UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 11, 2000
SUNRISE TECHNOLOGIES INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-10428 77-1048208
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
3400 West Warren Avenue, Fremont, California 94538
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (510) 623-9001
Not applicable
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(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS
On January 11, 2000, Sunrise Technologies International, Inc. (the
"Company") raised approximately $11.7 million in a private placement of
convertible debentures and related warrants. The debentures bear interest
at 7% per annum for a term of two and a half years, and convert at the
option of the investors at $13.67 per share. The debentures and warrants
were sold pursuant to an exemption from registration under the Securities
Act of 1933, as amended, pursuant to Regulation D promulgated thereunder.
The investors will receive two classes of warrants: A and B. Each
class of warrants are to purchase 25% of the number of shares represented
by the conversion of debentures into common stock at an exercise price
equal to a premium of 15% to the conversion price of the debentures. Class
A warrants have an expiration date of January 11, 2005. Class B warrants
have an expiration date of January 11, 2002 and are callable by the Company
if the stock's closing bid price is above a 25% premium to the exercise
price for 20 consecutive trading days.
On January 13, 2000, the Company issued a press release to report
that the Ophthalmic Devices Panel, an advisory committee of the US Food and
Drug Administration (the "FDA"), had voted to recommend that the FDA
approve the Sunrise Hyperion[trademark] LTK (Laser Thermal Keratoplasty)
System in the United States for treatment of low to moderate hyperopia in
the range of +0.75 to +2.50 diopters with conditions related to labeling
regarding patient symptoms, longevity of effect and the effect of
retreatment.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Not applicable.
(b) Not applicable.
(c) Exhibits:
Exhibit No. Exhibit Description
10.1 Purchase Agreement dated January 11, 2000 between
the Company and The Tail Wind Fund, Ltd., LBI Group Inc., Jeddy Development
Inc., Donald Sanders MD, PhD, Donald Sanders, IRA, CIBC Oppenheimer Corp as
Custodian, Monica Sanders, Kendra Sanders, Wanda Sanders, IRA, CIBC
Oppenheimer Corp as Custodian, Meyer Temkin, and Charles D. Kelman, MD
(collectively, the "Investors").
10.2 Form of 7% Convertible Debenture dated January 11,
2000.
10.3 Form of A Warrant dated January 11, 2000.
10.4 Form of B Warrant dated January 11, 2000.
10.5 Registration Rights Agreement dated January 11,
2000 between the Company and the Investors.
99.1 Press release dated January 11, 2000.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
SUNRISE TECHNOLOGIES INTERNATIONAL, INC.
By: /s/ C. Russell Trenary, III
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C. Russell Trenary, III,
President and Chief Executive Officer
Date: January 13, 2000
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EXHIBIT INDEX
Exhibit Exhibit Description
No.
10.1 Purchase Agreement dated January 11, 2000 between
the Company and The Tail Wind Fund, Ltd., LBI Group Inc., Jeddy Development
Inc., Donald Sanders MD, PhD, Donald Sanders, IRA, CIBC Oppenheimer Corp as
Custodian, Monica Sanders, Kendra Sanders, Wanda Sanders, IRA, CIBC
Oppenheimer Corp as Custodian, Meyer Temkin, and Charles D. Kelman, MD
(collectively, the "Investors").
10.2 Form of 7% Convertible Debenture dated January 11,
2000.
10.3 Form of A Warrant dated January 11, 2000.
10.4 Form of B Warrant dated January 11, 2000.
10.5 Registration Rights Agreement dated January 11,
2000 between the Company and the Investors.
99.1 Press release dated January 11, 2000.
EXHIBIT 10.1
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PURCHASE AGREEMENT
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THIS PURCHASE AGREEMENT ("Agreement") is made as of the 11th
day of January, 2000 by and between Sunrise Technologies International,
Inc., a corporation organized under the laws of Delaware, with headquarters
located at 3400 West Warren Avenue, Fremont, California 94538 (the
"Company"), and the persons listed as investors on the signature page
hereof (collectively, the "Investors").
RECITALS
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A. The Company and the Investors are executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by the provisions of the U.S. Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended;
B. The Investors wish to purchase, and the Company wishes to
sell and issue to the Investors, upon the terms and conditions stated in
this Agreement, an aggregate of up to $13 million in principal amount of
the Company's 7% Convertible Debentures due June 30, 2002 in the form
attached hereto as Exhibit A (the "Debentures") and warrants to acquire
shares of Common Stock; and
C. Contemporaneous with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement, in the form attached hereto as Exhibit B (the
"Registration Rights Agreement"), pursuant to which the Company has agreed
to provide certain registration rights under the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder, and
applicable state securities laws;
In consideration of the mutual promises made herein and for
other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto agree as follows:
1. Definitions. In addition to those terms defined above and
elsewhere in this Agreement, for the purposes of this Agreement, the
following terms shall have the meanings here set forth:
1.1 "Affiliate" means, with respect to any Person, any other
Person which directly or indirectly controls, is controlled by, or is under
common control with, such Person.
1.2 "Agreements" means this Agreement, the Registration
Rights Agreement, the Debentures and the Warrants.
1.3 "A Warrants" means warrants to acquire shares of Common
Stock with an exercise price equal to 115% of the Conversion Price and
exercisable from the date of issuance until the fifth (5th) anniversary
thereafter, in the form attached hereto as Exhibit C-1.
1.4 "B Warrants" means warrants to acquire shares of Common
Stock with an exercise price equal to 115% of the Conversion Price and
exercisable from the date of issuance until the second (2nd) anniversary
thereafter, in the form attached hereto as Exhibit C-2.
1.5 "Closing" means the consummation of the transactions
contemplated by this Agreement, and "Closing Date" means the date of such
Closing.
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1.6 "Common Stock" means the Company's common stock, par
value $.001 per share.
1.7 "Control" means the possession , direct or indirect, of
the power to direct or cause the direction of the management and policies
of a Person, whether through the ownership of voting securities, by
contract or otherwise.
1.8 "Conversion Price" means:
(A) for the period after February 29, 2000, 75% of the
average of the ten (10) lowest Market Prices during the month of February
2000; provided, that such Conversion Price shall not be less than $3.00 or
more than $13.67;
(B) for the period from the tenth (10th) trading day in
February 2000 until the end of February 2000, the Conversion Price shall be
75% of the average of the ten (10) lowest Market Prices during February
2000 up until the applicable conversion date; and
(C) for the period prior to the 10th trading day in
February 2000, the Conversion Price shall be $13.67.
1.9 "Market Price" means the closing bid price of the Common
Stock on a trading day as reported by NASDAQ National Market (the "Nasdaq
Stock Market") or other principal exchange or market on which the Common
Stock is listed.
1.10 "Material Adverse Effect" means a material adverse effect
on the (i) condition (financial or otherwise), business, assets, or
results of operations of the Company and its subsidiaries, taken as a
whole; (ii) ability of the Company to perform any of its material
obligations under the Agreements; or (iii) rights and remedies of any
Investor under the Agreements.
1.11 "Person" means an individual, corporation, partnership,
trust, business trust, association, joint stock company, joint venture,
pool, syndicate, sole proprietorship, unincorporated organization,
governmental authority or any other form of entity not specifically listed
herein.
1.12 "SEC Filings" has the meaning set forth in Section 4.6.
1.13 "Securities" means the Debentures, the Warrants, the
Underlying Shares and the Warrant Shares (defined below).
1.14 "Shares" means the Underlying Shares and Warrant Shares.
1.15 "Underlying Shares" means the shares of Common Stock
issuable upon conversion of, as payment for interest under, or otherwise
pursuant to the Debentures.
1.16 "Warrants" means collectively the A Warrants and B
Warrants.
1.17 "Warrant Shares" means the shares of Common Stock
issuable upon exercise of or otherwise pursuant to the Warrants.
1.18 "1933 Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
1.19 "1934 Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
<PAGE>
2. Purchase and Sale of the Shares and Warrants. Subject to the
terms and conditions of this Agreement, each Investor hereby severally (and
not jointly) agrees to purchase, and the Company hereby agrees to sell and
issue to such Investor:
(a) The principal amount of Debentures set forth on
such Investor's signature page attached hereto (with respect to such
Investor, the "Purchase Price);
(b) A Warrants to purchase such number of shares of
Common Stock equal to 25% of the sum of the Underlying Shares (i) issued
prior to March 1, 2000 and (ii) issuable on March 1, 2000, in each case
upon conversion of the Debentures purchased by such Investor hereunder and
without considering any limitations or restrictions contained in Section
3(i) of the Debentures; and
(c) B Warrants to purchase such number of shares of
Common Stock equal to 25% of the sum of the Underlying Shares (i) issued
prior to March 1, 2000 and (ii) issuable on March 1, 2000, in each case
upon conversion of the Debentures purchased by such Investor hereunder and
without considering any limitations or restrictions contained in Section
3(i) of the Debentures.
The Company agrees that within ten (10) business days after
March 1, 2000, it shall deliver to each Investor (or then holder of
Securities) new Debentures and Warrants in substitution of the Debentures
and Warrants issued on the Closing Date which are identical in all respects
except that the then fixed Conversion Price shall be appropriately
specified in the Debentures, the then fixed exercise price under the
Warrants shall be appropriately specified in the Warrants, and the Warrants
shall specify the fixed number of Warrant Shares into which the Warrants
are then exercisable. Such changes are intended not as amendments to the
Debentures or Warrants but only as clarification of the foregoing numbers
for convenience purposes, and such changes shall not affect any provisions
concerning adjustments to the Conversion Price, exercise price or number of
Warrant Shares contained therein.
The Debentures shall be callable by the Company at any time
after the second anniversary of the issuance date thereof at a price
consisting of (i) cash equal to 130% of the outstanding Principal Amount
and accrued but unpaid interest thereunder, and (ii) additional A Warrants
to purchase such number of shares of Common Stock equal to 30% of the
Underlying Shares which would have been issued or issuable upon conversion
of the portion of the outstanding Principal Amount called. The B Warrants
shall be callable by the Company for $.01 per Warrant Share issuable under
such called B Warrants if the Market Price of the Common Stock is more that
125% of the then applicable exercise price for the B Warrants for twenty
(20) consecutive trading days (the "Pre-Call Period").
Notwithstanding the foregoing, to execute either of the
foregoing call rights, (i) the Company must exercise its rights pro rata
among all Investors; (ii) the Company must give each Investor at least
thirty (30) business days prior written notice of the call date (the period
from the Notice to the call date being referred to as the "Post-Call
Period"); (iii) during the entire Post-Call Period and, in the case of B
Warrants, the entire Pre-Call Period, and in the case of Debentures, the
entire twenty (20) consecutive trading day period immediately preceding the
call notice, the Underlying Shares and Warrant Shares must either be (A)
covered by an effective registration statement under the 1933 Act and a
deliverable prospectus or (B) freely tradeable under Rule 144(k) thereunder
and (iv) the Underlying Shares and Warrant Shares must be listed and traded
on the Nasdaq Stock Market or another acceptable exchange or market.
<PAGE>
3. Closing. The Company shall promptly deliver to Kleinberg,
Kaplan, Wolff & Cohen, P.C. ("KKWC"), on the date hereof, in trust, (i) the
Warrants and Debentures registered in such name or names as the Investors
may designate, representing all of the Warrants and Debentures, and (ii)
payment in full of the fees and expenses referred to in Section 10.5(c)
below, with instructions that such Debentures, Warrants and dollar amounts
are to be held for release only upon payment of the Purchase Price
pertaining thereto to the Company. Upon receipt by KKWC of such
Debentures, Warrants and dollar amounts, such Investor shall promptly cause
wire transfers in same day funds to be sent to the account of the Company
as instructed in writing by the Company, in amounts representing each
Investor's aggregate Purchase Price. On the date the Company receives each
such wire transfer it shall immediately notify KKWC, and the Debentures and
the Warrants pertaining to such wire transfers shall be released to the
applicable Investor(s) and the dollar amounts shall be released to the
payee as contemplated by Sections 10.5 (c) (and the first such date shall
be deemed the "Closing Date"). The portion of the dollar amounts due under
Section 10.5(c) below upon execution hereof shall be paid directly to the
payee herein or, if same is paid to KKWC, may be immediately released to
such payee.
4. Representations and Warranties of the Company. The Company
hereby represents and warrants to each Investor that:
4.1 Organization, Good Standing and Qualification. The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of Delaware and has all requisite power and
authority to carry on its business and own its properties as now conducted
and owned. The Company is duly qualified or licensed to do business as a
foreign corporation and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of property makes
such qualification or licensing necessary unless the failure to so qualify
or be licensed would not have a Material Adverse Effect. Schedule 4.1
lists all subsidiaries of the Company. Except when the context otherwise
requires, representations and warranties in this Section 4 by the Company
shall be deemed to include representations and warranties as to its
subsidiaries as well.
4.2 Authorization. The Company has full power and authority
and has taken all requisite action on the part of the Company, its
officers, directors and stockholders necessary for (i) the authorization,
execution and delivery of the Agreements, (ii) the performance of all
obligations of the Company hereunder or thereunder, and (iii) the
authorization, issuance (or reservation for issuance) and delivery of the
Securities. The Agreements constitute the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance
with their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability,
relating to or affecting creditors' rights generally.
4.3 Capitalization. Set forth on Schedule 4.3 hereto is (a)
the authorized capital stock of the Company on the date hereof; (b) the
number of shares of capital stock issued and outstanding; (c) the number of
shares of capital stock issuable pursuant to the Company's stock plans; and
(d) the number of shares of capital stock issuable and reserved for
issuance pursuant to securities (other than the Shares) exercisable for, or
convertible into or exchangeable for any shares of capital stock. All of
the issued and outstanding shares of the Company's capital stock have been
duly authorized and validly issued and are fully paid, nonassessable and
free of preemptive rights. Except as set forth on Schedule 4.3, no Person
is entitled to preemptive or similar statutory or contractual rights with
respect to any securities of the Company, including the Securities. Except
as set forth on Schedule 4.3, there are no outstanding warrants, options,
convertible securities or other rights, agreements or arrangements of any
character under which the Company is or may be obligated to issue any
equity securities of any kind, or to transfer any equity securities of any
<PAGE>
kind, and except as contemplated by this Agreement, the Company does not
have any present plan or intention to issue any equity securities of any
kind, or to transfer any equity securities of any kind owned by it. Except
as set forth on Schedule 4.3, the Company does not know of any voting
agreements, buy-sell agreements, option or right of first purchase
agreements or other agreements of any kind among any of the securityholders
of the Company relating to the securities held by them. Except as set
forth on Schedule 4.3, the Company has not granted any Person the right to
require the Company to register any securities of the Company under the
1933 Act, whether on a demand basis or in connection with the registration
of securities of the Company for its own account or for the account of any
other Person.
4.4 Valid Issuance. The Company has reserved a sufficient
number of shares of Common Stock for issuance upon conversion of, as
payment for interest on and otherwise pursuant to the Debentures, and upon
exercise of the Warrants. The Company will take such steps as may be
necessary to reserve sufficient additional shares for issuance pursuant to
Section 7 below when such issuance is determinable (if not already
reserved). The Debentures and Warrants are duly authorized, and such
Securities, along with the Underlying Shares and the Warrant Shares when
issued in accordance herewith and with the terms of the Debentures and
Warrants, will be duly authorized, validly issued, fully paid, non-
assessable and free and clear of all encumbrances and restrictions, except
for restrictions on transfer imposed by applicable securities laws.
4.5 Consents. The execution, delivery and performance by the
Company of the Agreements and the offer, issuance and sale of the
Securities require no consent of, action by or in respect of, or filing
with, any Person, governmental body, agency, or official other than
(i) filings that have been made pursuant to applicable state securities
laws and the requirements of the Nasdaq Stock Market and (ii) post-sale
filings pursuant to applicable state and federal securities laws and the
requirements of the Nasdaq Stock Market which the Company undertakes to
file within the applicable time periods.
4.6 Delivery of SEC Filings; Business. The Company has
provided each Investor with copies of the Company's most recent Annual
Report on Form 10K for the fiscal year ended December 31, 1998, and all
other reports filed by the Company pursuant to the 1934 Act since the
filing of the Annual Report on Form 10K (collectively, the "SEC Filings").
The Company is engaged only in the business described in the SEC Filings
and the SEC Filings contain a complete and accurate description of the
business of the Company. The Company has not provided to the Investors (i)
any information required to be filed under the 1934 Act that has not been
so filed or (ii) any non-public information.
4.7 Use of Proceeds. The proceeds of the sale of the
Securities hereunder shall be used by the Company for working capital and
general corporate purposes.
4.8 No Material Adverse Change. Since the filing of the
Company's most recent Annual Report on Form 10K or as otherwise identified
and described in subsequent reports filed by the Company pursuant to the
1934 Act, there has not been:
(i) any change in the consolidated assets, liabilities,
financial condition or operating results of the Company from that reflected
in the financial statements included in the Company's most recent Report on
Form 10Q, except changes in the ordinary course of business which have not
had, in the aggregate, a Material Adverse Effect;
(ii) any declaration or payment of any dividend, or any
authorization or payment of any distribution, on any of the capital stock
of the Company, or any redemption or repurchase of any securities of the
Company;
<PAGE>
(iii) any material damage, destruction or loss, whether
or not covered by insurance to any assets or properties of the Company or
any of its subsidiaries;
(iv) any waiver by the Company of a valuable right or of
a material debt owed to it;
(v) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the
ordinary course of business and which is not material to the assets,
properties, financial condition, operating results or business of the
Company taken as a whole (as such business is presently conducted and as it
is proposed to be conducted);
(vi) any material change or amendment to a material
contract or arrangement by which the Company or any of its assets or
properties is bound or subject;
(vii) any labor difficulties or labor union organizing
activities with respect to employees of the Company;
(viii) any transaction entered into by the Company other
than in the ordinary course of business; or
(ix) any other event or condition of any character that
might have a Material Adverse Effect.
4.9 SEC Filings; Material Contracts.
(a) As of its filing date, each report filed by the
Company with the SEC pursuant to the 1934 Act, complied as to form in all
material respects with the requirements of the 1934 Act and did not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(b) Each registration statement and any amendment
thereto filed by the Company pursuant to the 1933 Act and the rules and
regulations thereunder, as of the date such statement or amendment became
effective, complied as to form in all material respects with the 1933 Act
and did not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; and each prospectus filed pursuant to Rule 424(b)
under the 1933 Act, as of its issue date and as of the closing of any sale
of securities pursuant thereto did not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which
they were made, not misleading.
(c) Except as set forth on Schedule 4.3 hereto, there
are no agreements or instruments currently in force and effect that
constitute a warrant, option, convertible security or other right,
agreement or arrangement of any character under which the Company is or may
be obligated to issue any material amounts of any equity security of any
kind, or to transfer any material amounts of any equity security of any
kind.
4.10 Form S-3 Eligibility.
The Company is currently eligible to register the resale of its
Common Stock on a registration statement on Form S-3 under the 1933 Act.
<PAGE>
4.11 No Conflict, Breach, Violation or Default. (a) The
execution, delivery and performance of the Agreements by the Company and
the issuance and sale of the Securities will not conflict with or result in
a breach or violation of any of the terms and provisions of, or constitute
a default under (i) the Company's Certificate of Incorporation ("Articles")
or Bylaws, each as in effect on the date hereof, or (ii) except where it
would not have a Material Adverse Effect, (a) any statute, rule, regulation
or order of any governmental agency or body or any court, domestic or
foreign, having jurisdiction over the Company or any of its properties, or
(b) any agreement or instrument to which the Company is a party or by which
the Company is bound or to which any of the properties of the Company are
subject.
(b) Except as set forth on Schedule 4.11 hereto, or
where it would not have a Material Adverse Effect, the Company (i) is not
in violation of any statute, rule or regulation applicable to the Company
or its assets, (ii) is not in violation of any judgment, order or decree
applicable to the Company or its assets; and (iii) is not in breach or
violation of any agreement, note or instrument to which it or its assets
are a party or are bound. The Company has not received notice from any
Person of any claim or investigation that, if adversely determined, would
render the preceding sentence untrue or incomplete.
4.12 Tax Matters. The Company has correctly and timely
prepared and filed or timely obtained extensions for, all tax returns
required to have been filed by it with all appropriate governmental
agencies and timely paid all taxes owed by it. The charges, accruals and
reserves on the books of the Company in respect of taxes for all fiscal
periods are adequate in all material respects, and there are no material
unpaid assessments of the Company nor, to the knowledge of the Company, any
basis for the assessment of any additional taxes, penalties or interest for
any fiscal period or audits by any federal, state or local taxing authority
except such as which are not material. All material taxes and other
assessments and levies that the Company is required to withhold or to
collect for payment have been duly withheld and collected and paid to the
proper governmental entity or third party. There are no tax liens or
claims pending or threatened against the Company or any of its assets or
property. There are no outstanding tax sharing agreements or other such
arrangements between the Company and any other corporation or entity.
4.13 Title to Properties. Except as disclosed in the SEC
Filings, the Company has good and marketable title to all real properties
and all other properties and assets owned by it, in each case free from
liens, encumbrances and defects that would materially affect the value
thereof or materially interfere with the use made or currently planned to
be made thereof by them; and except as disclosed in the SEC Filings, the
Company holds any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with
the use made or currently planned to be made thereof by them.
4.14 Certificates, Authorities and Permits. The Company
possesses adequate certificates, authorizations or permits issued by
appropriate governmental agencies or bodies necessary to conduct its
business as presently operated and has not received any written notice of
proceedings relating to the revocation or modification of any such
certificate, authority or permit that, if determined adversely to the
Company, would individually or in the aggregate have a Material Adverse
Effect.
4.15 No Labor Disputes. No labor dispute with the employees
of the Company or any subsidiary exists or, to the knowledge of the
Company, is imminent.
<PAGE>
4.16 Intellectual Property. The Company owns or possesses
adequate trademarks and trade names and have all other rights to
inventions, know-how, patents, copyrights, trademarks, trade names,
confidential information and other intellectual property (collectively,
"Intellectual Property Rights"), free and clear of all liens, security
interests, charges, encumbrances, equities and other adverse claims,
necessary to conduct the business now operated by it, or presently employed
by it, and presently contemplated to be operated by it, and has not
received any notice of infringement of or conflict with asserted rights of
others with respect to any Intellectual Property Rights. Schedule 4.16
sets forth a list by serial number and title of the patents and/or patent
applications owned or possessed by the Company. No proprietary technology
of any Person was used in the design or development by the Company of (or
otherwise with respect to) any of the Intellectual Property Rights, which
technology was not properly acquired by the Company from such Person.
4.17 Environmental Matters. The Company is not in violation
of any statute, rule, regulation, decision or order of any governmental
agency or body or any court, U.S. or foreign, relating to the use, disposal
or release of hazardous or toxic substances or relating to the protection
or restoration of the environment or human exposure to hazardous or toxic
substances (collectively, "Environmental Laws"), does not own or operate
any real property contaminated with any substance that is subject to any
Environmental Laws, is not liable for any off-site disposal or
contamination pursuant to any Environmental Laws, and is not subject to any
claim relating to any Environmental Laws, which violation, contamination,
liability or claim would individually or in the aggregate have a Material
Adverse Effect; and the Company is not aware of any pending investigation
that might lead to such a claim.
4.18 Litigation. Except as disclosed in the SEC Filings,
there are no pending actions, suits or proceedings against or affecting the
Company, or any of its properties that, if determined adversely to the
Company, would individually or in the aggregate have a Material Adverse
Effect or would materially and adversely affect the ability of the Company
to perform its obligations under the Agreements, or which are otherwise
material in the context of the sale of the Securities; and to the Company's
knowledge, no such actions, suits or proceedings are threatened or
contemplated.
4.19 Financial Statements. The financial statements included
in each SEC Filing present fairly and accurately the consolidated financial
position of the Company as of the dates shown and its results of operations
and cash flows for the periods shown, and such financial statements have
been prepared in conformity with generally accepted accounting principles
applied on a consistent basis. Except as set forth on Schedule 4.19 or in
the financial statements of the Company included in the SEC Filings filed
prior to the date hereof, the Company has no liabilities, contingent or
otherwise, except those which individually or in the aggregate are not
material to the financial condition or operating results of the Company.
4.20 Insurance Coverage. The Company maintains in full force
and effect insurance coverage that is customary for comparably situated
companies for the business being conducted, and properties owned or leased,
by the Company, and the Company reasonably believes such insurance coverage
to be adequate against all liabilities, claims and risks against which it
is customary for comparably situated companies to insure.
4.21 Compliance with Nasdaq Continued Listing Requirements.
The Company is in compliance with all applicable Nasdaq continued listing
requirements for the Nasdaq Stock Market. There are no proceedings pending
or, to the Company's knowledge, threatened against the Company relating to
the continued listing of the Company's Common Stock on the Nasdaq Stock
Market and the Company has not received any notice of, nor to the knowledge
of the Company is there any basis for, the delisting of the Common Stock
from the Nasdaq Stock Market.
<PAGE>
4.22 Acknowledgement of Dilution. The number of shares of
Common Stock issuable pursuant to the Debentures and Warrants may increase
significantly. The Company's executive officers and directors have studied
and fully understand the nature of the transactions being contemplated
hereunder and recognize that they have a potential dilutive effect.
4.23 Brokers and Finders. The Investors shall have no
liability or responsibility for the payment of any commission or finder's
fee to any third party in connection with or resulting from this agreement
or the transactions contemplated by this Agreement by virtue of any
agreement made by the Company to a third party, and except as set forth in
Section 10.5 below, the Company shall have no such liability or
responsibility for any such commission or finder's fee.
4.24 No Directed Selling Efforts or General Solicitation.
Neither the Company nor, to its knowledge, any Person acting on its behalf
has conducted any general solicitation or general advertising (as those
terms are used in Regulation D) in connection with the offer or sale of any
of the Securities.
4.25 No Integrated Offering. Neither the Company nor any of
its Affiliates, nor any Person acting on its or their behalf has, directly
or indirectly, made any offers or sales of any security or solicited any
offers to buy any security, under circumstances that would adversely affect
reliance by the Company on Section 4(2) for the exemption from registration
for the transactions contemplated hereby or would require registration of
the Securities under the 1933 Act; or would require the integration of this
offering with any other offering of securities for purposes of determining
the need to obtain shareholder approval of the transactions contemplated
hereby under the rules of the Nasdaq Stock Market.
4.26 Disclosures. No representation or warranty made under
any Section hereof and no information furnished by the Company pursuant
hereto, or in any other document, certificate or statement furnished by the
Company to the Investor or any authorized representative of the Investor,
pursuant to the Agreements or in connection therewith, contains any untrue
statement of a material fact or omits to state a material fact necessary to
make the respective statements contained herein or therein, in light of the
circumstances under which the statements were made, not misleading.
5. Representations and Warranties of the Investors. Each Investor
hereby severally represents and warrants to the Company as to itself only
that:
5.1 Organization and Existence. The Investor is a validly
existing company and has all requisite corporate, partnership or limited
liability company power and authority to invest in the Securities pursuant
to this Agreement.
5.2 Authorization. The execution, delivery and performance
by the Investor of the Agreements have been duly authorized and the
Agreements will each constitute the valid and legally binding obligation of
the Investor, enforceable against the Investor in accordance with their
terms.
5.3 Purchase Entirely for Own Account. The Securities to be
received by the Investor hereunder will be acquired for the Investor's own
account, not as nominee or agent, and not with a view to the resale or
distribution of any part thereof in violation of securities laws, and the
Investor has no present intention of selling, granting any participation
in, or otherwise distributing the same in violation of securities laws.
The Investor is not a registered broker dealer or an entity engaged in the
business of being a broker dealer.
<PAGE>
5.4 Investment Experience. The Investor acknowledges that it
can bear the economic risk and complete loss of its investment in the
Securities and has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the
investment contemplated hereby.
5.5 Disclosure of Information. The Investor has had an
opportunity to receive documents related to the Company and to ask
questions of and receive answers from the Company regarding the Company,
its business and the terms and conditions of the offering of the
Securities. Neither such inquiries nor any other due diligence
investigation conducted by the Investor shall modify, amend or affect the
Investor's right to rely on the Company's representations and warranties
contained in this Agreement or made pursuant to this Agreement.
5.6 Restricted Securities. The Investor understands that the
Securities are characterized as "restricted securities" under the U.S.
federal securities laws inasmuch as they are being acquired from the
Company in a transaction not involving a public offering and that under
such laws and applicable regulations such securities may be resold without
registration under the 1933 Act only in certain limited circumstances.
5.7 Legends. It is understood that, until registration for
resale pursuant to the Registration Rights Agreement or until sales under
Rule 144 are permitted, certificates evidencing the Securities will bear
one or all of the following legends or legends substantially similar
thereto:
"These securities have not been registered under the Securities
Act of 1933, as amended (the "Act"), and may not be offered, sold, pledged,
hypothecated, assigned or transferred except (i) pursuant to a registration
statement under the Act which has become effective and is current with
respect to these securities, or (ii) pursuant to a specific exemption from
registration under the Act but only upon a holder hereof first having
obtained the written opinion of counsel to the Corporation, or other
counsel reasonably acceptable to the Corporation, that the proposed
disposition is consistent with all applicable provisions of the Act."
Upon registration for resale pursuant to the Registration
Rights Agreement, or when sales under Rule 144 are permitted, the Company
shall promptly cause certificates evidencing the Shares previously issued
hereunder to be replaced with certificates which do not bear such
restrictive legends. Upon conversion of the Debentures, exercise of the
Warrants, and payment of interest on the Debentures in Common Stock, the
Company shall promptly cause certificates evidencing the Shares issued
thereunder to be delivered to the holder thereof without any restrictive
legends thereon, so long as such Shares have been registered for resale
under the 1933 Act or sales of such Shares are permitted under Rule 144.
5.8 Accredited Investor. The Investor is an accredited
investor as defined in Rule 501(a) of Regulation D, as amended, under the
1933 Act.
5.9 No General Solicitation. The Investor did not learn of
the investment in the Securities as a result of any public advertising or
general solicitation.
6. Registration Rights Agreement. The parties acknowledge and
agree that part of the inducement for the Investors to enter into this
Agreement is the Company's execution and delivery of the Registration
Rights Agreement. The parties acknowledge and agree that simultaneously
with the execution hereof, the Registration Rights Agreement is being duly
executed and delivered by the parties thereto.
<PAGE>
7. Covenants and Agreements of the Company.
7.1 Subsequent Sale at Lower Price.
(a) Required Adjustments. If during the period ending
on the later of (i) thirty (30) months following the Closing Date or (ii)
twenty-seven (27) months following the effective date of the Registration
Statement contemplated by the Registration Rights Agreement (the "MFN
Period"), the Company sells any shares of its Common Stock at a per share
selling price ("Per Share Selling Price") lower than the Conversion Price
per share set forth in the definition hereof, then (1) the Conversion Price
per share under the Debentures shall be adjusted downward to equal such
lower Per Share Selling Price, and (2) the then exercise price under the
Warrants shall be adjusted downward to equal such lower Per Share Selling
Price, as set forth in the Debentures and Warrants, respectively; provided,
however, that this provision shall not apply to (w) any issuances or sales
of securities pursuant to employee or director option plans of the Company
approved by shareholders or pursuant to contracts currently in effect and
disclosed to Investors, (x) any issuances of securities in connection with
any acquisition, merger or licensing arrangement for products or
intellectual property, (y) any issuances to consultants as reasonable
consideration for services rendered, or (z) any issuances of securities to
liquidate royalty interests, so long as all such issuances under this
clause (z) in the aggregate do not cause a dilution of greater than 5% of
the Investors' equity ownership in the Company during the one year period
following the Closing Date (for clarification purposes, such 5% dilution
provision shall apply only to this clause (z) and shall not affect any
other provisions of this Section 7.1(a)). If such dilution is greater than
5% at any time or from time to time during the one year period following
the Closing Date, then (1) the Conversion Price per share under the
Debentures shall be adjusted downward, and (2) the then exercise price
under the Warrants shall be adjusted downward, to the extent necessary such
that the Investors shall be entitled to receive in the aggregate, upon
conversion and exercise thereof in full, such additional number of shares
of Common Stock as is necessary to eliminate such dilution over 5% without
any additional consideration therefor. For purposes of the preceding
sentence and clause (z) above, any issuances of Common Stock to third
parties shall be deemed to have occurred upon the issuance of "derivative
securities" as set forth in Section 7.1(b)(i) below, and dilution
calculations shall be computed as if all the Debenture and Warrants issued
on the date hereof were already converted and exercised in full and any
"derivative securities" were already converted, exchanged and exercised in
full.
(b) Definitions.
(i) For the purposes of adjustments contained in
the Debentures and Warrants as described in Section 7.1(a) above, the term
"Per Share Selling Price" shall include the amount actually paid by third
parties for each share of Common Stock; in the event a fee is paid by the
Company in connection with the transaction, any such fee shall be deducted
from the selling price pro rata to all shares sold in the transaction to
arrive at the Per Share Selling Price. A sale of shares of Common Stock
shall include the sale or issuance of rights, options, warrants or
convertible securities ("derivative securities") under which the Company is
or may become obligated to issue shares of Common Stock, and in such
circumstances the sale of Common Stock shall be deemed to have occurred at
the time of the issuance of the derivative securities and the Per Share
Selling Price of the Common Stock covered thereby shall also include the
exercise or conversion price thereof (in addition to the consideration per
underlying share of Common Stock received by the Company upon such sale or
<PAGE>
issuance of the derivative security, less the fee amount as provided
above). In case of any such security issued within the MFN Period in a
"Variable Rate Transaction" or an "MFN Transaction" (each as defined
below), the Per Share Selling Price shall be deemed to be the lowest
conversion or exercise price at which such securities are converted or
exercised or might have been converted or exercised in the case of a
Variable Rate Transaction, or the lowest adjustment price in the case of an
MFN Transaction. If shares are issued for a consideration other than cash,
the per share selling price shall be the fair value of such consideration
as determined in good faith by the Board of Directors of the Company.
(ii) The term "Variable Rate Transaction" shall mean a
transaction in which the Company issues or sells (a) any debt or equity
securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock either (x)
at a conversion, exercise or exchange rate or other price that is based
upon and/or varies with the trading prices of or quotations for the Common
Stock at any time after the initial issuance of such debt or equity
securities, or (y) with a fixed conversion, exercise or exchange price that
is subject to being reset at some future date after the initial issuance of
such debt or equity security or upon the occurrence of specified or
contingent events directly or indirectly related to the business of the
Company or the market for the Common Stock (but excluding standard stock
split anti-dilution provisions), or (b) any securities of the Company
pursuant to an "equity line" structure which provides for the sale, from
time to time, of securities of the Company which are registered for resale
pursuant to the 1933 Act.
(iii) The term "MFN Transaction" shall mean a transaction
in which the Company issues or sells any securities in a capital raising
transaction or series of related transactions (the "New Offering") which
grants to an investor (the "New Investor") the right to receive additional
shares (including without limitation as a result of a lower conversion,
exchange or exercise price) based upon subsequent transactions of the
Company on terms more favorable than those granted to such New Investor in
such New Offering.
(iv) The term "MFN Period" shall have the meaning set
forth in Section 7.1(a), above.
7.2 Limitation on Transactions.
(a) Until the date of effectiveness of the registration
statement contemplated by the Registration Rights Agreement, without the
prior written consent of a majority-in-interest of the Investors (which
consent may be withheld in the Investors' discretion), the Company shall
not (i) issue or sell or agree to issue or sell any securities for cash in
a non-public MFN Transaction; or (ii) issue or sell, or agree to issue or
sell, any securities for cash in a non-public Variable Rate Transaction.
(b) During the period after effectiveness of the
registration statement contemplated by the Registration Rights Agreement
and until the expiration of the MFN Period, without the prior written
consent of a majority-in-interest of the Investors (which consent may be
withheld in the Investors' discretion), the Company shall not (i) issue or
sell or agree to issue or sell any securities for cash in a non-public MFN
Transaction; or (ii) issue or sell, or agree to issue or sell, any
securities for cash in a non-public Variable Rate Transactions.
(c) The Company shall not issue any securities in any
transaction that would be integrated with the Securities issued pursuant to
this Agreement for federal or state securities laws purposes or under NASD
or NASDAQ rules or regulations.
<PAGE>
7.3 Right of Investors to Participate in Future Transactions.
(a) The Company agrees that during the MFN Period the
Investors will have a right to participate in future non-public capital
raising transactions as set forth in this Section 7.3. The Company shall
give advance written notice to the Investors prior to any offer or sale of
any of its equity securities or any securities convertible into or
exchangeable or exercisable for such securities in a non-public capital
raising transaction. Prior to the closing of any such transaction, the
Investors shall have the right to participate, on a pro rata basis among
those Investors interested in participating, in up to 33 1/3% of such new
offering (or in the case of a Variable Rate Transaction, up to 75% of such
new offering) and purchase such securities for the same consideration and
on the same terms and conditions as contemplated for such third-party sale.
In order to exercise this right, an Investor must give written notice to
the Company of the Investor's election to participate and such notice must
be given within ten (10) days following receipt of the notice from the
Company. In the event the Company gives notice to the Investors of an
expected transaction pursuant to this Section 7.3 but cannot consummate
such transaction, the Company will give the Investors prompt written notice
of the cancellation of such transaction. If, subsequent to the Company
giving notice to the Investors hereunder, the terms and conditions of the
proposed third-party sale are changed in any way, the Company shall be
required to provide a new notice to the Investors hereunder and the
Investors shall have the right to participate in the offering on such
changed terms and conditions as provided hereunder.
(b) Notwithstanding anything contained in Section
7.3(a) above, such Section 7.3(a) shall not apply if an investment bank,
which has been ranked as one of the top ten firms for dollar value of
equity underwritings for the prior calendar year (as reported by Dow Jones,
Bloomberg or other national financial publication or reporting service), is
providing the capital in such offering and such investment bank reasonably
requires as a condition thereto that such bank be the sole investor (not
acting as agent) in such offering.
(c) The Company agrees that during the MFN Period, if
the Company desires to seek or enter into any non-public capital raising
transaction from time to time, it shall first discuss such potential
transaction with the Investors and offer the Investors the right to provide
such capital in whole or in part prior to seeking capital from other
sources ("Right of First Discussion"). If after any such discussions
and/or offer the terms or conditions of such potential capital raising
transaction shall change in any way, the Right of First Discussion
contained herein shall again apply as if a new potential capital raising
transaction were contemplated. Notwithstanding anything contained in this
Section 7.3(c), this Section 7.3(c) is intended to be in addition to
Section 7.1(a) and shall not in any way affect the Investors' rights or the
Company's obligations under Section 7.3(a).
7.4 Opinion of Counsel. On or prior to the Closing Date, the
Company will deliver to the Investors the opinions of independent legal
counsel to the Company, in form and substance reasonably acceptable to the
Investors, addressing those legal matters set forth in Schedule 7.4 hereto.
7.5 Reservation of Common Stock. The Company hereby agrees,
at all times with respect to shares issuable upon conversion of and
interest payable pursuant to the Debentures and upon exercise of the
Warrants, (including without limitation additional shares issuable
following any adjustment described in Section 7.1 above), to reserve and
keep available out of its authorized but unissued shares of Common Stock,
solely for the purpose of providing for such issuance(s) of Common Stock
upon conversion of and for interest payable pursuant to the Debentures and
upon exercise of the Warrants, such number of shares of Common Stock as
shall from time to time equal the number of shares sufficient to permit the
exercise of the Warrants and conversion of and payment of interest under
the Debentures in full in accordance with the terms of the Warrants and
Debentures.
<PAGE>
7.6 Reports. Within one week of filing the following reports
with the SEC, or in the absence of such filing within the time periods
specified below, the Company shall send a copy of the following reports to
each Investor by regular mail:
(a) Quarterly Reports. As soon as available the
Company's quarter-annual report on Form 10-Q or, in the absence of such
report, consolidated balance sheets of the Company and its subsidiaries as
at the end of such period and the related consolidated statements of
operations, stockholders' equity and cash flows for such period and for the
portion of the Company's fiscal year ended on the last day of such quarter,
all in reasonable detail and certified by a principal financial officer of
the Company to have been prepared in accordance with generally accepted
accounting principles, subject to year-end and audit adjustments.
(b) Annual Reports. As soon as available after the end
of each fiscal year of the Company, the Company's Form 10K or, in the
absence of a Form 10K, consolidated balance sheets of the Company and its
subsidiaries as at the end of such year and the related consolidated
statements of earnings, stockholders' equity and cash flows for such year,
all in reasonable detail and accompanied by the report on such consolidated
financial statements of an independent certified public accountant,
currently PricewaterhouseCoopers LLP, or an equivalent accounting firm as
appointed by the Company's stockholders.
(c) Securities Filings. As promptly as practicable and
in any event within one week after the same are issued or filed, copies of
(i) all notices, proxy statements, financial statements, reports and
documents as the Company or any subsidiary shall send or make available
generally to its stockholders or to financial analysts, and (ii) all
periodic and special reports, documents and registration statements which
the Company or any subsidiary furnishes or files, or any officer or
director of the Company or any of its subsidiaries (in such person's
capacity as such) furnishes or files with the SEC.
(d) Other Information. Such other information relating
to the Company or its subsidiaries as from time to time may reasonably be
requested by any Investor provided the Company produces such information in
its ordinary course of business, and further provided that the Company,
solely in its own discretion, determines that such information is not
confidential in nature and disclosure to the Investors would not be harmful
to the Company.
(e) Rule 144. The Company agrees to make publicly
available on a timely basis the information necessary to enable Rule 144 to
be available for resale.
7.7 Press Releases. Any press release or other publicity
concerning this Agreement or the transactions contemplated by this
Agreement shall be submitted to the Investors for comment at least two (2)
business days prior to issuance, unless the release is required to be
issued within a shorter period of time by law or pursuant to the rules of a
national securities exchange. The Company shall issue a press release
concerning the fact and material terms of this Agreement within one
business day of the Closing.
7.8 No Conflicting Agreements. The Company will not, and
will not permit its subsidiaries to, take any action, enter into any
agreement or make any commitment that would conflict or interfere in any
material respect with the obligations to the Investors under the
Agreements.
<PAGE>
7.9 Insurance. For so long as any Investor beneficially owns
any of the Securities, the Company shall, and shall cause each subsidiary
to, have in full force and effect (a) insurance reasonably believed to be
adequate on all assets and activities of a type customarily insured,
covering property damage and loss of income by fire or other casualty, and
(b) insurance reasonably believed to be adequate protection against all
liabilities, claims and risks against which it is customary for companies
similarly situated as the Company and the subsidiaries to insure.
7.10 Compliance with Laws. For so long as any Investor
beneficially owns any of the Securities, the Company will use reasonable
efforts, and will cause each of its subsidiaries to use reasonable efforts,
to comply with all applicable laws, rules, regulations, orders and decrees
of all governmental authorities, except to the extent non-compliance (in
one instance or in the aggregate) would not have a Material Adverse Effect.
7.11 Listing of Shares and Related Matters. The Company
hereby agrees, promptly following the Closing of the transactions
contemplated by this Agreement, to take such action to cause the Shares to
be listed on the Nasdaq Stock Market as promptly as possible but no later
than the effective date of the registration contemplated by the
Registration Rights Agreement. The Company further agrees that if the
Company applies to have its Common Stock or other securities traded on any
other principal stock exchange or market, it will include in such
application the Common Stock underlying the Debentures and Warrants, and
will take such other action as is necessary to cause such Common Stock to
be so listed. The Company will take all action necessary to continue the
listing and trading of its Common Stock on the Nasdaq Stock Market and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of such exchange, as applicable, to
ensure the continued eligibility for trading of the Shares thereon.
7.12 Corporate Existence. So long as any Investor
beneficially owns any of the Securities, the Company shall maintain its
corporate existence, except in the event of a merger, consolidation or sale
of all or substantially all of the Company's assets, as long as the
surviving or successor entity in such transaction (a) assumes the Company's
obligations hereunder and under the agreements and instruments entered into
in connection herewith, regardless of whether or not the Company would have
had a sufficient number of shares of Common Stock authorized and available
for issuance in order to fulfill its obligations hereunder and effect the
conversion and exercise in full of all Debentures and Warrants outstanding
as of the date of such transaction; (b) has no legal, contractual or other
restrictions on its ability to perform the obligations of the Company
hereunder and under the agreements and instruments entered into in
connection herewith; and (c) (i) is a publicly traded corporation whose
common stock and the shares of capital stock issuable upon conversion and
exercise of the Debentures and Warrants are (or would be upon issuance
thereof) listed for trading on the Nasdaq Stock Market, New York Stock
Exchange or American Stock Exchange, or (ii) if not such a publicly traded
corporation, then the buyer agrees that it will, at the election of the
Investors, purchase such Investors' Securities at a price equal to 120% of
the Purchase Price of such Securities.
8. Survival. All representations, warranties, covenants and
agreements contained in this Agreement shall be deemed to be
representations, warranties, covenants and agreements as of the date hereof
and shall survive the execution and delivery of this Agreement.
<PAGE>
9. Litigation. The parties hereby agree that all actions or
proceedings arising directly or indirectly from or in connection with this
Agreement or the other Agreements shall be litigated only in the Supreme
Court of the State of New York or the United States District Court for the
Southern District of New York located in New York County, New York. The
parties consent to the jurisdiction and venue of the foregoing courts and
consent that any process or notice of motion or other application to either
of said courts or a judge thereof may be served inside or outside the State
of New York or the Southern District of New York by registered mail, return
receipt requested, directed to the party being served at its address set
forth in this Agreement (and service so made shall be deemed complete three
(3) days after the same has been posted as aforesaid) or by personal
service or in such other manner as may be permissible under the rules of
said courts. The Company hereby waives any right to a jury trial in
connection with any litigation pursuant to this Agreement or the other
Agreements.
10. Miscellaneous.
10.1 Successors and Assigns. This Agreement may not be
assigned by a party hereto without the prior written consent of the other
party hereto which consent may not be unreasonably withheld or delayed,
except that without the prior written consent of the Company, but after
notice duly given, an Investor may assign its rights hereunder in whole or
in part to any purchaser of Securities from such Investor or to such
Investor's affiliates. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective permitted
successors and assigns of the parties. Nothing in this Agreement, express
or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
10.2 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
10.3 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered
in construing or interpreting this Agreement.
10.4 Notices. Unless otherwise provided, any notice required
or permitted under this Agreement shall be given in writing and shall be
deemed effectively given only upon delivery to each party to be notified by
(i) personal delivery, (ii) telex or telecopier, upon receipt of the
electronically generated confirmation of delivery, or (iii) a recognized
overnight air courier, addressed to the party to be notified at the address
as follows, or at such other address as such party may designate by ten
days' advance written notice to the other party:
If to the Company:
SUNRISE TECHNOLOGIES INTERNATIONAL, INC.
3400 West Warren Avenue
Fremont, California 94538
Telephone: (510) 623-9001
Telefax: (510) 623-9009
Attention: Mr. Peter E. Jansen
Chief Financial Officer
<PAGE>
with a copy to:
Duane, Morris & Heckscher LLP
227 West Monroe Street, Suite 3400
Chicago, Illinois 60606
Attn: Eric M. Fogel
Telephone: (312) 499-6700
Facsimile: (312) 499-6701
If to the Investors:
To the address listed for such Investor on its signature
page.
with a copy to:
Tail Wind, Inc.
c/o European American Securities, Inc.
One Regent Street, 4th Floor
London SW1Y 4NS
England
Attn: David Crook
Telephone: 44-171-468-7660
Facsimile: 44-171-468-7657
and with a copy to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue
New York, New York 10176
Attn: Stephen M. Schultz
Telephone: (212) 986-6000
Facsimile: (212) 986-8866
10.5 Fees and Expenses.
(a) Except as set forth below, the parties hereto shall
pay their own costs and expenses in connection herewith.
(b) The Investors shall have no liability or
responsibility for the payment of any commission or finder's fee to any
third party in connection with or resulting from this agreement or the
transactions contemplated by this Agreement. A cash fee equal to 4.5% of
the gross proceeds received by the Company hereunder from Investors
procured by Dunwoody will be paid by the Company to Dunwoody Brokerage
Services, Inc. ("Dunwoody") at closing. The company will also issue to
Dunwoody a five-year warrant (the "Dunwoody Warrant") for the purchase of
100,000 shares of Common Stock. The Dunwoody Warrant shall have an
exercise price per share equal to the five-day average closing bid price of
the Company's Common Stock as reported on the Nasdaq National Market over
the five trading days immediately preceding the Closing Date. The shares
of Common Stock underlying the Dunwoody Warrants shall be included in the
definition of "Registrable Securities" under the Registration Rights
Agreement and Dunwoody shall be made a party thereto.
<PAGE>
(c) Tail Wind Inc. shall receive an expense allowance to
cover due diligence expenses and legal expenses, in an amount equal to the
sum of (i) 1% of the aggregate Purchase Price of The Tail Wind Fund, Ltd.,
Jeddy Development Inc. (or other investor in substitution thereof) and LBI
Group Inc. and (ii) 0.5% of the aggregate Purchase Price of all other
Investors. Half of such expense allowance shall be paid by the Company
upon execution hereof and the remainder shall be paid at the Closing.
10.6 Amendments and Waivers. Any term of this Agreement may
be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and a
majority-in-interest of the Investors, provided, however, that (a) any such
amendment or waiver shall not be effective against any Investor not
consenting to same in writing to the extent such Investor's rights or
obligations hereunder are or may be adversely affected thereby, and (b) any
amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any Securities purchased under this Agreement
at the time outstanding, each future holder of all such securities, and the
Company.
10.7 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of this Agreement
shall be interpreted as if such provision were so excluded and shall be
enforceable in accordance with its terms.
10.8 Entire Agreement. This Agreement, including the Exhibits
and Schedules hereto, and the Registration Rights Agreement constitute the
entire agreement among the parties hereof with respect to the subject
matter hereof and thereof and supersede all prior agreements and
understandings, both oral and written, between the parties with respect to
the subject matter hereof and thereof.
10.9 Further Assurances. The parties shall execute and
deliver all such further instruments and documents and take all such other
actions as may reasonably be required to carry out the transactions
contemplated hereby and to evidence the fulfillment of the agreements
herein contained.
10.10 Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York without
regard to principles of conflicts of laws.
10.11 Remedies.
(a) The Investors shall be entitled to specific
performance of the Company's obligations under the Agreements.
(b) Each party shall indemnify the other and hold it
harmless from any loss, cost, expense or fees (including attorneys' fees
and expenses) arising out of any breach of any representation, warranty,
covenant or agreement in any of the Agreements, or arising out of the
enforcement of this Section 10.11
[Signature Page Follows]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
The Company:
-----------
SUNRISE TECHNOLOGIES INTERNATIONAL, INC.
By:_________________________
Name:
Title:
<PAGE>
The Investors:
-------------
THE TAIL WIND FUND, LTD.
By:_________________________
Name:
Title:
Aggregate Purchase Price: $1,500,000
Address for Notices: The Tail Wind Fund, Ltd.
Windermere House
404 East Bay Street
P.O. Box SS-5539
Nassau, Bahamas
Attn: J. McCarroll
Telephone: 242/393-8777
Facsimile: 242/393-9021
with a copy to:
Tail Wind, Inc.
c/o European American Securities, Inc.
One Regent Street, 4th Floor
London SW1Y 4NS
England
Attn: David Crook
Telephone: 44-171-468-7660
Facsimile: 44-171-468-7657
and with a copy to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue
New York, New York 10176
Attn: Stephen M. Schultz
Telephone: (212) 986-6000
Facsimile: (212) 986-8866
<PAGE>
LBI GROUP INC.
By:_________________________
Name: Steven L. Berkenfeld
Title: Senior Vice President
Aggregate Purchase Price: $5,000,000
Address for Notices: LBI Group Inc.
c/o Lehman Brothers, Inc.
3 World Financial Center
New York, NY 10285
Attn: Steven Weinstein
Phone: (212) 526-6957
Fax: (212) 526-2199
with a copy to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue
New York, New York 10176
Attn: Stephen M. Schultz
Telephone: (212) 986-6000
Facsimile: (212) 986-8866
<PAGE>
JEDDY DEVELOPMENT INC.
By:_________________________
Name: Pablo Javier Espino
Title: Director
Aggregate Purchase Price: $2,000,000
Address for Notices: JEDDY DEVELOPMENT INC.
53 Street
Urbanization Obarrio
Republic of Panama
Attn: Pablo Javier Espino
Phone: (212) 692-9577
Fax: 001718-339-7079
with a copy to:
Moe Bodner
551 Fifth Avenue
New York, New York 10176
Telephone: (212) 693-9577
Facsimile: (212) 986-2825
with a copy to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue
New York, New York 10176
Attn: Stephen M. Schultz
Telephone: (212) 986-6000
Facsimile: (212) 986-8866
<PAGE>
The undersigned Investor agrees that he, she or it will permit all
decisions with respect to amendments, waivers and remedies of the Purchase
Agreement, Registration Rights Agreement, Debenture and Warrant to be made
by LBI Group Inc. ("LBI") and The Tail Wind Fund, Ltd. ("Tail Wind"),
provided that no amendment, waiver or remedy shall discriminate to the
detriment of such undersigned but not LBI and Tail Wind. The undersigned
has had the opportunity to consult with separate counsel with respect to
such documents. The undersigned Investor does not make the representation
contained in Section 5.1 hereof.
____________________________
Donald Sanders MD, PhD
Aggregate Purchase Price: $800,000
Address for Notices: DONALD SANDERS MD, PhD
180 W. Park Avenue
Suite 150
Elmhurst, Illinois 60126
Attn: DONALD SANDERS MD, PhD
Phone: (630) 530-9700
Fax: (630) 530-1636
<PAGE>
The undersigned Investor agrees that he, she or it will permit all
decisions with respect to amendments, waivers and remedies of the Purchase
Agreement, Registration Rights Agreement, Debenture and Warrant to be made
by LBI Group Inc. ("LBI") and The Tail Wind Fund, Ltd. ("Tail Wind"),
provided that no amendment, waiver or remedy shall discriminate to the
detriment of such undersigned but not LBI and Tail Wind. The undersigned
has had the opportunity to consult with separate counsel with respect to
such documents. The undersigned Investor does not make the representation
contained in Section 5.1 hereof.
DONALD SANDERS, IRA,
CIBC OPPENHEIMER CORP AS CUSTODIAN
By:_________________________
Name: Donald Sanders MD, PhD
Title: Beneficiary
Aggregate Purchase Price: $700,000
Address for Notices: DONALD SANDERS MD, PhD
180 W. Park Avenue
Suite 150
Elmhurst, Illinois 60126
Attn: DONALD SANDERS MD, PhD
Phone: (630) 530-9700
Fax: (630) 530-1636
<PAGE>
The undersigned Investor agrees that he, she or it will permit all
decisions with respect to amendments, waivers and remedies of the Purchase
Agreement, Registration Rights Agreement, Debenture and Warrant to be made
by LBI Group Inc. ("LBI") and The Tail Wind Fund, Ltd. ("Tail Wind"),
provided that no amendment, waiver or remedy shall discriminate to the
detriment of such undersigned but not LBI and Tail Wind. The undersigned
has had the opportunity to consult with separate counsel with respect to
such documents. The undersigned Investor does not make the representation
contained in Section 5.1 hereof.
MONICA SANDERS
By:_________________________
Name:Donald Sanders MD, PhD,
as guardian for
Monica Sanders
Aggregate Purchase Price: $100,000
Address for Notices: DONALD SANDERS MD, PhD
180 W. Park Avenue
Suite 150
Elmhurst, Illinois 60126
Attn: DONALD SANDERS MD, PhD
Phone: (630) 530-9700
Fax: (630) 530-1636
<PAGE>
The undersigned Investor agrees that he, she or it will permit all
decisions with respect to amendments, waivers and remedies of the Purchase
Agreement, Registration Rights Agreement, Debenture and Warrant to be made
by LBI Group Inc. ("LBI") and The Tail Wind Fund, Ltd. ("Tail Wind"),
provided that no amendment, waiver or remedy shall discriminate to the
detriment of such undersigned but not LBI and Tail Wind. The undersigned
has had the opportunity to consult with separate counsel with respect to
such documents. The undersigned Investor does not make the representation
contained in Section 5.1 hereof.
KENDRA SANDERS
By:_________________________
Name:Donald Sanders MD, PhD,
as guardian for
Kendra Sanders
Aggregate Purchase Price: $100,000
Address for Notices: DONALD SANDERS MD, PhD
180 W. Park Avenue
Suite 150
Elmhurst, Illinois 60126
Attn: DONALD SANDERS MD, PhD
Phone: (630) 530-9700
Fax: (630) 530-1636
<PAGE>
The undersigned Investor agrees that he, she or it will permit all
decisions with respect to amendments, waivers and remedies of the Purchase
Agreement, Registration Rights Agreement, Debenture and Warrant to be made
by LBI Group Inc. ("LBI") and The Tail Wind Fund, Ltd. ("Tail Wind"),
provided that no amendment, waiver or remedy shall discriminate to the
detriment of such undersigned but not LBI and Tail Wind. The undersigned
has had the opportunity to consult with separate counsel with respect to
such documents. The undersigned Investor does not make the representation
contained in Section 5.1 hereof.
WANDA SANDERS, IRA,
CIBC OPPENHEIMER CORP AS CUSTODIAN
By:_________________________
Name: Wanda Sanders
Title: Beneficiary
Aggregate Purchase Price: $300,000
Address for Notices: DONALD SANDERS MD, PhD
180 W. Park Avenue
Suite 150
Elmhurst, Illinois 60126
Attn: DONALD SANDERS MD, PhD
Phone: (630) 530-9700
Fax: (630) 530-1636
<PAGE>
The undersigned Investor agrees that he, she or it will permit all
decisions with respect to amendments, waivers and remedies of the Purchase
Agreement, Registration Rights Agreement, Debenture and Warrant to be made
by LBI Group Inc. ("LBI") and The Tail Wind Fund, Ltd. ("Tail Wind"),
provided that no amendment, waiver or remedy shall discriminate to the
detriment of such undersigned but not LBI and Tail Wind. The undersigned
has had the opportunity to consult with separate counsel with respect to
such documents. The undersigned Investor does not make the representation
contained in Section 5.1 hereof.
____________________________
Meyer Temkin
Aggregate Purchase Price: $200,000
Address for Notices: Meyer Temkin
11 Grace Ave
Great Neck, NY 11021
Attn: Meyer Temkin
Telephone: 516-829-4242
Facsimile: 516-829-3752
with a copy to:
Berger Kaye LLP
270 Madison Avenue
New York, New York 10016
Attn: Darren Berger, Esq.
Telephone: (212) 252-7733
Facsimile: (212) 252-7738
<PAGE>
The undersigned Investor agrees that he, she or it will permit all
decisions with respect to amendments, waivers and remedies of the Purchase
Agreement, Registration Rights Agreement, Debenture and Warrant to be made
by LBI Group Inc. ("LBI") and The Tail Wind Fund, Ltd. ("Tail Wind"),
provided that no amendment, waiver or remedy shall discriminate to the
detriment of such undersigned but not LBI and Tail Wind. The undersigned
has had the opportunity to consult with separate counsel with respect to
such documents. The undersigned Investor does not make the representation
contained in Section 5.1 hereof.
____________________________
Charles D. Kelman, M.D.
Aggregate Purchase Price: $1,000,000
Address for Notices: Charles D. Kelman, M.D.
631 South Ocean Blvd.
Boca Raton, Florida 33432
Attn: Charles D. Kelman, M.D.
Telephone: 561-367-0218
Facsimile: 561-367-1030
with a copy to:
Berger Kaye LLP
270 Madison Avenue
New York, New York 10016
Attn: Darren Berger, Esq.
Telephone: (212) 252-7733
Facsimile: (212) 252-7738
EXHIBIT 10.2
- ------------
Exhibit A
---------
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.
7% CONVERTIBLE DEBENTURE
- ------------------------
January 10, 2000 Original Principal Amount: $___________
FOR VALUE RECEIVED, SUNRISE TECHNOLOGIES INTERNATIONAL, INC., a Delaware
corporation (the "Company"), hereby promises to pay to the order of
[_____________] or its registered assigns ("Holder") the Principal Amount
(as defined in Section 3(a)(i) below), together with all accrued but unpaid
interest thereon, if any, on June 30, 2002 (the "Maturity Date") to the
extent such Principal Amount and interest has not been converted into the
Company's Common Stock, $.001 par value per share (the "Common Stock"), in
accordance with the terms hereof, and to pay interest on the unpaid
principal balance hereof at the rate of 7% per annum from the date hereof
(the "Issuance Date") until the same becomes due and payable on the
Maturity Date, or such earlier date upon acceleration or by conversion or
redemption in accordance with the terms hereof. Interest on this Debenture
shall accrue daily commencing on the Issuance Date and shall be computed on
the basis of a 360-day year, 30-day months and actual days elapsed and
shall be payable in accordance with Section 3(a)(ii) hereof.
Notwithstanding anything contained herein, this Debenture shall bear
interest from and after the occurrence and during the continuance of a
default pursuant to Section 5(a), at the rate equal to the lower of fifteen
percent (15%) per annum or the highest rate permitted by law. Unless
otherwise agreed or required by applicable law, payments will be applied
first to any unpaid collection costs, then to unpaid interest and fees and
any remaining amount to principal.
All payments of principal and interest on this Debenture (to the
extent such principal and/or interest is not converted into Common Stock or
interest is not paid in Common Stock in accordance with the terms hereof)
shall be made in lawful money of the United States of America by wire
transfer of immediately available funds to such account as the Holder may
from time to time designate by written notice in accordance with the
provisions of this Debenture or by Company check. Whenever any amount
expressed to be due by the terms of this Debenture is due on any day which
is not a Business Day (as defined below), the same shall instead be due on
the next succeeding day which is a Business Day. For purposes of this
Debenture, "Business Day" shall mean any day other than a Saturday, Sunday
or a day on which commercial banks in the City of New York are authorized
or required by law or executive order to remain closed. Each capitalized
term used herein, and not otherwise defined, shall have the meaning
ascribed thereto in the Purchase Agreement dated on or about the Issuance
Date pursuant to which this Debenture was originally issued (the "Purchase
Agreement"). This Debenture and the other convertible debentures issued by
the Company on or about the Issuance Date pursuant to the Purchase
Agreement are collectively referred to in this Debenture as the
"Debentures."
<PAGE>
The following terms and conditions shall apply to this Debenture:
Section 1. Interest. The Company shall pay the interest
hereunder quarterly in arrears on each April 1, July 1, October 1 and
January 1 (except that interest accrued through January 1, 2000 shall be
paid on April 1, 2000) either in cash or in shares of Common Stock at the
Company's option. Accrued but unpaid interest on any portion of the
Principal Amount which is redeemed or repurchased hereunder shall be paid
in cash concurrently with such redemption or repurchase. If the Company
elects to pay interest hereunder in shares of Common Stock, the number of
such shares to be issued on such payment date shall be the number
determined by dividing (x) the dollar amount of interest due, by (y) the
lower of the Conversion Price or 75% of the average of the ten (10) lowest
Market Prices during the full calendar month immediately preceding the date
of issuance of such shares. Such shares shall be issued and delivered on
the interest payment due date and shall be duly authorized, validly issued,
fully paid, non-assessable and free and clear of all encumbrances,
restrictions and legends.
Notwithstanding anything to the contrary contained herein, the
Company may not pay interest in shares of Common Stock (and must deliver
cash in respect thereof) on the Debentures if:
(1) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes, or held as treasury
stock, is insufficient to issue such interest upon conversion of all
Debentures;
(2) such shares are not registered for resale pursuant
to an effective registration statement and covered by a current related
prospectus, the use of which has not been suspended, that names the
recipient of such dividend as a selling stockholder thereunder and may not
be sold without restrictions pursuant to Rule 144 promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), as determined by
counsel to the Company pursuant to a written opinion letter, addressed to
the Company's transfer agent, in the form and substance reasonably
acceptable to the holder;
(3) such shares are not listed on the Nasdaq National
Market, The Nasdaq SmallCap Market, the New York Stock Exchange, the
American Stock Exchange or any other national exchange or quotation system
on which the Common Stock is then listed for trading; or
(4) the Company shall have failed to pay any cash
interest payments when due (unless waived by holders of 75% in outstanding
principal amount of the Debentures).
Section 2. No Senior Debt. So long as any principal amount of
Debentures is outstanding, the Company and its subsidiaries shall not,
without the affirmative vote of the holders of at least 75% of the
principal amount of the Debentures then outstanding, incur any additional
indebtedness which is senior to the Debentures, except for capital leases
and financing for operating equipment and for working capital facilities
from commercial banks up to the greater of $15 million or 25% of revenues,
provided that such limitation shall not apply to financing for acquisitions
of companies or assets or licenses of products, patents or other
intellectual property.
Section 3. Conversion. The Holder shall have the right, at
the Holder's option, to convert this Debenture into shares of Common Stock
on the following terms and conditions:
<PAGE>
(a) Any part of the Principal Amount (as defined below) of
this Debenture shall be convertible into shares of Common Stock (subject to
reduction pursuant to Section 3(i) below) at the Conversion Ratio at the
option of the Holder in whole or in part at any time following the Issuance
Date up to and including the day that all of the Principal Amount and
interest accrued but unpaid thereon, if any, are paid in full. The Holder
shall effect conversions by delivering to the Company a fully executed
notice of conversion in the form of conversion notice attached hereto as
Exhibit A (the "Conversion Notice"), which may be transmitted by facsimile.
Each Conversion Notice shall specify the outstanding Principal Amount of
this Debenture to be converted and the date on which such conversion is to
be effected, which date may not be prior to the date such Conversion Notice
is received by the Company hereunder (the "Conversion Date"). If no
Conversion Date is specified in a Conversion Notice, the Conversion Date
shall be the date that the Conversion Notice is deemed delivered pursuant
to Section 3(h) hereof. The Holder shall surrender this Debenture to the
Company with or promptly following the delivery of a Conversion Notice. If
the Holder is converting less than all of the outstanding Principal Amount
hereunder, or if a conversion hereunder cannot be effected in full for any
reason, the Company shall promptly deliver to the Holder (in the manner and
within the time set forth in Section 3(b) hereof) a Debenture for such
Principal Amount as has not been converted. As used herein, "Principal
Amount" shall refer to the sum of (i) the original principal amount of this
Debenture, and (ii) all accrued but unpaid interest payments hereunder.
(b) Not later than three (3) Trading Days after the
Conversion Date, the Company will deliver to the Holder (i) a certificate
or certificates which shall be free of restrictive legends and trading
restrictions representing the number of shares of Common Stock being
acquired upon the conversion of this Debenture (unless such securities are
neither registered under the Securities Act or tradeable pursuant to Rule
144 thereunder), and (ii) a Debenture representing the remaining Principal
Amount of this Debenture not converted, if any. In lieu of delivering
physical certificates representing the shares of Common Stock issuable upon
conversion of this Debenture, provided the Company's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer ("FAST") program, upon request of the Holder, the
Company shall use its best efforts to cause its transfer agent to
electronically transmit such shares issuable upon conversion to the Holder
(or its designee), by crediting the account of the Holder's (or such
designee's) prime broker with DTC through its Deposit Withdrawal Agent
Commission system. If in the case of any Conversion Notice, such
certificate or certificates are not delivered to or as directed by the
Holder by the third Trading Day after the Conversion Date, the Holder shall
be entitled by written notice to the Company at any time on or before its
receipt of such certificate or certificates thereafter, to rescind such
conversion, in which event the Company shall immediately return this
Debenture tendered for conversion. If the Company fails to deliver to the
Holder such certificate or certificates pursuant to this Section 3(b), or
fails to delivery certificate or certificates for shares of Common Stock
being issued in payment of interest hereunder in accordance herewith, prior
to the fifth Trading Day after the Conversion Date or the interest payment
due date, as the case may be, the Company shall pay to the Holder, in cash,
an amount equal to 2% of the Principal Amount per month payable ratably in
Common Stock or cash, at the Holder's election; provided, however, that
such 2% amount shall not be payable (1) unless and until the Holder
provides the Company or its transfer agent with all accurate information
completed on the Conversion Notice, and (2) if such failure is due solely
to an event of "force majeure", where "force majeure" means circumstances
beyond the reasonable control of both the Company and its transfer agent
including acts of God, war, national emergency, labor strikes, fire or
flood (but not including inadequate staffing of workloads unless as a
result of a strike).
<PAGE>
(c) (i) The Conversion Price applicable to conversions of
the Principal Amount of this Debenture into Common Stock hereunder shall be
subject to adjustment as provided herein and in the Purchase Agreement.
(ii) If the Company, at any time while any Principal
Amount of this Debenture is outstanding, (a) shall pay a stock dividend or
otherwise make a distribution or distributions on shares of its Junior
Securities payable in shares of Common Stock, (b) subdivide outstanding
shares of Common Stock into a larger number of shares, (c) combine
outstanding shares of Common Stock into a smaller number of shares, or (d)
issue by reclassification of shares of Common Stock any shares of capital
stock of the Company, the Conversion Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding before such event and
of which the denominator shall be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to this Section
3(c)(ii) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective
date in the case of a subdivision, combination or re-classification.
(iii) If the Company, at any time while any Principal
Amount of this Debenture is outstanding, shall distribute to all holders of
Common Stock evidences of its indebtedness or assets or rights or warrants
to subscribe for or purchase any security (excluding those referred to in
Section 3(c)(ii) above), then in each such case the Conversion Price shall
be determined by multiplying the Conversion Price in effect immediately
prior to the record date fixed for determination of stockholders entitled
to receive such distribution by a fraction of which the denominator shall
be the Market Price of Common Stock determined as of the record date
mentioned above, and of which the numerator shall be such Market Price of
the Common Stock on such record date less the then fair market value at
such record date of the portion of such assets or evidence of indebtedness
so distributed applicable to one outstanding share of Common Stock as
determined by the Company's Board of Directors in good faith; provided,
however, that if the holders of a majority of the outstanding principal of
the Debentures dispute such amount, such holders may select a nationally
recognized or major regional investment banking firm or firm of independent
certified public accountants of recognized standing (an "Appraiser") paid
for by the holders of the outstanding principal of the Debentures then
outstanding, in which case the fair market value shall be equal to the
average of the determinations by the Company's Board of Directors and such
Appraiser. In either case the adjustments shall be described in a
statement provided to the holders of the Debentures of the portion of
assets or evidences of indebtedness so distributed or such subscription
rights applicable to one share of Common Stock. Such adjustment shall be
made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
(iv) All calculations under this Section 3 shall be made
to the nearest cent or the nearest 1/100th of a share, as the case may be.
(v) Whenever the Conversion Price is adjusted pursuant
to Section 3(c)(ii) or (iii) above, the Company shall promptly mail to each
holder of the Debentures, a notice setting forth the Conversion Price after
such adjustment and setting forth a brief statement of the facts requiring
such adjustment.
<PAGE>
(vi) In case of (i) an acquisition after the date hereof
by an individual, legal entity or "group" within the meaning of Section
13(d) under the Exchange Act of voting securities of the Company pursuant
to which, after giving effect to such acquisition, such individual, legal
entity or group will beneficially own in excess of 50% of the issued and
outstanding voting securities of the Company, (ii) a replacement of more
than one-half of the members of the Company's Board of Directors which is
not approved by those individuals who are members of the Company's Board of
Directors on the date thereof in one or a series of related transactions,
(iii) the merger of the Company with or into another entity, consolidation
or sale, transfer or disposition of all or substantially all of the assets
of the Company in one or a series of transactions or (iv) the execution by
the Company of an agreement to which the Company is a party or which it is
bound providing for an event set forth in (i), (ii) or (iii) above,
pursuant to which the Common Stock is converted into other securities, cash
or property (each, a "Business Combination"), the Holder shall have the
right thereafter to, at its option, (A) convert this Debenture, in whole or
in part, only into the shares of stock and other securities, cash and/or
property receivable upon or deemed to be held by holders of Common Stock
following such Business Combination, and the Holder shall be entitled upon
such event to receive such amount of securities, cash or property as the
shares of the Common Stock of the Company into which this Debenture could
have been converted immediately prior to such Business Combination would
have been entitled, subject to such further applicable adjustments set
forth in this Section 3 or (B) require the Company to redeem this
Debenture, in whole or in part, at a redemption price equal to the greater
of (i) the outstanding Principal Amount being redeemed plus any accrued and
unpaid cash interest thereon and (ii) the product of (x) the average of the
Market Price for the five (5) Trading Days immediately preceding the
Holder's election to have its Debentures redeemed and (y) the Conversion
Ratio; provided, however, that the redemption right contained in clause (B)
above shall only apply if any such Business Combination occurs without the
consent of the then incumbent Board of Directors of the Company or if any
such Business Combination occurs in connection with a transaction or series
of transactions in which the Company's Common Stock is issued, sold or
transferred at effectively a Per Share Selling Price less than the Market
Price at the time of such Business Combination, provided in each case any
securities issuable upon conversion hereof in accordance with this Section
following the Business Combination shall at all times be (A) covered by an
effective registration statement under the Securities Act and a deliverable
prospectus or freely tradeable under Rule 144(k) thereunder, and (B) listed
and traded on the Nasdaq Stock Market or another acceptable exchange or
market. The terms of any such Business Combination shall include such
terms so as to continue to give to the Holders the right to receive the
amount of securities, cash and/or property upon any conversion or
redemption following such Business Combination to which a holder of the
number of shares of Common Stock deliverable upon such conversion would
have been entitled in such Business Combination, and interest payable
hereunder shall be in cash or such new securities and/or property, at the
Holder's option. This provision shall similarly apply to successive
reclassifications, consolidations, mergers, sales, transfers or share
exchanges.
(vii)If:
A. the Company shall declare a dividend (or any
other distribution) on its Common Stock; or
B. the Company shall declare a special
nonrecurring cash dividend on or a redemption of its Common Stock; or
C. the Company shall authorize the granting to
all holders of the Common Stock rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights; or
<PAGE>
D. the approval of any stockholders of the
Company shall be required in connection with any reclassification of the
Common Stock of the Company, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, of any compulsory share of exchange whereby the
Common Stock is converted into other securities, cash or property; or
E. the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the affairs of the
Company.
then the Company shall cause to be filed at each office or agency
maintained for the purpose of conversion of this Debenture, and shall cause
to be mailed to the Holder at its last address as it shall appear upon the
books of the Company, on or prior to the date notice to the Company's
stockholders generally is given, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided, however,
that the failure to mail such notice or any defect therein or in the
mailing thereof shall not affect the validity of the corporate action
required to be specified in such notice.
(d) The Company covenants that it will at all times reserve
and keep available out of its authorized and unissued Common Stock solely
for the purpose of issuance upon conversion of this Debenture, free from
preemptive rights or any other actual contingent purchase rights of persons
other than the holders of the Debentures, not less than such number of
shares of Common Stock as shall (subject to any additional requirements of
the Company as to reservation of such shares set forth in the Purchase
Agreement) be issuable (taking into account the adjustments and
restrictions of this Section 3) upon the conversion of this Debenture
hereunder. The Company covenants that all shares of Common Stock that
shall be so issuable shall, upon issue, be duly authorized, validly issued,
fully paid, nonassessable and freely tradeable.
(e) Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares of
Common Stock, but may if otherwise permitted, make a cash payment in
respect of any final fraction of a share based on the Market Price at such
time. If the Company elects not, or is unable, to make such a cash
payment, the Holder shall be entitled to receive, in lieu of the final
fraction of a share, one whole share of Common Stock.
(f) The issuance of certificates for shares of Common Stock
on conversion of this Debenture or in payment of interest hereunder shall
be made without charge to the Holder for any documentary stamp or similar
taxes that may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate in a name other than that of
the Holder and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
<PAGE>
(g) After all of the Principal Amount and accrued but unpaid
interest at any time owed on this Debenture have been paid in full or
converted into Common Stock, this Debenture shall automatically be deemed
be canceled.
(h) Any and all notices or other communications or deliveries
to be provided by the Holder hereunder, including, without limitation, any
Conversion Notice, shall be in writing and delivered personally, by
facsimile, or by a nationally recognized overnight courier service to the
Company at the facsimile telephone number or address of the principal place
of business of the Company as set forth in the Purchase Agreement. Any and
all notices or other communications or deliveries to be provided by the
Company hereunder shall be in writing and delivered personally, by
facsimile, or by a nationally recognized overnight courier service
addressed to the Holder at the facsimile telephone number or address of the
Holder appearing on the books of the Company, or if no such facsimile
telephone number or address appears, at the principal place of business of
the Holder. Any notice or other communication or deliveries hereunder
shall be deemed delivered (i) upon receipt, when delivered personally, (ii)
when sent by facsimile, upon receipt if received on a Business Day prior to
5:00 p.m. (Eastern Time), or on the first Business Day following such
receipt if received on a Business Day after 5:00 p.m. (Eastern Time) or
(iii) upon receipt, when deposited with a nationally recognized overnight
courier service.
(i) (A) Notwithstanding anything to the contrary contained
herein, the number of shares of Common Stock that may be acquired by the
holder upon conversion pursuant to the terms hereof shall not exceed a
number that, when added to the total number of shares of Common Stock
deemed beneficially owned by such holder (other than by virtue of the
ownership of securities or rights to acquire securities that have
limitations on the Holder's right to convert, exercise or purchase similar
to the limitation set forth herein), together with all shares of Common
Stock deemed beneficially owned by the holder's "affiliates" (as defined in
Rule 144 of the Securities Act) that would be aggregated for purposes of
determining whether a group under Section 13(d) of the Securities Exchange
Act of 1934, as amended, exists, would exceed 9.99% of the total issued and
outstanding shares of the Company's Common Stock (the "Restricted Ownership
Percentage"); provided that (w) the holder hereof shall have the right at
any time and from time to time to reduce its Restricted Ownership
Percentage immediately upon notice to the Company and (x) each holder shall
have the right at any time and from time to time, to increase its
Restricted Ownership Percentage immediately (subject to waiver) in the
event of a pending or announced change of control transaction (including
without limitation a transaction that would result in a transfer of more
than 50% of the Company's voting power or equity, or a transaction that
would result in a person or "group" being deemed the beneficial owner of
50% or more of the Company's voting power or equity).
(B) Each time (a "Covenant Time") the holder makes a
Triggering Acquisition (as defined below) of shares of Common Stock (the
"Triggering Shares") pursuant to this Debenture, the holder will be deemed
to covenant that it will not, during the balance of the day on which such
Triggering Acquisition occurs, and during the 61-day period beginning
immediately after that day, acquire additional shares of Common Stock
pursuant to Debentures existing at that Covenant Time, if the aggregate
amount of such additional shares so acquired (without reducing that amount
by any dispositions) would exceed (x) 9.99% of the number of shares of
Common Stock outstanding at that Covenant Time (including the Triggering
Shares) minus (y) the number of shares of Common Stock actually owned by
the Holder at that Covenant Time (regardless of how or when acquired, and
including the Triggering Shares). "Triggering Acquisition" means the
exercise of this Debenture by the holder; provided, however, that with
respect to the exercise of this Debenture, if the associated issuance of
shares of Common Stock does not occur, such event shall cease to be a
Triggering Acquisition and the related covenant under this paragraph shall
<PAGE>
terminate. At each Covenant Time, the Holder shall be deemed to waive any
right it would otherwise have to acquire shares of Common Stock to the
extent that such acquisition would violate any covenant given by the Holder
under this paragraph.
(x) The covenant to be given pursuant to this paragraph
will be given at every Covenant Time and shall be calculated based on the
circumstances then in effect. The making of a covenant at one Covenant
Time shall not terminate or modify any prior covenants.
The Holder may therefore from time to time be subject to multiple
such covenants, each one having been made at a different Covenant Time, and
some possibly being more restrictive than others. The Holder must comply
with all such covenants then in effect.
(C) Notwithstanding anything contained herein, in no
event shall the Company issue shares of Common Stock hereunder to the
extent that the total number of shares issued or deemed issued to the
Investors under the Purchase Agreement (when added to the Underlying Shares
and Warrant Shares) would exceed 19.9% of the Company's issued and
outstanding shares of Common Stock on the date of the Purchase Agreement.
Instead, the Company shall redeem Debentures at 120% of the Purchase Price
in the aggregate principal amount necessary to place the Investors in the
same economic position they would have been if not for such limitation.
Only shares acquired pursuant to the Purchase Agreement, Debentures and
Warrants will be included in determining whether the limitations would be
exceeded for purposes of this paragraph.
(j) Notwithstanding and in addition to anything contained
herein, if during the MFN Period (as defined in Section 7.1 of the Purchase
Agreement), the Company sells any shares of its Common Stock at a Per Share
Selling Price (as defined in Section 7.1 of the Purchase Agreement) lower
than the Conversion Price per share, then the Conversion Price per share
under this Debenture shall be adjusted downward to equal such lower Per
Share Selling Price, regardless of whether such adjusted Conversion Price
falls below the $3.00 floor set forth in the definition of "Conversion
Price" in the Purchase Agreement. The Company shall give to the Holder
written notice of any such sale within 72 hours of the closing of any such
sale. If an adjustment ("Adjustment") of the Conversion Price is required
as provided herein or in the Purchase Agreement, the Company shall deliver
to the Holder within eight calendar days of the closing of the transaction
giving rise to the Adjustment ("Delivery Date") a notice ("Adjustment
Notice") stating that such Conversion Price has been automatically adjusted
as of the Delivery Date, and such notice shall constitute an amendment to
this Debenture. In the event the Company fails to deliver the Adjustment
Notice by the applicable Delivery Date, such failure to notify shall not
affect automatic adjustment of the Conversion Price. This Section 3(j)
shall not apply to (i) sales of shares of Common Stock by the Company upon
conversion or exercise of any convertible securities, options or warrants
outstanding prior to the date hereof; or (ii) sales of shares of Common
Stock by the Company pursuant to the provisions of any shareholder-approved
option or similar plan heretofore adopted by the Company. This provision
shall similarly apply to successive sales of shares of Common Stock by the
Company and shall not affect the other Conversion Price adjustments
contained herein.
<PAGE>
Section 4. Redemption. (a) The Company shall have the right,
exercisable at any time upon thirty (30) business days' prior written
notice ("Redemption Notice") to the holders of the Debentures given at any
time on or after the second anniversary of the Issuance Date (the period
from the Redemption Notice until Holder's receipt of the Redemption Price
being referred to as the "Post-Call Period"), to redeem all or any portion
of this Debenture which has not previously been converted or redeemed, at a
redemption price ("Redemption Price") consisting of (i) cash equal to 130%
of the outstanding Principal Amount hereunder (including without limitation
accrued and unpaid interest thereon), and (ii) A Warrants to purchase such
number of shares of Common Stock equal to 30% of the Underlying Shares
which would have been issued or issuable upon conversion of the portion of
the outstanding Principal Amount hereunder being redeemed, provided that
such new A Warrants shall expire five (5) years from their issuance date
and have an exercise price equal to the then applicable "Warrant Price"
under the A Warrants (and shall be subject to further adjustment as
provided in the A Warrants). The entire Redemption Price shall be paid and
issued on the Redemption Date (as defined below). The Holder may convert
this Debenture in whole or in part, including any portion subject to a
Redemption Notice, during the Post-Call Period, and the Company shall honor
all Conversion Notices delivered during such period. Any Redemption Notice
under this Section 4(a) shall indicate the Principal Amount of Debentures
to be redeemed and the date (subject to the terms hereof) on which such
redemption is to occur ("Redemption Date"). If the Company intends to
redeem less than all of the then outstanding Debentures issued under the
Purchase Agreement, it shall do so on a pro rata basis among such holders
in accordance with this Section 4(a). If any portion of the applicable
Redemption Price under this Section shall not be paid by the Company within
seven (7) days after the Redemption Date, interest shall accrue thereon
(valuing the A Warrants portion of the Redemption Price at the Market Price
multiplied by the applicable number of underlying Warrant Shares) at the
rate of 15% per annum until the Redemption Price plus all such interest is
paid in full (which amount shall be paid as liquidated damages and not as a
penalty). In addition, if any portion of such Redemption Price remains
unpaid for more than seven (7) days after the Redemption Date, the Holder
may elect to invalidate ab initio such redemption, notwithstanding anything
herein contained to the contrary, and the Company shall be prohibited from
exercising such redemption right pursuant to this Section 4(a) again.
(b) Notwithstanding anything to the contrary herein,
the Company shall be prohibited from exercising its right to redeem this
Debenture unless during the entire Post-Call Period and the entire twenty
(20) consecutive Trading Day period immediately preceding the Redemption
Notice (i) all the Underlying Shares with respect to this Debenture are
either (A) covered by an effective registration statement under the
Securities Act and a deliverable prospectus or (B) freely tradeable under
Rule 144(k) thereunder, and (ii) the Underlying Shares with respect to this
Debenture are listed and traded on the Nasdaq Stock Market.
Section 5. Defaults and Remedies.
(a) Events of Default. An "Event of Default" is: (i)
default in payment of the Principal Amount or accrued but unpaid interest
thereon of any of the Debentures on or after the date such payment is due
(to the extent such principal and/or amount has not been converted into
Common Stock in accordance with the terms hereof) which default continues
for three (3) days after notice of such non-payment; (ii) any principal
payment under the Debentures shall have been accelerated, (iii) failure by
the Company for thirty (30) days after written notice to it to comply with
any material provision of any of the Debentures, the Purchase Agreement,
the Registration Rights Agreement or the Warrants (including without
limitation the failure to issue the requisite number of shares of Common
Stock upon conversion hereof and the failure to redeem Debentures upon the
<PAGE>
Holder's request following a Business Combination pursuant to Section
3(c)(vi)); (iv) a material breach by the Company of its representations or
warranties in the Purchase Agreement or Registration Rights Agreement; (v)
any default after any cure period under, or acceleration prior to maturity
of, any mortgage, indenture or instrument under which there may be issued
or by which there may be secured or evidenced any indebtedness for money
borrowed by the Company or for money borrowed the repayment of which is
guaranteed by the Company, whether such indebtedness or guarantee now
exists or shall be created hereafter; (vi) if the Company pursuant to or
within the meaning of any Bankruptcy Law (A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in an
involuntary case, (C) consents to the appointment of a Custodian of it or
for all or substantially all of its property; (D) makes a general
assignment for the benefit of its creditors; or (E) admits in writing that
it is generally unable to pay its debts as the same become due; or (vii) a
court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that (1) is for relief against the Company in an involuntary
case, (2) appoints a Custodian of the Company or for all or substantially
all of its property, or (3) orders the liquidation of the Company or any
subsidiary. The Term "Bankruptcy Law" means Title 11, U.S. Code, or any
similar federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
(b) Remedies. If an Event of Default occurs and is
continuing with respect to any of the Debentures, the Holder may declare
all of the then outstanding Principal Amount of this Debenture and all
other Debentures held by the Holder, including any interest due thereon, to
be due and payable immediately, except that in the case of an Event of
Default arising from events described in clauses (vi) and (vii) of Section
5(a), this Debenture shall become due and payable without further action or
notice. In the event of such acceleration, the amount due and owing to the
Holder shall be the greater of (1) the outstanding Principal Amount of the
Debentures held by the Holder (plus all accrued and unpaid interest, if
any) and (2) the product of (A) the product of the average of Market Price
for the five (5) Trading days immediately preceding the Holder's
acceleration and (B) the Conversion Ratio. In either case the Company
shall pay interest on such amount in cash at a rate of 15% per annum to the
Holder if such amount is not paid within 7 days of Holder's request. The
remedies under this Debenture shall be cumulative.
Section 6. Definitions. For the purposes hereof, the
following terms shall have the following meanings:
"Conversion Ratio" means, at any time, a fraction, of which the
numerator is the Principal Amount of this Debenture (and any accrued but
unpaid interest thereon, if any) to be converted in such conversion, and of
which the denominator is the Conversion Price at such time.
"Junior Securities" means the Company's capital stock and all
other equity securities and all debt securities of the Company which are
junior in rights and liquidation preference to the Debentures.
"Person" means a corporation, an association, a partnership, a
limited liability company, an organization, a business, an individual, a
government or political subdivision thereof or a governmental agency.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of the Purchase Agreement, between the
Company and the original holders of the Debentures.
"Trading Day" means a day on which the Common Stock is traded
on the Nasdaq National Market or other stock exchange or market on which
the Common Stock has been listed.
<PAGE>
"Underlying Shares" means the shares of Common Stock into which
the Debentures are convertible in accordance with the terms hereof and the
Purchase Agreement.
Section 7. General
(a) Payment of Expenses. The Company agrees to pay all
reasonable charges and expenses, including attorneys' fees and expenses,
which may be incurred by the Holder in successfully enforcing this
Debenture and/or collecting any amount due under this Debenture.
(b) Savings Clause. In case any provision of this Debenture
is held by a court of competent jurisdiction to be excessive in scope or
otherwise invalid or unenforceable, such provision shall be adjusted rather
than voided, if possible, so that it is enforceable to the maximum extent
possible, and the validity and enforceability of the remaining provisions
of this Debenture will not in any way be affected or impaired thereby. In
no event shall the amount of interest paid hereunder exceed the maximum
rate of interest on the unpaid principal balance hereof allowable by
applicable law. If any sum is collected in excess of the applicable
maximum rate, the excess collected shall be applied to reduce the principal
debt. If the interest actually collected hereunder is still in excess of
the applicable maximum rate, the interest rate shall be reduced so as not
to exceed the maximum allowable under law.
(c) Amendment. Neither this Debenture nor any term hereof
may be amended, waived, discharged or terminated other than by a written
instrument signed by the Company and Holder.
(d) Assignment, Etc. The Holder may assign or transfer this
Debenture to any transferee only with the prior consent of the Company,
which may not be unreasonably withheld or delayed, provided that the Holder
may assign or transfer this Debenture to any of such Holder's affiliates
without the consent of the Company. This Debenture shall be binding upon
the Company and its successors and shall inure to the benefit of the Holder
and its successors and permitted assigns.
(e) No Waiver. No failure on the part of the Holder to
exercise, and no delay in exercising any right, remedy or power hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise
by the Holder of any right, remedy or power hereunder preclude any other or
future exercise of any other right, remedy or power. Each and every right,
remedy or power hereby granted to the Holder or allowed it by law or other
agreement shall be cumulative and not exclusive of any other, and may be
exercised by the Holder from time to time.
(f) Governing Law; Jurisdiction.
(i) THIS DEBENTURE WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY
CONFLICTS OF LAWS PROVISIONS THEREOF THAT WOULD OTHERWISE REQUIRE THE
APPLICATION OF THE LAW OF ANY OTHER JURISDICTION.
(ii) The Company irrevocably submits to the exclusive
jurisdiction of any State or Federal Court sitting in the State of New
York, County of New York, over any suit, action, or proceeding arising out
of or relating to this Debenture. The Company irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of the venue of any such suit, action, or
proceeding brought in such a court and any claim that suit, action, or
proceeding has been brought in an inconvenient forum.
<PAGE>
The Company agrees that the service of process upon it
mailed by certified or registered mail (and service so made shall be deemed
complete three days after the same has been posted as aforesaid) or by
personal service shall be deemed in every respect effective service of
process upon it in any such suit or proceeding. Nothing herein shall
affect Holder's right to serve process in any other manner permitted by
law. The Company agrees that a final non-appealable judgement in any such
suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on such judgment or in any other lawful manner.
(iii)THE COMPANY HERETO KNOWINGLY AND VOLUNTARILY WAIVES
ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY
LITIGATION BASED ON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
DEBENTURE.
(g) Replacement Debentures. This Debenture may be exchanged
by Holder at any time and from time to time for a Debenture or Debentures
with different denominations representing an equal aggregate Principal
Amount, as reasonably requested by Holder, upon surrendering the same. No
service charge will be made for such registration or exchange. In the
event that Holder notifies the Company that this Debenture has been lost,
stolen or destroyed, a replacement Debenture identical in all respects to
the original Debenture (except for registration number and Principal
Amount, if different than that shown on the original Debenture), shall be
issued to the Holder, provided that the Holder executes and delivers to the
Company an agreement reasonably satisfactory to the Company to indemnify
the Company from any loss incurred by it in connection with the Debenture.
[Signature Page Follows]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Debenture to be
duly executed on the day and in the year first above written.
SUNRISE TECHNOLOGIES INTERNATIONAL, INC.
By:
Name:
Title:
Attest:
<PAGE>
EXHIBIT A
---------
FORM OF NOTICE OF CONVERSION
(To be Executed by the Holder
in order to Convert a Debenture)
The undersigned hereby elects to convert the aggregate Principal Amount (as
defined in the Debenture) indicated below of this Debenture into shares of
Common Stock, par value $.001 per share (the "Common Stock"), of Sunrise
Technologies International, Inc. (the "Company") according to the
conditions hereof, as of the date written below. If shares are to be
issued in the name of a person other than undersigned, the undersigned will
pay all transfer taxes payable with respect thereto and is delivering
herewith such certificates and opinions as reasonably requested by the
Company in accordance therewith. No fee will be charged to the holder for
any conversion, except for such transfer taxes, if any.
The undersigned hereby represents that the number of shares of Common Stock
issuable pursuant to this Notice of Conversion does not violate or breach
the restrictions on conversions contained in Section 3 of the Debenture.
Conversion information:
Date to Effect Conversion
Aggregate Principal Amount of Debenture Being Converted
Number of shares of Common Stock to be Issued
Applicable Conversion Price
Signature
Name
Address
EXHIBIT 10.3
- ------------
THIS WARRANT ("WARRANT") HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT COVERING THIS
WARRANT UNDER SAID ACT OR AN EXEMPTION FROM REGISTRATION UNDER SAID ACT.
VOID AFTER 5:00 P.M. EASTERN TIME ON JANUARY 10, 2005 ("EXPIRATION
DATE").
SUNRISE TECHNOLOGIES INTERNATIONAL, INC.
A WARRANT
WARRANT TO PURCHASE SHARES OF
COMMON STOCK, PAR VALUE $.001 PER SHARE
This is to certify that, for VALUE RECEIVED, [_______________]
("Warrantholder"), is entitled to purchase, subject to the provisions of
this Warrant, from Sunrise Technologies International, Inc., a corporation
organized under the laws of Delaware ("Company"), at any time not later
than 5:00 P.M., Eastern time, on the Expiration Date, at an exercise price
per share equal to 115% of the Conversion Price (the exercise price in
effect from time to time hereafter being herein called the "Warrant Price")
such number of shares ("Warrant Shares") of Common Stock, par value $.001
per share ("Common Stock") of the Company equal to 25% of the sum of the
Underlying Shares (i) issued prior to March 1, 2000 and (ii) issuable on
March 1, 2000, in each case upon conversion of the Debentures purchased by
the original holder hereof pursuant to the Purchase Agreement (as defined
below) and without considering any limitations or restrictions contained in
Section 3(i) of the Debentures. The number of Warrant Shares purchasable
upon exercise of this Warrant and the Warrant Price shall be subject to
adjustment from time to time as described herein.
This Warrant has been issued pursuant to the terms of the Purchase
Agreement ("Purchase Agreement") dated on or about the date hereof between
the Company and the Warrantholder. Capitalized terms used herein and not
defined shall have the meaning specified in the Purchase Agreement.
Section 1. Registration. The Company shall maintain books for
the transfer and registration of the Warrant. Upon the initial issuance of
the Warrant, the Company shall issue and register the Warrant in the name
of the Warrantholder.
Section 2. Transfers. As provided herein, the Warrant may be
transferred only pursuant to a registration statement filed under the
Securities Act of 1933, as amended ("Securities Act") or an exemption from
registration thereunder. Subject to such restrictions, the Company shall
transfer from time to time, the Warrant, upon the books to be maintained by
the Company for that purpose, upon surrender thereof for transfer properly
endorsed or accompanied by appropriate instructions for transfer upon any
such transfer, and a new Warrant shall be issued to the transferee and the
surrendered Warrant shall be canceled by the Company.
<PAGE>
Section 3.
(a) Exercise of Warrant. Subject to the provisions hereof,
the Warrantholder may exercise the Warrant in whole or in part at any time
upon surrender of the Warrant, together with delivery of the duly executed
Warrant exercise form attached hereto (the "Exercise Agreement"), to the
Company during normal business hours on any business day at the Company's
principal executive offices (or such other office or agency of the Company
as it may designate by notice to the holder hereof), and upon (i) payment
to the Company in cash, by certified or official bank check or by wire
transfer for the account of the Company of the Warrant Price for the
Warrant Shares specified in the Exercise Agreement or (ii) delivery to the
Company of a written notice of an election to effect a "Cashless Exercise"
(as defined below) for the Warrant Shares specified in the Exercise
Agreement. The Warrant Shares so purchased shall be deemed to be issued to
the holder hereof or such holder's designee, as the record owner of such
shares, as of the close of business on the date on which this Warrant (or
evidence of loss, theft or destruction thereof) shall have been
surrendered, the completed Exercise Agreement shall have been delivered,
and payment shall have been made for such shares as set forth above.
Certificates for the Warrant Shares so purchased, representing the
aggregate number of shares specified in the Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding two
(2) business days, after this Warrant shall have been so exercised. The
certificates so delivered shall be in such denominations as may be
requested by the holder hereof and shall be registered in the name of such
holder or such other name as shall be designated by such holder. If this
Warrant shall have been exercised only in part, then, unless this Warrant
has expired, the Company shall, at its expense, at the time of delivery of
such certificates, deliver to the holder a new Warrant representing the
number of shares with respect to which this Warrant shall not then have
been exercised.
To effect a Cashless Exercise, the holder shall submit to the
Company with the Exercise Agreement, written notice of the holder's
intention to do so, including a calculation of the number of shares of
Common Stock to be issued upon such exercise in accordance with the terms
hereof. In the event of a Cashless Exercise, in lieu of paying the Warrant
Price in cash, the holder shall surrender this Warrant for that number of
shares of Common Stock determined by multiplying the number of Warrant
Shares to which it would otherwise be entitled by a fraction, the numerator
of which shall be the difference between the then current Market Price per
share of the Common Stock and the Warrant Price, and the denominator of
which shall be the then current Market Price per share of the Common Stock.
For this purpose, the "Market Price" of the Common Stock shall be the
Market Price on the trading day immediately preceding the date of the
Exercise Agreement.
(b) No Redemption of Warrant. The Company may not redeem
this Warrant in whole or in part.
Section 4. Compliance with the Securities Act of 1933.
Neither this Warrant nor the Common Stock issued upon exercise hereof nor
any other security issued or issuable upon exercise of this Warrant may be
offered or sold except as provided in this agreement and in conformity with
the Securities Act of 1933, as amended, and then only against receipt of an
agreement of such person to whom such offer of sale is made to comply with
the provisions of this Section 4 with respect to any resale or other
disposition of such security. The Company may cause the legend set forth
on the first page of this Warrant to be set forth on each Warrant or
similar legend on any security issued or issuable upon exercise of this
Warrant until the Warrant Shares have been registered for resale under the
Registration Rights Agreement or until Rule 144 is available, unless
counsel for the Company is of the opinion as to any such security that such
legend is unnecessary.
<PAGE>
Section 5. Payment of Taxes. The Company will pay any
documentary stamp taxes attributable to the initial issuance of Warrant
Shares issuable upon the exercise of the Warrant; provided, however, that
the Company shall not be required to pay any tax or taxes which may be
payable in respect of any transfer involved in the issue or delivery of any
certificates for Warrant Shares in a name other than that of the registered
holder of the Warrant in respect of which such shares are issued, and in
such case, the Company shall not be required to issue or deliver any
certificate for Warrant Shares or any Warrant until the person requesting
the same has paid to the Company the amount of such tax or has established
to the Company's satisfaction that such tax has been paid. The holder
shall be responsible for income taxes due under federal or state law, if
any such tax is due.
Section 6. Mutilated or Missing Warrants. In case the Warrant
shall be mutilated, lost, stolen, or destroyed, the Company shall issue in
exchange and substitution of and upon cancellation of the mutilated
Warrant, or in lieu of and substitution for the Warrant lost, stolen or
destroyed, a new Warrant of like tenor and for the purchase of a like
number of Warrant Shares, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction of the
Warrant, and with respect to a lost, stolen or destroyed Warrant,
reasonable indemnity or bond, if requested by the Company.
Section 7. Reservation of Common Stock. The Company hereby
represents and warrants that there have been reserved, and the Company
shall at all applicable times keep reserved, out of the authorized and
unissued Common Stock, a number of shares sufficient to provide for the
exercise of the rights of purchase represented by the Warrant, and the
transfer agent for the Common Stock ("Transfer Agent"), and every
subsequent transfer agent for the Common Stock or other shares of the
Company's capital stock issuable upon the exercise of any of the right of
purchase aforesaid, shall be irrevocably authorized and directed at all
times to reserve such number of authorized and unissued shares of Common
Stock as shall be requisite for such purpose. The Company agrees that all
Warrant Shares issued upon exercise of the Warrant shall be, at the time of
delivery of the certificates for such Warrant Shares, duly authorized,
validly issued, fully paid and non-assessable shares of Common Stock of the
Company. The Company will keep a conformed copy of this Warrant on file
with the Transfer Agent and with every subsequent transfer agent for the
Common Stock or other shares of the Company's capital stock issuable upon
the exercise of the rights of purchase represented by the Warrant. The
Company will supply from time to time the Transfer Agent with duly executed
stock certificates required to honor the outstanding Warrant.
Section 8. Warrant Price. The Warrant Price, subject to
adjustment as provided in Section 9, shall, if payment is made in cash or
by certified check, be payable in lawful money of the United States of
America.
Section 9. Adjustments. Subject and pursuant to the
provisions of this Section 9, the Warrant Price and number of Warrant
Shares subject to this Warrant shall be subject to adjustment from time to
time as set forth hereinafter.
(a) If the Company shall at any time or from time to
time while the Warrant is outstanding, pay a dividend or make a
distribution on its Common Stock in shares of Common Stock, subdivide its
outstanding shares of Common Stock into a greater number of shares or
combine its outstanding shares into a smaller number of shares or issue by
reclassification of its outstanding shares of Common Stock any shares of
its capital stock (including any such reclassification in connection with a
<PAGE>
consolidation or merger in which the Company is the continuing
corporation), then the number of Warrant Shares purchasable upon exercise
of the Warrant and the Warrant Price in effect immediately prior to the
date upon which such change shall become effective, shall be adjusted by
the Company so that the Warrantholder thereafter exercising the Warrant
shall be entitled to receive the number of shares of Common Stock or other
capital stock which the Warrantholder would have received if the Warrant
had been exercised immediately prior to such event. Such adjustment shall
be made successively whenever any event listed above shall occur.
(b) If any capital reorganization, reclassification of the
capital stock of the Company, consolidation or merger of the Company with
another corporation, or sale, transfer or other disposition of all or
substantially all of the Company's properties to another corporation shall
be effected, then, as a condition of such reorganization, reclassification,
consolidation, merger, sale, transfer or other disposition, lawful and
adequate provision shall be made whereby each Warrantholder shall
thereafter have the right to purchase and receive upon the basis and upon
the terms and conditions herein specified and in lieu of the Warrant Shares
immediately theretofore issuable upon exercise of the Warrant, such shares
of stock, securities or properties as may be issuable or payable with
respect to or in exchange for a number of outstanding Warrant Shares equal
to the number of Warrant Shares immediately theretofore issuable upon
exercise of the Warrant, had such reorganization, reclassification,
consolidation, merger, sale, transfer or other disposition not taken place,
and in any such case appropriate provision shall be made with respect to
the rights and interests of each Warrantholder to the end that the
provisions hereof (including, without limitations, provision for adjustment
of the Warrant Price) shall thereafter be applicable, as nearly equivalent
as may be practicable in relation to any shares of stock, securities or
properties thereafter deliverable upon the exercise hereof. The Company
shall not effect any such consolidation, merger, sale, transfer or other
disposition unless prior to or simultaneously with the consummation thereof
the successor corporation (if other than the Company) resulting from such
consolidation or merger, or the corporation purchasing or otherwise
acquiring such assets or other appropriate corporation or entity shall
assume, by written instrument executed and delivered to the Company, the
obligation to deliver to the holder of the Warrant such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to purchase and the other obligations under this
Warrant. The provisions of this paragraph (b) shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers,
sales, transfers or other dispositions.
(c) In case the Company shall fix a record date for the
making of a distribution to all holders of Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing corporation) of evidences of indebtedness or
assets (other than cash dividends or cash distributions payable out of
consolidated earnings or earned surplus or dividends or distributions
referred to in Section 9(a)), or subscription rights or warrants, the
Warrant Price to be in effect after such record date shall be determined by
multiplying the Warrant Price in effect immediately prior to such record
date by a fraction, the numerator of which shall be the total number of
shares of Common Stock outstanding multiplied by the Market Price per share
of Common Stock (as determined pursuant to Section 3), less the fair market
value (as determined by the Company's Board of Directors in good faith) of
said assets or evidences of indebtedness so distributed, or of such
subscription rights or warrants, and the denominator of which shall be the
total number of shares of Common Stock outstanding multiplied by such
current Market Price per share of Common Stock. Such adjustment shall be
made successively whenever such a record date is fixed.
<PAGE>
(d) If the Company shall at any time or from time to time
during the MFN Period (as defined in Section 7.1 of the Purchase Agreement)
issue or sell in a financing transaction (which shall not include any sales
or issuances of Common Stock after the date hereof pursuant to contractual
obligations in effect on the date hereof), (A) any shares of Common Stock
for a Per Share Selling Price (as defined in Section 7.1 of the Purchase
Agreement) less than the Warrant Price (as defined above) or (B) any
securities convertible into shares of Common Stock ("Convertible
Securities") for which the Per Share Selling Price of the Common Stock is
less than the Warrant Price (as defined above) on the date of such
issuance, then the Warrant Price shall be automatically reset (if it would
result in a reduction of such price) to a price equal to such Per Share
Selling Price, regardless of whether such adjusted Warrant Price falls
below the $3.00 floor set forth in the definition of "Conversion Price"
under the Purchase Agreement. The number of Warrant Shares shall be
proportionally increased. Such adjustments shall be made successively
whenever such sales are made. If an adjustment (the "Adjustment") of the
Warrant Price is required pursuant hereto, the Company shall deliver to
each the Warrantholder within eight calendar days of the closing of the
transaction giving rise to the Adjustment ("Delivery Date") a notice
("Adjustment Notice") stating that such Warrant Price has been
automatically adjusted as of the Delivery Date, and such notice shall
constitute an amendment to this Warrant. In the event the Company fails to
deliver the Adjustment Notice by the applicable Delivery Date, the Company
shall be liable to each Warrantholder for a delay payment equal to 2% of
(x) the number of Warrant Shares issuable hereunder times (y) the Market
Price, per month payable in Common Stock or cash, at the Warrantholder's
election (provided, that such failure to notify shall not affect automatic
adjustment of the Warrant Price). The Company shall give to Warrantholder
written notice of any such sale of Common Stock within 24 hours of the
closing of any such sale and shall within such 24 hour period issue a press
release announcing such sale.
(e) An adjustment shall become effective immediately after
the record date in the case of each dividend or distribution and
immediately after the effective date of each other event which requires an
adjustment.
(f) In the event that, as a result of an adjustment made
pursuant to Section 9, the holder of the Warrant shall become entitled to
receive any shares of capital stock of the Company other than shares of
Common Stock, the number of such other shares so receivable upon exercise
of the Warrant shall be subject thereafter to adjustment from time to time
in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Warrant Shares contained in this Warrant.
Section 10. Fractional Interest. The Company shall not be
required to issue fractions of Warrant Shares upon the exercise of the
Warrant. If any fraction of a Warrant Share would, except for the
provisions of this Section, be issuable upon the exercise of the Warrant
(or specified portions thereof), the Company shall round such calculation
to the nearest whole number and disregard the fraction.
Section 11. Benefits. Nothing in this Warrant shall be
construed to give any person, firm or corporation (other than the Company
and the Warrantholder) any legal or equitable right, remedy or claim, it
being agreed that this Warrant shall be for the sole and exclusive benefit
of the Company and the Warrantholder.
Section 12. Notices to Warrantholder. Upon the happening of
any event requiring an adjustment of the Warrant Price, the Company shall
forthwith give written notice thereof to the Warrantholder at the address
appearing in the records of the Company, stating the adjusted Warrant Price
and the adjusted number of Warrant Shares resulting from such event and
setting forth in reasonable detail the method of calculation and the facts
upon which such calculation is based. The certificate of the Company's
independent certified public accountants shall be conclusive evidence of
the correctness of any computation made, absent manifest error. Failure to
give such notice to the Warrantholder or any defect therein shall not
affect the legality or validity of the subject adjustment. At the
Warrantholder's request, the Company shall deliver to the Warrantholder as
of a requested date a notice specifying the number of Warrant Shares into
which this Warrant is exercisable as of such date.
Section 13. Identity of Transfer Agent. The Transfer Agent for
the Common Stock is ChaseMellon Shareholder Services, c/o Gloria Pouncil,
235 Montgomery Street, 23rd Floor, San Francisco, CA 94104, Phone: (415)
643-1427. Forthwith upon the appointment of any subsequent transfer agent
for the Common Stock or other shares of the Company's capital stock
issuable upon the exercise of the rights of purchase represented by the
Warrant, the Company will fax to the Warrantholder a statement setting
forth the name and address of such transfer agent.
Section 14. Notices. Any notice pursuant hereto to be given or
made by the Warrantholder to or on the Company shall be sufficiently given
or made personally or if sent by an internationally recognized courier by
next day or two day delivery service, addressed as follows:
Sunrise Technologies International, Inc.
3400 West Warren Avenue
Fremont, California 94538
Telephone: (510) 623-9001
Telefax: (510) 623-9009
Attention: Mr. Peter Jansen
Chief Financial Officer
or such other address as the Company may specify in writing by notice to
the Warrantholder complying as to delivery with the terms of this Section
14.
Any notice pursuant hereto to be given or made by the Company
to or on the Warrantholder shall be sufficiently given or made if
personally delivered or if sent by an internationally recognized courier
service by overnight or two-day service, to the address set forth on the
books of the Company or, as to each of the Company and the Warrantholder,
at such other address as shall be designated by such party by written
notice to the other party complying as to delivery with the terms of this
Section 14.
All such notices, requests, demands, directions and other
communications shall, when sent by courier, be effective two (2) days after
delivery to such courier as provided and addressed as aforesaid.
Section 15. Registration Rights. The initial holder of this
Warrant is entitled to the benefit of certain registration rights in
respect of the Warrant Shares as provided in the Registration Rights
Agreement.
Section 16. Successors. All the covenants and provisions
hereof by or for the benefit of the Warrantholder shall bind and inure to
the benefit of its respective successors and permitted assigns hereunder.
The Warrantholder may assign or transfer this Warrant to any transferee
only with the prior consent of the Company, which may not be unreasonably
withheld or delayed, provided that the Warrantholder may assign or transfer
this Warrant to any of its affiliates without the consent of the Company.
Section 17. Governing Law. This Warrant shall be deemed to be
a contract made under the laws of the State of New York, and for all
purposes shall be construed in accordance with the laws of said State.
<PAGE>
Section 18. 9.9% and 19.9% Limitations.
(a) Notwithstanding anything to the contrary contained
herein, the number of shares of Common Stock that may be acquired by the
holder upon exercise pursuant to the terms hereof shall not exceed a number
that, when added to the total number of shares of Common Stock deemed
beneficially owned by such holder (other than by virtue of the ownership of
securities or rights to acquire securities that have limitations on the
Holder's right to convert, exercise or purchase similar to the limitation
set forth herein), together with all shares of Common Stock deemed
beneficially owned by the holder's "affiliates" (as defined in Rule 144 of
the Securities Act) that would be aggregated for purposes of determining
whether a group under Section 13(d) of the Securities Exchange Act of 1934,
as amended, exists, would exceed 9.99% of the total issued and outstanding
shares of the Company's Common Stock (the "Restricted Ownership
Percentage"); provided that (w) each holder shall have the right at any
time and from time to time to reduce its Restricted Ownership Percentage
immediately upon notice to the Company and (x) each holder shall have the
right at any time and from time to time, to increase its Restricted
Ownership Percentage immediately (subject to waiver) in the event of a
pending or announced change of control transaction (including without
limitation a transaction that would result in a transfer of more than 50%
of the Company's voting power or equity, or a transaction that would result
in a person or "group" being deemed the beneficial owner of 50% or more of
the Company's voting power or equity).
(b) Each time (a "Covenant Time") the holder makes a
Triggering Acquisition (as defined below) of shares of Common Stock (the
"Triggering Shares") pursuant to the Agreement, the holder will be deemed
to covenant that it will not, during the balance of the day on which such
Triggering Acquisition occurs, and during the 61-day period beginning
immediately after that day, acquire additional shares of Common Stock
pursuant to Warrants existing at that Covenant Time, if the aggregate
amount of such additional shares so acquired (without reducing that amount
by any dispositions) would exceed (x) 9.99% of the number of shares of
Common Stock outstanding at that Covenant Time (including the Triggering
Shares) minus (y) the number of shares of Common Stock actually owned by
the Holder at that Covenant Time (regardless of how or when acquired, and
including the Triggering Shares). "Triggering Acquisition" means the
exercise of the Warrant by the holder; provided, however, that with respect
to the exercise of this Warrant, if the associated issuance of shares of
Common Stock does not occur, such event shall cease to be a Triggering
Acquisition and the related covenant under this paragraph shall terminate.
At each Covenant Time, the Holder shall be deemed to waive any right it
would otherwise have to acquire shares of Common Stock to the extent that
such acquisition would violate any covenant given by the Holder under this
paragraph.
(i) The covenant to be given pursuant to this paragraph
will be given at every Covenant Time and shall be calculated based on the
circumstances then in effect. The making of a covenant at one Covenant
Time shall not terminate or modify any prior covenants.
(ii) The Warrantholder may therefore from time to time
be subject to multiple such covenants, each one having been made at a
different Covenant Time, and some possibly being more restrictive than
others. The Warrantholder must comply with all such covenants then in
effect.
<PAGE>
(c) Notwithstanding anything contained herein, in no event
shall the Company issue shares of Common Stock hereunder to the extent that
the total number of shares issued or deemed issued to the Investors (when
added to the Underlying Shares and Warrant Shares) under the Purchase
Agreement would exceed 19.9% of the Company's issued and outstanding shares
of Common Stock on the date hereof. Instead, the Company shall redeem this
Warrant to the extent necessary at such consideration required to place the
Investors in the same economic position they would have been if not for
such limitation. Only shares acquired pursuant to the Purchase Agreement
will be included in determining whether the limitation would be exceeded
for purposes of this paragraph.
[Signature Page Follows]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed as of January 10, 2000.
SUNRISE TECHNOLOGIES INTERNATIONAL, INC.
By:___________________________
Name:
Title:
Attest:
______________________________
<PAGE>
SUNRISE TECHNOLOGIES INTERNATIONAL, INC.
WARRANT EXERCISE FORM
Sunrise Technologies International, Inc.
3400 West Warren Avenue
Fremont, California 94538
Telephone: (510) 623-9001
Telefax: (510) 623-9009
Attention: Mr. Peter Jansen
Chief Financial Officer
This undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant ("Warrant") for, and to purchase
thereunder by (CHECK AS APPLICABLE):
[ ] payment by cash, wire or certified check,
[ ] conversion of the within Warrant by surrender of the Warrant,
_______________ shares of Common Stock* ("Warrant Shares") provided for
therein, and requests that certificates for the Warrant Shares be issued as
follows:
Name
________________________________
________________________________
Address
________________________________
________________________________
and, if the number of Warrant Shares shall not be all the Warrant Shares
purchasable upon exercise of the Warrant, that a new Warrant for the
balance of the Warrant Shares.
In lieu of delivering physical certificates representing the Warrant
Shares purchasable upon exercise of this Warrant, provided the Company's
transfer agent is participating in the Depository Trust Company ("DTC")
Fast Automated Securities Transfer ("FAST") program, upon request of the
Holder, the Company shall use its best efforts to cause its transfer agent
to electronically transmit the Warrant Shares issuable upon conversion or
exercise to the undersigned, by crediting the account of the undersigned's
prime broker with DTC through its Deposit Withdrawal Agent Commission
("DWAC") system.
Dated: ______________________________
Signature: ______________________________
______________________________
Name (please print)
_______________________________
Address
-------------------------------
* NOTE: If conversion of the Warrant is made by surrender of the
Warrant and the number of shares indicated exceeds the maximum number of
shares to which a holder is entitled, the Company will issue such maximum
number of shares purchasable upon exercise of the Warrant registered in the
name of the undersigned Warrantholder or the undersigned's Assignee as
below indicated and deliver same to the address stated below.
EXHIBIT 10.4
- ------------
THIS WARRANT ("WARRANT") HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT COVERING THIS
WARRANT UNDER SAID ACT OR AN EXEMPTION FROM REGISTRATION UNDER SAID ACT.
VOID AFTER 5:00 P.M. EASTERN TIME ON JANUARY 10, 2002 ("EXPIRATION
DATE").
SUNRISE TECHNOLOGIES INTERNATIONAL, INC.
B WARRANT
WARRANT TO PURCHASE SHARES OF
COMMON STOCK, PAR VALUE $.001 PER SHARE
This is to certify that, for VALUE RECEIVED, [_______________]
("Warrantholder"), is entitled to purchase, subject to the provisions of
this Warrant, from Sunrise Technologies International, Inc., a corporation
organized under the laws of Delaware ("Company"), at any time not later
than 5:00 P.M., Eastern time, on the Expiration Date, at an exercise price
per share equal to 115% of the Conversion Price (the exercise price in
effect from time to time hereafter being herein called the "Warrant Price")
such number of shares ("Warrant Shares") of Common Stock, par value $.001
per share ("Common Stock") of the Company equal to 25% of the sum of the
Underlying Shares (i) issued prior to March 1, 2000 and (ii) issuable on
March 1, 2000, in each case upon conversion of the Debentures purchased by
the original holder hereof pursuant to the Purchase Agreement (as defined
below) and without considering any limitations or restrictions contained in
Section 3(i) of the Debentures. The number of Warrant Shares purchasable
upon exercise of this Warrant and the Warrant Price shall be subject to
adjustment from time to time as described herein.
This Warrant has been issued pursuant to the terms of the Purchase
Agreement ("Purchase Agreement") dated on or about the date hereof between
the Company and the Warrantholder. Capitalized terms used herein and not
defined shall have the meaning specified in the Purchase Agreement.
Section 1. Registration. The Company shall maintain books for
the transfer and registration of the Warrant. Upon the initial issuance of
the Warrant, the Company shall issue and register the Warrant in the name
of the Warrantholder.
Section 2. Transfers. As provided herein, the Warrant may be
transferred only pursuant to a registration statement filed under the
Securities Act of 1933, as amended ("Securities Act") or an exemption from
registration thereunder. Subject to such restrictions, the Company shall
transfer from time to time, the Warrant, upon the books to be maintained by
the Company for that purpose, upon surrender thereof for transfer properly
endorsed or accompanied by appropriate instructions for transfer upon any
such transfer, and a new Warrant shall be issued to the transferee and the
surrendered Warrant shall be canceled by the Company.
<PAGE>
Section 3.
(a) Exercise of Warrant. Subject to the provisions hereof,
the Warrantholder may exercise the Warrant in whole or in part at any time
upon surrender of the Warrant, together with delivery of the duly executed
Warrant exercise form attached hereto (the "Exercise Agreement"), to the
Company during normal business hours on any business day at the Company's
principal executive offices (or such other office or agency of the Company
as it may designate by notice to the holder hereof), and upon payment to
the Company in cash, by certified or official bank check or by wire
transfer for the account of the Company of the Warrant Price for the
Warrant Shares specified in the Exercise. The Warrant Shares so purchased
shall be deemed to be issued to the holder hereof or such holder's
designee, as the record owner of such shares, as of the close of business
on the date on which this Warrant (or evidence of loss, theft or
destruction thereof) shall have been surrendered, the completed Exercise
Agreement shall have been delivered, and payment shall have been made for
such shares as set forth above. Certificates for the Warrant Shares so
purchased, representing the aggregate number of shares specified in the
Exercise Agreement, shall be delivered to the holder hereof within a
reasonable time, not exceeding two (2) business days, after this Warrant
shall have been so exercised. The certificates so delivered shall be in
such denominations as may be requested by the holder hereof and shall be
registered in the name of such holder or such other name as shall be
designated by such holder. If this Warrant shall have been exercised only
in part, then, unless this Warrant has expired, the Company shall, at its
expense, at the time of delivery of such certificates, deliver to the
holder a new Warrant representing the number of shares with respect to
which this Warrant shall not then have been exercised.
(b) Redemption of Warrant. Subject to the Purchase
Agreement, in the event that the Market Price is greater than 125% of the
Warrant Price for twenty (20) consecutive trading days ("Pre-Call Period"),
the Company shall have the right, upon at least thirty (30) business days'
prior written notice to the Warrantholder ("Redemption Notice") (the period
from the Redemption Notice to the redemption date being referred to as the
"Post-Call Period"), to redeem all or any portion of this Warrant which has
not previously been exercised, at a redemption price equal to $.01 per
Warrant Share issuable hereunder for the portion hereof being redeemed.
The Warrantholder may exercise this Warrant, including any portion subject
to a Redemption Notice, during the period from the date of such Redemption
Notice through the date on which the redemption price for such Warrants is
paid by the Company, and the Company shall honor all tendered Exercise
Agreements during such period. Any Redemption Notice under this Section
shall be irrevocable and shall indicate the portion of this Warrant to be
redeemed and the date (subject to the terms hereof) on which such
redemption is to occur. If the Company intends to redeem less than all of
the then outstanding Warrants issued to Investors under the Purchase
Agreement, it shall do so on a pro rata basis among such holders in
accordance with this Section. Failure by the Company to redeem this
Warrant on a timely basis after delivering a Redemption Notice shall result
in the Company being prohibited from exercising such right pursuant to this
Section again.
Notwithstanding anything to the contrary herein, the Company
shall be prohibited from exercising its right to redeem this Warrant
pursuant to this Section unless during the entire Pre-Call Period and Post-
Call Period (i) all the Warrant Shares with respect to this Warrant are
either (A) covered by an effective registration statement under the
Securities Act and a deliverable prospectus or (B) freely tradeable under
Rule 144(k) thereunder, and (ii) the Warrant Shares with respect to this
Warrant are listed and traded on the Nasdaq Stock Market.
<PAGE>
Section 4. Compliance with the Securities Act of 1933.
Neither this Warrant nor the Common Stock issued upon exercise hereof nor
any other security issued or issuable upon exercise of this Warrant may be
offered or sold except as provided in this agreement and in conformity with
the Securities Act of 1933, as amended, and then only against receipt of an
agreement of such person to whom such offer of sale is made to comply with
the provisions of this Section 4 with respect to any resale or other
disposition of such security. The Company may cause the legend set forth
on the first page of this Warrant to be set forth on each Warrant or
similar legend on any security issued or issuable upon exercise of this
Warrant until the Warrant Shares have been registered for resale under the
Registration Rights Agreement or until Rule 144 is available, unless
counsel for the Company is of the opinion as to any such security that such
legend is unnecessary.
Section 5. Payment of Taxes. The Company will pay any
documentary stamp taxes attributable to the initial issuance of Warrant
Shares issuable upon the exercise of the Warrant; provided, however, that
the Company shall not be required to pay any tax or taxes which may be
payable in respect of any transfer involved in the issue or delivery of any
certificates for Warrant Shares in a name other than that of the registered
holder of the Warrant in respect of which such shares are issued, and in
such case, the Company shall not be required to issue or deliver any
certificate for Warrant Shares or any Warrant until the person requesting
the same has paid to the Company the amount of such tax or has established
to the Company's satisfaction that such tax has been paid. The holder
shall be responsible for income taxes due under federal or state law, if
any such tax is due.
Section 6. Mutilated or Missing Warrants. In case the Warrant
shall be mutilated, lost, stolen, or destroyed, the Company shall issue in
exchange and substitution of and upon cancellation of the mutilated
Warrant, or in lieu of and substitution for the Warrant lost, stolen or
destroyed, a new Warrant of like tenor and for the purchase of a like
number of Warrant Shares, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction of the
Warrant, and with respect to a lost, stolen or destroyed Warrant,
reasonable indemnity or bond, if requested by the Company.
Section 7. Reservation of Common Stock. The Company hereby
represents and warrants that there have been reserved, and the Company
shall at all applicable times keep reserved, out of the authorized and
unissued Common Stock, a number of shares sufficient to provide for the
exercise of the rights of purchase represented by the Warrant, and the
transfer agent for the Common Stock ("Transfer Agent"), and every
subsequent transfer agent for the Common Stock or other shares of the
Company's capital stock issuable upon the exercise of any of the right of
purchase aforesaid, shall be irrevocably authorized and directed at all
times to reserve such number of authorized and unissued shares of Common
Stock as shall be requisite for such purpose. The Company agrees that all
Warrant Shares issued upon exercise of the Warrant shall be, at the time of
delivery of the certificates for such Warrant Shares, duly authorized,
validly issued, fully paid and non-assessable shares of Common Stock of the
Company. The Company will keep a conformed copy of this Warrant on file
with the Transfer Agent and with every subsequent transfer agent for the
Common Stock or other shares of the Company's capital stock issuable upon
the exercise of the rights of purchase represented by the Warrant. The
Company will supply from time to time the Transfer Agent with duly executed
stock certificates required to honor the outstanding Warrant.
Section 8. Warrant Price. The Warrant Price, subject to
adjustment as provided in Section 9, shall, if payment is made in cash or
by certified check, be payable in lawful money of the United States of
America.
<PAGE>
Section 9. Adjustments. Subject and pursuant to the
provisions of this Section 9, the Warrant Price and number of Warrant
Shares subject to this Warrant shall be subject to adjustment from time to
time as set forth hereinafter.
(a) If the Company shall at any time or from time to time
while the Warrant is outstanding, pay a dividend or make a distribution on
its Common Stock in shares of Common Stock, subdivide its outstanding
shares of Common Stock into a greater number of shares or combine its
outstanding shares into a smaller number of shares or issue by
reclassification of its outstanding shares of Common Stock any shares of
its capital stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing
corporation), then the number of Warrant Shares purchasable upon exercise
of the Warrant and the Warrant Price in effect immediately prior to the
date upon which such change shall become effective, shall be adjusted by
the Company so that the Warrantholder thereafter exercising the Warrant
shall be entitled to receive the number of shares of Common Stock or other
capital stock which the Warrantholder would have received if the Warrant
had been exercised immediately prior to such event. Such adjustment shall
be made successively whenever any event listed above shall occur.
(b) If any capital reorganization, reclassification of the
capital stock of the Company, consolidation or merger of the Company with
another corporation, or sale, transfer or other disposition of all or
substantially all of the Company's properties to another corporation shall
be effected, then, as a condition of such reorganization, reclassification,
consolidation, merger, sale, transfer or other disposition, lawful and
adequate provision shall be made whereby each Warrantholder shall
thereafter have the right to purchase and receive upon the basis and upon
the terms and conditions herein specified and in lieu of the Warrant Shares
immediately theretofore issuable upon exercise of the Warrant, such shares
of stock, securities or properties as may be issuable or payable with
respect to or in exchange for a number of outstanding Warrant Shares equal
to the number of Warrant Shares immediately theretofore issuable upon
exercise of the Warrant, had such reorganization, reclassification,
consolidation, merger, sale, transfer or other disposition not taken place,
and in any such case appropriate provision shall be made with respect to
the rights and interests of each Warrantholder to the end that the
provisions hereof (including, without limitations, provision for adjustment
of the Warrant Price) shall thereafter be applicable, as nearly equivalent
as may be practicable in relation to any shares of stock, securities or
properties thereafter deliverable upon the exercise hereof. The Company
shall not effect any such consolidation, merger, sale, transfer or other
disposition unless prior to or simultaneously with the consummation thereof
the successor corporation (if other than the Company) resulting from such
consolidation or merger, or the corporation purchasing or otherwise
acquiring such assets or other appropriate corporation or entity shall
assume, by written instrument executed and delivered to the Company, the
obligation to deliver to the holder of the Warrant such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to purchase and the other obligations under this
Warrant. The provisions of this paragraph (b) shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers,
sales, transfers or other dispositions.
(c) In case the Company shall fix a record date for the
making of a distribution to all holders of Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing corporation) of evidences of indebtedness or
assets (other than cash dividends or cash distributions payable out of
consolidated earnings or earned surplus or dividends or distributions
referred to in Section 9(a)), or subscription rights or warrants, the
Warrant Price to be in effect after such record date shall be determined by
<PAGE>
multiplying the Warrant Price in effect immediately prior to such record
date by a fraction, the numerator of which shall be the total number of
shares of Common Stock outstanding multiplied by the Market Price per share
of Common Stock (as determined pursuant to Section 3), less the fair market
value (as determined by the Company's Board of Directors in good faith) of
said assets or evidences of indebtedness so distributed, or of such
subscription rights or warrants, and the denominator of which shall be the
total number of shares of Common Stock outstanding multiplied by such
current Market Price per share of Common Stock. Such adjustment shall be
made successively whenever such a record date is fixed.
(d) If the Company shall at any time or from time to time
during the MFN Period (as defined in Section 7.1 of the Purchase Agreement)
issue or sell in a financing transaction (which shall not include any sales
or issuances of Common Stock after the date hereof pursuant to contractual
obligations in effect on the date hereof), (A) any shares of Common Stock
for a Per Share Selling Price (as defined in Section 7.1 of the Purchase
Agreement) less than the Warrant Price (as defined above) or (B) any
securities convertible into shares of Common Stock ("Convertible
Securities") for which the Per Share Selling Price of the Common Stock is
less than the Warrant Price (as defined above) on the date of such
issuance, then the Warrant Price shall be automatically reset (if it would
result in a reduction of such price) to a price equal to such Per Share
Selling Price, regardless of whether such adjusted Warrant Price falls
below the $3.00 floor set forth in the definition of "Conversion Price"
under the Purchase Agreement. The number of Warrant Shares shall be
proportionally increased. Such adjustments shall be made successively
whenever such sales are made. If an adjustment (the "Adjustment") of the
Warrant Price is required pursuant hereto, the Company shall deliver to
each the Warrantholder within eight calendar days of the closing of the
transaction giving rise to the Adjustment ("Delivery Date") a notice
("Adjustment Notice") stating that such Warrant Price has been
automatically adjusted as of the Delivery Date, and such notice shall
constitute an amendment to this Warrant. In the event the Company fails to
deliver the Adjustment Notice by the applicable Delivery Date, the Company
shall be liable to each Warrantholder for a delay payment equal to 2% of
(x) the number of Warrant Shares issuable hereunder times (y) the Market
Price, per month payable in Common Stock or cash, at the Warrantholder's
election (provided, that such failure to notify shall not affect automatic
adjustment of the Warrant Price). The Company shall give to Warrantholder
written notice of any such sale of Common Stock within 24 hours of the
closing of any such sale and shall within such 24 hour period issue a press
release announcing such sale.
(e) An adjustment shall become effective immediately after
the record date in the case of each dividend or distribution and
immediately after the effective date of each other event which requires an
adjustment.
(f) In the event that, as a result of an adjustment made
pursuant to Section 9, the holder of the Warrant shall become entitled to
receive any shares of capital stock of the Company other than shares of
Common Stock, the number of such other shares so receivable upon exercise
of the Warrant shall be subject thereafter to adjustment from time to time
in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Warrant Shares contained in this Warrant.
Section 10. Fractional Interest. The Company shall not be
required to issue fractions of Warrant Shares upon the exercise of the
Warrant. If any fraction of a Warrant Share would, except for the
provisions of this Section, be issuable upon the exercise of the Warrant
(or specified portions thereof), the Company shall round such calculation
to the nearest whole number and disregard the fraction.
<PAGE>
Section 11. Benefits. Nothing in this Warrant shall be
construed to give any person, firm or corporation (other than the Company
and the Warrantholder) any legal or equitable right, remedy or claim, it
being agreed that this Warrant shall be for the sole and exclusive benefit
of the Company and the Warrantholder.
Section 12. Notices to Warrantholder. Upon the happening of
any event requiring an adjustment of the Warrant Price, the Company shall
forthwith give written notice thereof to the Warrantholder at the address
appearing in the records of the Company, stating the adjusted Warrant Price
and the adjusted number of Warrant Shares resulting from such event and
setting forth in reasonable detail the method of calculation and the facts
upon which such calculation is based. The certificate of the Company's
independent certified public accountants shall be conclusive evidence of
the correctness of any computation made, absent manifest error. Failure to
give such notice to the Warrantholder or any defect therein shall not
affect the legality or validity of the subject adjustment. At the
Warrantholder's request, the Company shall deliver to the Warrantholder as
of a requested date a notice specifying the number of Warrant Shares into
which this Warrant is exercisable as of such date.
Section 13. Identity of Transfer Agent. The Transfer Agent for
the Common Stock is ChaseMellon Shareholder Services, c/o Gloria Pouncil,
235 Montgomery Street, 23rd Floor, San Francisco, CA 94104, Phone: (415)
643-1427. Forthwith upon the appointment of any subsequent transfer agent
for the Common Stock or other shares of the Company's capital stock
issuable upon the exercise of the rights of purchase represented by the
Warrant, the Company will fax to the Warrantholder a statement setting
forth the name and address of such transfer agent.
Section 14. Notices. Any notice pursuant hereto to be given or
made by the Warrantholder to or on the Company shall be sufficiently given
or made personally or if sent by an internationally recognized courier by
next day or two day delivery service, addressed as follows:
Sunrise Technologies International, Inc.
3400 West Warren Avenue
Fremont, California 94538
Telephone: (510) 623-9001
Telefax: (510) 623-9009
Attention: Mr. Peter Jansen
Chief Financial Officer
or such other address as the Company may specify in writing by notice to
the Warrantholder complying as to delivery with the terms of this
Section 14.
Any notice pursuant hereto to be given or made by the Company
to or on the Warrantholder shall be sufficiently given or made if
personally delivered or if sent by an internationally recognized courier
service by overnight or two-day service, to the address set forth on the
books of the Company or, as to each of the Company and the Warrantholder,
at such other address as shall be designated by such party by written
notice to the other party complying as to delivery with the terms of this
Section 14.
All such notices, requests, demands, directions and other
communications shall, when sent by courier, be effective two (2) days after
delivery to such courier as provided and addressed as aforesaid.
Section 15. Registration Rights. The initial holder of this
Warrant is entitled to the benefit of certain registration rights in
respect of the Warrant Shares as provided in the Registration Rights
Agreement.
<PAGE>
Section 16. Successors. All the covenants and provisions
hereof by or for the benefit of the Warrantholder shall bind and inure to
the benefit of its respective successors and permitted assigns hereunder.
The Warrantholder may assign or transfer this Warrant to any transferee
only with the prior consent of the Company, which may not be unreasonably
withheld or delayed, provided that the Warrantholder may assign or transfer
this Warrant to any of its affiliates without the consent of the Company.
Section 17. Governing Law. This Warrant shall be deemed to be
a contract made under the laws of the State of New York, and for all
purposes shall be construed in accordance with the laws of said State.
Section 18. 9.9% and 19.9% Limitations.
(a) Notwithstanding anything to the contrary contained
herein, the number of shares of Common Stock that may be acquired by the
holder upon exercise pursuant to the terms hereof shall not exceed a number
that, when added to the total number of shares of Common Stock deemed
beneficially owned by such holder (other than by virtue of the ownership of
securities or rights to acquire securities that have limitations on the
Holder's right to convert, exercise or purchase similar to the limitation
set forth herein), together with all shares of Common Stock deemed
beneficially owned by the holder's "affiliates" (as defined in Rule 144 of
the Securities Act) that would be aggregated for purposes of determining
whether a group under Section 13(d) of the Securities Exchange Act of 1934,
as amended, exists, would exceed 9.99% of the total issued and outstanding
shares of the Company's Common Stock (the "Restricted Ownership
Percentage"); provided that (w) each holder shall have the right at any
time and from time to time to reduce its Restricted Ownership Percentage
immediately upon notice to the Company and (x) each holder shall have the
right at any time and from time to time, to increase its Restricted
Ownership Percentage immediately (subject to waiver) in the event of a
pending or announced change of control transaction (including without
limitation a transaction that would result in a transfer of more than 50%
of the Company's voting power or equity, or a transaction that would result
in a person or "group" being deemed the beneficial owner of 50% or more of
the Company's voting power or equity).
(b) Each time (a "Covenant Time") the holder makes a
Triggering Acquisition (as defined below) of shares of Common Stock (the
"Triggering Shares") pursuant to the Agreement, the holder will be deemed
to covenant that it will not, during the balance of the day on which such
Triggering Acquisition occurs, and during the 61-day period beginning
immediately after that day, acquire additional shares of Common Stock
pursuant to Warrants existing at that Covenant Time, if the aggregate
amount of such additional shares so acquired (without reducing that amount
by any dispositions) would exceed (x) 9.99% of the number of shares of
Common Stock outstanding at that Covenant Time (including the Triggering
Shares) minus (y) the number of shares of Common Stock actually owned by
the Holder at that Covenant Time (regardless of how or when acquired, and
including the Triggering Shares). "Triggering Acquisition" means the
exercise of the Warrant by the holder; provided, however, that with respect
to the exercise of this Warrant, if the associated issuance of shares of
Common Stock does not occur, such event shall cease to be a Triggering
Acquisition and the related covenant under this paragraph shall terminate.
At each Covenant Time, the Holder shall be deemed to waive any right it
would otherwise have to acquire shares of Common Stock to the extent that
such acquisition would violate any covenant given by the Holder under this
paragraph.
(i) The covenant to be given pursuant to this paragraph
will be given at every Covenant Time and shall be calculated based on the
circumstances then in effect. The making of a covenant at one Covenant
Time shall not terminate or modify any prior covenants.
<PAGE>
(ii) The Warrantholder may therefore from time to time
be subject to multiple such covenants, each one having been made at a
different Covenant Time, and some possibly being more restrictive than
others. The Warrantholder must comply with all such covenants then in
effect.
(c) Notwithstanding anything contained herein, in no
event shall the Company issue shares of Common Stock hereunder to the
extent that the total number of shares issued or deemed issued to the
Investors (when added to the Underlying Shares and Warrant Shares) under
the Purchase Agreement would exceed 19.9% of the Company's issued and
outstanding shares of Common Stock on the date hereof. Instead, the
Company shall redeem this Warrant to the extent necessary at such
consideration required to place the Investors in the same economic position
they would have been if not for such limitation. Only shares acquired
pursuant to the Purchase Agreement will be included in determining whether
the limitation would be exceeded for purposes of this paragraph.
[Signature Page Follows]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed as of January 10, 2000.
SUNRISE TECHNOLOGIES INTERNATIONAL, INC.
By:___________________________
Name:
Title:
Attest:
______________________________
<PAGE>
SUNRISE TECHNOLOGIES INTERNATIONAL, INC.
WARRANT EXERCISE FORM
Sunrise Technologies International, Inc.
3400 West Warren Avenue
Fremont, California 94538
Telephone:(510) 623-9001
Telefax:(510) 623-9009
Attention: Mr. Peter Jansen
Chief Financial Officer
This undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant ("Warrant") for, and to purchase
thereunder by (CHECK AS APPLICABLE):
[ ] payment by cash, wire or certified check,
[ ] conversion of the within Warrant by surrender of the Warrant,
_______________ shares of Common Stock* ("Warrant Shares") provided for
therein, and requests that certificates for the Warrant Shares be issued as
follows:
_______________________________
Name
________________________________
Address
________________________________
________________________________
and, if the number of Warrant Shares shall not be all the Warrant Shares
purchasable upon exercise of the Warrant, that a new Warrant for the
balance of the Warrant Shares.
In lieu of delivering physical certificates representing the Warrant
Shares purchasable upon exercise of this Warrant, provided the Company's
transfer agent is participating in the Depository Trust Company ("DTC")
Fast Automated Securities Transfer ("FAST") program, upon request of the
Holder, the Company shall use its best efforts to cause its transfer agent
to electronically transmit the Warrant Shares issuable upon conversion or
exercise to the undersigned, by crediting the account of the undersigned's
prime broker with DTC through its Deposit Withdrawal Agent Commission
("DWAC") system.
Dated: ______________________________
Signature: ______________________________
______________________________
Name (please print)
_______________________________
Address
_______________________________
* NOTE: If conversion of the Warrant is made by surrender of the
Warrant and the number of shares indicated exceeds the maximum number of
shares to which a holder is entitled, the Company will issue such maximum
number of shares purchasable upon exercise of the Warrant registered in the
name of the undersigned Warrantholder or the undersigned's Assignee as
below indicated and deliver same to the address stated below.
EXHIBIT 10.5
- ------------
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (the "Agreement") is made and
entered as of this 11th day of January, 2000 by and between Sunrise
Technologies International, Inc., a corporation organized under the laws of
Delaware (the "Company"), Dunwoody Brokerage Services, Inc. ("Dunwoody"),
and the persons listed on the signature page hereto ("Initial Investors")
pursuant to the Purchase Agreement of even date herewith by and between the
Company and the Initial Investors.
The parties hereby agree as follows:
1. Certain Definitions
As used in this Agreement, the following terms shall have
the following meanings:
"Additional Registrable Securities" shall mean, to the
extent not included in the definition of "Registrable Securities," any
additional shares of Common Stock, if any, issuable or issued to the
Investors pursuant to Purchase Agreement, Debenture or Warrants.
"Common Stock" shall mean the Company's shares of Common
Stock, par value $.001 per share.
"Investor" shall mean the Initial Investors and Dunwoody
and any subsequent holder of any Common Stock, Debentures, Warrants or
Registrable Securities.
"Prospectus" shall mean the prospectus included in any
Registration Statement, as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the
Registrable Securities and Additional Registrable Securities covered by
such Registration Statement and by all other amendments and supplements to
the prospectus, including post-effective amendments and all material
incorporated by reference in such prospectus.
"Register," "registered" and "registration" refer to a
registration made by preparing and filing a registration statement or
similar document in compliance with the 1933 Act (as defined below), and
the declaration or ordering of effectiveness of such registration statement
or document.
"Registrable Securities" shall mean the shares of Common
Stock issued and issuable to the Investors pursuant to the Purchase
Agreement and issuable upon conversion of or payment for interest under the
Debentures and upon the exercise of the Warrants and issuable to Dunwoody
upon exercise of the Dunwoody Warrant, and any securities issued with
respect to, or in exchange for, such securities (including without
limitation additional shares issuable following any adjustment described in
Section 7.1 of the Purchase Agreement).
"Registration Statement" shall mean any registration
statement filed under the 1933 Act of the Company that covers the resale of
any of the Registrable Securities or Additional Registrable Securities
pursuant to the provisions of this Agreement, amendments and supplements to
such Registration Statement, including post-effective amendments, all
exhibits and all material incorporated by reference in such Registration
Statement.
<PAGE>
"SEC" means the U.S. Securities and Exchange Commission.
"1933 Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Warrants" mean the warrants to purchase shares of Common
Stock issued to the Investors pursuant to the Purchase Agreement.
Other capitalized terms used herein but not defined
herein shall have the meaning provided therefor in the Purchase Agreement.
2. Registration.
(a) Registration Statement. Promptly following the
closing of the transactions contemplated by the Purchase Agreement (the
"Closing Date") (but no later than 45 days after the Closing Date), the
Company shall prepare and file with the SEC one Registration Statement on
Form S-3 (or, if Form S-3 is not then available to the Company, on such
form of registration statement as is then available to effect a
registration for resale of the Registrable Securities, subject to the
Investors' consent) covering the resale of the Registrable Securities.
Such Registration Statement shall cover, to the extent allowable under the
1933 Act and the Rules promulgated thereunder (including Rule 416), such
indeterminate number of additional shares of Common Stock resulting from
stock splits, stock dividends or similar transactions with respect to the
Registrable Securities. No securities shall be included in the
Registration Statement without the consent of the Investors other than the
Registrable Securities. The Registration Statement (and each amendment or
supplement thereto, and each request for acceleration of effectiveness
thereof) shall be provided in accordance with Section 3(c) to (and subject
to the approval of) the Investors and their counsel prior to its filing or
other submission, which approval shall not be unreasonably withheld or
delayed.
<PAGE>
(b) Expenses. The Company will pay all expenses
associated with the registration, excluding discounts, commissions, fees of
underwriters, selling brokers, dealer managers or similar securities
industry professionals and excluding legal fees of the Investors.
(c) Effectiveness.
(i) The Company shall use its best efforts to have the
Registration Statement declared effective as soon as practicable. If (A)
the Registration Statement is not declared effective by the SEC within 90
days following the Closing Date or, if the Registration Statement is
subject to full SEC review (which excludes "plain English" and other
immaterial comments), then within 20 days following the Closing Date (in
either case, the "Registration Date"), or (B) after the Registration
Statement has been declared effective by the SEC, sales cannot be made
pursuant to the Registration Statement for any reason but except as excused
pursuant to subparagraph (ii) below, then the Company will make payments to
each Investor, as damages and not as a penalty, for any 30 day period or
portion thereof following the Registration Date during which any of the
events described in (A) or (B) above occurs and is continuing (the
"Blackout Period") in an amount equal to 2% of the aggregate Purchase Price
paid by such Investor to the Company on the Closing Date. The amounts
payable as damages pursuant to this paragraph shall be payable in lawful
money of the United States and shall be paid on demand from time to time
following the commencement of the Blackout Period until the termination of
the Blackout Period. The same remedy shall be available in the case of any
failure to timely issue Underlying Shares upon conversion of the Debentures
or Warrant Shares upon exercise of the Warrants, or in the case of any
suspension from trading or delisting of the Common Stock from the Nasdaq
Stock Market. If at any time a payment due hereunder remains unpaid for
more than sixty (60) days after demand, the rate of damage payments shall
thereafter be increased for all purposes to a rate equal to 3% per 30 day
period. The remedies set forth in this section are not intended to be
exclusive, and shall be in addition to any other remedies available at law
or in equity. Amounts payable as damages hereunder shall cease when the
Investors no longer hold any Debentures, Warrants or Registrable
Securities, or Additional Registrable Securities, as applicable.
(ii) The Company may terminate or suspend
effectiveness of any registration contemplated by this Section one time for
a period of not more than twenty (20) days if the Company shall deliver to
the Investors a certificate signed by the President of the Company stating
that, in the good faith judgment of the Board of Directors of the Company,
it would (A) be seriously detrimental to the business of the Company for
such registration to be effected or remain effective at such time, (B)
interfere with any proposed or pending material corporate transaction
involving the Company or any of its subsidiaries, or (C) result in any
premature disclosure thereof. In such a case, the Company shall not
disclose to an Investor any facts or circumstances constituting material
non-public information, without the prior written consent of such Investor.
The duration of the MFN Period provided for in the Purchase Agreement, the
Debentures and the Warrants will be extended by the number of days of (x)
any termination or suspension of the effectiveness of any registration
contemplated by this Section 2, and (y) without duplicating, the number of
days in any Blackout Period (computed as if the excused period in this
subsection (c)(ii) did not apply).
(d) Promptly following the issuance of any Additional
Registrable Securities, the Company shall file a Registration Statement and
use its best efforts to have such Registration Statement covering the
Additional Registrable Securities declared effective as soon as possible.
All time periods, provisions, rights and remedies covering the registration
of Registrable Securities shall apply, mutatis mutandis, to the
registration of the Additional Registrable Securities.
<PAGE>
3. Company Obligations. The Company will use its best
efforts to effect the registration of the Registrable Securities and
Additional Registrable Securities in accordance with the terms hereof, and
pursuant thereto the Company will, as expeditiously as possible:
(a) use its best efforts to cause such Registration
Statement to become effective and to remain continuously effective for a
period that will terminate upon the later of (i) thirty (30) months
following the effective date of the Registration Statement and (ii) the
earlier of the date on which all Registrable Securities or Additional
Registrable Securities, as the case may be, covered by such Registration
Statement, as amended from time to time, have been sold or until such time
as they become eligible for distribution pursuant to Rule 144(k), or any
successor provision thereof, under the 1933 Act (the "Registration
Period");
(b) prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement and the Prospectus
as may be necessary to keep the Registration Statement effective for the
period specified in Section 3(a) and to comply with the provisions of the
1933 Act and the 1934 Act with respect to the distribution of all
Registrable Securities and Additional Registrable Securities; provided
that, at a time reasonably prior to the filing of a Registration Statement
or Prospectus, or any amendments or supplements thereto, the Company will
furnish to the Investors copies of all documents proposed to be filed,
which documents will be subject to the comments of the Investors;
(c) permit a single firm of counsel designated by the
Investors to review the Registration Statement and all amendments and
supplements thereto no fewer than ten (10) days prior to their filing with
the SEC, and not file any document in a form to which such counsel
reasonably objects;
(d) furnish to the Investors and their legal counsel
(i) promptly after the same is prepared and publicly distributed, filed
with the SEC, or received by the Company, one copy of the Registration
Statement and any amendment thereto, each preliminary prospectus and
Prospectus and each amendment or supplement thereto, and each letter
written by or on behalf of the Company to the SEC or the staff of the SEC,
and each item of correspondence from the SEC or the staff of the SEC, in
each case relating to such Registration Statement (other than any portion
of any thereof which contains information for which the Company has sought
confidential treatment), and (ii) such number of copies of a Prospectus,
including a preliminary prospectus, and all amendments and supplements
thereto and such other documents as such Investor may reasonably request in
order to facilitate the disposition of the Registrable Securities and
Additional Registrable Securities owned by such Investor;
(e) make reasonable effort to prevent the issuance of
any stop order or other suspension of effectiveness and, if such order is
issued, obtain the withdrawal of any such order at the earliest possible
moment;
(f) furnish to the Investors at least five copies of
the Registration Statement and any post-effective amendment thereto,
including financial statements and schedules by courier pursuant to the
notice requirements of Section 10.4 of the Purchase Agreement;
(g) prior to any public offering of Registrable
Securities and/or Additional Registrable Securities, use its best efforts
to register or qualify or cooperate with the Investors and their counsel in
connection with the registration or qualification of such Registrable
Securities or Additional Registrable Securities, as applicable, for offer
and sale under the securities or blue sky laws of all U.S. jurisdictions
and do any and all other reasonable acts or things necessary or advisable
to enable the distribution in such jurisdictions of the Registrable
Securities or Additional Registrable Securities covered by the Registration
Statement;
<PAGE>
(h) cause all Registrable Securities and/or Additional
Registrable Securities covered by the Registration Statement to be listed
on each securities exchange, interdealer quotation system or other market
on which similar securities issued by the Company are then listed;
(i) immediately notify the Investors, at any time when
a Prospectus relating to the Registrable Securities and/or Additional
Registrable Securities is required to be delivered under the Securities
Act, upon discovery that, or upon the happening of any event as a result of
which, the Prospectus included in such Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing, and at the request of any such holder, promptly prepare and
furnish to such holder a reasonable number of copies of a supplement to or
an amendment of such Prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities or Additional
Registrable Securities, as applicable, such Prospectus shall not include an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing; and
(j) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC under the 1933 Act and the 1934
Act, take such other actions as may be reasonably necessary to facilitate
the registration of the Registrable Securities and Additional Registrable
Securities hereunder.
4. Obligations of the Investors.
(a) It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities and/or Additional
Registrable Securities, if applicable, that each Investor shall furnish in
writing to the Company such information regarding itself, the Registrable
Securities and/or Additional Registrable Securities, as applicable, held by
it and the intended method of disposition of the Registrable Securities
and/or Additional Registrable Securities, as applicable, held by it as
shall be reasonably required to effect the registration of such Registrable
Securities and/or Additional Registrable Securities, as applicable, and
shall execute such documents in connection with such registration as the
Company may reasonably request. At least ten (10) business days prior to
the first anticipated filing date of the Registration Statement, the
Company shall notify the Investors of the information the Company requires
from each Investor if such Investor elects to have any of the Registrable
Securities and/or Additional Registrable Securities included in the
Registration Statement.
(b) Each Investor, by its acceptance of the Registrable
Securities and Additional Registrable Securities, if any, agrees to
cooperate with the Company as reasonably requested by the Company in
connection with the preparation and filing of the Registration Statement
hereunder, unless such Investor has notified the Company in writing of its
election to exclude all of its Registrable Securities or Additional
Registrable Securities, as applicable, from the Registration Statement.
(c) In the event the Investors determine to engage the
services of an underwriter, the Investors agree to enter into and perform
their obligations under an underwriting agreement, in usual and customary
form, including, without limitation, customary indemnification and
contribution obligations, with the managing underwriter of such offering
and take such other actions as are reasonably required in order to expedite
or facilitate the dispositions of the Registrable Securities and/or
Additional Registrable Securities, as applicable.
<PAGE>
(d) Each Investor agrees that, upon receipt of any
notice from the Company of the happening of any event rendering the
Registration Statement no longer effective, the Investor will immediately
discontinue disposition of Registrable Securities or Additional Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities or Additional Registrable Securities until the Investor's
receipt of the copies of the supplemented or amended prospectus filed with
the SEC and declared effective and, if so directed by the Company, the
Investor shall deliver to the Company (at the expense of the Company) or
destroy (and deliver to the Company a certificate of destruction) all
copies in the Investor's possession of the prospectus covering the
Registrable Securities or Additional Registrable Securities, as applicable,
current at the time of receipt of such notice.
(e) An Investor may not participate in any underwritten
registration hereunder unless it (i) agrees to sell the Registrable
Securities or Additional Registrable Securities, as applicable, on the
basis provided in any underwriting arrangements in usual and customary form
entered into by the Company, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements
and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of
all underwriting discounts and commissions and any expenses in excess of
those payable by the Company pursuant to the terms of this Agreement.
5. Indemnification.
(a) Indemnification by Company. The Company agrees to
indemnify and hold harmless, to the fullest extent permitted by law each
Investor, its officers, directors, partners, members, managers and
employees and each person who controls such Investor (within the meaning of
the 1933 Act) against all losses, claims, damages, liabilities, costs
(including, without limitation, reasonable attorney's fees) and expenses
caused by (i) any untrue or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or any preliminary
prospectus or any amendment or supplement thereto or any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as the same are based upon any information furnished in writing to
the Company by such Investor, expressly for use therein, or (ii) any
violation by the Company of any federal, state or common law, rule or
regulation applicable to the Company in connection with any Registration
Statement, Prospectus or any preliminary prospectus, or any amendment or
supplement thereto, and shall reimburse in accordance with subparagraph (c)
below, each of the foregoing persons for any legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claims. The foregoing is subject to the condition that, insofar as the
foregoing indemnities relate to any untrue statement, alleged untrue
statement, omission or alleged omission made in any preliminary prospectus
or Prospectus that is eliminated or remedied in any Prospectus or amendment
or supplement thereto, the above indemnity obligations of the Company shall
not inure to the benefit of any indemnified party if a copy of such
corrected Prospectus or amendment or supplement thereto had been made
available to such indemnified party and was not sent or given by such
indemnified party at or prior to the time such action was required of such
indemnified party by the 1933 Act and if delivery of such Prospectus or
amendment or supplement thereto would have eliminated (or been a sufficient
defense to) any liability of such indemnified party with respect to such
statement or omission. Indemnity under this Section 5(a) shall remain in
full force and effect regardless of any investigation made by or on behalf
of any indemnified party and shall survive the permitted transfer of the
Registrable Securities and Additional Registrable Securities.
<PAGE>
(b) Indemnification by Holder of Registrable
Securities. In connection with any registration pursuant to the terms of
this Agreement, each Investor severally will furnish to the Company in
writing such information as the Company reasonably requests concerning the
holders of Registrable Securities and Additional Registrable Securities or
the proposed manner of distribution for use in connection with any
Registration Statement or Prospectus and severally (and not jointly) agrees
to indemnify and hold harmless, to the fullest extent permitted by law, the
Company, its directors, officers, employees, stockholders and each person
who controls the Company (within the meaning of the 1933 Act) against any
losses, claims, damages, liabilities and expense (including reasonable
attorney's fees) resulting from any untrue statement of a material fact or
any omission of a material fact required to be stated in the Registration
Statement or Prospectus or preliminary prospectus or amendment or
supplement thereto or necessary to make the statements therein not
misleading, to the extent, but only to the extent that such untrue
statement or omission is contained in any information furnished in writing
by such holder of Registrable Securities or Additional Registrable
Securities to the Company specifically for inclusion in such Registration
Statement or Prospectus or amendment or supplement thereto and that such
information was substantially relied upon by the Company in preparation of
the Registration Statement or Prospectus or any amendment or supplement
thereto. In no event shall the liability of a holder of Registrable
Securities or Additional Registrable Securities be greater in amount than
the dollar amount of the proceeds (net of all expense paid by such holder
and the amount of any damages such holder has otherwise been required to
pay by reason of such untrue statement or omission) received by such holder
upon the sale of the Registrable Securities or Additional Registrable
Securities included in the Registration Statement giving rise to such
indemnification obligation.
(c) Conduct of Indemnification Proceedings. Any person
entitled to indemnification hereunder shall (i) give prompt notice to the
indemnifying party of any claim with respect to which it seeks
indemnification and (ii) permit such indemnifying party to assume the
defense of such claim with counsel reasonably satisfactory to the
indemnified party; provided that any person entitled to indemnification
hereunder shall have the right to employ separate counsel and to
participate in the defense of such claim, but the fees and expenses of such
counsel shall be at the expense of such person unless (a) the indemnifying
party has agreed to pay such fees or expenses, or (b) the indemnifying
party shall have failed to assume the defense of such claim and employ
counsel reasonably satisfactory to such person or (c) in the reasonable
judgment of any such person, based upon written advice of its counsel, a
conflict of interest exists between such person and the indemnifying party
with respect to such claims (in which case, if the person notifies the
indemnifying party in writing that such person elects to employ separate
counsel at the expense of the indemnifying party, the indemnifying party
shall not have the right to assume the defense of such claim on behalf of
such person); and provided, further, that the failure of any indemnified
party to give notice as provided herein shall not relieve the indemnifying
party of its obligations hereunder, except to the extent that such failure
to give notice shall materially adversely affect the indemnifying party in
the defense of any such claim or litigation. It is understood that the
indemnifying party shall not, in connection with any proceeding in the same
jurisdiction, be liable for fees or expenses of more than one separate firm
of attorneys at any time for all such indemnified parties. No indemnifying
party will, except with the consent of the indemnified party, consent to
entry of any judgment or enter into any settlement that does not include as
an unconditional term thereof the giving by the claimant or plaintiff to
such indemnified party of a release from all liability in respect to such
claim or litigation.
<PAGE>
(d) Contribution. If for any reason the
indemnification provided for in the preceding paragraphs (a) and (b) is
unavailable to an indemnified party or insufficient to hold it harmless,
other than as expressly specified therein, then the indemnifying party
shall contribute to the amount paid or payable by the indemnified party as
a result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect the relative fault of the indemnified party and the
indemnifying party, as well as any other relevant equitable considerations.
No person guilty of fraudulent misrepresentation within the meaning of
Section 11(f) of the 1933 Act shall be entitled to contribution from any
person not guilty of such fraudulent misrepresentation. In no event shall
the contribution obligation of a holder of Registrable Securities or
Additional Registrable Securities be greater in amount than the dollar
amount of the proceeds (net of all expenses paid by such holder and the
amount of any damages such holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission) received by it upon the sale of the Registrable Securities or
Additional Registrable Securities giving rise to such contribution
obligation.
6. Miscellaneous.
(a) Amendments and Waivers. This Agreement may be
amended only by a writing signed by the parties hereto intended to be
bound. The Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company
shall have obtained the written consent to such amendment, action or
omission to act, of the Investor(s) affected by such amendment, action or
omission to act.
(b) Notices. All notices and other communications
provided for or permitted hereunder shall be made as set forth in Section
10.4 of the Purchase Agreement.
(c) Assignments and Transfers by Investors. This
Agreement and all the rights and obligations of the Investors hereunder may
not be assigned or transferred to any transferee or assignee except as set
forth herein. An Investor may make such assignment or transfer to any
transferee or assignee of any Common Stock, Debenture, Warrant, Dunwoody
Warrant or Registrable Securities, or Additional Registrable Securities,
provided, that (i) such transfer is made expressly subject to this
Agreement and the transferee agrees in writing to be bound by the terms and
conditions hereof, and (ii) the Company is provided with written notice of
such assignment.
(d) Assignments and Transfers by the Company. This
Agreement may not be assigned by the Company without the prior written
consent of the Investors, except that without the prior written consent of
the Investors, but after notice duly given, the Company shall assign its
rights and delegate its duties hereunder to any successor-in-interest
corporation, and such successor-in-interest shall assume such rights and
duties, in the event of a merger or consolidation of the Company with or
into another corporation or the sale of all or substantially all of the
Company's assets.
(e) Benefits of the Agreement. The terms and
conditions of this Agreement shall inure to the benefit of and be binding
upon the respective permitted successors and assigns of the parties.
Nothing in this Agreement, express or implied, is intended to confer upon
any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by
reason of this Agreement, except as expressly provided in this Agreement.
<PAGE>
(f) Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
(g) Titles and Subtitles. The titles and subtitles
used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
(h) Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of this Agreement
shall be interpreted as if such provision were so excluded and shall be
enforceable in accordance with its terms to the fullest extent permitted by
law.
(i) Further Assurances. The parties shall execute and
deliver all such further instruments and documents and take all such other
actions as may reasonably be required to carry out the transactions
contemplated hereby and to evidence the fulfillment of the agreements
herein contained.
(j) Entire Agreement. This Agreement is intended by
the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. This
Agreement supersedes all prior agreements and understandings between the
parties with respect to such subject matter.
(k) Applicable Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York
without regard to principles of conflicts of law.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
The Company: SUNRISE TECHNOLOGIES
INTERNATIONAL, INC.
By:_________________________
Name:
Title:
Placement Agent: DUNWOODY BROKERAGE SERVICES, INC.
By:_________________________
Name:
Title:
The Investors: THE TAIL WIND FUND, LTD.
By:_________________________
Name:
Title:
JEDDY DEVELOPMENT INC.
By:_________________________
Name: Pablo Javier Espino
Title: President
LBI GROUP INC.
By:_________________________
Name: Steven L. Berkenfeld
Title: Senior Vice President
____________________________
Donald Sanders MD, PhD
DONALD SANDERS, IRA,
CIBC OPPENHEIMER CORP AS CUSTODIAN
By:_________________________
Name: Donald Sanders MD, PhD
Title: Beneficiary
<PAGE>
____________________________
Donald Sanders MD, PhD, as guardian for
Monica Sanders
____________________________
Donald Sanders MD, PhD, as guardian for
Kendra Sanders
WANDA SANDERS, IRA,
CIBC OPPENHEIMER CORP AS CUSTODIAN
By:_________________________
Name: Wanda Sanders
Title: Beneficiary
____________________________
Meyer Temkin
____________________________
Charles D. Kelman, M.D.
EXHIBIT 99.1
- ------------
FOR IMMEDIATE RELEASE
---------------------
CONTACT: Sunrise Technologies
Ed Coghlan, VP Corporate Communications
& Investor Relations, (510) 771-2399
Susan Lorigan, (510) 623-9001
MEDIA CONTACTS:
Deborah Vaswani, Cell (310) 567-7048; Office (310) 966-5500
Todd Appleman, Cell (310) 567-7042; Office (310) 966-5500
APPROVAL OF SUNRISE HYPERION[trademark] LTK SYSTEM
RECOMMENDED BY FDA OPHTHALMIC DEVICES PANEL
FOR TREATMENT OF LOW TO MODERATE HYPEROPIA
WITH CONDITIONS
FREMONT, CA, JANUARY 13, 2000 - Sunrise Technologies International, Inc.
(NASDAQ/NMS: SNRS) today announced that the Ophthalmic Devices Panel (ODP),
an advisory committee of the U.S. Food and Drug Administration (FDA), has
unanimously voted to recommend that the FDA approve the Sunrise Hyperion
[trademark] LTK (Laser Thermal Keratoplasty) System in the United States
for the temporary reduction of low to moderate hyperopia (farsightedness)
in the range of +0.75 to +2.50 diopters with conditions.
"This is a victory for ophthalmology and the farsighted patients in the
United States," said C. Russell Trenary III, President and CEO of Sunrise
Technologies. "We eagerly look forward to working closely with the FDA in
the coming weeks to obtain final approval for the Sunrise Hyperion
[trademark] LTK System, which is the first technology designed specifically
for the treatment of farsightedness."
The recommended conditions are limited to labeling issues regarding patient
symptoms, longevity of effect, and the effect of retreatment. The Company
will immediately begin discussions with the FDA Ophthalmic Devices staff to
resolve any issues.
Among those attending the ODP meeting was world renowned ophthalmologist
Charles Kelman, M.D., who recently underwent the Sunrise LTK procedure as
part of a current LTK U.S. clinical trial. Speaking before the ODP, Dr.
Kelman observed, "The difference between hyperopia and myopia is severe.
When you are hyperopic such as I am, you have no clear distance or near
vision. I had been wearing contacts, but was at a point that I had to do
something because my eyes were becoming too dry to wear them comfortably.
I looked very carefully at the procedures available for treatment of
hyperopia, and decided that LTK was the best option.
"There is a tremendous need for the Sunrise LTK procedure for patients who
can no longer wear contacts," he said. " It was the only solution for
someone like me. There are tens of thousands of people who can benefit
from the Sunrise LTK procedure."
-more-
<PAGE>
Sunrise Technologies Receives Conditional FDA Panel Approval
Page 2 of 3
Brian S. Boxer Wachler, M.D., an investigator for the Sunrise Technologies
LTK U.S. clinical trials, provided the following statement about the
Sunrise Hyperion[trademark] LTK System: "LTK represents the next level in
the field of vision correction. It is the ideal 'no-touch' laser vision
correction for farsightedness. LTK is quick, easy and painless for the
patient and LTK has an extremely high level of safety." Dr. Boxer Wachler
currently serves as the Director of Refractive Surgery and Assistant
Professor of Ophthalmology of the Jules Stein Eye Institute at the UCLA
Department of Ophthalmology.
Said Mr. Trenary, "At today's ODP meeting, our clinical data showed that
patients can experience an immediate improvement in vision and a
demonstrated longevity of effect with a surgery that takes only a few
seconds to perform and has an excellent safety profile. Our clinical
experience suggests that the Sunrise Hyperion[trademark] LTK System has the
potential to 'turn back the clock' and mimic the vision a patient had 10 or
20 years before."
He noted that the dialogue at today's meeting reflected the growing
awareness in the ophthalmic community that hyperopia is a condition that is
much different from myopia. It is common for individuals to experience a
shift toward hyperopia after they reach the age of 40.
In addition to Dr. Kelman, other patients and physicians who have had
personal experience with the Sunrise Hyperion[trademark] LTK System
appeared before the ODP to illustrate the difference between hyperopia and
myopia, as well as the benefits of the Sunrise LTK procedure.
Among these patients was Marybeth Weissberger, the first patient in the
Sunrise LTK U.S. clinical trials, which began in 1997.
"I had been wearing bifocals and couldn't see anything anymore," she said,
showing her old glasses to the Panel. The Sunrise LTK procedure was
attractive to her because "I read up on LTK and saw that there was no
cutting and no anesthesia involved."
Of her experience with the Sunrise LTK procedure, Ms. Weissberger said,
"It's basically changed my whole life. I still have 20/20 vision in my
right eye and 20/10 in my left eye. It's just the greatest thing. Today
is my birthday and I'm 48 years old, and I hope I will never need these
glasses again. To me, it's the safest thing anyone can do."
According to Jeannie G. Cecka, Sunrise's Vice President of Clinical and
Regulatory Affairs, data on 612 eyes were submitted in the PMA reviewed
today.
"Our data showed that patients experienced a significant improvement in
their visual acuity from pre-operative levels with virtually no side
effects," she said. "Thanks to the high quality of the clinical
investigators, this was an extremely well-run study. We thank the FDA and
our clinical investigators for the effort that was necessary to enable
Sunrise to present our findings today."
According to Mr. Trenary, there is a large potential market for the Sunrise
Hyperion[trademark] LTK System. Hyperopia is the most common refractive
error of the American population, according to an independent research
study known as The Baltimore Eye Study* (conducted by investigators from
Johns Hopkins University and supported by grants from the National
Institutes of Health).
-more-
<PAGE>
Sunrise Technologies Receives Conditional FDA Panel Approval
Page 3 of 3
This Study revealed that by the year 2000, nearly 118 million Americans
will be age 40 and over, and about 60 million of them will be hyperopic.
Of these 60 million, about 62%, or 37 million, are expected to have low to
moderate hyperopia from +0.75 to 2.50 diopters (the initial application for
approval of the Sunrise Hyperion[trademark] LTK System); 30% or nearly 28
million will have hyperopia from +2.75 to +4.0 diopters; and 8%, or nearly
5 million will have hyperopia of more than 4.0 diopters (the measure of the
focusing power of the eye).
The Company believes that the Sunrise Hyperion[trademark] LTK System offers
an elegant and simple surgical technique for the treatment of hyperopia.
Two rings of laser energy are applied to the mid-periphery of the cornea at
the six and seven millimeter zones, gently heating the collagen. This
shrinks the collagen, causing the cornea to steepen. No instrumentation
touches the eye, and no corneal tissue is cut or removed during the Sunrise
procedure, thereby contributing to the excellent safety profile of the
technique as shown in clinical trials.
Sunrise Technologies International, Inc. is a refractive surgery company
based in Fremont, California, that is developing holmium:YAG laser-based
systems that utilize a patented process for shrinking collagen developed by
Dr. Bruce Sand (the "Sand Process") in correcting ophthalmic refractive
conditions.
Except for historical information, this news release contains certain
forward-looking statements that involve risk and uncertainties, which may
cause actual results to differ materially from the statements made
including market potential, regulatory clearances, business growth, and
other risks listed from time to time in the Company's Securities and
Exchange Commission (SEC) filings. These forward-looking statements
represent the Company's judgment, as of the date of this release, and the
Company disclaims any intent or obligation to update these forward-looking
statements.
# # #
* (Published in Investigative Opthalmology & Visual Science, February
1997)
Caution: Investigational device. Federal law restricts this device
to investigational use in the U.S. Internet users can access Sunrise's
World Wide Web site at http://www.sunrise-tech.com.
