UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 13)*
Advanced Medical, Inc.
(Name of Issuer)
Common Stock, $.01 par value
(Title of Class of Securities)
00754 C 10 1
(CUSIP Number)
Barry D. Shalov, Esq.
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street, 20th Floor
New York, New York 10036
(212) 626-0800
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
December 4, 1995
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the
subject of this Schedule 13D, and is filing this schedule
because of Rule 13d-1(b)(3) or (4), check the following box
//.
Check the following box if a fee is being paid with the
statement //. (A fee is not required only if the reporting
person: (1) has a previous statement on file reporting
beneficial ownership of more than five percent of the
class of securities described in Item 1; and (2) has
filed no amendment subsequent thereto reporting
beneficial ownership of five percent or less of such
class.) (See Rule 13d-7).
NOTE: Six copies of this statement, including all
exhibits, should be filed with the Commission. See Rule
13d-1(a) for other parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a
reporting person's initial filing on this form with respect
to the subject class of securities, and for any subsequent
amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page
shall not be deemed to be "filed" for the purpose of Section
18 of the Securities Exchange Act of 1934 ("Act") or
otherwise subject to the liabilities of that section of the
Act but shall be subject to all other provisions of the
Act (however, see the Notes).
Page 1 of Pages
List of Exhibits is on Page
<PAGE>
SCHEDULE 13D
CUSIP No. 00754 C 10 1 Page 2 of Pages
1 NAME OF REPORTING PERSON
Jeffry M. Picower
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
See Items 2 and 6 hereof.
(a) /x/
(b) //
3 SEC USE ONLY
4 SOURCE OF FUNDS*
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) //
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
7 SOLE VOTING POWER
2,277,764.905
8 SHARED VOTING POWER
27,966,612.67
9 SOLE DISPOSITIVE POWER
2,277,764.905
10 SHARED DISPOSITIVE POWER
27,966,612.67
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
30,244,377.575
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
//
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
71.16%
14 TYPE OF REPORTING PERSON*
IN
<PAGE>
SCHEDULE 13D
CUSIP No. 00754 C 10 1 Page 3 of Pages
1 NAME OF REPORTING PERSON
Decisions Incorporated
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
See Items 2 and 6 hereof.
(a) /x/
(b) //
3 SEC USE ONLY
4 SOURCE OF FUNDS*
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
//
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
7 SOLE VOTING POWER
-0-
8 SHARED VOTING POWER
27,966,612.67
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
27,966,612.67
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
27,966,612.67
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
//
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
65.80%
14 TYPE OF REPORTING PERSON*
CO
<PAGE>
SCHEDULE 13D - AMENDMENT NO. 9
This statement ("Statement") constitutes Amendment
No. 13 to the Schedule 13D filed with the Securities and
Exchange Commission (the "Commission") on April 7, 1989
(the "Original Filing"), as amended by (i) Amendment No.
1 (the "First Amendment") filed with the Commission on June
5, 1989; (ii) Amendment No. 2 (the "Second Amendment")
filed with the Commission on May 18, 1990; (iii)
Amendment No. 3 (the "Third Amendment") filed with the
Commission on March 1, 1991; (iv) Amendment No. 4 (the
"Fourth Amendment") filed with the Commission on April 12,
1991; (v) Amendment No. 5 (the "Fifth Amendment") filed
with the Commission on November 27, 1991; (vi) Amendment
No. 6 (the "Sixth Amendment") filed with the Commission on
April 12, 1993; (vii) Amendment No. 7 (the "Seventh
Amendment") filed with the Commission on January 4, 1994,
(viii) Amendment No. 8 (the "Eighth Amendment") filed
with the Commission on June 29, 1994; (ix) Amendment
No. 9 filed with the Commission on August 19, 1994
(the "Ninth Amendment"); (x) Amendment No. 10 filed with
the Commission on September 14, 1994 (the "Tenth
Amendment"); (xi) Amendment No. 11 filed with the Commission
on October 26, 1994 (the "Eleventh Amendment"); and (xii)
Amendment No. 12 filed with the Commission on February 3,
1995 (the "Twelfth Amendment"), concerning the common
stock, par value $.01 per share ("Common Stock"), of
Advanced Medical, Inc., a Delaware corporation (the
"Issuer"). The Original Filing, the First Amendment, the
Second Amendment and the Third Amendment were filed on
behalf of Jeffry M. Picower, April C. Freilich and
Decisions Incorporated, a Delaware corporation
("Decisions"). The Fourth Amendment, the Fifth Amendment,
the Sixth Amendment, Seventh Amendment, the Eighth
Amendment, the Ninth Amendment, the Tenth Amendment,
the Eleventh Amendment, and the Twelfth Amendment
were, and this Statement is, filed on behalf of Mr.
Picower, Ms. Freilich, Decisions and JA Special Limited
Partnership, a Delaware limited partnership ("JA Special",
and collectively with Mr. Picower, Ms. Freilich and
Decisions, "Registrants").
This Statement hereby amends the Items identified
below, or the particular paragraphs of such Items which are
identified below, to reflect the execution of a letter
agreement between Mr. Picower and the Issuer.
<PAGE>
Item 3. Source and Amount of Funds or Other Consideration
Item 3 is hereby amended to add the following:
As more fully described in Item 4, the funds
used by Decisions for the $25,000,000 loan to the Issuer
under the Note (as hereinafter defined) were derived from
the working capital of Decisions.
Item 4. Purpose of the Transaction
Item 4 is hereby amended to add the following:
On October 12, 1995, Decisions Incorporated,
a corporation wholly owned by Picower ("Decisions") agreed
to lend and on December 4, 1995 loaned to the Issuer the
principal amount of $25,000,000 (the "Loan"), and, in
exchange, the Issuer issued to Decisions a promissory note
(the "Note"), a copy of which is attached hereto as Exhibit
26 and incorporated herein by reference. The Note provides,
among other things, that: (i) interest on the principal
amount of the Loan shall accrue at a rate of 7% per annum;
(ii) interest on the principal amount of the $25,000,000
Note shall be due and payable on October 11, 1996 and
thereafter on June 30 and December 31 of each calendar
year; (iii) principal (together with accrued and unpaid
interest thereon) shall be payable on January 4, 2001;
(iv) the Issuer's obligations under the $25,000,000
Note shall be secured by a first priority security
interest in all of the Corporation's assets, subject to
certain senior liens previously granted to General Electric
Capital Corporation ("GECC"), provided, however, that
until such time as the Issuer has obtained GECC's consent,
the first priority security interest will not apply to
assets of the Issuer on which GECC has a lien; and (v)
the principal portion of the $25,000,000 Note may be, at
the option of the holder, converted into up to 9,523,809
shares of the Corporation's common stock, par value $.01
per share, at a conversion price of $2.625 per share,
subject to anti-dilution protection, which was the closing
price of the Common Stock on the day immediately prior to
the date on which Decisions agreed to provide the Loan.
The source of the funds, used by Decisions to
extend the Loan to the Issuer was Decisions working
capital.
<PAGE>
Item 5. Interest in Securities of the Issuer
Item 5(a) is hereby amended to add the
following:
(a) As of the close of business on December 4,
1995, Registrants may be deemed to have direct beneficial
ownership of the following amounts of Common Stock:
Approximate
Percentage of
Name Number of Shares Outstanding
Shares(1)
Mr. Picower 2,277,764.905(2) 5.36%
- -------------------------------
(1) The percentage of outstanding shares of Common Stock
calculated is based upon the number of shares of Common
Stock outstanding on October 13, 1995 (the "Common Stock
Outstanding") (i.e., 14,069,261), as reported on the
cover page of the Issuer's Quarterly Report on Form 10-Q
for the fiscal period ended September 30, 1995. For purposes
of calculating the percentages of outstanding shares of
Common Stock owned by Mr. Picower, Decisions and JA Special
the shares of Common Stock issuable upon conversion of
their respective holdings of Convertible Preferred
Stock were added to the Common Stock Outstanding. Also
included in such calculation with respect to Decisions were
the 6,030,151 shares of Common Stock which are issuable to
Decisions upon conversion of a promissory note owned by
Decisions (the "$6,000,000 Note"), the 10,534,846 shares of
Common Stock which are issuable to Decisions upon conversion
of a promissory note owned by Decisions (the "6,500,000
Note"), and the 9,523,809 shares of Common Stock which are
issuable to Decisions upon conversion of the Note.
(2) For purposes of calculating the number of shares of
Common Stock of which Mr. Picower, Decisions and JA Special
are the direct beneficial owners, an additional 141,401.905
shares of Common Stock, 25,720.158 shares of Common Stock
and 115,386.513 shares of Common Stock, respectively,
were included in such calculations. Such additional
amounts of Common Stock are issuable upon the conversion
by such persons of their respective holdings of the
Issuer's convertible preferred stock, par value $.01 per
share ("Convertible Preferred Stock"). Also included in
such calculation with respect to Decisions were the
6,030,151 shares of Common Stock which are issuable to
Decisions upon conversion the $6,000,000 Note, the
10,534,846 shares of Common Stock which are issuable to
Decisions upon conversion of the 6,500,000 Note, and the
9,523,809 shares of Common Stock which are issuable to
Decisions upon conversion of the Note.
<PAGE>
Decisions 27,494,125.1582 64.69%
JA Special 472,487.5132 1.11%
Ms. Freilich 1,000 less than 0.1%
Mr. Picower may, by virtue of his controlling
shareholder interest in Decisions and his position as the
sole director of Decisions, be deemed to beneficially own
(as contemplated by Rule 13d-3 ("Rule 13d-3") promulgated
under the Securities Exchange Act of 1934, as amended) the
shares of Common Stock of which Decisions and JA Special
possess direct beneficial ownership. Ms. Freilich may, by
virtue of her position as President of Decisions, be
deemed to beneficially own (as contemplated by Rule 13d-3)
the shares of Common Stock of which Decisions and JA Special
possess direct beneficial ownership. Decisions may, by
virtue of its position as general partner of JA Special
be deemed to beneficially own (as contemplated by Rule
13d-3) the shares of Common Stock of which JA Special
possesses direct beneficial ownership. Mr. Picower,
Ms. Freilich and Decisions disclaim beneficial
ownership of such shares for all other purposes.
Item 6. Contracts, Arrangements, Understandings
or Relationships With Respect to
Securities of the Issuer
Item 6 is hereby amended to add the following:
As more fully described in Item 4, the Issuer
issued the Note to Decisions.
Item 7. Material to be Filed as Exhibits
Exhibit 26. Promissory Note dated as of At Page ___
October 12, 1995, issued to
Decisions.
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of my
knowledge and belief, I certify that the information set
forth in this statement is true, complete and correct.
Dated: December 4, 1995
/s/ Jeffry M. Picower
Jeffry M. Picower
/s/ April C. Freilich
April C. Freilich
DECISIONS INCORPORATED
By: /s/ April C. Freilich
April C. Freilich
President
JA SPECIAL LIMITED PARTNERSHIP
By: Decisions Incorporated
General Partner
By: /s/ April C. Freilich
April C. Freilich
President
<PAGE>
This Note and any shares acquired upon the exercise of this Note have not
been registered under the Securities Act of 1933, as amended, and may not be
transferred, sold or otherwise disposed of except while such a registration is
in effect or pursuant to an exemption from registration under said Act.
PROMISSORY NOTE
$25,000,000 As of October 12, 1995
New York, New York
FOR VALUE RECEIVED, the undersigned, Advanced Medical, Inc., a Delaware
corporation (the "Company"), hereby promises to pay to Decisions Incorporated, a
Delaware corporation (the "Noteholder"), the principal sum of Twenty Five
Million ($25,000,000) Dollars, with interest on the unpaid balance hereof from
December 4, 1995 (the "Funding Date") at a rate of seven (7%) percent per annum
compounded semi-annually (the "Interest Rate"). The principal amount hereof and
all accrued and unpaid interest thereon shall be due and payable at noon,
Eastern Standard Time, on January 4, 2001, and all the accrued and unpaid
interest under the Note shall be due and payable in arrears on October 11, 1996
and thereafter on the 30th day of June and the 31st day of December of each
calendar year.
Both principal and interest shall be paid in lawful money of the United
States of America to the Noteholder at the address set forth in Section 6.4
hereof or at such other address as the Noteholder shall designate by notice in
writing to the Company, in immediately available funds.
This Note may not be prepaid at any time (except that principal under this
Note shall be reduced from time to time as contemplated in Article V hereof).
In the event that the Company fails to pay the principal under this Note
when due, interest or deemed interest on the entire unpaid balance of this Note
from the due date of such unpaid principal until payment is made, shall (to the
extent legally enforceable) accrue at a rate of 15% per annum compounded
annually (the "Late Rate") and shall be payable on demand.
In the event the Late Rate or the Interest Rate exceeds the maximum rate of
interest permitted by applicable law, the Late Rate or the Interest Rate, as the
case may be, shall be reduced to the maximum rate permitted by applicable law.
Nothing herein or in any other document related to this Note or the indebtedness
evidenced hereby ("Related Document") shall entitle the Noteholder
<PAGE>
to collect interest in excess of the maximum interest permitted by applicable
law (the "Legal Maximum"), and nothing herein or in any Related Document shall
obligate the Company to pay interest in excess of the Legal Maximum. If any
interest is charged in excess of the Legal Maximum, any such charge will result
from bona fide error, and the excess amount shall be applied or credited to the
indebtedness of the Company hereunder or returned to the Company. For the
purpose of determining whether any excess amount of interest has been contracted
for, charged, or received by the Noteholder, all interest at any time contracted
for, charged, or received by the Noteholder in connection with this Note shall
be amortized, prorated, allocated, and spread in equal parts during the entire
term of this Note. The terms of this paragraph shall govern in the event of any
inconsistency in any other provision of this Note or any Related Document.
If any part of this Note is determined to be illegal, unenforceable or
against public policy, then the same shall be deemed deleted from this Note
without affecting or impairing any other part hereof.
The Company agrees to reimburse the Noteholder, on demand, for (i) all
costs (including reasonable attorneys' fees and disbursements actually incurred)
in connection with the enforcement of this Note by the Noteholder or the
protection of the rights of the Noteholder hereunder, and (ii) all fees in
connection with any filing of a Notification and Report Form ("Hart-Scott Form")
under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended from
time to time ("Hart-Scott") as contemplated by Section 5.13 hereof.
The Company hereby waives presentment, demand, notice of dishonor, protest
and all other notices whatsoever.
ARTICLE I
CERTAIN DEFINITIONS
SECTION 1.1. Definitions. As used herein, the following terms shall have
the meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares (including
treasury shares) of Common Stock issued or sold (or, pursuant to Section 5.2.3
or 5.2.4 hereof, deemed to be issued) by the Company after the date hereof,
whether or not subsequently reacquired or retired by the Company, other than the
shares of Common Stock issued upon the exercise of the Conversion Right and
-2-
<PAGE>
other than shares of Common Stock issued upon the exercise of options
granted pursuant to the Company's existing employee or non- employee director
Stock Option Plan and Stock Purchase Plan, as the same may be amended from time
to time.
"Affiliate" shall mean any first Person which, directly or indirectly, is
controlled by a second Person. Control shall be deemed to exist when the second
Person beneficially owns, directly or indirectly, the securities or other
interests (a) having voting power under ordinary circumstances to elect at least
a majority of the directors (or persons performing similar functions) of the
first Person or (b) representing a majority in interest of the equity of the
first Person.
"Book Value" shall mean, in respect of any share of Common Stock on any
date herein specified, the quotient of (a) the amount by which (i) the Company's
consolidated total assets exceeds (ii) the Company's consolidated total
liabilities, in each case determined (A) as of the last day of the most recent
fiscal year of the Company ended prior to such date, or (B) as of the last day
of the most recent calendar month ended prior to such date, whichever is higher,
divided by (b) the number of Fully Diluted Outstanding shares of Common Stock.
"Business Day" shall mean any day other than a Saturday or a Sunday or a
day on which commercial banking institutions in New York, New York are
authorized by law to be closed. Any reference to "days" (unless Business Days
are specified) shall mean calendar days.
"Collateral" shall mean the collateral pledged by the Company to the
Noteholder or in which the Company granted the Noteholder a security interest
pursuant to or under the Pledge Provision as security for its obligations
hereunder.
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Common Stock" shall mean the common stock, $.01 par value, of the Company,
such term to include any stock into which such Common Stock shall have been
changed or any stock resulting from any reclassification of such Common Stock,
and all other stock of any class or classes (however designated) of the Company
the shareholders of which have the right, without limitation as to amount,
either to all or to a share of the balance of current dividends and liquidating
dividends after the payment of dividends and distributions on any shares
entitled to preference.
-3-
<PAGE>
"Company" shall mean Advanced Medical, Inc., and such term to include any
corporation which shall succeed to or assume the obligations of the Company
hereunder in compliance with Section 5.3 hereof.
"Convertible Securities" shall mean any evidences of indebtedness, shares
of stock (other than Common Stock) or other securities directly or indirectly
convertible into or exchangeable for Additional Shares of Common Stock.
"Current Market Price" shall mean on any date specified herein, the average
daily Market Price during the period of the most recent 20 days, ending on such
date, on which the national securities exchanges were open for trading, except
that if no class of the Common Stock is then listed or admitted to trading on
any national securities exchange or quoted in the over-the-counter market, the
Current Market Price shall be the Market Price on such date; provided, however,
that in the event that the Company has entered into a firm commitment
underwriting agreement with an underwriter (i) pursuant to which the Company and
such underwriter have determined an offering price for the sale of Common Stock
in a public offering as a result of arms length negotiations within the 20 day
period described above or (ii) relating to the public offering of Convertible
Securities then, in the case of (i), the Current Market Price of shares of
Common Stock issued and sold in such public offering shall be such offering
price and in the case of (ii), the Current Market Price shall be the lower of
Current Market Price or Market Price on the date immediately preceding the date
the offering price of such Convertible Securities was determined in connection
with the filing of the Registration Statement which is declared effective
covering such Convertible Securities filed pursuant to the Securities Act.
"Decisions Notes" shall mean the principal of, premium (if any), interest
on and any other amounts due in respect of all Indebtedness of the Company to
Decisions Incorporated ("Decisions") which is the subject of (i) the Promissory
Note dated as of January 4, 1994 ( as amended and modified through the date
hereof), between the Company and Decisions, in the principal amount of
$6,000,000, and (ii) the Promissory Note dated as of August 12, 1994 (as amended
and modified through the date hereof), between the Company and Decisions, in the
principal amount of $6,500,000, in each case as the same may be modified and
amended by agreement of the Company and Decisions from time to time, provided
that the principal amount of such Indebtedness shall not exceed the outstanding
principal amount thereof immediately prior to such amendment or modification.
-4-
<PAGE>
"Debentures" shall mean the Company's 7-1/4% Subordinated Convertible
Debentures due 2002 and the Company's 15% Subordinated Debentures due 1999.
"Debenture Notes" shall mean those notes issued to the holders of the
Company's 7-1/4% Subordinated Convertible Debentures due 2002 in consideration
of the conversion by such holders of the Company's 7-1/4% Subordinated
Convertible Debentures due 2002 held by them.
"Exchange Act" shall mean the Securities Exchange Act of 1934, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Fidata Reorganization Event" shall mean the occurrence of any event
contemplated in clause (1) through (5) of Section 4.1(e) hereof, with respect to
Fidata Trust Company New York or any other immaterial direct or indirect
subsidiary of Fidata Corporation.
"Fully Diluted Outstanding" when used with reference to Common Stock, shall
mean at any date as of which the number of shares thereof is to be determined,
all shares of Common Stock outstanding at such date and all shares of Common
Stock issuable in respect of the Conversion Right on such date and other options
or warrants to purchase, or securities convertible into, shares of Common Stock
outstanding on such date which would be deemed outstanding in accordance with
generally accepted accounting principles as from time to time in effect for
purposes of deeming book value or net income per share.
"GECC Loan Agreement" shall mean the Loan Agreement, dated August 12, 1994,
between IMED Corporation ("IMED") and General Electric Capital Corporation
("GECC").
"GECC 1994 Intercreditor Agreement" shall mean the inter- creditor
agreement dated as of August 12, 1994, between the Initial Noteholder and GECC.
"Indebtedness" shall mean all debt for borrowed money and similar monetary
obligations evidenced by bonds, notes, debentures, capitalized lease obligations
or otherwise.
"Initial Noteholder" shall mean Decisions Incorporated, a Delaware
corporation.
-5-
<PAGE>
"Market Price" shall mean on any date specified herein, the amount per
share of Common Stock equal to (a) the last sale price of Common Stock, regular
way, on such date or, if no such sale takes place on such date, the average of
the closing bid and asked prices thereof on such date, in each case as
officially reported on the principal national securities exchange on which
Common Stock is then listed or admitted to trading, or (b) if Common Stock is
not then listed or admitted to trading on any national securities exchange but
is designated as a national market system security by the NASD, the last trading
price of Common Stock on such date, or (c) if there shall have been no trading
on such date or if Common Stock is not so designated, the average of the closing
bid and asked prices of Common Stock on such date as shown by the NASD automated
quotation system, or (d) if Common Stock is not then listed or admitted to
trading on any national exchange or quoted in the over-the-counter market, the
higher of (x) Book Value per share or (y) the fair value thereof determined in
good faith by the Board of Directors of the Company as of a date which is within
15 days of the date as of which the determination is to be made.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Note" shall mean this promissory note in the principal amount of
$25,000,000.
"Options" shall mean rights, options or warrants to subscribe for, purchase
or otherwise acquire either Additional Shares of Common Stock or Convertible
Securities other than options granted pursuant to the Company's existing
employee Stock Option Plan as the same may be amended from time to time.
"Other Securities" shall mean any stock (other than Common Stock) and other
securities of the Company or any other Person which the Noteholder at any time
shall be entitled to receive, or shall have received, upon the exercise of the
Conversion Right, in lieu of or in addition to Common Stock, or which at any
time shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to Section 5.3 hereof
or otherwise.
"Person" shall mean a corporation, an association, a partnership, an
organization or a business in whatever form.
"Pledge Provision" shall mean Sections 3.2 through 3.9 of this Agreement.
-6-
<PAGE>
"Registration Rights Agreement" shall mean the Registration Rights
Agreement, dated August 12, 1994, between the Company and the Initial Noteholder
(and/or any Affiliate thereof).
Repurchase Obligation" shall mean the obligations of the Company pursuant
to Section 5.13 hereof.
"Restricted Securities" shall mean any shares of Common Stock (or Other
Securities) which have been issued upon the exercise of the Conversion Right and
which are evidenced by a certificate or certificates bearing the applicable
legend or legends referred to herein.
"Sale of the Company" shall mean the sale by the shareholders of the
Company in one or more transactions of a majority of the capital stock of the
Company, the merger or consolidation of the Company with or into any other
Person, or the sale of assets of the Company (excluding sales of inventory and
other assets in the ordinary course of business and consistent with past
practices of the Company and its predecessors) aggregating 50% or more of the
book value of the Company's assets as of the date hereof.
"Securities Act" shall mean the Securities Act of 1933, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
ARTICLE II
RANKING OF THE NOTE
SECTION 2.1. Ranking. Any Indebtedness of the Company evidenced by this
Note shall be senior in right to payment of any of the Company's Indebtedness,
including, without limitation, the Debentures and the Debenture Notes, provided,
however, that Indebtedness of the Company evidenced by this Note shall
constitute Indebtedness ranking pari passu with the Indebtedness outstanding
under the Decisions Notes; and provided further, however, that so long as there
exists no Event of Default hereunder and no event which, with the passage of
time or the giving of notice or both would result in the occurrence of an Event
of Default, the Company may make (i) any payment on any Indebtedness of the
Company outstanding as of the date hereof in accordance with and subject to the
terms thereof; and (ii) any payment of regularly scheduled interest upon any
other Indebtedness, when the same is due and payable in accordance with and
subject to the terms thereof.
-7-
<PAGE>
SECTION 2.2. Acceleration Right. The Company shall, not less than ten (10)
days prior to the date of the payment of any principal portion of any Debenture
Note (including, without limitation, any prepayment or redemption thereof or any
similar payment thereunder, other than the payment of regularly scheduled
interest thereon), deliver written notice thereof to the Noteholder (the
"Payment Notice"), which notice shall specify the date upon which the Company
intends to make such payment. For a period of five (5) days following the date
of receipt of the Payment Notice by the Noteholder (the "Exercise Period")
Decisions will have the right (the "Acceleration Right") to declare all or any
portion of the outstanding interest and principal under this Note to be
immediately due and payable, such right to be exercised by delivery of notice
thereof (the "Acceleration Notice") by the Noteholder to the Company prior to
the expiration of the Exercise Period.
Any other provision of this Note to the contrary notwithstanding, in the
event of the exercise of the Acceleration Right by the Noteholder, all such
outstanding amounts so specified by the Noteholder in the Acceleration Notice
(the "Accelerated Amounts") under this Note shall immediately become due and
payable and the Company shall thereafter make no further payment under the
Debenture Notes or the Debentures until the Accelerated Amounts have been paid
in full.
ARTICLE III
COVENANTS OF THE COMPANY/PLEDGE/DIVIDENDS
SECTION 3.1. Creation of Indebtedness. So long as this Note shall remain
outstanding the Company shall not, without having obtained the prior written
consent of the Noteholder, create, incur, assume or guarantee any Indebtedness:
(i) which is secured by any lien, claim, security interest or other encumbrance
on any assets, property or rights of the Company or any Affiliate, or upon the
income derived therefrom; or (ii) the principal portion of which is due or
payable prior to payment in full of the Indebtedness evidenced by this Note: (x)
in each case, other than those arising with respect to the GECC Loan Agreement;
and (y) in the case of clause (ii), other than the Debenture Notes.
SECTION 3.2. Pledge. The payment and performance of the Company's
obligations under this Note will at all times be secured as follows:
(a) Security Interest. Subject and on par with the rights of Decisions
under the Decisions Notes and the agreements and instruments related thereto
(the "Parity Rights"); and subject
-8-
<PAGE>
to and subordinate to the prior rights of GECC under the GECC Loan Agreement and
the agreements and instruments related thereto (the "Prior Rights"), as security
for the due and punctual performance and payment of the Company's obligations
under this Note, the Company hereby pledges to and creates in, and hereby agrees
from time to time hereafter to pledge to and create in, the Noteholder, for its
benefit, a security interest in all of the Company's right, title and interest
in all of the Company's assets whether now owned or hereafter acquired and all
products and proceeds thereof (all such assets and all products and proceeds
thereof being referred to herein as the "Collateral"), including, without
limitation: (i) all of the shares of Common Stock, par value $.01 per share and
all other securities of IMED Corporation ("IMED") held by the Company, whether
now owned or hereafter acquired; (ii) all of the shares of Common Stock of
Alteon, Inc., a Delaware corporation, held by the Company ("Alteon Stock"),
whether now owned or hereafter acquired, and (iii) all patents, trademarks and
other intellectual property rights owned by the Company, including, without
limitation, those licensed by the Company to IMED. Notwithstanding the
foregoing, to the extent that GECC has Prior Rights with respect to any of the
Collateral (all such Collateral referred to herein as the "GECC Collateral"),
the Company shall not be deemed to have granted the Noteholder a security
interest in any the GECC Collateral until such time as the Company has obtained
GECC's consent to the Company granting to the Noteholder of a security interest
therein.
SECTION 3.3. Representations, Warranties and Covenants with Respect to
Collateral. The Company hereby represents, warrants and covenants that:
(a) The Collateral which constitutes securities (the "Pledged Collateral")
is and shall be at all times duly authorized, validly issued, fully paid and
nonassessable. Subject to the Prior Rights and the Parity Rights, the Company
will deliver to the Noteholder certificates representing all of the Pledged
Collateral accompanied by a stock transfer power executed in blank with
signature guaranteed, all in the form and manner to the Noteholder or its
counsel.
(b) All Collateral shall be free and clear of any liens and restrictions on
the transfer thereof except for (i) the Prior Rights and Parity Rights, (ii)
restrictions on transfer of the Collateral imposed by state and federal
securities laws and (iii) restrictions imposed herein.
(c) The Company shall use its reasonable business efforts to, as promptly
as practicable following the date hereof, obtain the consent of GECC to the
Company granting to the
-9-
<PAGE>
Noteholder a lien on and security interest in the GECC Collateral as provided in
the Company in Section 3.2 hereof; provided, however, that at the request of
GECC, the Noteholder will enter into an subordination and intercreditor
agreement with GECC substantially in the form of the GECC 1994 Intercreditor
Agreement.
SECTION 3.4. Perfection of Security Interest. Before the issuance of the
Note at the Closing and upon the Noteholder's written request from time to time
thereafter, the Company will make, execute, acknowledge and deliver, and deliver
to the Noteholder for filing and recording in the proper filing and recording
places, all such instruments, including, without limitation, appropriate
financing statements, and take all such action as the Noteholder or its counsel
may reasonably deem necessary or advisable to carry out the intent and purposes
of this Note, or for assuring and confirming to the Noteholder the security
interest in the Collateral provided for hereunder. Without limiting the
generality of the foregoing sentence, the Company will, from time to time upon
the Noteholder's request, cause its accounting books and records to be marked
with such legends or segregated in such manner as the Noteholder may specify,
and take or cause to be taken such other action and adopt such procedures as the
Noteholder may specify, to give notice of or better to assure the lien on the
Collateral intended to be created hereby.
SECTION 3.5. Indemnity. The Company will indemnify and save and hold the
Noteholder harmless from and against any and all claims, damages, loss,
liability or judgments which may be incurred or sustained by the Noteholder or
asserted against the Noteholder, directly or indirectly, in connection with the
existence of or the exercise of any of the liens with respect to the Collateral;
provided, however, that the foregoing shall not extend to actions of the
Noteholder which are grossly negligent or constitute willful misconduct or which
are not taken in good faith by the Noteholder, and any action or failure to act
in accordance with an opinion of legal counsel shall conclusively be deemed,
insofar as addressed by the legal conclusions set forth in such opinion, to be
without gross negligence or willful misconduct and to be in good faith. The
covenants contained in this Section 3.5 shall survive the termination of the
other provisions of this Note.
SECTION 3.6. Administration of Collateral. The Noteholder shall have all
rights afforded a secured party under the uniform commercial code. Without
limiting the foregoing, subject to the Prior Rights and the Parity Rights, the
following provisions shall govern the administration of the Pledged Collateral:
-10-
<PAGE>
(a) Until there shall be an Event of Default hereunder, the Company shall:
(i) be entitled to receive all cash dividends and other cash distributions or
cash payments on or with respect to the Pledged Collateral; and (ii) be entitled
to vote or consent with respect to the Pledged Collateral in any manner not
inconsistent with the terms of this Note. Subject to the Prior Rights and the
Parity Rights, and to the preceding sentence all distributions constituting
Pledged Collateral made or paid on the Pledged Collateral will be retained by
the Noteholder (or if received by the Company or a subsidiary of the Company
shall be held by such Person in trust and shall be forthwith delivered by it to
the Noteholder in the original form received, endorsed in blank) and held by the
Noteholder as a part of the Collateral.
(b) If there shall have occurred an Event of Default hereunder, then,
subject to the Prior Rights and Parity rights, all dividend and other
distributions and payments with respect to the Pledged Collateral shall be
retained by the Noteholder (or if received by the Company or a subsidiary of the
Company shall be held by such Person in trust and shall be forthwith delivered
by it to the Noteholder in the original form received, endorsed in blank) and
held by the Noteholder as part of the Collateral or applied by the Noteholder to
the payment of the Note in such manner as it may determine in its sole and
absolute discretion, and, if to the extent that the Noteholder shall so notify
the Company in writing, only the Noteholder shall be entitled to vote or consent
or to take any other action with respect to the Pledged Collateral (and the
Company or the appropriate subsidiary of the Company will, if so requested,
execute or cause to be executed appropriate proxies therefor). If there shall
have occurred an Event of Default hereunder, the Noteholder at its option shall
at all times have the right to transfer into its name or that of its nominee any
or all of the Collateral, subject to any applicable laws governing such transfer
and to the Prior Rights and Parity Rights.
SECTION 3.7. Right to Realize upon Collateral. Subject to the Prior Rights
and Parity Rights, except to the extent prohibited by applicable law which
cannot be waived the following provisions shall govern the Noteholder's right to
realize upon the Collateral if an Event of Default hereunder shall have
occurred, in addition to any rights and remedies available at law or in equity:
(a) Marshaling, etc. The Noteholder shall not be required to make any
demand upon or pursue or exhaust any of its rights or remedies against the
Company or others with respect to the payment of the Company's obligations with
respect to the Note, or to pursue or exhaust any of its rights or remedies with
respect to any of the Collateral therefor. The Noteholder shall not be
-11-
<PAGE>
required to marshal the Collateral in any particular order and all of its rights
hereunder shall be cumulative. The Company agrees to waive, and does hereby
absolutely and irrevocably waive and relinquish the benefit and advantage of,
and does hereby covenant not to assert against the Noteholder, any valuation,
stay, appraisement, extension or redemption laws now existing or which may
hereafter exist which, but for this provision, might be applicable to any sale
made under the judgment, order or decree of any court, or privately under the
power of sale conferred by this Note or otherwise based on this Note in respect
of any Collateral. Without limiting the generality of the foregoing, the Company
hereby agrees that it will not invoke or utilize any law which might cause delay
in, or impede the enforcement of the rights of the Noteholder under this Note,
and hereby waives the same. In addition, the Company hereby waives any right to
prior notice (except to the extent expressly provided in this Note) or judicial
hearing in connection with the taking possession or the disposition of any of
the Collateral, including without limitation any such right which the Company
would otherwise have under the Constitution of the United States of America, or
any state or territory thereof.
(b) Sales of Collateral. Any item of the Collateral may be sold for cash or
other value in any number of lots at public or private sale without demand,
advertisement or notice (excepting only that the Noteholder shall give the
Company five (5) days prior written notice of the time and place of any public
sale, or the time after which a private sale may be made, which notice each of
the Company and the Noteholder hereby agrees to be reasonable). At any sale or
sales of the Collateral (except to the extent prohibited by applicable law which
cannot be waived) the Noteholder or any of its officers acting on its behalf or
its assigns may bid for the purchase of the whole or any part of the property
and rights so sold and upon compliance with the terms of such sale may hold,
exploit and dispose of such property and rights so sold without further
accountability to the Company except for the proceeds of such sale or sales. The
Company will execute and deliver, or cause to be executed and delivered, such
instruments, documents, assignments, waivers, certificates and affidavits and
supply or cause to be supplied such further information and take such further
action as the Noteholder shall require in connection with such sale.
(c) Application of Proceeds. After the occurrence of an Event of Default
hereunder, and subject to the Prior Rights and the Parity Rights, the proceeds
of all sales and collections, and any other moneys (including any cash contained
in the Collateral) the application of which is not otherwise herein provided
for, shall be applied as follows:
-12-
<PAGE>
First, to the payment of the costs and expenses of such sale or sales
and the reasonable compensation of the Noteholder and its counsel.
Second, any surplus then remaining to the payment of the Company's
obligations in respect of the Note secured by such Collateral in such order
and manner as the Noteholder may in its sole discretion determine.
Third, any surplus then remaining shall be deposited in the account of
the Company, subject, however, to the rights of the holder of any then
existing lien of which the Noteholder has actual notice.
(d) Sale without Registration. The Company recognizes that registration
under the Securities Act of 1933, as amended (the "Securities Act") of
securities included in the Collateral or compliance with the requirements of
Rule 144 might be required to effect any public sale thereof and that the
Noteholder may desire to effect one or more private or other sales not requiring
such registration to avoid the attendant delays and uncertainty. The Company
therefore agrees that if, at any time when the Noteholder shall determine to
exercise such right to sell all or part of the securities included in the
Collateral pursuant to this Section 3.7, and the securities in questions shall
not be effectively registered under the Securities Act, the Noteholder may, in
its sole and absolute discretion, sell such securities by private or other sale
not requiring such registration in such manner and in such circumstances as the
Noteholder may deem necessary or advisable in order that such sale may be
effected without such registration. Without limiting the generality of the
foregoing, in any event the Noteholder may, in its sole and absolute discretion:
(i) approach and negotiate with one or more possible purchasers to effect such
sale; and (ii) restrict such sale to one or more purchasers each of whom will
represent and agree that such purchaser is purchasing for its own account, for
investment and not with a view to the distribution or sale of such securities.
The Company hereby agrees that such manner of disposition is commercially
reasonable, that it will upon the request of the Noteholder give any such
purchaser access to such information as would be necessary if such sale were by
the issuer seeking to effect compliance with Regulation D under the Securities
Act, and that the Noteholder shall incur no responsibility for selling all or
part of the securities constituting Collateral at a private or other sale not
requiring such registration notwithstanding the possibility that a substantially
higher price might be realized if the sale were deferred until after
registration or were made in compliance with Rule 144 or other exemption from
the registration provisions under the
-13-
<PAGE>
Securities Act. The Company acknowledges that there is no adequate remedy at law
for failure by it to comply with the provisions of this Section 3.7 and that
such failure would not be adequately compensable in damages, therefore agrees
that its agreements contained in this Section 3.7 may be specifically enforced.
(e) Registration of Securities. If, in the opinion of counsel for the
Noteholder, registration under the Securities Act of securities included in the
Collateral or compliance with the requirements of Rule 144 is required in
connection with a proposed sale of any security included in the Collateral and
there is no exemption from registration under the Securities Act which, if
utilized, would give the Noteholder materially similar benefits from such sale,
the Company will use its reasonable efforts to cause the issuer of such
security, as expeditiously as possible and at its expense (including the expense
of printing such reasonable number of prospectuses as the Noteholder may
specify), to cause such security to be registered under the Securities Act or
any similar federal statute then in effect and cause such registration to remain
effective, and to cause such security to be and remain qualified under the "Blue
Sky" or securities laws of any states designated by the Noteholder in each case
for a period not to exceed nine (9) months; and provided, further, that only one
effective registration shall be required hereunder.
SECTION 3.8. Custody of Collateral. Except to the extent provided by the
mandatory requirements of applicable law which cannot be waived, the Noteholder
shall not have any duty as to the custody and protection of the Collateral, the
collection of any part thereof or any income thereon, or as to the preservation
or exercise of any rights pertaining thereto, including, without limitation,
rights against the prior parties, beyond the use of reasonable care in the
custody and physical preservation of any Collateral actually in the Noteholder's
possession.
SECTION 3.9. Alteon Stock. If there shall not have occurred and be
continuing an Event of Default hereunder, the Company will be entitled to sell
the Alteon Stock. Upon any such sale, the Noteholder's security interest and the
security interest granted by the Decision Notes in the shares sold (but not in
the proceeds thereof (the "Alteon Proceeds")) shall terminate; and the
Noteholder agrees to return any certificates evidencing such securities held by
it and to execute such documents and instruments necessary to allow the Company
to transfer such securities free of any interest of the Noteholder created
hereunder.
Following any such sale, at the Noteholder's request, the Company shall (i)
establish a segregated bank account (the "Bank
-14-
<PAGE>
Account") solely for the purpose of holding, and into which the Company shall
deposit, the Alteon Proceeds, and (ii) take all steps required in order to cause
the bank at which the Bank Account is established to record the Noteholder's
security interest in the Bank Account and the funds held therein. The Company
agrees that, without the prior written consent of the Noteholder, the Company
shall only withdraw and use the funds held in the Bank Account: (x) after the
Company has exhausted all of its other cash reserves; and (y) once so withdrawn,
solely for working capital and not for the purpose of making any redemptions or
paying any dividends, distributions, interest or capital expenditures.
SECTION 3.10. Dividends and Use of Proceeds. From and after the date hereof
and while this Note is outstanding, without the prior written consent of the
Initial Noteholder, which may be withheld in its sole and absolute discretion,
the Company shall not: (i) declare or pay any cash dividends on its common
stock; or (ii) utilize the proceeds of the loan evidenced by this Note (or
permit or suffer any such utilization to occur or exist) for any purpose other
than: (w) the payment of principal and interest on this Note or on any other
indebtedness of the Company to the Initial Noteholder or its Affiliates; (x) to
acquire or assist any of the Company's Affiliates to acquire any business or
line of business; (y) to invest in or acquire any securities (or right to
acquire any securities) of IMED, any other Affiliate of the Company or any other
entity (other than the Company); or (z) to pay any and all costs and expenses
incurred in connection with the foregoing activities.
ARTICLE IV
EVENTS OF DEFAULT
SECTION 4.1. Events of Default. If any of the following events ("Events of
Default") shall occur and be continuing:
(a) the Company shall fail to pay the principal of this Note when due or
shall fail to pay interest on this Note when due; or
(b) the Company shall fail to perform or observe any covenant contained in
this Note and such failure shall continue for a period of three (3) days
following notice thereof from the Noteholder to the Company;
(c) there shall occur an event of default under any instrument evidencing
Indebtedness the principal amount of which exceeds $500,000 of the Company or
any Affiliate (including IMED)
-15-
<PAGE>
and the holder of such Indebtedness shall accelerate the maturity
thereof;
(d) a final judgment which, in the aggregate with other outstanding final
judgments against the Company or any of its Affiliates (including IMED), exceeds
$500,000 shall be rendered against the Company or any of its Affiliates
(including IMED) if, within 30 days after entry thereof, such judgment shall not
have been discharged or stayed pending appeal, or within 30 days after
expiration of such stay such judgment shall not have been discharged; or
(e) the Company or any of its Affiliates (including IMED) (other than a
Fidata Reorganization Event) shall:
(1) commence a voluntary case under Title 11 of the United States Code
as from time to time in effect, or authorize, by appropriate
proceedings of its board of directors, or other governing body, the
commencement of such a voluntary case;
(2) have filed against it a petition commencing an involuntary
case under said Title 11;
(3) seek relief as a debtor under any applicable law, other than said
Title 11, of any jurisdiction relating to the liquidation or
reorganization of debtors or to the modification or alteration of the
rights of creditors, or consent to or acquiesce in such relief;
(4) have entered against it any order by a court of competent
jurisdiction (i) finding it to be bankrupt or insolvent, (ii) ordering
or approving its liquidation, reorganization or any modification or
alteration of the rights of its creditors, or (iii) assuming custody
of, or appointing a receiver or other custodian for, all or a
substantial part of its property; or
(5) make an assignment for the benefit of, or enter into a composition
with, its creditors, or appoint or consent to the appointment of a
receiver or other custodian for all or a substantial part of its
property;
-16-
<PAGE>
then, the Noteholder may, by notice to the Company, declare the entire unpaid
principal amount of this Note, and all interest accrued and unpaid thereon, to
be forthwith due and payable, whereupon this Note and all such accrued interest
and all such amounts shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Company.
ARTICLE V
CONVERSION
The Noteholder is entitled to purchase from the Company by conversion of
the principal portion of this Note pursuant to the terms hereof (which may be
converted in whole or in part at any time or from time to time following the
Commencement Date (as hereinafter defined)) (the "Conversion Right") up to
9,523,809 duly authorized, validly issued, fully paid and nonassessable shares
of Common Stock, par value $.01 per share (the "Common Stock"), of the Company
at the purchase price per share of $2-5/8 of such principal amount (the "Initial
Purchase Price"), at any time or from time to time from and after the earlier
of: thirty (30) days following the Funding Date or the date on which the Common
Stock issuable upon exercise hereof is first approved for listing, upon official
notice of issuance, on the American Stock Exchange (the "Commencement Date"),
and prior to 5:00 p.m., Eastern Standard time, on January 4, 2001 (the
"Expiration Date"), all subject to the terms, conditions and adjustments set
forth below.
SECTION 5.1. Conversion of Note.
5.1.1. Exercise. The Conversion Right may be exercised by the Noteholder
hereof, in whole or in part, from time to time, during normal business hours on
any Business Day from and after the Commencement Date and prior to the
Expiration Date, by delivery to the Company at its office maintained pursuant to
Section 5.12.2(a) hereof, a subscription in substantially the form attached
hereto as Exhibit A, or a reasonable facsimile thereof (the "Subscription
Notice") duly executed by such Noteholder, in which event the principal amount
of the Note shall be reduced by an amount equal to the amount obtained by
multiplying (a) the number of shares of Common Stock (without giving effect to
any adjustment thereof) designated in such subscription by (b) the Initial
Purchase Price, and such Noteholder shall thereupon be entitled to receive the
number of duly authorized, validly issued, fully paid and nonassessable shares
of Common Stock (or Other Securities) determined as provided in Sections 5.2
through 5.4 hereof.
-17-
<PAGE>
5.1.2. When Exercise Effective. Each exercise of the Conversion Right shall
be deemed to have been effected immediately prior to the close of business on
the Business Day on which the Subscription Notice shall have been delivered to
the Company as provided in Section 5.1.1 hereof, and at such time the Person or
Persons in whose name or names any certificate or certificates for shares of
Common Stock (or Other Securities) shall be issuable upon such exercise as
provided in Section 5.1.3 hereof shall be deemed to have become the holders of
record thereof.
5.1.3. Delivery of Stock Certificates, etc. As soon as practicable after
the delivery of the Subscription Notice and in any event within five Business
Days thereafter, the Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of and delivered to
the Noteholder hereof, or, subject to Section 5.9 hereof, as such Noteholder
(upon payment by such Noteholder of any applicable transfer taxes) may direct a
certificate or certificates for the number of duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock (or Other Securities) to
which such Noteholder shall be entitled upon such exercise plus, in lieu of any
fractional share to which such Noteholder would otherwise be entitled, cash in
an amount equal to the same fraction of the Market Price per share on the
Business Day next preceding the date of such exercise.
5.1.4. Company to Reaffirm Obligations. The Company will, at the time of
each exercise of the Conversion Right, upon the request of the Noteholder
hereof, acknowledge in writing its continuing obligation to afford to such
Noteholder all rights (including without limitation any rights to registration,
pursuant to the Registration Rights Agreement, of the shares of Common Stock or
Other Securities issued upon such exercise) to which such Noteholder shall
continue to be entitled after such exercise in accordance with the terms hereof;
provided, however, that if the Noteholder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford
such rights to such Noteholder.
5.2. Adjustment of Common Stock Issuable Upon Exercise.
5.2.1. General; Number of Shares; Conversion Price. The number of shares of
Common Stock which the Noteholder shall be entitled to receive upon each
exercise of the Conversion Right shall be determined by multiplying the number
of shares of Common Stock which would otherwise (but for the provisions of this
Section 5.2) be issuable upon such exercise, as designated by the Noteholder
hereof pursuant to Section 5.1.1 hereof, by the fraction
-18-
<PAGE>
of which (a) the numerator is the Initial Purchase Price and (b) the denominator
is the Conversion Price in effect on the date of such exercise. The "Conversion
Price" (i) shall initially be the Initial Purchase Price, (ii) shall be adjusted
and readjusted from time to time as provided in this Section 5.2 and, (iii) as
so adjusted or readjusted, shall remain in effect until a further adjustment or
readjustment thereof is required by this Section 5.2.
5.2.2. Adjustment of Conversion Price. In case the Company at any time or
from time to time after the date hereof shall issue or sell Additional Shares of
Common Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Section 5.2.3 or 5.2.4 hereof) without consideration or for a
consideration per share less than the greater of the Current Market Price or the
Conversion Price in effect immediately prior to such issue or sale, then, and in
each such case, subject to Section 5.2.7 hereof, such Conversion Price shall be
reduced, concurrently with such issue or sale, to a price (calculated to the
nearest .001 of a cent) determined by multiplying such Conversion Price by a
fraction:
(a) the numerator of which shall be (i) the number of shares of
Common Stock outstanding immediately prior to such issue or sale plus
(ii) the number of shares of Common Stock which the aggregate
consideration received by the Company for the total number of such
Additional Shares of Common Stock so issued or sold would purchase at
the greater of such Current Market Price and such Conversion Price;
and
(b) the denominator of which shall be the number of shares of
Common Stock outstanding immediately after such issue or sale.
5.2.3. Treatment of Options and Convertible Securities. In case the Company
at any time for from time to time after the date hereof shall issue, sell, grant
or assume, or shall fix a record date for the determination of shareholders of
any class of securities entitled to receive, any Options or Convertible
Securities, then, and in each such case, the maximum number of Additional Shares
of Common Stock (as set forth in the instrument relating thereto, without regard
to any provisions contained therein for a subsequent adjustment of such number
the purpose of which is to protect against dilution) at any time issuable upon
the exercise of such Options or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible Securities and
Options therefor, shall be deemed to be Additional Shares of Common Stock issued
as of the time of such issue, sale, grant or assumption or, in case such a
record date
-19-
<PAGE>
shall have been fixed, as of the close of business on such record date (or, if
the Common Stock trades on an ex-dividend basis, on the date prior to the
commencement of ex-dividend trading); provided, however, that such Additional
Shares of Common Stock shall not be deemed to have been issued unless the
consideration per share (determined pursuant to Section 5.2.5 hereof) of such
shares would be less than the greater of the Current Market Price or the
Conversion Price in effect on the date of and immediately prior to such issue,
sale, grant or assumption or immediately prior to the close of business on such
record date (or, if the Common Stock trades on an ex-dividend basis, on the date
prior to the commencement of ex-dividend trading), as the case may be; and
provided, further, that:
(a) whether or not an adjustment of the Conversion Price is required
in connection with the issuance, sale grant or assumption of such Options
or Convertible Securities, no adjustment or further adjustment of the
Conversion Price shall be made as a result of the exercise of such Options
or the conversion or exchange of such Convertible Securities and the
consequent issue or sale of Convertible Securities or shares of Common
Stock;
(b) in any case in which Additional Shares of Common Stock are deemed
to be issued, if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the exercise, conversion
or exchange thereof (by change of rate or otherwise), the Conversion Price
computed on the original issue, sale, grant or assumption thereof (or upon
the occurrence of the record date, or date prior to the commencement of
ex-dividend trading, as the case may be, with respect thereof), and any
subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options, or the rights of conversion or
exchange under such Convertible Securities, which are outstanding at such
time;
(c) in any case in which Additional Shares of Common Stock are deemed
to be issued, upon the expiration (or purchase by the Company and
cancellation or retirement) of any such Options which shall not have been
exercised, or the expiration of any rights of conversion or exchange under
any such Convertible Securities the rights of conversion or exchange under
which shall not have been exercised, the
-20-
<PAGE>
Conversion Price computed upon the original issue, sale, grant or
assumption thereof (or upon the occurrence of the record date, or date
prior to the commencement of ex-dividend trading, as the case may be, with
respect thereto), and any subsequent adjustments based thereon, shall, upon
(and effective as of) such expiration (or such cancellation or retirement,
as the case may be), be recomputed as if:
(i) in the case of Options or Convertible Securities, the only
Additional Shares of Common Stock issued or sold were the Additional
Shares of Common Stock, if any, actually issued or sold upon the
exercise of such Options or the conversion or exchange of such
Convertible Securities and the consideration received therefor was the
consideration actually received by the Company upon such exercise, or
for the issue or sale of all such Convertible Securities which were
actually converted or exchanged, plus the additional consideration, if
any, actually received by the Company upon such conversion or
exchange, and
(ii) in the case of Options for Convertible Securities, only the
Convertible Securities, if any, actually issued or sold upon the
exercise of such Options were issued at the time of the issue, sale,
grant or assumption of such Options, and the consideration received by
the Company for the Additional Shares of Common Stock deemed to have
then been issued was the consideration actually received by the
Company for the issue, sale, grant or assumption of all such Options,
whether or not exercised, plus the consideration deemed to have been
received by the Company (pursuant to Section 5.2.5 hereof) upon the
issue or sale of such Convertible Securities with respect to which
such Options were actually exercised; and
(d) no readjustment pursuant to clause (b) or (c) above (either
individually or cumulatively together with all prior readjustments as made
in respect of such Options or Convertible Securities) shall have the effect
of increasing the Conversion Price by a proportion (relative to the
Conversion Price in effect immediately prior to such readjustment) in
excess of the inverse of the aggregate proportional adjustment thereof made
in respect of the issue, sale, grant or assumption of such Options or
Convertible Securities or the fact that such Options or Convertible
Securities were outstanding at the time other shares of Common Stock,
Options or Convertible Securities were issued.
-21-
<PAGE>
If the consideration provided for in any Option or the additional consideration,
if any, payable upon the conversion or exchange of any Convertible Security
shall be reduced, or the rate at which any Option is exercisable or any
Convertible Security is convertible into or exchangeable for shares of Common
Stock shall be increased, at any time under or by reason of provisions with
respect thereto designed to protect against dilution, then, effective
concurrently with each such change, the Conversion Price then in effect shall
first be adjusted to eliminate the effects (if any) of the issuance (or deemed
issuance) of such Option or Convertible Security on the Conversion Price and
then readjusted as if such Option or Convertible Security had been issued on the
date of such change with the terms in effect after such change, but only if as a
result of such adjustment the Conversion Price then in effect hereunder is
thereby reduced.
5.2.4. Treatment of Stock Dividends, Stock Splits, etc. In case the Company
at any time or from time to time after the date hereof shall declare or pay any
dividend on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, Additional Shares of
Common Stock shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business on the record date for the
determination of shareholders of any class of securities entitled to receive
such dividend, or (b) in the case of any such subdivision, at the close of
business on the day immediately prior to the day upon which such corporate
action becomes effective.
5.2.5. Computation of Consideration. For the purposes of this Section 5.2:
(a) the consideration for the issue or sale of any Additional
Shares of Common Stock shall, irrespective of the accounting treatment
of such consideration:
(i) insofar as it consists of cash, be computed at the
amount of cash actually received by the Company net of any
expenses paid or incurred by the Company or any commissions or
compensation paid or concessions or discounts allowed to
underwriters, dealers or others performing similar services in
connection with such issue or sale;
(ii) insofar as it consists of property (including
securities) other than cash actually received
-22-
<PAGE>
by the Company, be computed at the fair value thereof at the time
of such issue or sale, as determined in good faith by the Board
of Directors of the Company;
(iii) insofar as it consists neither of cash nor of other
property, be computed as having no value; and
(iv) in case Additional Shares of Common Stock are issued or
sold together with other stock or securities or other assets of
the Company for a consideration which covers both, be the portion
of such consideration so received, computed as provided in
clauses (i), (ii) and (iii) above, allocable to such Additional
Shares of Common Stock, all as determined in good faith by the
Board of Directors of the Company;
(b) Additional Shares of Common Stock deemed to have been issued
pursuant to Section 5.2.3 hereof shall be deemed to have been issued for a
consideration per share determined by dividing:
(i) the total amount of cash and other property, if any,
received and receivable by the Company as direct consideration
for the issue, sale, grant or assumption of the Options or
Convertible Securities in question, plus the minimum aggregate
amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such
consideration the purpose of which is to protect against
dilution) payable to the Company upon the exercise in full of
such Options or the conversion or exchange of such Convertible
Securities or, in the case of Options for Convertible Securities,
the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, in each
case computing such consideration as provided in the foregoing
clause (a),
by
(ii) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such
number the purpose of which is to protect against dilution)
issuable upon the exercise of such Options or the conversion or
exchange of such Convertible securities; and
-23-
<PAGE>
(c) Additional Shares of Common Stock deemed to have been issued
pursuant to Section 5.2.4 hereof shall be deemed to have been issued for no
consideration.
5.2.6. Adjustments for Combinations, etc. In case the outstanding shares of
Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Conversion Price
in effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
5.2.7. Minimum Adjustment of Conversion Price. If the amount of any
adjustment of the Conversion Price required pursuant to this Section 5.2 would
be less than one-tenth (1/10) of one percent (1%) of the Conversion Price in
effect at the time such adjustment is otherwise so required to be made, such
amount shall be carried forward and adjustment with respect thereto made at the
time of and together with any subsequent adjustment which, together with such
amount and any other amount or amounts so carried forward, shall aggregate at
least one tenth (1/10) of one percent (1%) of such Conversion Price.
5.2.8. Shares Deemed Outstanding. For all purposes of the computations to
be made pursuant to this Section 5.2: (i) there shall be deemed to be
outstanding all shares of Common Stock issuable pursuant to the exercise of
Options and conversion of Convertible Securities outstanding at the close of
business on the date hereof, including, without limitation, (a) this Note, (b)
the Decisions Notes, and (c) the Warrant to purchase 25,000 shares of common
stock, dated July 29, 1991, issued to Montgomery Medical Ventures II, L.P., (ii)
immediately after any Additional Shares of Common Stock are deemed to have been
issued pursuant to Section 5.2.3 or 5.2.4 hereof, such Additional Shares shall
be deemed to be outstanding; (iii) treasury shares shall not be deemed to be
outstanding; and (iv) no adjustment shall be made in the Conversion Price upon
the issuance of shares of Common Stock pursuant to Options and Convertible
Securities so deemed to be outstanding, but this Section 5.2.8 shall not prevent
other adjustments in the Conversion Price arising by virtue of such outstanding
Options or Convertible Securities pursuant to the provisions of Section 5.2.3
hereof; provided, however, that, for purposes of calculating adjustments to the
Conversion Price, there shall be deemed to be outstanding immediately after
giving effect to any issuance of shares of Common Stock, Options or Convertible
Securities all shares of Common Stock issuable upon the exercise of Options and
conversion of Convertible Securities then outstanding (including without
limitation this Note) after giving effect to the
-24-
<PAGE>
antidilution provisions contained in all such outstanding Options and
Convertible Securities which cause an adjustment in the number of shares of
Common Stock so issuable, either by virtue of such issuance of shares of Common
Stock, Options or Convertible Securities or by virtue of the operation of such
antidilution provisions.
5.3. Consolidation, Merger, etc.
5.3.1. Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, etc. In case the Company after the date hereof (a) shall
consolidate with or merge into any other Person and shall not be the continuing
or surviving corporation of such consolidation or merger, or (b) shall permit
any other Person to consolidate with or merge into the Company and the Company
shall be the continuing or surviving Person but, in connection with such
consolidation or merger, the Common Stock or Other Securities shall be changed
into or exchanged for stock or other securities of any other Person or cash or
any other property, or (c) shall transfer all or substantially all of its
properties or assets to any other Person, or (d) shall effect a capital
reorganization or reclassification of the Common Stock or Other Securities
(other than a capital reorganization or reclassification to the extent that such
capital reorganization or reclassification results in the issue of Additional
Shares of Common Stock for which adjustment in the Conversion Price is provided
in Section 5.2.2. hereof), then, and in the case of each such transaction,
proper provision shall be made so that, upon the basis and the terms and in the
manner provided herein the Noteholder, upon the exercise of the Conversion Right
at any time after the consummation of such transaction, shall be entitled to
receive (at the aggregate Conversion Price in effect at the time of such
consummation for all Common Stock or Other Securities issuable upon such
exercise immediately prior to such consummation), in lieu of the Common Stock or
Other Securities issuable upon such exercise prior to such consummation, the
greatest amount of securities, cash or other property to which such Noteholder
would actually have been entitled as a shareholder upon such consummation if
such Noteholder had exercised the Conversion Right immediately prior thereto,
subject to adjustments (subsequent to such consummation) as nearly equivalent as
possible to the adjustments provided for in Sections 5.2, 5.3 and 5.4 hereof;
provided however, that if a purchase, tender or exchange offer shall have been
made to and accepted by the shareholders of more than 50% of the outstanding
shares of Common Stock, and if the Noteholder so designates in a notice given to
the Company on or before the date immediately preceding the date of the
consummation of such transaction, the Noteholder shall be entitled to receive
the greatest amount of securities, cash or other property to which
-25-
<PAGE>
such Noteholder would actually have been entitled as a shareholder if the
Noteholder had exercised the Conversion Right prior to the expiration of such
purchase, tender or exchange offer and accepted such offer, subject to
adjustments (from and after the consummation of such purchase, tender or
exchange offer) as nearly equivalent as possible to the adjustments provided for
in Sections 5.2, 5.3 and 5.4 hereof.
5.3.2. Assumption of Obligations. Notwithstanding anything contained in the
Note to the contrary, the Company will not effect any of the transactions
described in clauses (a) through (d) of Section 5.3.1 hereof unless, prior to
the consummation thereof, each person (other than the Company) which may be
required to deliver any stock, securities, cash or property upon the exercise of
the Conversion Right as provided herein shall assume, by written instrument
delivered to, and reasonably satisfactory to, the Noteholder, (a) the
obligations of the Company hereunder (and if the Company shall survive the
consummation of such transaction, such assumption shall be in addition to, and
shall not release the Company from, any continuing obligations of the Company
hereunder), (b) the obligations of the Company under the Registration Rights
Agreement, and (c) the obligation to deliver to such Noteholder such shares of
stock, securities, cash or property as, in accordance with the foregoing
provisions of this Section 5.3, such Noteholder may be entitled to receive, and
such Person shall have similarly delivered to such Noteholder an opinion of
counsel for such Person, which counsel shall be reasonably satisfactory to such
Noteholder, stating that this Note shall thereafter continue in full force and
effect and the terms hereof (including without limitation all of the provisions
of this Section 5.3) shall be applicable to the stock, securities, cash or
property which such Person may be required to deliver upon any exercise of the
Conversion Right or the exercise of any rights pursuant hereto.
5.4. Other Dilutive Events. In case any event shall occur as to which the
provisions of Section 5.2 or 5.3 hereof are not strictly applicable but the
failure to make any adjustment would not, in the reasonable opinion of the
Noteholder, fairly protect the purchase Conversion Right in accordance with the
essential intent and principles of such Sections, then, in each such case, at
the request of such Noteholder, the Company shall appoint a firm of independent
investment bankers of recognized national standing (which shall be independent
of the Company and shall be satisfactory to the Noteholder), which shall give
their opinion upon the adjustment, if any, on a basis consistent with the
essential intent and principles established in Sections 5.2 and 5.3 hereof,
necessary to preserve, without dilution, the Conversion Right. Upon receipt of
such opinion, the Company will promptly
-26-
<PAGE>
mail a copy thereof to the Noteholder and shall make the adjustments
described therein.
5.5. No Dilution or Impairment. The Company will not, by amendment of its
certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Note, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Right of the
Noteholder against dilution or other impairment. Without limiting the generality
of the foregoing, the Company (a) will not permit the par value of any shares of
stock receivable upon the exercise of the Conversion Right to exceed the amount
payable therefor upon such exercise, (b) will take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of stock on the exercise of the Conversion
Right from time to time outstanding, (c) will not take any action which results
in any adjustment of the Conversion Price if the total number of shares of
Common Stock (or Other Securities) issuable after the action upon the complete
exercise of the Conversion Right for all shares of Common Stock that may be
acquired hereunder would exceed the total number of shares of Common Stock (or
Other Securities) then authorized by the Company's certificate of incorporation
and available for the purpose of issue upon such exercise, and (d) will not
issue any capital stock of any class which is preferred as to dividends or as to
the distribution of assets upon voluntary or involuntary dissolution,
liquidation or winding-up, unless the rights of the holder thereof shall be
limited to a fixed sum or percentage of par value or a sum determined by
reference to a formula based on a published index of interest rates, an interest
rate publicly announced by a financial institution or a similar indicator of
interest rates in respect of participation in dividends and to a fixed sum or
percentage of par value in any such distribution of assets.
5.6. Accountants' Report as to Adjustments. In each case of any adjustment
or readjustment in the shares of Common Stock (or Other Securities) issuable
upon the exercise of the Conversion Right, the Company at its expense will
promptly compute such adjustment or readjustment in accordance with the terms
hereof and cause independent certified public accounts of recognized national
standing (which may be the regular auditors of the Company) selected by the
Company to verify such computation (other than any computation of the fair value
of property as determined in good faith by the Board of Directors of the
Company) and prepare a
-27-
<PAGE>
report setting forth such adjustment or readjustment and showing in reasonable
detail the method of calculation thereof and the facts upon which such
adjustment or readjustment is based, including a statement of (a) the
consideration received or to be received by the Company for any Additional
Shares of Common Stock issued or sold or deemed to have been issued, (b) the
number of shares of Common Stock outstanding or deemed to be outstanding, and
(c) the Conversion Price in effect immediately prior to such issue or sale and
as adjusted and readjusted (if required by Section 5.2 hereof) on account
thereof. The Company will forthwith mail a copy of each such report to each
Noteholder and will, upon the written request at any time of any Noteholder,
furnish to such Noteholder a like report setting forth the Conversion Price at
the time in effect and showing in reasonable detail how it was calculated. The
Company will also keep copies of all such reports at its office maintained
pursuant to Section 5.12.2(a) hereof and will cause the same to be available for
inspection at such office during normal business hours by any Noteholder or any
prospective purchaser thereof designated by the Noteholder thereof.
5.7. Notices of Corporate Action. In the event of
(a) any taking by the Company of a record (or establishment of a
record date) of the shareholders of any class of securities for the purpose
of determining the shareholders thereof who are entitled to receive any
dividend or other distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities
or property, or to receive any other right, or
(b) any capital reorganization of the Company, reclassification or
recapitalization of the capital stock of the Company or any consolidation
or merger involving the Company and any other Person or any transfer of all
or substantially all the assets of the Company to any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
(d) any issuance of any Common Stock, Convertible Security or Option
by the Company,
the Company will mail to each Noteholder a notice specifying (i) the date
or expected date on which any record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such dividend,
distribution or right, (ii) the
-28-
<PAGE>
date or expected date on which any such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation or
winding-up is to take place, the time, if any such time is to be fixed, as of
which the Noteholders of record of Common Stock (or Other Securities) shall be
entitled to exchange their shares of Common Stock (or Other Securities) for the
securities or other property deliverable upon such reorganization,
reclassification, recapitalization, consolidation, merger, transfer,
dissolution, liquidation or winding-up and a description in reasonable detail of
the transaction and (iii) the date of such issuance, together with a description
of the security so issued and the consideration received by the Company
therefor. Such notice shall be mailed at least 45 days prior to the date therein
specified.
5.8. Registration of Common Stock. If any shares of Common Stock required
to be reserved for purposes of exercise of the Conversion Right require
registration with or approval of any governmental authority under any federal or
state law (other than the Securities Act) before such shares may be issued upon
exercise, the Company will, at its expense and as expeditiously as possible, use
its best efforts to cause such shares to be duly registered or approved, as the
case may be. The shares of Common Stock (or Other Securities) issuable upon
exercise of the Conversion Right shall constitute Registrable Securities (as
such term is defined in the Registration Rights Agreement). Each Noteholder
shall be entitled to all of the benefits afforded to a holder of any such
Registrable Securities under the Registration Rights Agreement and such
Noteholder, by its acceptance of the Note, agrees to be bound by and to comply
with the terms and conditions of the Registration Rights Agreement applicable to
such Noteholder as a holder of such Registrable Securities. As promptly as
practicable following the date hereof and, in any event within 30 days
thereafter, the Company will, at its expense, arrange for the listing on the
American Stock Exchange, upon official notice of issuance, of the shares of
Common Stock issuable upon exercise hereof. At any such time as such shares are
listed on any other national securities exchange, the Company will, at its
expense, obtain promptly and maintain the approval for listing on each such
exchange, upon official notice of issuance, of the shares of Common Stock
issuable upon exercise of the Conversion Right, and maintain the listing of such
shares after their issuance.
5.9. Restrictions on Transfer.
5.9.1. Restrictive Legend. Except as otherwise permitted by this Section
5.9, each certificate for Common Stock (or Other Securities) issued upon the
exercise of the Conversion Right
-29-
<PAGE>
and each certificate issued upon the direct or indirect transfer of any such
Common Stock (or Other Securities), this Note and each Note issued upon direct
or indirect transfer or in substitution for this Note pursuant to Section 5.12
hereof shall bear the legend set forth on the face of this Note and shall be
transferable only upon satisfaction of the conditions specified in this Section
5.9.
5.9.2. Notice of Proposed Transfer, Opinion of Counsel. Prior to any
transfer of this Note or any Restricted Securities which are not registered
under an effective registration statement under the Securities Act, the
Noteholder will give written notice to the Company of such Noteholder's
intention to effect such transfer and to comply in all other respects with this
Section 5.9.2. Each such notice (a) shall describe the manner and circumstances
of the proposed transfer, and (b) shall designate counsel for the Noteholder
giving such notice. The Noteholder giving such notice will submit a copy thereof
to the counsel designated in such notice. The following provisions shall then
apply:
(a) If in the opinion of such counsel the proposed transfer may be
effected without registration of such Note or Restricted Securities under
the Securities Act, such Noteholder shall thereupon be entitled to transfer
such Note or Restricted Securities in accordance with the terms of the
notice delivered by such Noteholder to the Company. Except as provided in
Section 5.9.3 hereof, each certificate representing the Note and such
Restricted Securities issued upon or in connection with such transfer shall
bear the restrictive legends required by Section 5.9.1 hereof.
(b) If in the opinion of such counsel the proposed transfer may not
legally be effected without registration under the Securities Act (such
opinion to state the basis of the legal conclusions reached therein), such
Noteholder shall not be entitled to transfer such Note or Restricted
Securities until either (x) receipt by the Company of a further notice from
such Noteholder pursuant to the foregoing provisions of this Section 5.9.2
and fulfillment of the provisions of clause (a) and (y) such Note or
Restricted Securities have been effectively registered under the Securities
Act.
The Company will pay the reasonable fees and disbursements of counsel for any
Noteholder and of counsel for the Company in connection with all opinions
rendered by them pursuant to this Section 5.9.2 and pursuant to Section 5.9.3
hereof. Notwithstanding any other provision of this Section 5.9, no opinion of
counsel shall be necessary for a transfer of the Note or
-30-
<PAGE>
Restricted Securities by the Noteholder thereof to an affiliate of such
Noteholder, if the transferee agrees in writing to be subject to the terms
hereof to the same extent as if such transferee were the Initial Noteholder
hereof.
5.9.3. Termination of Restrictions. The restrictions imposed by this
Section 5.9 upon the transferability of Restricted Securities shall cease and
terminate as to any particular Restricted Securities (a) when such Restricted
Securities shall have been effectively registered under the Securities Act, or
(b) when, in the opinions of both counsel for the Noteholder thereof and counsel
for the Company, such restrictions are no longer required in order to insure
compliance with the Securities Act. Whenever such restrictions shall cease and
terminate as to any Restricted Securities, the Noteholder thereof shall be
entitled to receive from the Company, without expense (other than applicable
transfer taxes, if any), new securities of like tenor not bearing the applicable
legends required by Section 5.9.1 hereof.
5.10. Availability of Information. If the Company shall have filed a
registration statement pursuant to the requirements of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act, the
Company will comply with the reporting requirements of Sections 13 and 15(d) of
the Exchange Act and will comply with all other public information reporting
requirements of the Commission (including Rule 144 promulgated by the Commission
under the Securities Act) from time to time in effect and relating to the
availability of an exemption from the Securities Act for the sale of any
Restricted Securities. The Company will also cooperate with each holder of any
Restricted Securities in supplying such information as may be necessary for such
holder to complete and file any information reporting forms presently or
hereafter required by the Commission as a condition to the availability of an
exemption from the Securities Act for the sale of any Restricted Securities. The
Company will furnish to each Noteholder, promptly upon their becoming available,
copies of all financial statements, reports, notices and proxy statements sent
or made available generally by the Company to its stockholders, and copies of
all regular and periodic reports and all registration statements and
prospectuses filed by the Company with any securities exchange or with the
Commission.
5.11. Reservation of Stock, Etc. The Company will at all times reserve and
keep available, solely for issuance and delivery upon exercise of the Conversion
Right, the number of shares of Common Stock of each class (or Other Securities)
from time to time issuable upon the complete exercise of the Conversion Right
for all shares that may be acquired hereunder. All shares of
-31-
<PAGE>
Common Stock (or Other Securities) issuable upon exercise of the Conversion
Right shall be duly authorized and, when issued upon such exercise, shall be
validly issued and, in the case of shares, fully paid and nonassessable with no
liability on the part of the holders thereof.
5.12. Ownership, Transfer and Substitution of Notes.
5.12.1. Ownership. The Company may treat the person in whose name the Note
is registered on the register kept at the office of the Company maintained
pursuant to Section 5.12.2(a) hereof as the owner and Noteholder thereof for all
purposes, notwithstanding any notice to the contrary, except that, if and when
the Note is properly assigned in blank, the Company may (but shall not be
obligated to) treat the bearer thereof as the owner of the Note for all
purposes, notwithstanding any notice to the contrary. Subject to Section 5.9
hereof, the Note, if properly assigned, may be exercised by a new Noteholder.
5.12.2. Office; Transfer and Exchange of Note.
(a) The Company will maintain an office (which may be an agency
maintained at a bank) in New York City (which is currently the office of
Fidata Corporation) and/or San Diego, California where notices,
presentations and demands in respect of this Note may be made upon it and
shall notify the Noteholders of any change of location of such office.
(b) The Company shall cause to be kept at its office maintained
pursuant to Section 5.12.2(a) hereof a register for the registration and
transfer of the Note. The names and addresses of Noteholders, the transfers
thereof and the names and addresses of transferees of the Note shall be
registered in such register. The Person in whose name any Note shall be so
registered shall be deemed and treated as the owner and Noteholder thereof
for all purposes, and the Company shall not be affected by any notice or
knowledge to the contrary.
(c) Upon the surrender of this Note, properly endorsed, for
registration of transfer or for exchange at the office of the Company
maintained pursuant to Section 5.12.2(a) hereof, the Company at its expense
will (subject to compliance with Section 5.9 hereof, if applicable) execute
and deliver to or upon the order of the Noteholder thereof a new Note or
Notes of like tenor, in the name of such Noteholder or as such Noteholder
(upon payment by such Noteholder of any applicable transfer taxes) may
direct, calling in the aggregate on the
-32-
<PAGE>
face or faces thereof for conversion into the number of shares of Common
Stock called for in the Notes so surrendered.
5.12.3. Replacement of Notes. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Note, upon delivery of indemnity reasonably satisfactory to the Company in form
and amount or, in the case of any such mutilation, upon surrender of such Note
for cancellation at the office of the Company maintained pursuant to Section
5.12.2(a) hereof, the Company at its expense will execute and deliver, in lieu
thereof, a new Note of like tenor and dated the date hereof.
5.12.4. Additional Restrictions. Any transfer of this Note shall be subject
to the additional restrictions and provisions of Section 6.1 hereof.
5.13. Repurchase by the Company of Note. In the event that, at any time or
from time to time prior to the Expiration Date, the Initial Holder or any
Affiliate thereof desires to exercise the Conversion Right and is required by
any of the provisions the Hart-Scott, to file a Hart-Scott Form with the United
States Federal Trade Commission and/or the United States Justice Department
prior to the conversion of all or any portion of this Note pursuant to the
Conversion Right; and (ii) such person, with due care and in good faith,
proceeds with such filing (the "Filing") but, within sixty (60) days following
the date on which such person makes a Filing, the Noteholder is prevented or
otherwise restricted by the provision of Hart-Scott and the rules and
regulations thereunder from converting all or any portion of this Note pursuant
to the Conversion Right, then upon written notice thereof from the Noteholder,
the Company shall, within ten (10) business days following the Company's receipt
of such notice, repurchase from the Noteholder the portion of this Note that
such holder was prohibited or otherwise restricted (the "Restricted Portion"),
pursuant to the provisions of Hart-Scott and the rules and regulations
thereunder, from converting, for a price equal to the product of: (x) the number
of shares of Common Stock for which the Restricted Portion of this Note is
convertible but for the provisions of Hart-Scott; and (y) the difference between
the Current Market Price per share of Common Stock as of the date of the Filing
and the current Conversion Price per share of Common Stock as of the date of the
Filing.
5.14. Remedies. The Company stipulates that the remedies at law of the
Noteholder in the event of any default or threatened default by the Company in
the performance of or compliance with any of the terms of this Note are not and
will not
-33-
<PAGE>
be adequate and that, to the fullest extent permitted by law, such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.
5.15. No Rights or Liabilities as Stockholder. Nothing contained in this
Note shall be construed as conferring upon the Noteholder hereof any rights as a
stockholder of the Company or as imposing any obligation on such Noteholder to
purchase any securities or as imposing any liabilities on such Noteholder as a
stockholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Transfer and Exchange. In addition to the provisions of
Section 5.12 hereof, at the option of the Noteholder hereof, this Note may be
transferred or exchanged for other notes of any denomination which is an
integral multiple of $1,000 and of a like aggregate principal amount. Upon
surrender hereof to the Company, the Company shall execute and deliver, in the
name of such Noteholder, or the new transferee or transferees, as the case may
be, one or more new notes, in such authorized denominations as shall be
designated by the Noteholder hereof and dated the most recent date to which
interest has been paid on the surrendered note, or if no interest has been paid,
then dated the date hereof. All notes issued under this Section 6.1 shall be
valid obligations of the Company, evidencing the same indebtedness and entitled
to the same benefits as the note surrendered. Upon presentation for transfer or
exchange, this Note shall be accompanied by an executed form of assignment
satisfactory to the Company. No service charge shall be made for the transfer or
exchange of this Note.
SECTION 6.2. No Waiver; Cumulative Remedies. No failure or delay on the
part of the Noteholder in exercising any right, power or remedy under this Note
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy right, power or remedy
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy under this Note. The remedies provided in this Note are
cumulative and not exclusive of any remedies provided by law.
-34-
<PAGE>
SECTION 6.3. Amendments, Etc. No amendment, modification, termination, or
waiver of any provision of this Note nor consent to any departure by the Company
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Noteholder, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given. No
notice or demand on the Company in any case shall entitle the Company to any
other or further notice or demand in similar or other circumstances.
SECTION 6.4. Addresses for Notices, Etc. All notices, requests, demands,
directions and other communications provided for under this Note shall be in
writing (including telegraphic communication) and mailed or delivered to the
applicable party at the addresses indicated below:
If to the Company:
Advanced Medical, Inc.
9775 Businesspark Avenue
San Diego, California 92131
Attention: President
If to the Noteholder:
Decisions Incorporated
22 Saw Mill River Road
Hawthorne, New York 10532
Attention: President
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party complying as to delivery with the terms
of this Section. All such notices, requests, demands, directions and other
communications shall, when mailed or telegraphed, be effective when deposited in
the mails or delivered to the telegraph company, respectively, addressed as
aforesaid.
SECTION 6.5. Payment on Non-Business Days. Whenever any payment to be made
under this Note shall be stated to be due on a Saturday, Sunday or a public
holiday under the laws of the State of New York or the State of California such
payment may be made on the next succeeding business day, and such extension of
time shall in such case be included in the computation of payment of interest
under this Note.
SECTION 6.6. Binding Effect; Assignment. This Note shall be binding upon
and inure to the benefit of such parties and
-35-
<PAGE>
their respective successors and assigns, except that, the Company shall not have
the right to assign its rights hereunder or any interest or obligation herein
without the prior written consent of the Noteholder.
SECTION 6.7. Governing Law. This Note shall be governed by, and construed
in accordance with, the laws of the State of New York applicable to contracts
made and to be performed wholly within such State.
SECTION 6.8. Severability of Provisions. Subject to the fifth paragraph of
this Note, any provision of this Note which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
SECTION 6.9. Headings. Article and Section headings in this Note are
included herein for convenience of reference only and shall not constitute a
part hereof for any other purpose.
SECTION 6.10 Consent of the Noteholder. Except to the extent specifically
provided herein, to the extent that the consent of the Noteholder is required in
accordance with the terms of this Note, such consent may be withheld in the
Noteholder's sole discretion.
SECTION 6.11. Debentures and Debenture Notes. The Indebtedness hereunder
constitutes "Senior Indebtedness" within the meaning ascribed to such term under
the indentures creating the Debentures and the Debenture Notes.
-36-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be executed by its
proper corporate officer thereunto duly authorized as of the date first above
written.
ADVANCED MEDICAL, INC.
By: /s/ Joseph Kuhn, President
The signature of the undersigned below evidences its agreement to and acceptance
of the provisions of Article II hereof.
DECISIONS INCORPORATED
By: /s/ April Freilich, President
-37-
<PAGE>
EXHIBIT A
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Conversion Right]
To Advanced Medical, Inc.
The undersigned registered Noteholder of the promissory note in the
original principal amount of $6,500,000 issued to Decisions on _______, 1995,
hereby irrevocably exercises the Conversion Right thereof for, and purchases
thereunder * shares of the Common Stock through application of $_____________ of
the principal amount of the Note as purchase price therefor, and requests that
the certificates for such shares be issued in the name of, and delivered to
____________________________ , whose address is __________________
- ----------------------.
Dated:
(Signature must conform in all
respects to name of Noteholder)
(Street Address)
(City) (State) (Zip Code)
- --------
*Insert here the number of shares called for in the first paragraph of Article V
of the Note (or, in the case of a partial exercise, the portion thereof as to
which the Conversion Right is being exercised), in either case without making
any adjustment for Additional Shares of Common Stock or any other stock or other
securities or property or cash which, pursuant to the adjustment provisions of
Article V of the Note, may be delivered upon exercise.
<PAGE>
