediately prior to the Closing Date] shares of Common Stock
(the "Shares") at the Exercise Price. This Warrant shall be exercisable at
any time and from time to time prior to the Expiration Date (the "Exercise
Period"). This Warrant and the right to purchase Warrant Shares hereunder
shall expire and become void on the Expiration Date.
2.2 Manner of Exercise.
(a) Holder may exercise this Warrant at any time, starting at the time of
the issuance of this Warrant and from time to time during the Exercise
Period, in whole or in part (but not in denominations of fewer than 10,000
Warrant Shares, except upon an exercise of this Warrant with respect to the
remaining balance of Warrant Shares purchasable hereunder at the time of
exercise), by delivering to the Escrow Agent (as defined in an escrow
agreement dated of the same date as this Warrant between the Company and
the Holder incorporated herein by reference) (i) a duly executed Notice of
Exercise in substantially the form attached as Appendix 1 hereto, (ii) the
Warrant Certificate representing the Warrants,
(iii) a bank cashier's or
certified check for the aggregate Exercise Price of the Warrant Shares
being purchased, and (iv) a bank cashier's, certified check or wire
transfer of $350 to the Escrow Agent for an exercise fee.
(b) The Holder may, at its option, in lieu of paying cash for the Warrant
Shares, exercise this Warrant by exchanging the Warrants, in whole or in
part (a "Warrant Exchange"), by delivering to the Escrow Agent (i) a duly
executed Notice of Exercise electing a Warrant Exchange, (ii) the Warrant
Certificate representing the Warrants, and (iii) a bank cashier's,
certified check or wire transfer of $350 to the Escrow Agent for an
exercise fee. In connection with any Warrant Exchange, the Holder shall be
deemed to surrender or exchange, for the Warrant Shares to be issued to it,
the number of Warrant Shares equal to the quotient obtained by dividing (A)
the product of the number of Warrant Shares exercised and the existing
Exercise Price of the Warrants by (B) the average Per Share Market Value of
a share of Common Stock for the ten (10) Trading Days ending on the date
the Notice of Exercise is sent to the Escrow Agent.
2.3 Termination. All rights of the Holder in this Warrant, to the extent
they have not been exercised, shall terminate on the Expiration Date.
2.4 No Rights Prior to Exercise. Prior to its exercise pursuant to
Section 2.2 above, this Warrant shall not entitle the Holder to any voting
or other rights as a shareholder of the Company.
2.5 Fractional Shares. No fractional shares shall be issuable upon
exercise of this Warrant and the number of Warrant Shares to be issued
shall be rounded up to the nearest whole Share. If a fractional Share
interest arises upon any exercise of the Warrant, the Company shall
eliminate such fractional Share interest by issuing Holder an additional
full Share.
2.6 Escrow. The Company agrees to enter into the escrow agreement and to
issue into said Escrow certificates to be held by the Escrow Agent (as
defined in the Escrow Agreement), registered in the name of the Holder,
representing a number of shares of Common Stock (in 10,000 share
certificates) equal to the number of Warrant Shares of this Warrant.
2.7 Adjustments to Exercise Price and Number of Securities
(a) Computation of Adjusted Exercise Price. In case the Company shall at
any time after the date hereof issue or sell any shares of Common Stock
(other than the issuances or sales referred to in Section 2.7 (g) hereof),
including shares held in the Company's treasury and shares of Common Stock
issued upon the exercise of any options, rights or warrants to subscribe
for shares of Common Stock and shares of Common Stock issued upon the
direct or indirect conversion or exchange of securities for shares of
Common Stock (excluding shares of Common Stock issuable upon exercise of
options, warrants or conversion rights granted as of the date hereof), for
a consideration per share less than Exercise Price on the date immediately
prior to the issuance or sale of such shares, or without consideration,
then forthwith upon such issuance or sale, the Exercise Price shall (until
another such issuance or sale) be reduced to the price (calculated
to the nearest full cent) equal to the quotient derived by dividing (A) an
amount equal to the sum of (X) the product of (a) the Exercise Price on the
date immediately prior to the issuance or sale of such shares, multiplied
by (b) the total number of shares of Common Stock outstanding immediately
prior to such issuance or sale plus, (Y) the aggregate of the amount of all
consideration, if any, received by the Company upon such issuance or sale,
by (B) the total number of shares of Common Stock outstanding immediately
after such issuance or sale; provided, however, that in no event shall the
Exercise Price be adjusted pursuant to this computation to an amount in
excess of the Exercise Price in effect immediately prior to such
computation, except in the case of a combination of outstanding shares of
Common Stock, as provided by Section 2.7 (c) hereof.
For the purposes of any computation to be made in accordance with this
Section 2.7(a), the following provisions shall be applicable:
(i) In case of the issuance or sale of shares of Common Stock for a
consideration part or all of which shall be cash, the amount of cash
consideration therefor shall be deemed to be the amount of cash received by
the Company for such shares (or, if shares of Common Stock are offered by
the Company for subscription, the subscription price, or if either of such
securities shall be sold to underwriters or dealers for public offering
without a subscription offering, the initial public offering price) before
deducting therefrom any compensation paid or discount allowed in the sale,
underwriting or purchase thereof by underwriters or dealers or others
performing similar services, or any expenses incurred in connection
therewith.
(ii) In case of the issuance or sale (otherwise than as a dividend or
other distribution on any stock of the Company) of shares of Common Stock
for a consideration part or all of which shall be other than cash, the
amount of the consideration therefor other than cash shall be deemed to be
the value of such consideration as determined in good faith by the Board of
Directors of the Company.
(iii) Shares of Common Stock issuable by way of dividend or other
distribution on any stock of the Company shall be deemed to have been
issued immediately after the opening of business on the day following the
record date for the determination of stockholders entitled to receive such
dividend or other distribution and shall be deemed to have been issued
without consideration.
(iv) The reclassification of securities of the Company other than shares
of the Common Stock into securities including shares of Common Stock shall
be deemed to involve the issuance of such shares of Common Stock for a
consideration other than cash immediately prior to the close of business on
the date fixed for the determination of security holders entitled to
receive such shares, and the value of the consideration allocable to such
shares of Common Stock shall be determined as provided in subsection (ii)
of this Section 2.7(a).
(v) The number of shares of Common Stock at any one time outstanding shall
include the aggregate number of shares issued or issuable (subject to
readjustment upon the actual issuance thereof) upon the exercise of
options, rights, warrants and upon the conversion or exchange of
convertible or exchangeable securities; provided, however, that shares
issuable upon the exercise of the Warrants shall not be included in such
calculation.
(b) Options, Rights, Warrants and Convertible and Exchangeable Securities.
In case the Company shall at any time after the date hereof issue options,
rights or warrants to subscribe for shares of Common Stock, or issue any
securities convertible into or exchangeable for shares of Common Stock, for
a consideration per share less than the Exercise Price immediately prior to
the issuance of such options, rights or warrants (excluding shares of
Common Stock issuable upon exercise of options, warrants or conversion
rights granted as of the date hereof), or such convertible or exchangeable
securities, or without consideration, the Exercise Price in effect
immediately prior to the issuance of such options, rights or warrants, or
such convertible or exchangeable securities, as the case may be, shall be
reduced to a price determined by making a computation in accordance with
the provision of Section 2.7 (a) hereof, provided that:
(i) The aggregate maximum number of shares of Common Stock, as the case
may be, issuable under such options, rights or warrants shall be deemed to
be issued and outstanding at the time such options, rights or warranties
were issued, and for a consideration equal to the minimum purchase price
per share provided for in such options, rights or warrants at the time of
issuance, plus the consideration (determined in the same manner as
consideration received on the issue or sale of shares in accordance with
the terms of the Warrants), if any, received by the Company for such
options, rights or warrants.
(ii) The aggregate maximum number of shares of Common Stock issuable upon
conversion or exchange of any convertible or exchangeable securities shall
be deemed to be issued and outstanding at the time of issuance of such
securities, and for a consideration equal to the consideration (determined
in the same manner as consideration received on the issue or sale of shares
of Common Stock in accordance with the terms of the Warrants) received by
the Company for such securities, plus the minimum consideration, if any,
receivable by the Company upon the conversion or exchange thereof.
(iii) If any change shall occur in the price per share provided for in any
of the options, rights or warrants referred to in subsection (a) of this
Section 2.7 (b), or in the price per share at which the securities referred
to in subsection (b) of this Section 2.7 (b) are convertible or
exchangeable, such options, rights or warrants or conversion or exchange
rights, as the case may be, shall be deemed to have expired or terminated
on the date when such price change became effective in respect of shares
not theretofore issued pursuant to the exercise or conversion or exchange
thereof, and the Company shall be deemed to have issued upon such date new
options, rights or warrants or convertible or exchangeable securities at
the new price in respect of the number of shares issuable upon the exercise
of such options, rights or warrants or the conversion or exchange of such
convertible or exchangeable securities.
(iv) If any options, rights or warrants referred to in subsection (a) of
this Section 2.7, or any convertible or exchangeable securities referred to
in subsection (b) of this Section 2.7, expire or terminate without exercise
or conversion, as the case may be, then the Exercise Price of the remaining
outstanding Warrants shall be readjusted as if such options, rights or
warrants or convertible or exchangeable securities, as the case may be, had
never been issued.
(c) Subdivision and Combination. In case the Company shall at any time
subdivide or combine the outstanding shares of Common Stock, the Exercise
Price shall forthwith be proportionately decreased in the case of
subdivision or increased in the case of combination.
(d) Adjustment in Number of Securities. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 2.7, the number
of Warrant Shares issuable upon the exercise of each Warrant shall be
adjusted to the nearest full amount by multiplying a number equal to the
Exercise Price in effect immediately prior to such adjustment by the number
of Warrant Shares issuable upon exercise of the Warrants immediately prior
to such adjustment and dividing the product so obtained by the adjusted
Exercise Price.
(e) [Reserved].
(f) Merger or Consolidation. In case of any consolidation of the Company
with, or merger of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger which does not result in
any reclassification or change of the outstanding Common Stock), the
corporation formed by such consolidation or merger shall execute and
deliver to the Holder a supplemental warrant agreement providing that the
Holder of each Warrant then outstanding or to be outstanding shall have the
right thereafter (until the expiration of such Warrant) to receive, upon
exercise of such Warrant, the kind and amount of shares of stock and other
securities and property (except in the event the property is cash, then the
Holder shall have the right to exercise the Warrant and receive cash in the
same manner as other stockholders) receivable upon such consolidation or
merger, by a holder of the number of shares of Common Stock of the Company
for which such warrant might have been exercised immediately prior to such
consolidation, merger, sale or transfer. Such supplemental warrant
agreement shall provide for adjustments which shall be identical to the
adjustments provided in Section 2.7. The above provision of this Subsection
shall similarly apply to successive consolidations or mergers.
(g) No Adjustment of Exercise Price in Certain Cases. No adjustment of the
Exercise Price shall be made upon the issuance of the Shares upon
conversion of the convertible debentures of this warrant, or upon the
exercise of any options, rights, or warrants outstanding as of the date of
the Purchase Agreement and disclosed in Section 3.1(c) therein.
(h) Dividends and Other Distributions. In the event that the Company
shall at any time prior to the exercise of all Warrants declare a dividend
(other than a dividend consisting solely of shares of Common Stock) or
otherwise distribute to its stockholders any assets, property, rights,
evidences of indebtedness, securities (other than shares of Common Stock),
whether issued by the Company or by another, or any other thing of value,
the Holders of the unexercised Warrants shall thereafter be entitled, in
addition to the shares of Common Stock or other securities and property
receivable upon the exercise thereof, to receive, upon the exercise of such
Warrants, the same property, assets, rights, evidences of indebtedness,
securities or any other thing of value that they would have been entitled
to receive at the time of such dividend or distribution as if the Warrants
had been exercised immediately prior to such dividend or distribution.
At the time of any such dividend or distribution, the Company shall make
appropriate reserves to ensure the timely performance of the provisions of
this subsection 2.7 (h). Nothing contained herein shall provide for the
receipt or accrual by a Holder of cash dividends prior to the exercise by
such Holder of the Warrants.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. In addition to the representations
and warranties contained in Article 3.1 of the Convertible Debenture
Purchase Agreement, the Company hereby represents and warrants to the
Holder as follows:
(a) All shares which may be issued upon the exercise of the purchase right
represented by this Warrant shall, upon issuance, be duly authorized,
validly issued, fully-paid and nonassessable, and free of any liens and
encumbrances except for restrictions on transfer provided for herein or
under applicable federal and state securities laws, and not subject to any
pre-emptive rights.
(b) The Company is a corporation duly organized and validly existing under
the laws of the State of Colorado, and has the full power and authority to
issue this Warrant and to comply with the terms hereof. The execution,
delivery and performance by the Company of its obligations under this
Warrant, including, without limitation, the issuance of the Warrant Shares
upon any exercise of the Warrant have been duly authorized by all necessary
corporate action. This Warrant has been duly executed and delivered by the
Company and is a valid and binding obligation of the Company, enforceable
in accordance with its terms, except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization or similar laws affecting
enforceability of creditors' rights generally and except as the
availability of the remedy of specific enforcement, injunctive relief or
other equitable relief is subject to the discretion of the court before
which any proceeding therefor may be brought.
(c) The Company is not subject to or bound by any provision of any
certificate or articles of incorporation or by-laws, mortgage, deed of
trust, lease, note, bond, indenture, other instrument or agreement,
license, permit, trust, custodianship, other restriction or any applicable
provision of any law, statute, rule, regulation, judgment, order, writ,
injunction or decree of any court, governmental body, administrative agency
or arbitrator which could prevent or be violated by or under which there
would be a default (or right of termination) as a result of the execution,
delivery and performance by the Company of this Warrant.
(d) The Company is subject to the reporting requirements of Section 13 or
Section 15(d) of the Securities Exchange Act of 1934, as amended, and is
current in its reporting requirements. The Company is eligible to issue
the Warrants and the Warrant Shares pursuant to Rule 506 of Regulation D
promulgated under the Securities Act.
ARTICLE 4. MISCELLANEOUS.
4.1 Transfer. This Warrant 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 (including,
without limitation, the delivery of an investment representation letter and
a legal opinion reasonably satisfactory to the Company), provided that this
Warrant may not be transferred or assigned such that either the Holder or
any transferee will, following such transfer or assignment, hold a Warrant
for the right to purchase fewer than 10,000 Warrant Shares.
4.2 Transfer Procedure. Subject to the provisions of Section 4.1, Holder
may transfer or assign this Warrant by giving the Company notice setting
forth the name, address and taxpayer identification number of the
transferee or assignee, if applicable (the "Transferee") and surrendering
this Warrant to the Company for reissuance to the Transferee and the
Holder, in the event of a transfer or assignment of this Warrant in part.
(Each of the persons or entities in whose name any such new Warrant shall
be issued are herein referred to as a "Holder").
4.3 Loss, Theft, Destruction or Mutilation. If this Warrant shall become
mutilated or defaced or be destroyed, lost or stolen, the Company shall
execute and deliver a new Warrant in exchange for and upon surrender and
cancellation of such mutilated or defaced Warrant or, in lieu of and in
substitution for such Warrant so destroyed, lost or stolen, upon the Holder
filing with the Company an affidavit that such Warrant has been so
mutilated, defaced, destroyed, lost or stolen. However, the Company shall
be entitled, as a condition to the execution and delivery of such new
Warrant, to demand reasonably acceptable indemnity to it and payment of the
expenses and charges incurred in connection with the delivery of such new
Warrant. Any Warrant so surrendered to the Company shall be canceled.
4.4 Notices. All notices and other communications from the Company to the
Holder or vice versa shall be deemed delivered and effective when given
personally, by facsimile transmission with confirmation sheet at such
address and/or facsimile number as may have been furnished to the Company
or the Holder, as the case may be, in writing by the Company or the Holder
from time to time.
4.5 Waiver. This Warrant and any term hereof may be changed, waived, or
terminated only by an instrument in writing signed by the party against
which enforcement of such change, waiver, discharge or termination is
sought.
4.6 Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
its principles regarding conflicts of law. Any action to enforce the terms
of this Warrant shall be exclusively heard in the State and Federal Courts
of New York County and State and Country of the United States of America.
4.7 Signature. In the event that any signature on this Warrant is
delivered by facsimile transmission, such signature shall create a valid
and binding obligation of the party executing (or on whose behalf such
signature is executed) the same, with the same force and effect as if such
facsimile signature page were an original thereof.
4.8 Legal Fees. In the event any Party commences a legal action to
enforce its rights under this Warrant, the non-prevailing shall pay all
reasonable costs and expenses (including reasonable attorney's fees)
incurred in enforcing such rights.
(Remainder of this page left intentionally blank)
4.9 Attorney-in-Fact. To effectuate the terms and provisions of the
Purchase Agreement, the Escrow Agreement, the Debenture and this Warrant,
the Company hereby agrees to give a power of attorney as is evidenced by
Exhibit F to the Convertible Debenture Purchase Agreement. All acts done
under the such power of attorney are hereby ratified and approved and
neither the Attorney-in-Fact nor any designee or agent thereof shall be
liable for any acts of commission or omission, for any error of judgment or
for any mistake of fact or law, as long as the Attorney - in- Fact is
operating within the scope of the power of attorney and within the scope
of, and in accordance with, this Warrant, the Purchase Agreement, the
Debenture and the Escrow Agreement. The power of attorney being coupled
with an interest shall be irrevocable while any amount of the Debenture
remains unpaid, any amount of this Warrant remains unexercised or any
portion of the Purchase Agreement or the Escrow Agreement remains
unsatisfied. In addition, the Company shall give the Attorney-in-Fact a
corporate resolution executed by the Board of Directors of the Company
which authorizes future issuances of the shares for the Debentures, and
which resolution states that it is irrevocable while any amount of the
Debenture remains unpaid, any amount of this Warrant remains unexercised or
any portion of the Purchase Agreement or the Escrow Agreement remains
unsatisfied.
Dated:__________________________________________
SURGILIGHT, INC.________________________________
By:_____________________________________________
Name:___________________________________________
Title:__________________________________________
Attest:_________________________________________
Name:___________________________________________
Title:__________________________________________
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects (please check the appropriate box and
fill in the blank spaces):
? to purchase ______ shares of Common Stock, no par value per share, of
SurgiLight, Inc. at $_____ per share for a total of $_____________ and
pursuant to the terms of the attached Warrant, and tenders herewith payment
of the purchase price of such Warrant Shares in full; or
? to purchase _______ shares of Common Stock, no par value per share, of
SurgiLight, Inc. pursuant to the cashless exercise provision under Section
2.2 (b) of the Warrant, and tenders herewith the number of Warrant Shares
to purchase such Warrant Shares based on the average closing bid price of
the Common Stock for the ten trading days prior to the date hereof of $
per share.
2. Please issue a certificate or certificates representing said Warrant
Shares in the name of the undersigned or in such other name as is specified
below:
Dated:
By:
Title:________________________________
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. [number]
US$[number]
3% CONVERTIBLE DEBENTURE DUE [date], 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 [date], 2003 (the "Debentures"), in an
aggregate principal amount of up to US$3,000,000.
FOR VALUE RECEIVED, the Company promises to pay to [name], or its
registered assigns (the "Holder"), the principal sum of [amount] Dollars
(US $[number]), on or prior to [date], 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. 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.
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.
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 Holder
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 Holder 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
(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
(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) [the lower of US$7.50 or one
hundred twenty-five percent (125%) of the average Per Share Market Value
for the five (5) Trading Days immediately prior to the Closing Date] (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 propeerty 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 IOLA 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 IOLA 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. 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
_______________________________________________
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of June 30, 2000, by and between SurgiLight, Inc., a Delaware
corporation, with its principal place of business at 12001 Science Drive,
Suite 140, Orlando, Florida 32826 (the "Company"); and GEM Global Yield
Fund Limited, a Nevis company, with its administrative office at Hunkins
Waterfront Plaza, P.O. Box 556, Main Street, Nevis, West Indies (Referred
to herein as the "Purchaser" or sometimes the "Purchasers").
Simultaneously with the execution of this Agreement, the Purchasers and
the Company entered into a Convertible Debenture Purchase Agreement, dated
as of the date hereof (the "Purchase Agreement") incorporated herein by
reference, pursuant to which the Purchasers have agreed to purchase certain
Debentures and Warrants (the "Debentures" and the "Warrants") of the
Company.
The Company and the Purchasers hereby agree as follows:
1. Definitions. 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:
"Advice" shall have the meaning set forth in Section 4.
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control
with such Person. For the purposes of this definition, "control " when
used with respect to any Person, means the possession, direct or indirect,
of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting
securities, by contract or otherwise; and the terms of "affiliated,"
"controlling" and "controlled" have meanings correlative to the foregoing.
"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 New York are authorized or required by law or other government
actions to close between the hours of 9:30 a.m. and 6:00 p.m. New York
Time.
"Closing" shall mean the Closing, as such term is defined in the
Purchase Agreement.
"Closing Date" shall mean the Closing Date, as such term is defined in
the Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, no par value per share.
"Debentures" means the Company's 3% Convertible Debentures delivered to
the Purchasers pursuant to the Purchase Agreement.
"Effectiveness Date" means, with respect to a Registration Statement, in
the case of a Closing, the earlier of the 180th day following the execution
of the Purchase Agreement (or if such date is not a Business Day, the next
Business Day) and the fifth (5th) Business Day after the date the Company
is notified by the Commission that such Registration Statement will not be
reviewed. "Effectiveness Period" shall have the meaning set forth in
Section 2(a).
"Event" shall have the meaning set forth in Section 6.
"Event Date" shall have the meaning set forth in Section 6.
"Escrow Agreement" means the escrow agreement by and among the Company,
KGL and the Purchasers, entered into on the same date as this Agreement,
and which is incorporated herein by reference.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Execution Date" means the day the Purchase Agreement and the other
Transaction Documents are executed by the parties
"Filing Date" means the day the Registration Statement is filed with the
Commission, which date shall be as soon as practicable after the Execution
Date.
"Holder" or "Holders" means the holder or holders, as the case may be,
from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 8(c).
"Indemnifying Party" shall have the meaning set forth in Section 8(c).
"Inspectors" shall have the meaning set forth in Section 3(m).
"Losses" shall have the meaning set forth in Section 8(a).
"New York Courts" shall have the meaning set forth in Section 10(h).
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
political subdivision thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding,
such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments
and supplements to the Prospectus, including post-effective amendments, and
all material incorporated by reference or deemed to be incorporated by
reference in such Prospectus.
"Records" shall have the meaning set forth in Section 3(m).
"Registrable Securities" means the Warrant Shares and the Underlying
Shares; provided, however, that in order to account for adjustments in the
conversion and exercise ratios, Registrable Securities shall include a
number of shares of Common Stock equal to no less than four (4) times the
number of shares of Common Stock into which the Debentures are convertible
in full, at the lesser of either the Fixed Conversion Price or the Floating
Conversion Price on the date of execution of the Purchase Agreement
together with such number of Warrant Shares issuable upon exercise of the
Warrants issued on the Closing.
"Registration Statement" means the registration statement, contemplated
by Section 2(a), including the Prospectus, amendments and supplements to
such registration statement or Prospectus, including pre- and post-
effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Underlying Shares" shall mean the shares of Common Stock into which the
Debentures are convertible in accordance with the Purchase Agreement and
the Debentures.
"Underwritten Registration" or "Underwritten Offering" means a
registration in connection with which securities of the Company are sold to
an underwriter for re-offering to the public pursuant to an effective
registration statement.
"Warrants" means the Common Stock purchase warrants issued in accordance
with the terms of the Purchase Agreement.
"Warrant Shares" means the shares of Common Stock issuable upon exercise
of the Warrants.
2. Shelf Registration
1. As soon as practicable after the date of this Agreement (the
"Execution Date"), the Company shall prepare and file with the Commission a
"Shelf" Registration Statement covering the issuance or resale of all
Registrable Securities for an offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement shall be on Form S-1 or
Form SB-2 or another appropriate form permitting registration of
Registrable Securities for issuance to or resale by the Holders in the
manner or manners designated by them (including, without limitation, public
or private sales and one or more Underwritten Offerings). The Company
shall (i) not permit any securities other than the Registrable Securities
to be included in the Registration Statement except as provided for in
Section 7(b) and (ii) use its best efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
practicable after the filing thereof, but in any event prior to the
Effectiveness Date, and to keep such Registration Statement continuously
effective under the Securities Act until the date which is five years after
the date of this Agreement or such earlier date when all Registrable
Securities covered by such Registration Statement have been sold or may be
sold pursuant to Rule 144 as determined by the counsel to the Company
pursuant to a written opinion letter, addressed to the Holders, to such
effect (the "Effectiveness Period"); provided, however, that the Company
shall not be deemed to have used its best efforts to keep the Registration
Statement effective during the Effectiveness Period if it voluntarily takes
any action to suspend the effectiveness of the Registration Statement under
the Securities Act during the Effectiveness Period, unless the Company,
after consultation with its counsel, determines that such action is
required under applicable law or the Company has filed a post-effective
amendment to the Registration Statement and the Commission has not declared
it effective. Should the Registration Statement not relate to the maximum
number of Registrable Securities acquired by (or potentially acquirable by)
the Holders thereof upon conversion or exercise of the Debentures, and
Warrants (because of the indeterminable number of shares of Common Stock
issuable upon conversion or exercise thereof), the Company shall be
required to file a separate registration statement (utilizing Rule 462
promulgated under the Securities Act, where applicable) relating to such
Registrable Securities which then remain unregistered. The provisions of
this Agreement shall relate to such separate registration statement as if
it were an amendment to such Registration Statement.
2. If the Holders of a majority of the Registrable Securities
so elect and inform the Company in writing a reasonable time prior to the
Filing Date, an offering of Registrable Securities pursuant to the
Registration Statement may be effected in the form of an Underwritten
Offering. In such event, and if the managing underwriters advise the
Company and such Holders in writing that in their opinion the amount of
Registerable Securities proposed to be sold in such offering exceeds the
amount of Registerable Securities which can be sold in such offering, there
shall be included in such Underwritten Offering the amount of such
Registerable Securities which in the opinion of such managing underwriters
can be sold, and such amount shall be allocated pro rata among the Holders
proposing to sell Registerable Securities in such Underwritten Offering.
3. If any of the Registerable Securities are to be sold in an
Underwritten Offering, the investment banker or investment bankers and
manager or managers that will administer the offering will be selected by
the Holders of a majority of the Registerable Securities included in such
offering, with the approval of the Company, which shall not be unreasonably
withheld or delayed. No Holder may participate in any Underwritten Offering
hereunder unless such Person (i) agrees to sell its Registerable Securities
on the basis provided in any underwriting agreements approved by the
Persons entitled hereunder to approve such arrangements and (ii) completes
and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of
such arrangements.
3. Registration Procedures. In connection with the Company's
registration obligations hereunder, the Company shall:
1. Prepare and file with the Commission within the time period
set forth in Section 2 a Registration Statement on Form S-1 or Form SB-2 or
another appropriate form permitting registration of Registrable Securities
for issuance to the Holders and the resale thereof in accordance with the
method or methods of distribution thereof as specified by the Holders, and
use its best efforts to cause the Registration Statement to become
effective and remain effective as provided herein; provided, however that,
subject only to the Holders providing to the Company in writing
information, requested in writing by the Company, relating to the Holders'
proposed method of distribution of Registrable Securities and such other
information required by law, not less than ten (10) days prior to the
filing of the Registration Statement or any related Prospectus or any
amendment (pre or post effective) or supplement thereto (including any
document that would be incorporated or deemed to be incorporated therein by
reference), the Company shall (i) furnish to the Holders, their Counsel and
any managing underwriters, copies of all such documents proposed to be
filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such Holders,
their Counsel and such managing underwriters, and (ii) cause its officers
and directors, counsel and independent certified public accountants to
respond to such inquiries as shall be necessary, in the opinion of
respective counsel to such Holders and such underwriters, to conduct a
reasonable investigation within the meaning of the Securities Act. The
Holders shall have five days after receipt of the Registration Statement or
any related Prospectus or any amendment or supplement thereto to comment on
or object to the filing of such documents. The Company shall not file the
Registration Statement or any such Prospectus or any amendments or
supplements thereto without including any comments reasonably requested by
the Holders and shall not file any such documents to which the Holders of a
majority of the Registrable Securities, their Counsel, or any managing
underwriters, shall object; provided, however, that the counting of days
for determining whether the Company has complied with the Filing Date and
Effectiveness Date requirements for purposes of this Agreement shall not
include any days during the period commencing with such objection and
ending when the Person objecting subsequently consents to the filing of
such documents. On the date of effectiveness of any Registration Statement,
the Company shall furnish an opinion, dated as of such date, from counsel
representing the Company addressed to the Holders of the Registrable
Securities and in form, scope and substance as is customarily given in an
underwritten public offering.
The Company shall also use its best efforts to cause to be furnished on the
date of effectiveness of any Registration Statement, a letter, dated such
date, from the Company's independent certified public accountants in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed
to the Holders of the Registrable Securities.
2. (i) Prepare and file with the Commission such amendments, including
post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective for the
applicable time period; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement, and as so supplemented
or amended to be filed pursuant to Rule 424 (or any simillar provisions
then in force)promulgated under the Securities Act; (iii) respond as
promptly as practicable to any comments received from the Commission with
respect to the Registration Statement or any amendment thereto; and (iv)
comply with the provisions of the Securities Act and the Exchange Act with
respect to the registration of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so
supplemented.
3. Notify the Holders of Registrable Securities to be sold, their Counsel
and any managing underwriters immediately (and, in the case of (i)(A)
below, not less than three Business Days prior to such filing) and (if
requested by any such Person) confirm such notice in writing no later than
one Business Day following the day (i)(A) when a Prospectus or any
Prospectus supplement or post-effective amendment to the Registration
Statement is proposed to be filed; and (B) with respect to the Registration
Statement or any post-effective amendment, when the same has become
effective; (ii) of any request by the Commission or any other federal or
state governmental authority for amendments or supplements to the
Registration Statement or Prospectus or for additional information; (iii)
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement covering any or all of the
Registrable Securities or the initiation of any Proceedings for that
purpose; (iv) if at any time the Registration Statement becomes stale and
is no longer effective; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening
of any Proceeding for such purpose; and (vi) of the occurrence of any event
that makes any statement made in the Registration Statement or Prospectus
or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to
the Registration Statement, Prospectus or other documents so that, in the
case of the Registration Statement or the Prospectus, as the case may be,
it will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
4. Use its reasonable best efforts to avoid the issuance of, or,
if issued, obtain the withdrawal of (i) any order suspending the
effectiveness of the Registration Statement or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable
moment.
5. If requested by any managing underwriter or the Holders of
a majority of the Registrable Securities to be sold in connection with an
Underwritten Offering, (i) promptly incorporate in a Prospectus supplement
or post-effective amendment to the Registration Statement such information
as such managing underwriters and such Holders reasonably agree should be
included therein and (ii) make all required filings of such Prospectus
supplement or such post-effective amendment as soon as practicable after
the Company has received notification of the matters to be incorporated in
such Prospectus supplement or post-effective amendment; provided, however,
that the Company shall not be required to take any action pursuant to this
Section 3(e) unless in the opinion of counsel for the Company such action
is required by applicable law.
6. Furnish to each Holder, their Counsel and any managing
underwriters, without charge, at least one complete copy of each
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent requested
by such Person (including those previously furnished or incorporated by
reference) promptly after the filing of such documents with the Commission.
7. Promptly deliver to each Holder, their Counsel, and any
underwriters, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus forming part of the
effective Registration Statement) and each amendment or supplement thereto
as such Persons may reasonably request; and the Company hereby agrees to
respond in writing to a written request from the Purchasers with respect to
the effectiveness of such Prospectus.
8. Prior to any public offering of Registrable Securities, use
its reasonable best efforts to register or qualify or cooperate with the
selling Holders, any underwriters and their respective counsel in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for offer and
sale under the securities or Blue Sky laws of such jurisdictions within the
United States as any Holder or underwriter requests in writing, to keep
each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of
the Registrable Securities covered by a Registration Statement; provided,
however, that the Company shall not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified or to take
any action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or subject the Company to any
tax in any such jurisdiction where it is not then so subject.
9. Cooperate with the Holders and any managing underwriters to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificates shall be free of all
restrictive legends, except as required by applicable law, and to enable
such Registrable Securities to be in such denominations and registered in
such names as any such managing underwriters or Holders may request at
least three (3) Business Days prior to any sale of Registrable Securities.
10. Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as practicable, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, and file any other required
document so that, as thereafter delivered, neither the Registration
Statement nor such Prospectus will contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
11. Use its reasonable best efforts to cause all Registrable
Securities relating to such Registration Statement to be listed or quoted
on the Nasdaq National Market, the Nasdaq SmallCap Market and any other
securities exchange, market or over-the-counter bulletin board, if any, on
which similar securities issued by the Company are then listed or quoted to
the extent required by the rules of such exchange, market or other
quotation
system.
12. If the Registrable Securities are included in a Registration
Statement filed in connection with an Underwritten Offering, the
Company shall, (i) make such representations and warranties to such Holders
as it agrees to make to the underwriters in such Underwritten Public
Offerings, and confirm the same if and when requested; (ii) enter into an
indemnification agreement which shall contain indemnification provisions
and procedures no less favorable to the selling Holders , than those set
forth in Section 6 and (iii) deliver such documents and certificates as may
be reasonably requested by the Holders of a majority of the Registrable
Securities being sold, their Counsel and any managing underwriters to
evidence the continued validity of the representations and warranties made
pursuant to clause 3(1)(i) .
(m) Make available for inspection by (i) Holders of the
Registrable Securities; (ii) any underwriter participating in any
disposition pursuant to the Registration Statement, (iii) one firm of
attorneys and one firm of accountants or other agents retained by the
Investors, and (iv) one firm of attorneys retained by all such underwriters
(collectively, the "Inspectors") all pertinent financial and other records,
and pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably deemed necessary by
each Inspector to enable each Inspector to exercise its due diligence
responsibility, and cause the Company's officers, directors and employees
to supply all information which any Inspector may reasonably request for
purposes of such due diligence; provided, however, that each Inspector
shall hold in confidence and shall not make any disclosure (except to an
Investor) of any Record or other information which the Company determines
in good faith to be confidential, and of which determination the Inspectors
are so
notified, unless (a) the disclosure of such Records is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (b)
the release of such Records is ordered pursuant to a subpoena or other
order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the
public other than by disclosure in violation of this or any other
agreement. The Company shall not be required to disclose any confidential
information in such Records to any Inspector until and unless such
Inspector shall have entered into confidentiality agreements (in form and
substance satisfactory to the Company) with the Company with respect
thereto, substantially in the form of this Section 3(m). Each Holder of
Registrable Securities agrees that it shall, upon learning that disclosure
of such Records is sought in or by a court or government body of competent
jurisdiction or through other means, give prompt notice to the Company and
allow the Company, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records
deemed confidential. Nothing herein shall be deemed to limit the Holders'
ability to sell Registrable Securities in a manner which is otherwise
consistent with applicable laws and regulations.
(n) Comply with all applicable rules and regulations of the
Commission and make generally available to its security holders earning
statements satisfying the provisions of Section 11(a) of the Securities Act
and Rule 158 not later than forty-five (45) days after the end of any 12-
month period (or ninety (90) days after the end of any 12-month period if
such period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Registrable Securities are sold to underwriters in a firm
commitment or best efforts Underwritten Offering and (ii) if not sold to
underwriters in such an offering, commencing on the first (1st) day of the
first (1st) fiscal quarter of the Company after the effective date of the
Registration Statement.
(o) At such time as the Registration Statement has been declared
effective by the Commission covering a resale of any Registrable
Securities, the Company shall cause its legal counsel to deliver to the
Transfer Agent an opinion, subject to the holders of any Registrable
Securities making such representations and warranties to Company counsel as
it may require, certifying that such Registrable Securities may be sold by
the Holders pursuant to such Registration Statement with the purchasers
thereof receiving share certificates without restrictive legend, which
opinion shall remain effective so long as such Registration Statement
remains in full force and effect. In the event that, at any time, such
Registration Statement ceases to be effective, the Company shall
immediately deliver written notice thereof to the Transfer Agent and the
Holders stating that the opinion of the Company's legal counsel may no
longer be relied upon by the Transfer Agent (unless and until an additional
or amended, as applicable, Registration Statement is so declared effective
(with respect to the resale of such Registrable Securities)).
(p) Provide a CUSIP number for all Registrable Securities, not
later than the effective date of the Registration Statement.
(q) The Company shall take all such other actions as any Holder
of Registrable Securities or the underwriters, if any, reasonably request
in order to expedite or facilitate the disposition of the Registration
Securities.
The Company may require each selling Holder and the underwriters to
furnish to the Company such information regarding the distribution of such
Registrable Securities and the Holder as is required by law to be disclosed
in the Registration Statement and as may otherwise be reasonably requested
by the Company, including, without limitation, information necessary for
the Company to respond to the comments from the Commission and/or state
securities authorities, and the Company may exclude from such registration
the Registrable Securities of any such Holder who unreasonably fails to
furnish such information within a reasonable time after receiving such
request, and such Holder shall be deemed to have violated this Registration
Rights Agreement for purposes of Section 6.2 of the Purchase Agreement.
If the Registration Statement refers to any Holder by name or otherwise
as the holder of any securities of the Company, then such Holder shall have
the right to require (i) the inclusion therein of language, in form and
substance reasonably satisfactory to such Holder and the Company, to the
effect that the ownership by such Holder of such securities is not to be
construed as a recommendation by such Holder of the investment quality of
the Company's securities covered thereby and that such ownership does not
imply that such Holder will assist in meeting any future financial
requirements of the Company, or (ii) if such reference to such Holder by
name or otherwise is not required by the Securities Act or any similar
federal statute then in force, the deletion of the reference to such Holder
in any amendment or supplement to the Registration Statement filed or
prepared subsequent to the time that such reference ceases to be required.
Each Purchaser covenants and agrees that (i) it will not offer or sell
any Registrable Securities under the Registration Statement until it has
received copies of the Prospectus as then amended or supplemented as
contemplated in Section 3(g) and notice from the Company that such
Registration Statement and any post-effective amendments thereto have
become effective as contemplated by Section 3(c) and (ii) each Purchaser
and its officers, directors or Affiliates, if any, will comply with the
prospectus delivery requirements of the Securities Act as applicable to
them in connection with sales of Registrable Securities pursuant to the
Registration Statement.
Each Holder agrees by its acquisition of such Registrable Securities
that, upon receipt of a written notice from the Company of the occurrence
of any event of the kind described in Section 3(c)(ii), 3(c)(iii),
3(c)(iv), 3(c)(v) or 3(c)(vi), such Holder will forthwith discontinue
disposition of such Registrable Securities until such Holder's receipt of
the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 3(j), or until it is advised in writing
(the "Advice") by the Company that the use of the applicable Prospectus may
be resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement.
4. Registration Expenses
1. All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not the Registration Statement is filed or becomes effective and
whether or not any Registrable Securities are sold pursuant to the
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing
fees (including, without limitation, fees and expenses (A) with respect to
filings required to be made with the National Association of Securities
Dealers, Inc. and (B) in compliance with state securities or Blue Sky laws
(including, without limitation, fees and disbursements of counsel for the
underwriters or Holders in connection with Blue Sky qualifications of the
Registrable Securities and determination of the eligibility of the
Registrable Securities for investment under the laws of such jurisdictions
as the managing underwriters, if any, or Holders of a majority of
Registrable Securities may designate)), (ii) printing
expenses (including, without limitation, expenses of printing certificates
for Registrable Securities and of printing prospectuses if the printing of
prospectuses is requested by the managing underwriters, if any, or by the
holders of a majority of the Registrable Securities included in the
Registration Statement), (iii) messenger, telephone and delivery expenses,
(iv) fees and disbursements of counsel for the Company, (v) fees and
disbursements of all independent certified public accountants referred to
in Section 3(a)(ii), and (vi) Securities Act liability insurance, if the
Company so desires such insurance, and (vii) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement. In addition, the Company
shall be responsible for all of its internal expenses incurred in
connection with the consummation of the transactions contemplated by this
Agreement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense
of any annual audit, the fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange on which
similar securities issued by the Company are then listed.
2. Notwithstanding anything to the contrary herein, the Holders shall be
responsible for the cost of underwriting discounts and commissions if any,
applicable to the Registrable Securities, and the fees and expenses of its
counsel.
5. Indemnification
1. Indemnification by the Company. The Company shall, notwithstanding
termination of this Agreement and without limitation as to
time, indemnify and hold harmless each Holder, the officers, directors,
agents (including any underwriters retained by such Holder in connection
with the offer or sale of Registrable Securities), brokers, investment
advisors and employees of each of them, each Person who controls any such
Holder (within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act) and the officers, directors, agents and employees
of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all losses, claims, damages,
liabilities, costs (including, without limitation, costs of preparation and
attorneys' fees) and expenses (collectively, "Losses"), as incurred,
arising out of or relating to any untrue or alleged untrue statement of a
material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of any Prospectus or form of
prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading, except solely to the extent that (i) such
untrue statements or omissions are based solely upon information regarding
such Holder furnished in writing to the Company by or on behalf of such
Holder expressly for use therein, which information was relied
on by the Company for use therein or (ii) such information relates to such
Holder or such Holder's proposed method of distribution of Registrable
Securities and was furnished in writing to the Company by or on behalf of
such Holder expressly for use therein. The Company shall notify the
Holders promptly of the institution, threat or assertion of any Proceeding
of which the Company is aware in connection with the transactions
contemplated by this Agreement.
2. Indemnification by Holders. In connection with the Registration
Statement, each Holder shall furnish to the Company in writing
such information as the Company reasonably requests for use in connection
with the Registration Statement or any Prospectus and agrees, severally and
not jointly, to indemnify and hold harmless the Company, their directors,
officers, agents and employees, each Person who controls the Company
(within the meaning of Section 15 of the Securities Act and Section 20 of
the Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law,
from and against all Losses (as determined by a court of competent
jurisdiction in a final judgment not subject to appeal or review) arising
solely out of or based solely upon any untrue statement of a material fact
contained in the Registration Statement, any Prospectus, or any form of
prospectus, or arising solely out of or based solely upon any omission of a
material fact required to be stated therein or necessary to make the
statements therein not misleading solely to the extent, and only to the
extent, that (i) such untrue statement or omission is contained in any
information furnished in writing by such Holder to the Company specifically
for inclusion in the Registration Statement or such Prospectus and such
information was relied upon by the Company for use in the Registration
Statement, such Prospectus or such form of prospectus, or (ii) such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was furnished in writing by or
on behalf of such Holder to the Company specifically for inclusion in the
Registration Statement or such Prospectus and such information was relied
upon by the Company for use in the Registration Statement, such Prospectus
or such form of prospectus. In addition, the foregoing shall not inure to
the benefit of any Holder if a copy of the Prospectus (as then amended or
supplemented) was furnished by the Company to such Holder and was not sent
or given by or on behalf of such Holder to such Holder's purchaser of
Registrable Securities if required by law to have been so delivered.
3. Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity
hereunder (an "Indemnified Party"), such Indemnified Party promptly shall
notify the Person from whom indemnity is sought (the "Indemnifying Party")
in writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any
Indemnified Party to give such notice shall not relieve the Indemnifying
Party of its obligations or liabilities pursuant to this Agreement, except
(and only) to the extent that it shall be finally determined by a court of
competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in
any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified
Party or Parties unless: (1) the Indemnifying Party has agreed to pay such
fees and expenses; or (2) the Indemnifying Party shall have failed promptly
to assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (3) the
named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of
interest is likely to exist if the same counsel were to represent such
Indemnified Party and the Indemnifying Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects
to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense of the
claim against the Indemnified Party but will retain the right to control
the overall Proceedings out of which the claim arose, and counsel employed
by the Indemnified Party shall be at the expense of the Indemnifying
Party). The Indemnifying Party shall not be liable for any settlement of
any such Proceeding effected without its written consent, which consent
shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement
of any pending Proceeding in respect of which any Indemnified Party is a
party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter
of such Proceeding.
All fees and expenses of the Indemnified Party to which the Indemnified
Party is entitled hereunder (including reasonable fees and expenses to the
extent incurred in connection with investigating or preparing to defend
such Proceeding in a manner not inconsistent with this Section) shall be
paid to the Indemnified Party, as incurred, within ten (10) Business Days
of written notice thereof to the Indemnifying Party.
4. Contribution. If a claim for indemnification under Section
6(a) or 6(b) is unavailable to an Indemnified Party or is insufficient to
hold such Indemnified Party harmless for any Losses in respect of which
this Section would apply by its terms (other than by reason of exceptions
provided in this Section), then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses, (i) in such
proportion as is appropriate to reflect the relative benefits received by
the Indemnifying Party on the one hand and the Indemnified Party on the
other from the distribution of the Registrable Securities or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Indemnifying Party and Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as any other
relevant equitable considerations. The relative benefits received by the
Indemnified Party and the Indemnifying Party, as the case may be, shall be
deemed to be in the same proportion as the total net proceeds received by
the Company from the initial sale of the Registrable Securities by the
Company to the Purchasers pursuant to the Purchase Agreement and the
Warrants bear to the gain, if any, realized by the selling Holder upon
the resale thereof. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material
fact, has been taken or made by, or relates to information supplied by,
such Indemnifying Party or Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or payable by
a party as a result of any Losses shall be deemed to include, subject to
the limitations set forth in Section 6(c), any attorneys' or other fees or
expenses incurred by such party in connection with any Proceeding to the
extent such party would have been indemnified for such fees or expenses if
the indemnification provided for in this Section was available to such
party.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this Section 6(d),
no Purchaser shall be required to contribute, in the aggregate, any amount
in excess of the amount by which the proceeds actually received by such
Purchaser from the sale of the Registrable Securities subject to the
Proceeding exceeds the amount of any damages that such Purchaser has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any Person who was not guilty
of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section are
in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6. Rule 144
The Company shall file the reports required to be filed by it under
the Securities Act and the Exchange Act in a timely manner and, if at any
time the Company is not required to file such reports, they will, upon the
request of any Holder, make publicly available other information so long as
necessary to permit sales of its securities pursuant to Rule 144. The
Company further covenants that it will take such further action as any
Holder may reasonably request, all to the extent required from time to time
to enable such Holder to sell Registrable Securities without registration
under the Securities Act within the limitation of the exemptions provided
by Rule 144. Upon the request of any Holder, the Company shall deliver to
such Holder a written certification of a duly authorized officer as to
whether it has complied with such requirements.
7. Miscellaneous
1. Remedies. In the event of a breach by the Company or by a Holder, of
any of their obligations under this Agreement, each Holder or the Company,
as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of
damages, will be entitled, after the Closing, to specific performance of
its rights under this Agreement. The Company and each Holder agree that,
after the Closing, monetary damages would not provide adequate compensation
for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event
of any action for specific performance in respect of such breach, it shall
waive the defense that a remedy at law would be adequate.
(b) No Piggyback on Registrations. Except as provided in Section
4.23 of the Purchase Agreement, neither the Company nor any of its security
holders (other than the Holders in such capacity pursuant hereto) may
include securities of the Company in the Registration Statement other than
the Registrable Securities, and the Company shall not enter into any
agreement providing any such right to any of its security holders.
(c) Amendments and Waivers. This Agreement may be amended and
the Company may take any action herein prohibited, or omit to perform any
act herein required to be performed by it, only if the Company shall have
obtained the written consent to such amendment, action or omission to act,
of the Holder or Holders of the sum of 51% or more of the shares of (i)
Registrable Securities issued at such time, plus (ii) Registrable
Securities issuable upon exercise or conversion of any Debentures, and
Warrants that have not been fully exchanged or converted in full as of the
date such consent is sought. Each Holder of any Registrable Securities at
the time or thereafter outstanding shall be bound by any consent authorized
by this Section 10(c), whether or not such Registrable Securities shall
have been marked to indicate such consent.
(d) Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed to
have been received (a) upon hand delivery (receipt acknowledged) or
delivery by telex (with correct answer back received), telecopy or
facsimile (with transmission confirmation report) at the address or number
designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during
normal business hours where such notice is to be received) or (b) on the
second (2nd) business day following the date of mailing by express courier
service, fully prepaid, addressed to such address, or upon actual receipt
of such mailing, whichever shall first occur.
The addresses for such communications shall be:
If to the Company: SurgiLight, Inc.
12001 Science Drive
Suite 140
Orlando, Florida 32826
Attn: J. T. Lin
Tel: 407-482-4555
Fax: 407-482-0505
With copies to: The Business Law Group
126 E. Jefferson St., Suite 200
Orlando, FL 32801
Attn: J. Bennet Grocock
Tel: 407-422-0300
Fax: 407-475-0032
If to the Purchasers: See Schedule 1 - Schedule of Purchasers
(attached to the Purchase Agreement)
With copies to: Kaplan Gottbetter & Levenson, LLP
630 Third Avenue
New York, NY 10017-6705
Attn: Adam S. Gottbetter, Esq.
Tel: (212) 983-6900
Fax: (212) 983-9210
If to any other Person who is then the registered Holder: to the address
of such Holder as it appears in the stock transfer books of the Company;
or such other address as may be designated in writing hereafter, in the
same manner, by such person.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each
of the parties and shall inure to the benefit of each Holder. The Company
may not assign its rights or obligations hereunder without the prior
written consent of each Holder.
(f) Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same
with the same force and effect as if such facsimile signature were the
original thereof.
(g) Governing Law; Submission to Jurisdiction; Waiver of Jury
Trial. This Agreement shall be governed by and construed in accordance
with
the laws of the State of New York, without regard to principles of
conflicts of law. The Company and each Holder (including Warrant Holders)
hereby irrevocably submits to the jurisdiction of any New York state court
sitting in the Borough of Manhattan in the City of New York or any federal
court sitting in the Borough of Manhattan in the City of New York
(collectively, the "New York Courts") in respect of any Proceeding arising
out of or relating to this Agreement, and irrevocably accepts for itself
and in respect of its property, generally and unconditionally, jurisdiction
of the New York Courts. The Company and each Holder (including Warrant
Holders) irrevocably waives to the fullest extent it may effectively do so
under applicable law any objection that it may now or hereafter have to the
laying of the venue of any such Proceeding brought in any New York Court
and any claim that any such Proceeding brought in any New York Court has
been brought in an inconvenient forum.
(h) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(i) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction
to be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or
invalidated, and the parties hereto shall use their reasonable efforts to
find and employ an alternative means to achieve the same or substantially
the same result as that contemplated by such term, provision, covenant or
restriction. It is hereby stipulated and declared to be the intention of
the parties that they would have executed the remaining terms, provisions,
covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(j) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning
hereof.
(k) Shares Held by The Company and its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the
Company or its Affiliates (other than a Purchaser or transferees or
successors or assigns thereof if such Persons are deemed to be Affiliates
solely by reason of their holdings of such Registrable Securities) shall
not be counted in determining whether such consent or approval was given by
the Holders of such required percentage.
[Signatures on following page]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Company:
SURGILIGHT, INC.
By: /s/J.T. Lin
Name: J. T. Lin
Title: President
Purchaser:
GEM GLOBAL YIELD FUND LIMITED
By: /s/Pierce Loughran
Name:Pierce Loughran
Title: Authorized Signatory Director
