SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the quarterly period ended June 30, 1997.
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the Transition period from
to .
------------------------------ ----------------------------------
Commission File Number: 0-19671
LASERSIGHT INCORPORATED
-----------------------
(Exact name of registrant as specified in its charter)
Delaware 65-0273162
-------- ----------
(State of Incorporation) (IRS Employer Identification No.)
12161 Lackland Road, St. Louis, Missouri 63146
----------------------------------------------
(Address of principal executive offices) (Zip Code)
(314) 469-3220
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
The Number of shares of the registrant's Common Stock outstanding as of
August 13, 1997 is 9,973,672.
<PAGE>
LASERSIGHT INCORPORATED AND SUBSIDIARIES
Except for the historical information contained herein, the discussion in this
Report contains forward-looking statements (within the meaning of Section 21E of
the Exchange Act) that involve risks and uncertainties. The Company's actual
results could differ materially from those discussed here. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed in the sections entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Uncertainties and Other Issues"
in this report and in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 1997 and
December 31, 1996
Condensed Consolidated Statements of Operations for the Three
Month Periods and Six Month Periods Ended June 30, 1997 and
1996
Condensed Consolidated Statements of Cash Flows for the Six
Month Periods Ended June 30, 1997 and 1996
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
LASERSIGHT INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, December 31,
1997 1996
--------------- --------------
CURRENT ASSETS ASSETS (Unaudited)
<S> <C> <C>
Cash and cash equivalents $3,091,169 $2,003,501
Accounts receivable - trade, net 3,709,153 5,458,153
Notes receivable - current portion, net 3,616,510 3,159,575
Inventories 3,685,758 3,328,903
Deferred tax assets 570,296 667,998
Income taxes recoverable 61,118 803,154
Other current assets 313,985 221,922
--------------- --------------
TOTAL CURRENT ASSETS 15,047,989 15,643,206
Notes receivable, less current portion, net 3,228,939 2,620,375
Property and equipment, net 2,092,317 1,936,220
Deferred financing costs, net 490,053 -
Goodwill, net 15,014,710 12,099,032
Other assets, net 2,111,204 1,951,380
--------------- --------------
$37,985,212 $34,250,213
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $2,505,703 $2,216,792
Note payable 4,000,000 -
Discount on notes payable (402,778) -
Note payable - related party - 1,000,000
Current portion of capital lease obligation 218,222 206,139
Accrued expenses 1,083,623 764,084
Accrued commissions 1,203,635 1,214,235
Dividends payable - 39,000
Other current liabilities 65,018 182,155
--------------- --------------
TOTAL CURRENT LIABILITIES 8,673,423 5,622,405
Refundable deposits 206,000 240,000
Accrued commissions, less current portion 419,496 309,656
Deferred income taxes 570,296 667,998
Long-term obligations 1,029,652 641,623
Commitments and contingencies
Stockholders' equity:
Convertible preferred stock - par value $.001 per share; authorized 10,000,000
shares; 0 and 8 issued and outstanding at June 30, 1997 and
December 31, 1996, respectively - -
Common stock - par value $.001 per share; authorized 20,000,000 shares;
9,599,107 and 8,454,266 shares issued at June 30,1997 and December 31,
1996, respectively 9,599 8,454
Additional paid-in capital 36,552,817 30,080,560
Obligation to issue common stock - 3,065,056
Stock subscription receivable (1,140,000) (1,140,000)
Accumulated deficit (7,703,362) (4,612,830)
Less treasury stock, at cost; 170,200 common shares (632,709) (632,709)
--------------- --------------
27,086,345 26,768,531
--------------- --------------
$37,985,212 $34,250,213
=============== ==============
See accompanying notes to the condensed consolidated financial statements.
</TABLE>
<TABLE>
LASERSIGHT INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------------- ------------------------------------
1997 1996 1997 1996
--------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
REVENUES, Net $5,408,572 $5,992,612 $11,926,714 $10,576,250
COST OF SALES 821,705 830,498 1,865,503 1,464,545
PROVIDER PAYMENTS 1,415,343 994,538 2,820,239 1,929,496
--------------- ---------------- ---------------- ----------------
GROSS PROFIT 3,171,524 4,167,576 7,240,972 7,182,209
RESEARCH, DEVELOPMENT AND REGULATORY
EXPENSES 550,427 311,490 912,631 1,047,622
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 4,565,185 3,907,671 8,908,172 8,094,268
--------------- ---------------- --------------- ----------------
LOSS FROM OPERATIONS (1,944,088) (51,585) (2,579,831) (1,959,681)
OTHER INCOME AND EXPENSES
Interest and dividend income 100,507 35,168 197,871 89,914
Interest expense (368,529) (21,224) (428,172) (47,588)
Other (230,400) -- (280,400) --
--------------- ---------------- ---------------- ----------------
NET LOSS BEFORE INCOME TAXES (2,442,510) (37,641) (3,090,532) (1,917,355)
INCOME TAX BENEFIT -- (12,701) -- (660,651)
--------------- ---------------- ---------------- ----------------
NET LOSS ($2,442,510) ($24,940) ($3,090,532) ($1,256,704)
=============== ================ ================ ================
LOSS PER COMMON SHARE
Primary: ($0.26) ($0.02) ($0.34) ($0.22)
=============== ================ ================ ================
Assuming full dilution: ($0.26) ($0.02) ($0.34) ($0.22)
=============== ================ ================ ================
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
Primary: 9,381,000 7,051,000 9,103,000 7,035,000
=============== ================ ================ ================
Assuming full dilution: 9,424,000 7,089,000 9,176,000 7,084,000
=============== ================ ================ ================
See accompanying notes to condensed consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
LASERSIGHT INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
<CAPTION>
1997 1996
------------------ ------------------
CASH FLOW FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss $ (3,090,532) $ (1,256,704)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 966,793 425,877
Decrease (increase) in accounts and notes receivable 683,501 (700)
Increase in inventories (448,155) (938,006)
Increase in accounts payable 288,911 160,156
Increase (decrease) in accrued liabilities 418,779 (196,879)
Decrease (increase) in income tax assets 742,036 (930,911)
Other (336,414) (3,339)
------------------ ------------------
NET CASH USED IN OPERATING ACTIVITIES (775,081) (2,740,506)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment, net (350,593) (246,863)
Purchase of managed care contract (150,000) --
------------------ ------------------
NET CASH USED IN INVESTING ACTIVITIES (500,593) (246,863)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options 49,088 46,940
Proceeds from issuance of notes payable, net 3,414,142 --
Repayments of notes payable - related party (1,000,000) (799,100)
Repayments of notes payable - officer -- (465,000)
Repayments of capital lease obligation (99,888) --
Proceeds from issuance of preferred stock, net -- 5,342,151
------------------ ------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,363,342 4,124,991
------------------ ------------------
INCREASE IN CASH AND CASH EQUIVALENTS 1,087,668 1,137,622
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 2,003,501 1,598,339
------------------ ------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,091,169 $ 2,735,961
================== ==================
See accompanying notes to the condensed consolidated financial statements.
</TABLE>
<PAGE>
LASERSIGHT INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Six Month Periods Ended June 30, 1997 and 1996
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited, condensed consolidated financial statements
of LaserSight Incorporated and subsidiaries (the Company) as of June
30, 1997, and for the three month periods and six month periods ended
June 30, 1997 and 1996 have been prepared in accordance with generally
accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and note
disclosures required by generally accepted accounting principles for
complete financial statements. These condensed consolidated financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1996. In the
opinion of management, the condensed consolidated financial statements
include all adjustments necessary for a fair presentation of
consolidated financial position and the results of operations and cash
flows for the periods presented. The results of operations for the
three and six month periods ended June 30, 1997 are not necessarily
indicative of the operating results for the full year.
NOTE 2 PER SHARE INFORMATION
Net loss per common share is computed using the weighted average number
of common shares and common share equivalents outstanding during each
period. Common share equivalents include options and warrants to
purchase Common Stock and are included in the computation using the
treasury stock method if they would have a dilutive effect. Fully
diluted loss per share for the three and six month periods ended June
30, 1997 were anti-dilutive and therefore, except for the impact of
Preferred Stock converted to Common Stock during the period, are the
same as primary loss per share.
In February 1997, Statement of Financial Accounting Standards No. 128
(SFAS 128), "Earnings Per Share," was issued establishing new standards
for computing and presenting earnings per share. The historical
measures of earnings per share (primary and fully diluted) are replaced
with two new computations of earnings per share (basic and diluted).
The Company will adopt SFAS 128 as of December 31, 1997. Loss per
share, on a pro forma basis, for the three and six month-periods ended
June 30, 1997 and 1996, computed pursuant to the provisions of SFAS
128, would have been as follows:
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1997 1996 1997 1996
---- ---- ---- ----
Basic loss per share ($0.26) ($0.02) ($0.34) ($0.20)
Diluted loss per share ($0.26) ($0.02) ($0.34) ($0.20)
<PAGE>
NOTE 3 INVENTORIES
Inventories, which consist primarily of laser systems, parts and
components, is stated at the lower of cost or market. Cost is
determined using the first-in, first-out method. The components of
inventories at June 30, 1997 and December 31, 1996 are summarized as
follows:
June 30, 1997 December 31, 1996
------------- -----------------
Raw materials $2,148,958 $2,008,610
Work-in-process 283,760 448,906
Finished goods 920,900 664,646
Test equipment-clinical trials 332,140 206,741
------- -------
$3,685,758 $3,328,903
========== ==========
NOTE 4 BUSINESS COMBINATIONS
LaserSight Centers Incorporated (Centers)
-----------------------------------------
In March 1997, the Company amended the purchase and royalty agreements
related to the 1993 acquisition of Centers. The amended purchase
agreement provided for the Company to issue 625,000 unregistered common
shares (valued at $3,320,321) with 600,000 additional shares
contingently issuable based upon future operating profits. This
replaces the provision calling for 1,265,333 contingently issuable
shares based on cumulative revenues or other future events and the
uncertainties associated therewith. The amended royalty agreement
reduces the royalty from $86 to $43 per refractive procedure and delays
the obligation to pay such royalties until the sooner of five years or
the issuance of all contingently issuable shares as described above.
NOTE 5 COMMITMENTS AND CONTINGENCIES
Patent Agreement
----------------
In February 1997, the Company entered into an agreement with
International Business Machines Corporation (IBM) which provides for
LaserSight to acquire certain IBM patents relating to ultraviolet light
ophthalmic products and procedures for ultraviolet ablation for
$14,900,000.
The agreement provides for IBM to transfer to the Company all of IBM's
rights under its patent license agreements with certain licensees.
Subject to the closing of the transaction, the Company will be entitled
to receive all royalties accrued on or after January 1, 1997, under
such patent license agreements.
An escrow agreement between IBM and the Company was negotiated and
executed in March 1997, upon which the Company placed a $1 million
deposit of its common stock into escrow. If the transaction does not
close by August 31, 1997, IBM may terminate the agreement. In such
event, the Company's sole obligation is to deliver from the escrow or
otherwise its common stock and/or cash with a value of $1 million. The
transaction is subject to the Company's arrangements for payment of the
purchase price.
<PAGE>
NOTE 6 FINANCING
On April 1, 1997, the Company entered into a loan agreement with
Foothill Capital Corporation (FCC) for a loan of up to $8 million,
consisting of a term loan in the amount of $4 million and a revolving
loan in an amount of 80% of the eligible receivables of LaserSight
Technologies, but not in excess of $4 million. The term loan bears
interest at an annual rate of 12.50% and requires repayment of
principal in monthly installments of $1.33 million beginning on May 1,
1998. The revolving loan bears interest at a variable annual rate of
1.50% above the base rate of Norwest Bank Minnesota. The $4 million
maximum amount of the revolving loan declines by $1.33 million per
month beginning on August 1, 1998. In connection with the loan, the
Company paid an origination fee of $150,000 and issued warrants to
purchase 500,000 shares of Common Stock. The warrants are exercisable
at any time from April 1, 1998 through April 1, 2002 at an exercise
price per share of $6.0667. Subject to certain conditions based on the
market price of the Common Stock, up to half of the warrants are
eligible for repurchase by the Company. Any warrants that remain
outstanding and unexercised on April 1, 2002 are subject to mandatory
repurchase by the Company at a price of $1.50 per warrant. The warrants
are classified as long-term obligations at June 30, 1997. The loan is
secured by a pledge of substantially all of the Company's accounts
receivable and other assets. The terms of the financing agreement
contain financial covenants with respect to, among other things,
current ratio, laser system sales, revenue, earnings before interest,
taxes, depreciation and amortization (EBITDA), and capital
expenditures. Due to the operating results of the quarter ended June
30, 1997, certain financial covenants have been waived by FCC for the
three months ended June 30, 1997. The Company is in the process of
working with FCC to revise the covenants.
The Company used a portion of the net proceeds of the term loan to pay
in full the balance due under its note to the former owners of MEC
Health Care, Inc., a wholly owned subsidiary of the Company acquired in
October 1995.
NOTE 7 SUBSEQUENT EVENT
In July 1997, the Company acquired the rights to a Pre-Market Approval
(PMA) application filed with the Food and Drug Administration (FDA) for
a laser to perform Laser In-Situ Keratomileusis (LASIK), a refractive
surgery alternative to surface Photorefractive Keratectomy (PRK) from
Photomed, Inc. In addition, the Company purchased from a shareholder of
Photomed, Inc. U.S. patent number 5,586,980 for a microkeratome, the
instrument necessary to create the corneal "flap" in the LASIK
procedure. The Company issued a combination of 535,515 unregistered
shares of Common Stock and $333,300 as consideration for the PMA
application and the microkeratome patent. The seller will also receive
a percentage of any licensing fees or sale proceeds related to the
patent. If the FDA approves the PMA so as to allow the Company to
commercialize a laser to perform LASIK in the U.S., the Company will
pay an additional $1.75 million. If such FDA approval is not obtained
by July 29, 1998, the Company has the option to unwind the PMA
transaction and receive from Photomed, Inc. 274,285 shares of the
Company's Common Stock. Additionally, if the FDA approves the use of
the laser for the treatment of hyperopia (farsightedness), the Company
will pay unregistered Common Stock valued at $1 million. If the
Company's scanning laser is approved by the FDA for commercial sale in
the United States on or before April 1, 1998, the Company will pay
$1,000,000. Approval after such date will result in lesser payments
until January 1, 1999, when no payment will be required.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
- ---------------------
Net Sales. The following tables present the Company's net sales by major
operating segments: technology products and services and health care services
for the three and six month periods ended June 30, 1997 and 1996.
For the Three Month For the Three Month
Period Ended Period Ended
June 30, 1997 June 30, 1996
------------- -------------
Net Sales % of Total Net Sales % of Total
--------- ---------- --------- ----------
Technology $2,130,698 39% $3,479,057 58%
Health care services 3,277,874 61% 2,622,753 44%
Intercompany revenues -- -- (109,198) (2%)
------------ ----- ---------- -----
Total net sales $5,408,572 100% $5,992,612 100%
============ ===== ========== =====
For the Six Month For the Six Month
Period Ended Period Ended
June 30, 1997 June 30, 1996
------------- -------------
Net Sales % of Total Net Sales % of Total
--------- ---------- --------- ----------
Technology $5,684,543 48% $5,463,407 52%
Health care services 6,242,171 52% 5,347,650 51%
Intercompany revenues -- -- (234,807) (3%)
---------- ----- --------- -----
Total net sales $11,926,714 100% $10,576,250 100%
=========== ===== =========== =====
Net sales in the second quarter of 1997 were $5,408,572, compared to $5,992,612
(for a decrease of 10%) over the same period in 1996. Net sales for the six
month period ended June 30, 1997, increased by $1,350,464 to $11,926,714 from
the same period in 1996. The increase in health care service revenue was
attributable to increased revenues generated by MEC Health Care, Inc. (MEC) and
revenues generated by the Company's latest acquisition, LSI Acquisition, Inc.
(NNJEI), the assets of which were acquired on July 3, 1996. These increases in
health care service revenues were partially offset by a substantial reduction in
revenues generated by The Farris Group. Net sales for The Farris Group in the
second quarter of 1997 were $420,190 compared to $1,151,280 (for a decrease of
$731,090) over the same period in 1996. These decreases were due primarily to a
reduction in consulting services provided and were accompanied by expense
reductions of $611,868 and $1,333,797 for the three and six month periods ended
June 30, 1997, respectively. Net sales for The Farris Group for the six month
period ended June 30, 1997, decreased by $1,708,179 to $652,068 from the same
period in 1996. The decrease in revenues generated by The Farris Group was
partially offset by revenues generated by NNJEI. The decrease in technology
revenues in the second quarter of 1997 was attributed to decreased sales of the
Company's LaserScan-2000 excimer laser system in overseas markets. The Company
<PAGE>
believes a contributing factor to the lower than expected number of laser sales
is the anticipation, particularly in Europe, of the introduction of the
LaserScan LSX announced in April. Eight laser systems were sold in the second
quarter of 1997 compared to thirteen systems sold over the same period in 1996.
Twenty-three laser systems were sold during the six month period ended June 30,
1997, compared to twenty systems, net of returns, sold over the same period in
1996. There were no system returns recognized during the first two quarters of
1997. In addition, due to competitive pressures in certain markets, the average
sales price per system declined from average levels during the same period in
1996. Based on the expected timing of the commercial introduction of its newest
laser system, the LaserScan LSX, the Company expects laser system sales to
remain below 1996 levels for the remaining two quarters of 1997, although it
expects such sales to exceed the second quarter of 1997 level.
Cost of Goods Sold and Gross Profits. The following tables present a comparative
analysis of cost of goods sold, gross profit and gross profit margins for three
and six month periods ended June 30, 1997 and 1996.
<TABLE>
<CAPTION>
For the Three Month For the Three Month
Period Ended Period Ended
June 30, 1997 Percent Change June 30, 1996
------------- -------------- -------------
<S> <C> <C> <C>
Cost of goods sold $ 821,705 (1%) $ 830,498
Provider payments 1,415,343 42% 994,538
Gross profit 3,171,524 (24%) 4,167,576
Gross profit percentage 59% 70%
Technology related only 1,308,993 (51%) 2,648,559
61% 76%
For the Six Month For the Six Month
Period Ended Period Ended
June 30, 1997 Percent Change June 30, 1996
------------- -------------- -------------
Cost of goods sold $1,865,503 27% $1,464,545
Provider payments 2,820,239 46% 1,929,496
Gross profit 7,240,972 1% 7,182,209
Gross profit percenetage 61% 68%
Technology related only 3,819,040 3,998,862
67% (4%) 73%
</TABLE>
Gross profit margins were 59% of net sales in the second quarter of 1997
compared to 70% for the same period in 1996. For the six month periods ended
June 30, 1997 and 1996, gross profit margins were 61% and 68%, respectively. The
gross profit margin decrease was attributable to (i) the decrease in revenues
generated by The Farris Group, which has no associated cost of sales, (ii) a
lower average sales price for laser systems sold during the first two quarters
of 1997, and (iii) a general increase in the operating costs of the Company's
Costa Rican manufacturing facility, which were spread over fewer sales during
the three months ended June 30, 1997.
Research, Development and Regulatory Expenses. The following tables present a
comparative analysis of research, development and regulatory expenses for the
three and six month periods ended June 30, 1997 and 1996.
<PAGE>
<TABLE>
<CAPTION>
For the Three Month For the Three Month
Period Ended Period Ended
June 30, 1997 Percent Change June 30, 1996
------------- -------------- -------------
<S> <C> <C> <C>
Research, development
and regulatory $ 550,427 77% $ 311,490
As a percentage of technology
net sales 26% 9%
For the Six Month For the Six Month
Period Ended Period Ended
June 30, 1997 Percent Change June 30, 1996
------------- -------------- -------------
Research, development
and regulatory $ 912,631 (13%) $1,047,622
As a percentage of technology
net sales 16% 19%
</TABLE>
Research, development and regulatory expenses for the second quarter of 1997
were $550,427, an increase of $238,937, or 77% from such expenditures during the
same period in 1996. Research, development and regulatory expenses for the six
month period ended June 30, 1997 decreased by $134,991 from $1,047,622 for the
same period in 1996 or 13%. The increase in research, development and regulatory
expenses during the second quarter of 1997 can primarily be attributed to
ongoing research and development of new refractive laser systems, including
development of the LaserScan LSX and refinements to the LaserScan-2000, and
continued software development for the excimer lasers. Initial shipments of the
LaserScan LSX are now anticipated during the fourth quarter. Since the initial
announcement of the development of the LaserScan LSX, the Company has solicited
and received input from clinical users and prospective customers. This has
resulted in modifications to the system, necessitating additional development
and testing for clinical validation. As a result of focusing its efforts on
having the LaserScan LSX available for limited commercial production and
shipment in the late fourth quarter of 1997, the Company expects research and
development expenses to remain at levels consistent with or higher than second
quarter 1997 levels throughout the remainder of 1997. Regulatory expenses for
the three month period ended June 30, 1997 have increased in comparison to the
same period in the prior year although for the six month period ended June 30,
1997 there has been a decrease in comparison to the same period in the prior
year. Regulatory expenses are expected to continue to increase for the remaining
portion of the year as a result of the Company's continuation of current FDA
clinical trials, the development of additional future protocols for submission
to the FDA and the PMA acquired in July 1997 (see Note 7).
Selling, General and Administrative Expenses. The following tables present a
comparative analysis of selling, general and administrative expenses for the
three and six month periods ended June 30, 1997 and 1996.
<PAGE>
<TABLE>
<CAPTION>
For the Three Month For the Three Month
Period Ended Period Ended
June 30, 1997 Percent Change June 30, 1996
------------- -------------- -------------
<S> <C> <C> <C>
Selling, general and
administrative $4,565,185 17% $3,907,671
Percentage of net sales 84% 65%
For the Six Month For the Six Month
Period Ended Period Ended
June 30, 1997 Percent Change June 30, 1996
------------- -------------- -------------
Selling, general and
administrative $8,908,172 10% $8,094,268
Percentage of net sales 75% 77%
</TABLE>
Selling, general and administrative expenses increased by $657,514 and $813,904
for the second quarter of 1997 and the first six months of 1997, respectively,
over comparable periods in 1996. The primary reasons for these increases include
increased employment and other operating costs as a result of the acquisition of
NNJEI in July 1996, the growth of MEC, and a general increase in personnel and
costs necessary to fund the strategic initiatives of the Company and the
development of its products and services. These increases in operating costs
were partially offset by a substantial reduction in the operating costs of The
Farris Group. Legal and accounting expenditures continue to be incurred as a
result of ongoing regulatory filings, general corporate issues, litigation and
patent issues.
Loss From Operations. There was an operating loss of $1,944,088 in the second
quarter of 1997 compared to an operating loss of $51,585 for the same period in
1996. Operating loss for the six month period ended June 30, 1997 was $2,579,831
compared to an operating loss of $1,959,681 for the same period in 1996. The
decline in operating results can be attributed primarily to the decrease in
sales of the Company's lasers and operating losses generated by The Farris
Group, partially offset by the continued profitability of MEC and NNJEI.
Other Income and Expenses. Interest and dividend income was $100,507 in the
second quarter of 1997 compared to interest and dividend income of $35,168 for
the same period in 1996. Interest and dividend income for the six month period
ended June 30, 1997 was $197,871 compared to interest and dividend income of
$89,914 for the same period in 1996. Interest and dividend income was earned
from the Company's cash deposits and short-term investments and the collection
of long-term receivables related to laser system sales. Interest expense
incurred was $368,529 in the second quarter of 1997 compared to interest expense
of $21,224 for the same period in 1996. Interest expense for the six month
period ended June 30, 1997 was $428,172 compared to interest expense of $47,588
for the same period in 1996. Interest expense incurred by the Company during the
second quarter of 1997 related primarily to the credit facility established with
FCC on April 1, 1997. In addition to interest paid on the outstanding note
payable balance, included in interest expense is the amortization of deferred
financing costs and the accretion of the discount on the note payable. Included
in other expense in 1997 are costs related to settling patent litigation.
<PAGE>
Income Taxes. For the three and six months ended June 30, 1997, the Company
recorded no income tax benefit or expense compared to an income tax benefit of
$660,651 for the six month period ended June 30, 1996. The lack of income tax
benefit for the first two quarters of 1997 has been based on the lack of
availability of loss carrybacks.
Net Loss. Net loss for the second quarter of 1997 was $2,442,510 compared to a
net loss of $24,940 for the same period in 1996. Net loss for the six month
period ended June 30, 1997, was $3,090,532 compared to a net loss of $1,256,704
for the same period in 1996. The loss is attributed to the decreased revenues
from technology products, losses generated from The Farris Group and higher
operating expenses as previously described for the first and second quarter of
1997.
Loss Per Share. Loss per primary and fully diluted share increased to $0.26 for
the second quarter of 1997 compared to $0.02 for the same period in 1996. Loss
per primary and fully diluted share increased to $0.34 for the six month period
ended June 30, 1997, compared to $0.22 for the same period in 1996. These
increases are attributable to the net loss incurred during both the first and
second quarters of 1997. Weighted average shares outstanding increased from the
second quarter of 1996 as a result of the conversion into Common Stock of 116
shares of convertible Preferred Stock issued in January 1996, the exercise of
options, the issuance of shares in conjunction with the 1996 acquisition of
NNJEI, the 1997 amendment to the purchase agreement related to LaserSight
Centers and the earnout provisions of the 1994 acquisition of The Farris Group.
Liquidity and Capital Resources.
- --------------------------------
Working capital decreased $3,646,235 from $10,020,801 at December 31, 1996 to
$6,374,566 as of June 30, 1997. This decrease in working capital resulted
primarily from the net loss previously mentioned and purchases of furniture and
equipment and a managed care contract.
Operating activities used net cash of $775,081 during the first six months of
1997, compared to $2,740,506 of net cash used during the same period in 1996.
This decrease in cash used is primarily attributable to a substantial decrease
in income tax assets during the first six months of 1997. Other factors
resulting in this decrease include an increase in amortization and depreciation
costs, a slight decrease in net receivables and an increase in accrued expenses,
partially offset by an increase in the net loss for the first six months of
1997. The Company used $500,593 in cash from investing activities during the
first six months of 1997 compared to $246,863 over the same period in 1996. Net
cash used in investing activities during the two quarters of 1997 can be
primarily attributed to the purchase of office and computer equipment and the
purchase of a managed care contract. Net cash provided by financing activities
during the first six months of 1997 was $2,363,342, and consisted of net
proceeds from the credit facility with FCC and the exercise of stock options,
offset by the repayment of a note payable to former owners of MEC and cost
related to the repayment of a capital lease obligation. That compares to cash
provided by financing activities in the first six months of 1996 of $4,124,991,
consisting of net proceeds from the sale of common and preferred stock totaling
$5,389,091 net of a repayment of $1,264,100 in notes payable.
The Company believes that its balances of cash and cash equivalents along with
operating cash flows and the availability of the FCC revolver will be sufficient
to fund its anticipated working capital requirements for the next twelve month
period based on modest growth and anticipated collection of receivables. A
failure to collect timely a material portion of current receivables could have a
material adverse effect on the Company's liquidity. The Company, which
implemented more stringent sales criteria during 1996, may from time to time
reassess its credit policy and the terms it will make available to individual
customers. As a result of a growing presence in a number of countries and
<PAGE>
continued acceptance of the Company's laser systems, the Company intends to
internally finance a proportionately smaller number of sales over periods
exceeding eighteen months than in 1996 and preceding years. There can be no
assurance as to the terms or amount of third-party financing, if any, that the
Company's customers may obtain in the future. The Company is placing greater
emphasis on the terms and collection timing of future sales.
The Company's operating performance in the second quarter caused it to fail to
comply with certain financial covenants under its FCC credit facility. The
Company has received from FCC a written waiver with respect to such
noncompliance and a verbal agreement to modify the financial covenants going
forward. Negotiations to amend the financial covenants are in process. Based on
discussions to date with FCC, management expects that such negotiations should
be successful. However, pending the execution of a definitive written amendment,
there can be no assurance that this expectation will materialize. Because of the
cumulative nature of the original financial covenants, the Company does not
expect that it will be able to satisfy certain such original covenants under the
FCC credit facility for the third quarter of 1997 (i.e., 20 laser system sales
and earnings before interest, taxes, depreciation and amortization (EBITDA, as
defined in the agreement) of approximately $2.0 million) and subsequent fiscal
periods. Achieving such operational targets would require a substantial
improvement in the Company's operating performance. Should the financial
covenants not be amended, and should the Company not achieve the necessary level
of improvement, the Company would be in default of its agreement and FCC would
have the right to accelerate the Company's repayment obligations.
The Company expects to continue a variety of research and development activities
on its excimer and solid-state laser systems over the next twelve months and it
is anticipated that such research and development as well as regulatory efforts
in the United States will be the most significant technology related expenses in
the foreseeable future. In addition, the Company expects to aggressively pursue
vision managed care contracts with HMOs, insurers and employer groups during the
next 12 months. The Company anticipates that such efforts will be the most
significant health care services-related expenses in the foreseeable future.
On March 4, 1997, the Company announced a tentative agreement to acquire
Intermountain Managed Eyecare, of Salt Lake City, Utah, a third-party
administrator of managed vision care contracts with a business strategy similar
to the Company's MEC Health Care subsidiary. The Company originally anticipated
closing this transaction on March 15, 1997. The Company has determined not to
proceed with this transaction at this time.
The Company is receptive to joint venture discussions with compatible companies
for the development and operation in international markets of surgical centers
that will utilize the Company's products or provide synergies to the development
of managed networks. In addition to cash contributions that may be available
from joint venture partners, the Company is also seeking complementary strengths
and other synergies that may provide strategic advantages. The Company has no
present commitments for joint venture relationships, and no assurance can be
given that any such relationship will be secured on terms satisfactory to the
Company.
<PAGE>
UNCERTAINTIES AND OTHER ISSUES
The Company's business, results of operations and financial conditions may also
be affected by a variety of factors, including the ones noted below and under
the same caption in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.
Company-Related Uncertainties
- -----------------------------
Operating Results. The Company incurred losses of $4,074,369 and $3,090,532
during 1996 and the first six months of 1997, respectively. In addition,
although the Company achieved profitability in 1995 and 1994, the Company
incurred losses in 1991 through 1993. As of June 30, 1997, the Company had an
accumulated deficit of $7,703,362. There can be no assurance that the Company
can regain or sustain profitability.
Receivables. At June 30, 1997, the Company's trade accounts and notes receivable
aggregated approximately $10,555,000 net of total allowances for collection
losses and returns of approximately $1,575,000. Accrued commissions, the payment
of which generally depends on the collection of such net trade accounts and
notes receivable, aggregated approximately $1,623,000 at June 30, 1997. Exposure
to collection losses on technology-related receivables is principally dependent
on its customers' ongoing financial condition and their ability to generate
revenues from the Company's laser systems. The Company's ability to evaluate the
financial condition and revenue generating ability of prospective customers
located outside of the United States is generally more limited than for
customers located in the United States. The Company monitors the status of its
receivables and maintains a reserve for estimated losses. The Company's
operating history has been relatively short. There can be no assurance that the
current reserves for estimated losses ($1,418,000 at June 30, 1997) will be
sufficient to cover actual write-offs over time. Actual write-offs that
materially exceed amounts reserved could have a material adverse effect on the
Company's consolidated financial condition and results of operations.
Possible Additional Capital. The Company is exploring alternative sources of
capital to fund its product development activities, to fund the $14.9 million
purchase price for its purchase of certain patents from IBM, to consummate
future strategic acquisitions, and to accelerate its implementation of managed
care strategies. The Company may also need additional capital to introduce its
laser systems into the United States market after receiving FDA approval and to
satisfy certain contingent payment obligations under its PMA acquisition
agreement of July 1997 (see Note 7). In addition, based on ongoing negotiations
with potential investors, the Company believes that any financing it obtains for
the IBM patent purchase is likely to be in the form of convertible preferred
stock that would be redeemable at a premium over its face value shortly after
the occurrence of certain defaults, including a failure by the shareholders of
the Company to approve the financing within a specified time after the closing.
Except for up to $4 million of additional borrowing available under its credit
facility with FCC, the Company has no present commitments to obtain such
capital, and no assurance can be given that the Company will be able to obtain
additional capital on terms satisfactory to the Company. In addition, the
Company may have additional capital requirements upon FDA approvals and other
events discussed in Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources. To the extent that
future financing requirements are satisfied through the sale of equity
securities, holders of Common Stock may experience significant dilution in
earnings per share and in net book value per share. The FCC financing or other
debt financing could result in a substantial portion of the Company's cash flow
from operations being dedicated to the payment of principal and interest on such
indebtedness and may render the Company more vulnerable to competitive pressures
and economic downturns.
<PAGE>
Technology-Related Uncertainties
- --------------------------------
Purchase of Patent Rights from IBM. On February 11, 1997 the Company executed an
agreement with IBM for the purchase of certain IBM patents relating to
ultraviolet light ophthalmic products and procedures for ultraviolet ablation
and IBM's patent license agreements with Summit Technology, Inc. and VISX, Inc.
The purchase price is $14.9 million, and was originally payable on July 1, 1997.
IBM subsequently agreed in writing not to exercise its right to terminate the
agreement until after July 31, 1997 and verbally advised the Company of its
intention not to exercise its right to terminate the agreement until after
August 31, 1997. LaserSight is exploring various alternatives to fund the
purchase price. There can be no assurance that such funding will be available.
If the transaction does not close by August 31, 1997, IBM may terminate the
agreement. In such event, LaserSight would be obligated to deliver to IBM shares
of Common Stock and/or cash with an aggregate value of $1 million.
New Products. There can be no assurance that the Company will not experience
difficulties that could delay or prevent the successful development,
introduction and marketing of its new LaserScan LSX excimer laser and other new
products and enhancements, or that its new products and enhancements will be
accepted in the marketplace. As is typical in the case of new and rapidly
evolving industries, demand and market acceptance for recently introduced
technology and products are subject to a high level or uncertainty. In addition,
announcements of currently planned or other new product offerings may cause
customers to defer purchasing existing Company products.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
Pillar Point Partners
---------------------
On March 25, 1997, the Company entered into an agreement with Pillar
Point Partners and each co-plaintiff to resolve this litigation. Under
the agreement, Pillar Point Partners and each co-plaintiff granted a
release from liability under any of their patents for certain of the
Company's ultraviolet laser corneal surgery systems and any service or
procedure performed with such systems before the effective date of the
agreement. The Company paid a nominal fee in April 1997 and agreed to
notify Pilllar Point Partners and the co-plaintiffs before LaserSight
begins manufacturing or selling in the United States in the future. The
action was dismissed without prejudice in the United States District
Court for the District of Delaware on March 26, 1997.
VISX
----
On May 27, 1997, the Company entered into a License Agreement with
VISX, Incorporated to settle this litigaton as well as any and all
potential claims related to patent infringement prior to May 1, 1997.
The agreement calls for an aggregate of $230,400 to be paid in eight
quarterly installments of $28,800 each.
Euro Pacific Securities Services
--------------------------------
To collect a $1,140,000 stock subscription receivable, the Company
initiated a lawsuit that is presently pending before the United States
District Court for the Middle District of Florida-Orlando Division in
June 1996 against Euro Pacific Securities Services GMBH & Co., KG and
Wolf Wiese (the "defendants"). In July 1997, after failing to timely
file a counterclain, the defendants filed a separate lawsuit in the
same court against the Company and its LaserSight Technologies, Inc.
subsidiary, without obtaining leave from the court, claiming breach of
contract, coercion to enter a contract, misrepresentation, and other
charges and seeking an unspecified amount of monetary damages. The
Company believes that the charges are without merit and procedurally
flawed. A motion for summary judgement is currently on file with the
court, but has not been acted upon.
ITEM 2 CHANGES IN SECURITIES
a) Not applicable.
b) Not applicable.
c) During the second quarter ended June 30, 1997, the Company has sold
or issued the following unregistered securities:
<PAGE>
(1) In April 1997, the Company issued 406,700 shares of Common Stock to
Michael R. Farris, the former shareholder of MRF, Inc. ("The Farris
Group") (now the President and Chief Executive Officer at the Company),
as partial consideration for the acquisition in 1994 of the capital
stock of The Farris Group. Under the original agreement, the investor
received certain rights to have the shares registered by the Company at
a later date.
(2) In April 1997, the Company granted Foothill Capital Corporation
five year warrants to purchase 500,000 shares of Common Stock as
partial consideration for the extension of credit by Foothill Capital
Corporation. The warrants are exerciseable commencing on March 31, 1998
at a price of $6.0667 per share and the investor received certain
rights to have the shares registered by the Company at a later date.
The issuance and sale of all such shares was intended to be exempt from
registration and prospectus delivery requirements under the Securities
Act of 1933, as amended (the "Securities Act") by virtue of Section
4(2) thereof due to, among other things, (i) the limited number of
persons to whom the shares were issued, (ii) the distribution of
disclosure documents to all investors, (iii) the fact that each such
person represented and warranted to the Company, among other things,
that such person was acquiring the shares for investment only and not
with a view to the resale or distribution thereof, and (iv) the fact
that certificates representing the shares were issued with a legend to
the effect that such shares had not been registered under the
Securities Act or any state securities laws and could not be sold or
transferred in the absence of such registration or an exemption
therefrom.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 13, 1997, at the Company's annual meeting of shareholders, the
following members were elected to the Board of Directors:
Votes For (1) Votes Withheld
------------- --------------
J. Richard Crowley 7,769,640 171,282
Michael R. Farris 7,432,692 508,230
Richard C. Lutzy 7,772,870 168,052
Francis E. O'Donnell, Jr., M.D. 7,219,320 721,602
Thomas Quinn 7,772,670 168,252
David T. Pieroni 7,431,442 509,480
A proposal to appoint KPMG Peat Marwick LLP as auditors was ratified as
follows:
Votes For (1) 7,917,932
Votes Against 9,150
Abstain 14,000
<PAGE>
Amendment of the Non-Employee Directors Stock Option Plan was ratified
as follows:
Votes For 6,907,767
Votes Against 829,126
Abstain 15,037
(1) As set forth in the Proxy Statement, includes shares not voted by
proxy which were automatically voted for election of the nominees for
director and the appointment of auditors.
ITEM 5 OTHER INFORMATION
Not applicable.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
EXHIBIT INDEX
Exhibit 2 - Plans of Acquisition, Reorganization
2.1 See Exhibits 10.3, 10.8, 10.10, 10.19, 10.26, 10.29, 10.30, 10.46 and
10.47.
Exhibit 4 - Instruments Defining the Rights of Security Holders
4.1 Instruments defining the rights of security holders are set forth in
the Articles of Incorporation, as amended, and are incorporated herein
by reference from 8-A/A filed January 18, 1996.
Exhibit 10 - Material Contracts
10.1 Agreement dated April 1, 1992 between International Business Machines
Corporation and LaserSight Incorporated (filed as Exhibit 10.1 on Form
10-K for the year ended December 31, 1995*).
10.2 Covenant Not to Compete entered into between LaserSight Incorporated
and Dr. J.T. Lin (filed as Exhibit 10(c) to the Company's Registration
Statement on Form S-18 (File No. 33-42734 and incorporated herein by
reference).
10.3 Agreement for Purchase and Sale of Stock by and among LaserSight
Centers Incorporated, its stockholders and LaserSight Incorporated
dated January 15, 1993 (filed as Exhibit 2 to the Company's Form 8-K/A
filed on January 25, 1993*).
10.4 Amendment to Agreement for Purchase and Sale of Stock by and among
LaserSight Centers Incorporated, its stockholders, and LaserSight
Incorporated dated April 5, 1993 (filed as Exhibit 2 to the Company's
Form 8-K/A filed on April 19, 1993*).
<PAGE>
10.5 Royalty Agreement by and between LaserSight Centers Incorporated and
LaserSight Partners dated January 15, 1993 (filed as Exhibit 10.5 to
the Company's Form 10-K for the year ended December 31, 1995*).
10.6 Exchange Agreement dated January 25, 1993 between LaserSight Centers
Incorporated and Laser Partners (filed as Exhibit 10.6 to the Company's
Form 10-K for the year ended December 31, 1995*).
10.7 Stipulation and Agreement of Compromise, Settlement and Release dated
April 18, 1995 among James Gossin, Francis E. O'Donnell, Jr., J.T. Lin,
Wen S. Dai, Emanuela Dobrin-Charlton, C.H. Huang, W. Douglas Hajjar,
and LaserSight Incorporated (filed as Exhibit 10.7 to the Company's
Form 10-K for the year ended December 31, 1995*).
10.8 Agreement for Purchase and Sale of Stock dated December 31, 1993, among
LaserSight Incorporated, MRF, Inc., and Michael R. Farris (filed as
Exhibit 2 to the Company's Form 8-K filed on December 31, 1993*).
10.9 First Amendment to Agreement for Purchase and Sale of Stock by and
among MRF, Inc., Michael R. Farris and LaserSight Incorporated dated
December 28, 1995 (filed as Exhibit 10.9 to the Company's Form 10-K for
the year ended December 31, 1995*).
10.10 Contribution Agreement dated July 7, 1994, between LaserSight
Incorporated and LaserSight Technologies, Inc. (filed as Exhibit 2.6 to
the Company's Form 10-K for the year ended December 31, 1994*).
10.11 Research and Development Consulting Agreement dated March 31, 1995
between LaserSight Technologies, Inc. and J.T. Lin, Ph.D. (filed as
Exhibit 10.3 to the Company's Form 10-Q for the quarter ended September
30, 1995*).
10.12 Technology Transfer Agreement dated July 25, 1995 between LaserSight
Technologies, Inc., J.T. Lin, Ph.D. and Photon Data, Inc. (filed as
Exhibit 10.4 to the Company's Form 10-Q for the quarter ended September
30, 1995*).
10.13 LaserSight Incorporated 1995 Stock Option Plan (filed as Exhibit 10.5
to the Company's Form 10-Q for the quarter ended September 30, 1995*).
10.14 Consulting Agreement dated November 1, 1996 by and between LaserSight
Technologies, Inc. and Emanuela Dobrin-Charlton (filed as Exhibit 10.14
to the Company's Form 10-K for the year ended December 31, 1996*).
10.15 Consulting Agreement dated June 7, 1995 by and between LaserSight
Incorporated and Richard C. Lutzy (filed as Exhibit 10.15 to the
Company's Form 10-K for the year ended December 31, 1995*).
10.16 Modified Promissory Note between LaserSight Incorporated, EuroPacific
Securities Services, GmbH and Co. KG and Wolf Wiese (filed as Exhibit
10.6 to the Company's Form 10-Q for the quarter ended September 30,
1995*).
<PAGE>
10.17 Employment Agreement by and between LaserSight Incorporated and Michael
R. Farris dated December 28, 1995 (filed as Exhibit 10.17 to the
Company's Form 10-K for the year ended December 31, 1995*).
10.18 Employment Agreement dated December, 1995 by and between LaserSight
Incorporated and David Pieroni (filed as Exhibit 10.18 to the Company's
Form 10-K for the year ended December 31, 1995*).
10.19 Agreement and Plan of Merger by and among LaserSight Incorporated, MEC
Health Care, Inc., Dr. Mark B. Gordon, O.D. and Dr. Howard M. Levin,
O.D., dated August 28, 1995 as amended as of October 5, 1995 (filed as
Exhibit 2 to the Company's Form 8-K filed on October 19, 1995*).
10.20 Manufacturer's Representative Agreement by and between LaserSight
Technologies, Inc. and Natural Vision of Malta dated September 1, 1995
(filed as Exhibit 10.20 to the Company's Form 10-K for the year ended
December 31, 1995*).
10.21 Patent License Agreement dated December 21, 1995 by and between Francis
E. O'Donnell, Jr. and LaserSight Centers, Inc. (filed as Exhibit 10.21
to the Company's Form 10-K for the year ended December 31, 1995*).
10.22 Agreement dated April 4, 1996 to amend Agreement and Plan of Merger by
and among LaserSight Incorporated, Mark B. Gordon, O.D. and Howard M.
Levin, O.D. (filed as Exhibit 10.22 to the Company's Form 10-Q for the
2nd quarter ended June 30, 1996*).
10.23 Agreement dated June 27, 1996 to amend Agreement and Plan of Merger by
and among LaserSight Incorporated, Mark B. Gordon, O.D. and Howard M.
Levin, O.D. (filed as Exhibit 10.23 to the Company's Form 10-Q for the
2nd quarter ended June 30, 1996*).
10.24 LaserSight Incorporated 1996 Equity Incentive Plan (filed as Exhibit A
to the Company's definitive proxy statement dated April 30, 1996*).
10.25 LaserSight Incorporated Amended and Restated Non-Employee Directors
Stock Option Plan (filed as Exhibit B to the Company's definitive proxy
statement dated May 19, 1997*).
10.26 Agreement and Plan of Merger dated April 18, 1996 among LaserSight
Incorporated, Eye Diagnostics & Surgery, P.A., LSI Acquisition, Inc.,
John W. Norris, M.D. and Bernard Spier, M.D. (filed as Exhibit 2 (i) to
the Company's Form 8-K dated July 18, 1996*).
10.27 Amendment to the Agreement and Plan of Merger dated June 17, 1996
(filed as Exhibit 2 (ii) to the Company's Form 8-K dated July 18,
1996*).
10.28 Second Amendment to the Agreement and Plan of Merger dated July 3, 1996
(filed as Exhibit 2 (iii) to the Company's Form 8-K dated July 18,
1996*).
10.29 Agreement and Plan of Merger dated June 17, 1996 among LaserSight
Incorporated, LaserSight Acquisition, Inc., Cataract Hotline, Inc. and
Michael R. Norris (filed as Exhibit 2 (iv) to the Company's Form 8-K
dated July 18, 1996*).
<PAGE>
10.30 Asset Purchase Agreement dated April 18, 1996 between LaserSight
Incorporated and John W. Norris, M.D. (filed as Exhibit 2 (vi) to the
Company's Form 8-K dated July 18, 1996*).
10.31 Amendment to Asset Purchase Agreement dated June 17, 1996 (filed as
Exhibit 2 (vii) to the Company's Form 8-K dated July 18, 1996*).
10.32 Agreement dated August 12, 1996 to amend Agreement and Plan of Merger
by and among LaserSight Incorporated, Mark B. Gordon, O.D. and Howard
M. Levin, O.D. (filed as Exhibit 10.32 to the Company's Form 10-K for
the year ended December 31, 1996*).
10.33 Agreement dated October 30, 1996 to amend Agreement and Plan of Merger
by and among LaserSight Incorporated, Mark B. Gordon, O.D. and Howard
M. Levin, O.D. (filed as Exhibit 10.33 to the Company's Form 10-K for
the year ended December 31, 1996*).
10.34 Agreement dated January 8, 1997 to amend Agreement and Plan of Merger
by and among LaserSight Incorporated, Mark B. Gordon, O.D. and Howard
M. Levin, O.D. (filed as Exhibit 10.34 to the Company's Form 10-K for
the year ended December 31, 1996*).
10.35 Agreement dated September 18, 1996 between David T. Pieroni and
LaserSight Incorporated (filed as Exhibit 10.35 to the Company's Form
10-K for the year ended December 31, 1996*).
10.36 Agreement dated December 17, 1996 between Public Company Publishing,
Inc., Samuel S. Duffey and LaserSight Incorporated (filed as Exhibit
10.36 to the Company's Form 10-K for the year ended December 31,
1996*).
10.37 Agreement dated January 1, 1997, between International Business
Machines Corporation and LaserSight Incorporated (filed as Exhibit
10.37 to the Company's Form 10-K for the year ended December 31,
1996*).
10.38 Addendum dated March 7, 1997 to Agreement between International
Business Machines Corporation and LaserSight Incorporated (filed as
Exhibit 10.38 to the Company's Form 10-K for the year ended December
31, 1996*).
10.39 Second Amendment to Agreement for Purchase and Sale of Stock by and
among LaserSight Centers Incorporated, its stockholders and LaserSight
Incorporated dated March 14, 1997 (filed as Exhibit 99.1 to the
Company's Form 8-K filed on March 27, 1997*).
10.40 Amendment to Royalty Agreement by and between LaserSight Centers
Incorporated, Laser Partners and LaserSight Incorporated dated March
14, 1997 (filed as Exhibit 99.2 to the Company's Form 8-K filed on
March 27, 1997*).
10.41 Employment Agreement dated September 16, 1996 by and between LaserSight
Incorporated and Richard L. Stensrud (filed as Exhibit 10.41 to the
Company's Form 10-Q filed on May 9, 1997*).
10.42 Loan and Security Agreement dated March 31, 1997 by and between
LaserSight Incorporated and certain of its subsidiaries and Foothill
Capital Corporation.
<PAGE>
10.43 Consent and Amendment Number One to Loan and Security Agreement dated
July 28, 1997 by and between LaserSight Incorporated and Foothill
Capital Corporation.
10.44 Warrant to purchase 500,000 shares of Common Stock dated March 31, 1997
by and between LaserSight Incorporated and Foothill Capital
Corporation.
10.45 License Agreement dated May 20, 1997 by and between VISX, Incorporated
and LaserSight Incorporated.
10.46 Patent Purchase Agreement dated July 15, 1997 by and between LaserSight
Incorporated and Frederic B. Kremer, M.D. (filed as Exhibit 2.(i) to
the Company's Form 8-K filed on August 13, 1997*).
10.47 Agreement and Plan of Merger dated July 15, 1997 by and among
LaserSight Incorporated, Photomed Acquisition, Inc., Photomed, Inc.,
Frederic B. Kremer, M.D., Linda Kremer, Robert Satalof, Trustee for
Alan Stewart Kremer and Robert Satalof, Trustee for Mark Adam Kremer
(filed as Exhibit 2.(ii) to the Company's Form 8-K filed on August 13,
1997*).
11 Statement of Computation of Per Share Earnings.
27 Financial Data Schedule.
b) Reports on Form 8-K
On April 8, 1997, the Company filed with the Commission a
Current Report on Form 8-K regarding the press release issued
by the Company dated April 7, 1997, announcing that LaserSight
has completed financing.
On April 25, 1997, the Company filed with the Commission a
Current Report on Form 8-K regarding the press release issued
by the Company dated April 24, 1997, regarding LaserSight
expecting a first quarter loss.
- -------------------
* Incorporated herein by reference. File No. 0-19671.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the undersigned have duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LaserSight Incorporated
Dated: August 14, 1997 By: /s/ Michael R. Farris
------------------- -------------------------
Michael R. Farris,
Chief Executive Officer
Dated: August 14, 1997 By: /s/ Gregory L. Wilson
------------------- -------------------------
Gregory L. Wilson,
Chief Financial Officer
------------------------------------------
LOAN AND SECURITY AGREEMENT
by and among
LASERSIGHT INCORPORATED,
each of its Subsidiaries signatory hereto,
and
FOOTHILL CAPITAL CORPORATION
Dated as of March 31, 1997
------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions
1.2 Accounting Terms
1.3 Code
1.4 Construction
1.5 Schedules and Exhibits
2. LOAN AND TERMS OF PAYMENT
2.1 Revolving Advances
2.2 [Intentionally Omitted]
2.3 Term Loan
2.4 [Intentionally Omitted]
2.5 Overadvances
2.6 Interest: Rates, Payments, and Calculations
2.7 Collection of Accounts
2.8 Crediting Payments; Application of Collections
2.9 Designated Account
2.10 Maintenance of Loan Account; Statements of Obligations
2.11 Fees
3. CONDITIONS; TERM OF AGREEMENT
3.1 Conditions Precedent to the Initial Advance and the Term Loan
3.2 Conditions Precedent to all Advances and the Term Loan
3.3 Conditions Subsequent
3.4 Term
3.5 Effect of Termination
3.6 Early Termination by Borrower
3.7 Termination Upon Event of Default
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest
4.2 Negotiable Collateral
4.3 Collection of Accounts, General Intangibles, and Negotiable
Collateral
4.4 Delivery of Additional Documentation Required
4.5 Power of Attorney
4.6 Right to Inspect
5. REPRESENTATIONS AND WARRANTIES
5.1 No Encumbrances
5.2 Eligible Contract Receivables
5.3 Purchase Agreements
5.4 Equipment
5.5 Location of Inventory and Equipment
5.6 Inventory Records
5.7 Location of Chief Executive Offices; FEINs
5.8 Due Organization and Qualification; Subsidiaries
5.9 Due Authorization; No Conflict
5.10 Litigation
5.11 No Material Adverse Change
5.12 Solvency
5.13 Employee Benefits
5.14 Environmental Condition
6. AFFIRMATIVE COVENANTS
6.1 Accounting System
6.2 Collateral Reporting
6.3 Financial Statements, Reports, Certificates
6.4 Tax Returns
6.5 Guarantor Reports
6.6 Returns
6.7 [Intentionally Omitted]
6.8 Maintenance of Equipment
6.9 Taxes....
6.10 Insurance
6.11 No Setoffs or Counterclaims
6.12 Location of Inventory and Equipment
6.13 Compliance with Laws
6.14 Employee Benefits
6.15 Leases
6.16 Purchase Agreements
6.17 Broker Indemnity
7. NEGATIVE COVENANTS
7.1 Indebtedness
7.2 Liens
7.3 Restrictions on Fundamental Changes
7.4 Disposal of Assets
7.5 Change Name
7.6 Guarantee
7.7 Nature of Business
7.8 Prepayments and Amendments
7.9 Change of Control
7.10 Consignments
7.11 Distributions
7.12 Accounting Methods
7.13 Investments
7.14 Transactions with Affiliates
7.15 Suspension
7.16 Compensation
7.17 Use of Proceeds
7.18 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees
7.19 No Prohibited Transactions Under ERISA
7.20 Financial Covenants
7.21 Capital Expenditures
7.22 Non-Material Subsidiaries
8. EVENTS OF DEFAULT
9. FOOTHILL'S RIGHTS AND REMEDIES
9.1 Rights and Remedies
9.2 Remedies Cumulative
10. TAXES AND EXPENSES
11. WAIVERS; INDEMNIFICATION
11.1 Demand; Protest; etc.
11.2 Foothill's Liability for Collateral
11.3 Indemnification
12. NOTICES
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
14. DESTRUCTION OF BORROWER'S DOCUMENTS
15. GENERAL PROVISIONS
15.1 Effectiveness
15.2 Successors and Assigns
15.3 Section Headings
15.4 Interpretation
15.5 Severability of Provisions
15.6 Amendments in Writing
15.7 Counterparts; Telefacsimile Execution
15.8 Revival and Reinstatement of Obligations
15.9 Integration
SCHEDULES AND EXHIBITS
----------------------
Schedule E-1 Existing Purchase Agreements
Schedule N-1 Non-Material Subsidiaries
Schedule P-1 Permitted Liens
Schedule 5.3(b) Existing Purchase Agreement Defaults
Schedule 5.8 Subsidiaries
Schedule 5.10 Litigation
Schedule 5.13 ERISA Benefit Plans
Schedule 6.12 Location of Inventory and Equipment
Schedule 7.14(a) Existing Transactions with Affiliates
Exhibit C-1 Form of Compliance Certificate
<PAGE>
LOAN AND SECURITY AGREEMENT
---------------------------
THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is entered into as of
March 31, 1997, between FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), with a place of business located at 11111 Santa Monica Boulevard,
Suite 1500, Los Angeles, California 90025-3333, on the one hand, and LASERSIGHT
INCORPORATED, a Delaware corporation ("LaserSight"), with its chief executive
office located at 12161 Lackland Road, St. Louis, Missouri 63146, LASERSIGHT
TECHNOLOGIES, INC., a Delaware corporation ("Technologies"), with its chief
executive office located at 12249 Science Drive, Suite 160, Orlando, Florida
32826, MEC HEALTH CARE, INC., a Maryland corporation ("MEC"), with its chief
executive office located at 100 Park Avenue, Baltimore, Maryland 21201, LSI
ACQUISITION, INC., a New Jersey corporation ("LSI"), with its chief executive
office located at 71 Second Street, South Orange, New Jersey 07079, LASERSIGHT
CENTERS INCORPORATED, a Delaware corporation ("Centers"), with its chief
executive office located at 12161 Lackland Road, St. Louis, Missouri 63146, and
MRF, INC., a Missouri corporation ("MRF"), with its chief executive office
located at 12161 Lackland Road, St. Louis, Missouri 63146.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the following terms shall
have the following definitions:
"Account Debtor" means any Person who is or who may become
obligated under, with respect to, or on account of, an Account or contract
receivable.
"Accounts" means all currently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to a
Borrower arising out of the sale or lease of goods or the rendition of services
by such Borrower, irrespective of whether earned by performance, and any and all
credit insurance, guaranties, or security therefor.
"Advances" has the meaning set forth in Section 2.1(a).
"Affiliate" means, as applied to any Person, any other Person who
directly or indirectly controls, is controlled by, is under common control with
or is a director or officer of such Person. For purposes of this definition,
"control" means the possession, directly or indirectly, of the power to vote 10%
or more of the securities having ordinary voting power for the election of
directors or the direct or indirect power to direct the management and policies
of a Person.
"Agreement" has the meaning set forth in the preamble to this
Agreement.
"Authorized Person" means any officer or other employee of a
Borrower.
"Bankruptcy Code" means the United States Bankruptcy Code (11
U.S.C.ss. 101 et seq.), as amended, and any successor statute.
"Benefit Plan" means a "defined benefit plan" (as defined in
Section 3(35) of ERISA) for which Borrower, any Subsidiary of Borrower, or any
ERISA Affiliate has been an "employer" (as defined in Section 3(5) of ERISA)
within the past six years.
"Borrower" means LaserSight, Technologies, MEC, LSI, Centers, and
MRF, individually and collectively, jointly and severally.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records indicating, summarizing, or evidencing Borrower's
properties or assets (including the Collateral) or liabilities; all information
relating to Borrower's business operations or financial condition; and all
computer programs, disk or tape files, printouts, runs, or other computer
prepared information.
"Borrower Letters of Credit" means any and all letters of credit
under which Borrower is the beneficiary.
"Borrowing Base" has the meaning set forth in Section 2.1(a).
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which national banks are authorized or required to close.
"Centers" has the meaning set forth in the preamble to this
Agreement.
"Change of Control" shall be deemed to have occurred at such time
as a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934) becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, of more than 20% of the total voting power of all classes of stock
then outstanding of any Borrower entitled to vote in the election of directors.
"Closing Date" means the date of the first to occur of the making
of the initial Advance or the funding of the Term Loan.
"Code" means the California Uniform Commercial Code.
"Collateral" means each of the following:
(a) the Accounts,
(b) Borrower's Books,
(c) the Equipment,
(d) the General Intangibles,
(e) the Inventory,
(f) the Negotiable Collateral,
(g) any money, or other assets of Borrower that now or hereafter
come into the possession, custody, or control of Foothill, and
(h) the proceeds and products, whether tangible or intangible, of
any of the foregoing, including proceeds of insurance covering any or all of the
Collateral, and any and all Accounts, Borrower's Books, Equipment, General
Intangibles, Inventory, Negotiable Collateral, money, deposit accounts, or other
tangible or intangible property resulting from the sale, exchange, collection,
or other disposition of any of the foregoing, or any portion thereof or interest
therein, and the proceeds thereof.
"Collateral Access Agreement" means a landlord waiver, mortgagee
waiver, bailee letter, or acknowledgement agreement of any warehouseman,
processor, lessor, consignee, or other Person in possession of, having a Lien
upon, or having rights or interests in the Equipment or Inventory, in each case,
in form and substance satisfactory to Foothill.
"Collections" means all cash, checks, notes, instruments, and other
items of payment (including, insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds).
"Commitment Letter" means that certain letter agreement, dated
March 12, 1997, from Foothill to LaserSight, which letter agreement sets forth
the terms and conditions of the credit facility to be extended by Foothill to
Borrower.
"Compliance Certificate" means a certificate substantially in the
form of Exhibit C-1 and delivered by the chief financial officer of LaserSight
to Foothill.
"Consolidated Current Assets" means, as of any date of
determination, the aggregate amount of all current assets of Borrower that
would, in accordance with GAAP, be classified on a balance sheet as current
assets.
"Consolidated Current Liabilities" means, as of any date of
determination, the aggregate amount of all current liabilities of Borrower that
would, in accordance with GAAP, be classified on a balance sheet as current
liabilities. For purposes of this definition, all Obligations outstanding under
this Agreement shall be deemed to be current liabilities without regard to
whether they would be deemed to be so under GAAP.
"Copyright Security Agreement" means that certain Copyright
Security Agreement, in form and substance satisfactory to Foothill, executed and
delivered by each Borrower.
"Daily Balance" means the amount of an Obligation owed at the end
of a given day.
"deems itself insecure" means that the Person deems itself insecure
in accordance with the provisions of Section 1208 of the Code.
"Default" means an event, condition, or default that, with the
giving of notice, the passage of time, or both, would be an Event of Default.
"Designated Account" means account number 3410627712 of Borrower
maintained with Borrower's Designated Account Bank, or such other deposit
account of Borrower (located within the United States) which has been
designated, in writing and from time to time, by Borrower to Foothill.
"Designated Account Bank" means Mark Twain Bank, whose office is
located at Clarkson Square, 1795 Clarkson Road, Suite 100, Chesterfield,
Missouri 63017, and whose ABA number is 081-003-408.
"Disbursement Letter" means an instructional letter executed and
delivered by Borrower to Foothill regarding the extensions of credit to be made
on the Closing Date, the form and substance of which shall be satisfactory to
Foothill.
"Dollars or $" means United States dollars.
"Early Termination Premium" has the meaning set forth in Section
3.6.
"EBITDA" means the consolidated net income of Borrower and its
Subsidiaries (excluding extraordinary gains, non-cash extraordinary losses, and
non-operating income) for the applicable period plus all interest expense,
income tax expense, non-operating expenses, and depreciation and amortization
(including amortization of any goodwill or other intangibles) for the applicable
period.
"Eligible Contract Receivables" means Eligible Existing Contract
Receivables and Eligible New Contract Receivables.
"Eligible Existing Contract Receivables" means those contract
receivables (net of commissions, unapplied cash, and financing discounts and
charges) created by Technologies in the ordinary course of business that arise
out of Technologies' sale of goods pursuant to an Existing Purchase Agreement,
that strictly comply with each and all of the representations and warranties
respecting Eligible Contract Receivables made by Borrower to Foothill in the
Loan Documents, and that are and at all times continue to be acceptable to
Foothill in all respects; provided, however, that standards of eligibility may
be fixed and revised from time to time by Foothill in Foothill's reasonable
credit judgment. Eligible Existing Contract Receivables shall not include the
following:
(a) Contract receivables (i) that the Account Debtor has failed to
pay within 60 days of the payment date set forth in the respective Purchase
Agreement, or (ii) that are payable under a restructured Purchase Agreement,
until such time as the Account Debtor has made the initial payment thereunder
within 60 days of the payment date set forth in the respective restructured
Purchase Agreement;
(b) Contract receivables owed by an Account Debtor or its
Affiliates where 50% or more of all contract receivables owed by that Account
Debtor (or its Affiliates) are deemed ineligible under clause (a) above;
(c) Contract receivables with respect to which the Account Debtor
is an employee, Affiliate, or agent of Borrower;
(d) Contract receivables with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, bill and hold,
or other terms by reason of which the payment by the Account Debtor may be
conditional;
(e) Contract receivables with respect to which the Account Debtor
is either (i) the United States or any department, agency, or instrumentality of
the United States (exclusive, however, of contract receivables with respect to
which Technologies has complied, to the satisfaction of Foothill, with the
Assignment of Claims Act, 31 U.S.C. ss. 3727), or (ii) any State of the United
States (exclusive, however, of contract receivables owed by any State that does
not have a statutory counterpart to the Assignment of Claims Act);
(f) Contract receivables with respect to which the Account Debtor
is a creditor of Borrower, has or has asserted a right of setoff, has disputed
its liability, or has made any claim with respect to the contract receivables;
(g) Contract receivables with respect to an Account Debtor whose
total obligations owing to Technologies exceed 10% of all Eligible Contract
Receivables, to the extent of the obligations owing by such Account Debtor in
excess of such percentage;
(h) Contract receivables with respect to which the Account Debtor
is subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business;
(i) Contract receivables the collection of which Foothill, in its
reasonable credit judgment, believes to be doubtful by reason of the Account
Debtor's financial condition;
(j) Contract receivables with respect to which the goods giving
rise to such contract receivables have not been shipped and billed to the
Account Debtor, the services giving rise to such contract receivables have not
been performed and accepted by the Account Debtor, or the contract receivables
otherwise do not represent a final sale; and
(k) Contract receivables that are evidenced by a Purchase Agreement
that is not in Foothill's possession and control.
"Eligible New Contract Receivables" means those contract
receivables (net of commissions, unapplied cash, and financing discounts and
charges) created by Technologies in the ordinary course of business that arise
out of Technologies' sale of goods pursuant to a Purchase Agreement entered into
by Technologies and an Account Debtor on or after the Closing Date, that
strictly comply with each and all of the representations and warranties
respecting Eligible Contract Receivables made by Borrower to Foothill in the
Loan Documents, and that are and at all times continue to be acceptable to
Foothill in all respects; provided, however, that standards of eligibility may
be fixed and revised from time to time by Foothill in Foothill's reasonable
credit judgment. Eligible New Contract Receivables shall not include the
following:
(a) Contract receivables (i) that the Account Debtor has failed to
pay within 60 days of the payment date set forth in the respective Purchase
Agreement, (ii) that are payable under a restructured Purchase Agreement, until
such time as the Account Debtor has made the initial payment thereunder within
60 days of the payment date set forth in the respective restructured Purchase
Agreement, or (iii) with selling terms of more than 24 months;
(b) Contract receivables owed by an Account Debtor or its
Affiliates where 50% or more of all contract receivables owed by that Account
Debtor (or its Affiliates) are deemed ineligible under clause (a) above;
(c) Contract receivables with respect to which the Account Debtor
is an employee, Affiliate, or agent of Borrower;
(d) Contract receivables with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, bill and hold,
or other terms by reason of which the payment by the Account Debtor may be
conditional;
(e) Contract receivables with respect to which the Account Debtor
is either (i) the United States or any department, agency, or instrumentality of
the United States (exclusive, however, of contract receivables with respect to
which Technologies has complied, to the satisfaction of Foothill, with the
Assignment of Claims Act, 31 U.S.C. ss. 3727), or (ii) any State of the United
States (exclusive, however, of contract receivables owed by any State that does
not have a statutory counterpart to the Assignment of Claims Act);
(f) Contract receivables with respect to which the Account Debtor
is a creditor of Borrower, has or has asserted a right of setoff, has disputed
its liability, or has made any claim with respect to the contract receivables;
(g) Contract receivables with respect to an Account Debtor whose
total obligations owing to Technologies exceed 10% of all Eligible Contract
Receivables, to the extent of the obligations owing by such Account Debtor in
excess of such percentage;
(h) Contract receivables with respect to which the Account Debtor
is subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business;
(i) Contract receivables the collection of which Foothill, in its
reasonable credit judgment, believes to be doubtful by reason of the Account
Debtor's financial condition;
(j) Contract receivables with respect to which the goods giving
rise to such contract receivables have not been shipped and billed to the
Account Debtor, the services giving rise to such contract receivables have not
been performed and accepted by the Account Debtor, or the contract receivables
otherwise do not represent a final sale; and
(k) Contract receivables that are evidenced by a Purchase Agreement
that is not in Foothill's possession and control.
"Equipment" means all of each Borrower's present and hereafter
acquired machinery, machine tools, motors, equipment, furniture, furnishings,
fixtures, vehicles (including motor vehicles and trailers), tools, parts, goods
(other than consumer goods, farm products, or Inventory), wherever located,
including, (a) any interest of a Borrower in any of the foregoing, and (b) all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974,
29 U.S.C. ss.ss. 1000 et seq., amendments thereto, successor statutes, and
regulations or guidance promulgated thereunder.
"ERISA Affiliate" means (a) any corporation subject to ERISA whose
employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any party subject to ERISA that is a party to an arrangement
with Borrower and whose employees are aggregated with the employees of Borrower
under IRC Section 414(o).
"ERISA Event" means (a) a Reportable Event with respect to any
Benefit Plan or Multiemployer Plan, (b) the withdrawal of Borrower, any of its
Subsidiaries or ERISA Affiliates from a Benefit Plan during a plan year in which
it was a "substantial employer" (as defined in Section 4001(a)(2) of ERISA), (c)
the providing of notice of intent to terminate a Benefit Plan in a distress
termination (as described in Section 4041(c) of ERISA), (d) the institution by
the PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan, (e)
any event or condition (i) that provides a basis under Section 4042(a)(1), (2),
or (3) of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan or Multiemployer Plan, or (ii) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA, (f) the
partial or complete withdrawal within the meaning of Sections 4203 and 4205 of
ERISA, of Borrower, any of its Subsidiaries or ERISA Affiliates from a
Multiemployer Plan, or (g) providing any security to any Plan under Section
401(a)(29) of the IRC by Borrower or its Subsidiaries or any of their ERISA
Affiliates.
"Event of Default" has the meaning set forth in Section 8.
"Existing Lender" means, collectively, Mark B. Gordon, O.D. and
Howard H. Levin, O.D.
"Existing Purchase Agreements" means the purchase agreements
identified on Schedule E-1.
"FEIN" means Federal Employer Identification Number.
"Foothill" has the meaning set forth in the preamble to this
Agreement.
"Foothill Account" has the meaning set forth in Section 2.7.
"Foothill Expenses" means all: (a) costs or expenses (including
taxes, and insurance premiums) required to be paid by Borrower under any of the
Loan Documents that are paid or incurred by Foothill; (b) fees or charges paid
or incurred by Foothill in connection with Foothill's transactions with
Borrower, including (i) fees or charges for appraisal (including periodic
Collateral appraisals), real estate surveys, and environmental audits, and (ii)
reasonable fees or charges for photocopying, notarization, couriers and
messengers, telecommunication, public record searches (including tax lien,
litigation, and UCC searches and including searches with the patent and
trademark office, the copyright office, or the department of motor vehicles),
filing, recording, publication, and real estate title policies and endorsements;
(c) costs and expenses incurred by Foothill in the disbursement of funds to
Borrower (by wire transfer or otherwise); (d) charges paid or incurred by
Foothill resulting from the dishonor of checks; (e) reasonable costs and
expenses paid or incurred by Foothill to correct any default or enforce any
provision of the Loan Documents, or in gaining possession of, maintaining,
handling, preserving, storing, shipping, selling, preparing for sale, or
advertising to sell the Collateral, or any portion thereof, irrespective of
whether a sale is consummated; (f) costs and expenses paid or incurred by
Foothill in examining Borrower's Books; (g) reasonable costs and expenses of
third party claims or any other suit paid or incurred by Foothill in enforcing
or defending the Loan Documents or in connection with the transactions
contemplated by the Loan Documents or Foothill's relationship with Borrower or
any guarantor; and (h) Foothill's reasonable attorneys fees and expenses
incurred in advising, structuring, drafting, reviewing, administering, amending,
terminating, enforcing (including attorneys fees and expenses incurred in
connection with a "workout," a "restructuring," or an Insolvency Proceeding
concerning Borrower or any guarantor of the Obligations), defending, or
concerning the Loan Documents, irrespective of whether suit is brought.
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States, consistently applied.
"General Intangibles" means all of each Borrower's present and
future general intangibles and other personal property (including contract
rights, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, patents, trade names, trademarks, servicemarks,
copyrights, blueprints, drawings, purchase orders, customer lists, monies due or
recoverable from pension funds, route lists, rights to payment and other rights
under any royalty or licensing agreements, infringement claims, computer
programs, information contained on computer disks or tapes, literature, reports,
catalogs, deposit accounts, insurance premium rebates, tax refunds, and tax
refund claims), other than goods, Accounts, and Negotiable Collateral.
"Governing Documents" means the certificate or articles of
incorporation, by-laws, or other organizational or governing documents of any
Person.
"Guarantor" means LST Laser, S.A. (Costa Rica), a corporation
organized under the laws of Costa Rica.
"Guaranty" means that certain General Continuing Guaranty, in form
and substance satisfactory to Foothill, executed and delivered by Guarantor in
favor of Foothill.
"Hazardous Materials" means (a) substances that are defined or
listed in, or otherwise classified pursuant to, any applicable laws or
regulations as "hazardous substances," "hazardous materials," "hazardous
wastes," "toxic substances," or any other formulation intended to define, list,
or classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
"IBM" means International Business Machines Corporation, a New York
corporation.
"IBM Consent" means that certain letter of consent, dated as of
March 31, 1997, executed and delivered by IBM to Foothill and LaserSight, in
form and substance satisfactory to Foothill.
"IBM License Agreement" means that certain Agreement, dated as of
April 1, 1992, by and between LaserSight and IBM, pursuant to which IBM licensed
the right to use certain patents to LaserSight.
"IBM Option Agreement" means that certain Agreement, dated as of
January 1, 1997, by and between Lasersight and IBM, pursuant to which (a)
LaserSight may acquire certain IBM patents relating to ultraviolet light
ophthalmic products and procedures, and (b) IBM will transfer to LaserSight all
of IBM's rights under certain of IBM's patent license agreements with Summit
Technology, Inc. and VISX, Inc.
"Indebtedness" means: (a) all obligations of Borrower for borrowed
money, (b) all obligations of Borrower evidenced by bonds, debentures, notes, or
other similar instruments and all reimbursement or other obligations of Borrower
in respect of letters of credit, bankers acceptances, interest rate swaps, or
other financial products, (c) all obligations of Borrower under capital leases,
(d) all obligations or liabilities of others secured by a Lien on any property
or asset of Borrower, irrespective of whether such obligation or liability is
assumed, and (e) any obligation of Borrower guaranteeing or intended to
guarantee (whether guaranteed, endorsed, co-made, discounted, or sold with
recourse to Borrower) any indebtedness, lease, dividend, letter of credit, or
other obligation of any other Person.
"Insolvency Proceeding" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law, assignments for the benefit of creditors, formal
or informal moratoria, compositions, extensions generally with creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.
"Intangible Assets" means, with respect to any Person, that portion
of the book value of all of such Person's assets that would be treated as
intangibles under GAAP.
"Intercompany Agreement" means an agreement between Technologies
and Guarantor, in form and substance satisfactory to Foothill, whereby, among
other things, Technologies and Guarantor clarify their respective rights and
interests in and to ophthalmic lasers and related products developed,
manufactured, sold, leased, or licensed by Technologies or Guarantor and the
Inventory, Accounts, and contract receivables related to the assembly and sale
thereof.
"Inventory" means all present and future inventory in which a
Borrower has any interest, including goods held for sale or lease or to be
furnished under a contract of service and all of a Borrower's present and future
raw materials, work in process, finished goods, and packing and shipping
materials, wherever located.
"Investment Property" means "investment property" as that term is
defined in Section 9115 of the Code.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"LaserSight" has the meaning set forth in the preamble to this
Agreement.
"Lien" means any interest in property securing an obligation owed
to, or a claim by, any Person other than the owner of the property, whether such
interest shall be based on the common law, statute, or contract, whether such
interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, adverse
claim or charge, conditional sale or trust receipt, or from a lease,
consignment, or bailment for security purposes and also including reservations,
exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances affecting real
property.
"Loan Account" has the meaning set forth in Section 2.10.
"Loan Documents" means this Agreement, the Disbursement Letter, the
Lockbox Agreements, the Guaranty, the Stock Pledge Agreement, the Copyright
Security Agreement, the Patent Security Agreement, the Trademark Security
Agreement, the Warrants, the Suretyship Agreement, the IBM Consent, any note or
notes executed by a Borrower and payable to Foothill, and any other agreement
entered into, now or in the future, in connection with this Agreement.
"Lockbox Account" shall mean a depositary account established
pursuant to one of the Lockbox Agreements.
"Lockbox Agreements" means those certain Lockbox Operating
Procedural Agreements and those certain Depository Account Agreements, in form
and substance satisfactory to Foothill, each of which is among Borrower,
Foothill, and one of the Lockbox Banks.
"Lockbox Banks" means Mercantile Bank of St. Louis, N.A.
"Lockboxes" has the meaning set forth in Section 2.7.
"LSI" has the meaning set forth in the preamble to this Agreement.
"Material Adverse Change" means (a) a material adverse change in
the business, prospects, operations, results of operations, assets, liabilities
or condition (financial or otherwise) of LaserSight and its Subsidiaries, taken
as a whole, (b) the material impairment of the ability of Borrower, taken as a
whole, to perform its obligations under the Loan Documents to which it is a
party or of Foothill to enforce the Obligations or realize upon the Collateral,
(c) a material adverse effect on the value of the Collateral or the amount that
Foothill would be likely to receive (after giving consideration to delays in
payment and costs of enforcement) in the liquidation of such Collateral, or (d)
a material impairment of the priority of Foothill's Liens with respect to the
Collateral.
"Maturity Date" has the meaning set forth in Section 3.4.
"Maximum Amount" means, as of any date of determination, the sum of
(a) the Maximum Revolving Amount, and (b) the then outstanding principal balance
of the Term Loan.
"Maximum Revolving Amount" means $4,000,000; provided, however,
that, commencing on the first day of the seventeenth month following the Closing
Date and continuing on the first day of each succeeding month, the then extant
Maximum Revolving Amount shall be reduced by $1,333,000; provided further, that
the Maximum Revolving Amount shall be reduced to zero on the Maturity Date.
"MEC" has the meaning set forth in the preamble to this Agreement.
"MRF" has the meaning set forth in the preamble to this Agreement.
"Multiemployer Plan" means a "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA) to which Borrower, any of its Subsidiaries, or any
ERISA Affiliate has contributed, or was obligated to contribute, within the past
six years.
"Negotiable Collateral" means all of a Person's present and future
letters of credit (including the Borrower Letters of Credit), notes, drafts,
instruments, Investment Property, documents, personal property leases (wherein
such Person is the lessor), chattel paper, and Books relating to any of the
foregoing.
"Non-Material Subsidiary" means any Subsidiary identified on
Schedule N-1 attached hereto.
"Obligations" means all loans, Advances, debts, principal, interest
(including any interest that, but for the provisions of the Bankruptcy Code,
would have accrued), premiums (including Early Termination Premiums),
liabilities (including all amounts charged to Borrower's Loan Account pursuant
hereto), obligations, fees, charges, costs, or Foothill Expenses (including any
fees or expenses that, but for the provisions of the Bankruptcy Code, would have
accrued), lease payments, guaranties, covenants, and duties owing by Borrower to
Foothill of any kind and description (whether pursuant to or evidenced by the
Loan Documents or pursuant to any other agreement between Foothill and Borrower,
and irrespective of whether for the payment of money), whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including any debt, liability, or obligation owing from
Borrower to others that Foothill may have obtained by assignment or otherwise,
and further including all interest not paid when due and all Foothill Expenses
that Borrower is required to pay or reimburse by the Loan Documents, by law, or
otherwise.
"Overadvance" has the meaning set forth in Section 2.5.
"Participant" means any Person to which Foothill has sold a
participation interest in its rights under the Loan Documents.
"Patent Security Agreement" means that certain Patent Security
Agreement, in form and substance satisfactory to Foothill, executed and
delivered by each Borrower.
"Pay-Off Letter" means a letter, in form and substance reasonably
satisfactory to Foothill, from Existing Lender respecting the amount necessary
to repay in full all of the obligations of Borrower owing to Existing Lender and
obtain a termination or release of all of the Liens existing in favor of
Existing Lender in and to the properties or assets of Borrower, including the
capital stock of MEC.
"PBGC" means the Pension Benefit Guaranty Corporation as defined in
Title IV of ERISA, or any successor thereto.
"Permitted Dispositions" means: (a) the sale of Inventory to buyers
in the ordinary course of business; (b) the sale or other disposition of
obsolete or substantially worn-out Equipment in the ordinary course of business;
and (c) the sale of Technologies if and only if this Agreement is terminated
pursuant to Section 3.4 and all Obligations have been fully and finally
discharged.
"Permitted Patent Acquisition Transaction" means the acquisition of
the patents and related rights contemplated under the IBM Option Agreement made
by: (a) a joint venture including Borrower (the "Joint Venture"), so long as (i)
Borrower has granted to Foothill a security interest with respect to all of
Borrower's right, title, and interest in and to the Joint Venture, (ii) the
Joint Venture and Technologies have executed and delivered a license agreement,
in form and substance satisfactory to Foothill, pursuant to which the Joint
Venture licenses to Technologies the right to use the acquired patents, and
(iii) Technologies has granted to Foothill a security interest in all of its
right, title, and interest in and to such licenses; or (b) LaserSight utilizing
the proceeds of purchase money financing from a Person (that is not a Borrower
or an Affiliate thereof), so long as (i) LaserSight and Technologies have
executed and delivered a license agreement, in form and substance satisfactory
to Foothill, pursuant to which LaserSight licenses to Technologies the right to
use the acquired patents, (ii) Technologies has granted to Foothill a security
interest in all of its right, title, and interest in and to such licenses, and
(iii) if such purchase money lender requires the subordination by Foothill of
Foothill's security interest in the acquired patents in favor of the interests
therein of such purchase money lender (the terms and conditions of which
subordination shall be reasonably satisfactory to Foothill), such purchase money
lender has executed and delivered a non-disturbance and attornment agreement, in
form and substance satisfactory to Foothill, in respect of the licenses granted
by LaserSight to Technologies pursuant to clause (b)(i) above.
"Permitted Liens" means (a) Liens held by Foothill, (b) Liens for
unpaid taxes that either (i) are not yet due and payable or (ii) are the subject
of Permitted Protests, (c) Liens set forth on Schedule P-1, (d) the interests of
lessors under operating leases and purchase money Liens of lessors under capital
leases to the extent that the acquisition or lease of the underlying asset is
permitted under Section 7.21 and so long as the Lien only attaches to the asset
purchased or acquired and only secures the purchase price of the asset, (e)
Liens arising by operation of law in favor of warehousemen, landlords, carriers,
mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course
of business of Borrower and not in connection with the borrowing of money, and
which Liens either (i) are for sums not yet due and payable, or (ii) are the
subject of Permitted Protests, (f) Liens arising from deposits made in
connection with obtaining worker's compensation or other unemployment insurance,
(g) Liens or deposits to secure performance of bids, tenders, or leases (to the
extent permitted under this Agreement), incurred in the ordinary course of
business of Borrower and not in connection with the borrowing of money, (h)
Liens arising by reason of security for surety or appeal bonds in the ordinary
course of business of Borrower, (i) Liens of or resulting from any judgment or
award that would not result in a Material Adverse Change and as to which the
time for the appeal or petition for rehearing of which has not yet expired, or
in respect of which Borrower is in good faith prosecuting an appeal or
proceeding for a review, and in respect of which a stay of execution pending
such appeal or proceeding for review has been secured, (j) with respect to any
real property, easements, rights of way, zoning and similar covenants and
restrictions, and similar encumbrances that customarily exist on properties of
Persons engaged in similar activities and similarly situated and that in any
event do not materially interfere with or impair the use or operation of the
Collateral by Borrower or the value of Foothill's Lien thereon or therein, or
materially interfere with the ordinary conduct of the business of Borrower, and
(k) the purchase money Lien, if any, of a Person (that is not a Borrower or an
Affiliate thereof) on the patents and related rights contemplated under the IBM
Option Agreement and acquired pursuant to clause (b) of the definition of
"Permitted Patent Acquisition Transaction", so long as the Lien only attaches to
the asset purchased or acquired and any royalties derived from the license
thereof and only secures the purchase price of the asset.
"Permitted Protest" means the right of Borrower to protest any Lien
other than any such Lien that secures the Obligations, tax (other than payroll
taxes or taxes that are the subject of a United States federal tax lien), or
rental payment, provided that (a) a reserve with respect to such obligation is
established on the books of Borrower in an amount that is reasonably
satisfactory to Foothill, (b) any such protest is instituted and diligently
prosecuted by Borrower in good faith, and (c) Foothill is satisfied that, while
any such protest is pending, there will be no impairment of the enforceability,
validity, or priority of any of the Liens of Foothill in and to the Collateral.
"Person" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or
other organizations, irrespective of whether they are legal entities, and
governments and agencies and political subdivisions thereof.
"Plan" means any employee benefit plan, program, or arrangement
maintained or contributed to by Borrower or with respect to which it may incur
liability.
"Purchase Agreement" means a purchase agreement used by
Technologies in connection with Technologies' sale of goods or rendition of
services, which agreement shall be assignable by its terms.
"Reference Rate" means the variable rate of interest, per annum,
most recently announced by Norwest Bank Minnesota, National Association, or any
successor thereto, as its "base rate," irrespective of whether such announced
rate is the best rate available from such financial institution.
"Reportable Event" means any of the events described in Section
4043(c) of ERISA or the regulations thereunder other than a Reportable Event as
to which the provision of 30 days notice to the PBGC is waived under applicable
regulations.
"Retiree Health Plan" means an "employee welfare benefit plan"
within the meaning of Section 3(1) of ERISA that provides benefits to
individuals after termination of their employment, other than as required by
Section 601 of ERISA.
"Solvent" means, with respect to any Person on a particular date,
that on such date (a) at fair valuations, all of the properties and assets of
such Person are greater than the sum of the debts, including contingent
liabilities, of such Person, (b) the present fair salable value of the
properties and assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person is able to realize upon its
properties and assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (d) such Person does not intend to, and does not believe that it will,
incur debts beyond such Person's ability to pay as such debts mature, and (e)
such Person is not engaged in business or a transaction, and is not about to
engage in business or a transaction, for which such Person's properties and
assets would constitute unreasonably small capital after giving due
consideration to the prevailing practices in the industry in which such Person
is engaged. In computing the amount of contingent liabilities at any time, it is
intended that such liabilities will be computed at the amount that, in light of
all the facts and circumstances existing at such time, represents the amount
that reasonably can be expected to become an actual or matured liability.
"Stock Pledge Agreement" means that certain Stock Pledge Agreement,
in form and substance satisfactory to Foothill, executed and delivered by each
Borrower relative to the shares of stock (if any) that it owns with respect to
each of its direct Subsidiaries.
"Subsidiary" of a Person means a corporation, partnership, limited
liability company, or other entity in which that Person directly or indirectly
owns or controls the shares of stock or other ownership interests having
ordinary voting power to elect a majority of the board of directors (or appoint
other comparable managers) of such corporation, partnership, limited liability
company, or other entity.
"Suretyship Agreement" means an agreement, in form and substance
satisfactory to Foothill, dated as of even date herewith and entered into by
each Borrower for the benefit of Foothill.
"Technologies" has the meaning set forth in the preamble to this
Agreement.
"Term Loan" has the meaning set forth in Section 2.3.
"Trademark Security Agreement" means that certain Trademark
Security Agreement, in form and substance satisfactory to Foothill, executed and
delivered by each Borrower.
"Voidable Transfer" has the meaning set forth in Section 15.8.
"Warrants" means those certain common stock purchase warrants
issued and delivered to Foothill by LaserSight, in form and substance
satisfactory to Foothill, on the Closing Date for the purchase of 500,000 shares
of LaserSight's common stock, $0.001 par value, having the powers, preferences,
and rights, and the qualifications, limitations, or restrictions set forth in
LaserSight's Governing Documents.
1.2 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto. Whenever
the term "Borrower" is used in respect of a financial covenant or a related
definition, it shall be understood to mean Borrower on a consolidated basis
unless the context clearly requires otherwise.
1.3 Code. Any terms used in this Agreement that are defined in the Code
shall be construed and defined as set forth in the Code unless otherwise defined
herein.
1.4 Construction. Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular, references to the
singular include the plural, the term "including" is not limiting, and the term
"or" has, except where otherwise indicated, the inclusive meaning represented by
the phrase "and/or." The words "hereof," "herein," "hereby," "hereunder," and
similar terms in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. An Event of Default shall "continue"
or be "continuing" until such Event of Default has been waived in writing by
Foothill. Section, subsection, clause, schedule, and exhibit references are to
this Agreement unless otherwise specified. Any reference in this Agreement or in
the Loan Documents to this Agreement or any of the Loan Documents shall include
all alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, and supplements, thereto and thereof, as
applicable.
1.5 Schedules and Exhibits. All of the schedules and exhibits attached
to this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT
2.1 Revolving Advances.
(a) Subject to the terms and conditions of this Agreement, Foothill
agrees to make advances ("Advances") to Borrower in an amount outstanding not to
exceed at any one time the lesser of (i) the Maximum Revolving Amount, or (ii)
the Borrowing Base. For purposes of this Agreement, "Borrowing Base", as of any
date of determination, shall mean the result of:
(y) 80% of Eligible Contract Receivables, minus
(z) the aggregate amount of reserves, if any, established by
Foothill under Section 2.1(b).
(b) Anything to the contrary in Section 2.1(a) above
notwithstanding, Foothill may create reserves against or reduce its advance
rates based upon Eligible Contract Receivables without declaring an Event of
Default if it determines that there has occurred a Material Adverse Change.
(c) Foothill shall have no obligation to make Advances hereunder to
the extent they would cause the outstanding Obligations (other than under the
Term Loan) to exceed the Maximum Revolving Amount.
(d) Amounts borrowed pursuant to this Section 2.1 may be repaid
and, subject to the terms and conditions of this Agreement, reborrowed at any
time during the term of this Agreement.
2.2 [Intentionally Omitted]
2.3 Term Loan. Foothill has agreed to make a term loan (the "Term Loan")
to Borrower in the original principal amount of $4,000,000. The Term Loan shall
be repaid in 3 installments of principal in the following amounts:
Month Installment Amount
----- ------------------
14 through 15 $1,333,000
16 $1,334,000
Each such installment shall be due and payable on the first day of each month
commencing on the first day of the fourteenth month following the Closing Date
and continuing on the first day of each succeeding month until and including the
date on which the unpaid balance of the Term Loan is paid in full. The
outstanding principal balance and all accrued and unpaid interest under the Term
Loan shall be due and payable upon the termination of this Agreement, whether by
its terms, by prepayment, by acceleration, or otherwise. The unpaid principal
balance of the Term Loan may be prepaid in whole or in part without penalty or
premium at any time during the term of this Agreement upon 30 days prior written
notice by Borrower to Foothill, all such prepaid amounts to be applied to the
installments due on the Term Loan in the inverse order of their maturity. All
amounts outstanding under the Term Loan shall constitute Obligations.
2.4 [Intentionally Omitted].
2.5 Overadvances. If, at any time or for any reason, the amount of
Obligations owed by Borrower to Foothill pursuant to Section 2.1 is greater than
either the Dollar or percentage limitations set forth in Section 2.1 (an
"Overadvance"), Borrower immediately shall pay to Foothill, in cash, the amount
of such excess to be used by Foothill to repay Advances outstanding under
Section 2.1.
2.6 Interest: Rates, Payments, and Calculations.
(a) Interest Rate. Except as provided in clause (b) below, (i) all
Obligations (except for the Term Loan) shall bear interest at a per annum rate
of 1.50 percentage points above the Reference Rate, and (ii) the Term Loan shall
bear interest at a per annum rate of 12.50 percentage points.
(b) Default Rate. Upon the occurrence and during the continuation
of an Event of Default, (i) all Obligations (except for the Term Loan) shall
bear interest at a per annum rate equal to 4.50 percentage points above the
Reference Rate, and (ii) the Term Loan shall bear interest at a per annum rate
equal to 15.50 percentage points.
(c) [Intentionally Omitted].
(d) Payments. Interest payable hereunder shall be due and payable,
in arrears, on the first day of each month during the term hereof. Each Borrower
hereby authorizes Foothill, at its option, without prior notice to such
Borrower, to charge such interest, all Foothill Expenses (as and when incurred),
the fees and charges provided for in Section 2.11 (as and when accrued or
incurred), and all installments or other payments due under the Term Loan or any
Loan Document to Borrower's Loan Account, which amounts thereafter shall accrue
interest at the rate then applicable to Advances hereunder. Any interest not
paid when due shall be compounded and shall thereafter accrue interest at the
rate then applicable to Advances hereunder.
(e) Computation. The Reference Rate as of the date of this
Agreement is 8.5% per annum. In the event the Reference Rate is changed from
time to time hereafter, the applicable rate of interest hereunder automatically
and immediately shall be increased or decreased by an amount equal to such
change in the Reference Rate. All interest and fees chargeable under the Loan
Documents shall be computed on the basis of a 360 day year for the actual number
of days elapsed.
(f) Intent to Limit Charges to Maximum Lawful Rate. In no event
shall the interest rate or rates payable under this Agreement, plus any other
amounts paid in connection herewith, exceed the highest rate permissible under
any law that a court of competent jurisdiction shall, in a final determination,
deem applicable. Each Borrower and Foothill, in executing and delivering this
Agreement, intend legally to agree upon the rate or rates of interest and manner
of payment stated within it; provided, however, that, anything contained herein
to the contrary notwithstanding, if said rate or rates of interest or manner of
payment exceeds the maximum allowable under applicable law, then, ipso facto as
of the date of this Agreement, Borrower is and shall be liable only for the
payment of such maximum as allowed by law, and payment received from Borrower in
excess of such legal maximum, whenever received, shall be applied to reduce the
principal balance of the Obligations to the extent of such excess.
2.7 Collection of Accounts. Each Borrower shall at all times maintain
its respective lockboxes (the "Lockboxes") and, immediately after the Closing
Date, shall instruct all Account Debtors with respect to the Accounts, General
Intangibles, and Negotiable Collateral of such Borrower to remit all Collections
in respect thereof to such Lockboxes. Each Borrower, Foothill, and the Lockbox
Banks shall enter into the Lockbox Agreements, which among other things shall
provide for the opening of a Lockbox Account for the deposit of Collections at a
Lockbox Bank. Each Borrower agrees that all Collections and other amounts
received by such Borrower from any Account Debtor or any other source
immediately upon receipt shall be deposited into a Lockbox Account. No Lockbox
Agreement or arrangement contemplated thereby shall be modified by a Borrower
without the prior written consent of Foothill. Upon the terms and subject to the
conditions set forth in the Lockbox Agreements, all amounts received in each
Lockbox Account shall be wired each Business Day into an account (the "Foothill
Account") maintained by Foothill at a depositary selected by Foothill.
2.8 Crediting Payments; Application of Collections. The receipt of any
Collections by Foothill (whether from transfers to Foothill by the Lockbox Banks
pursuant to the Lockbox Agreements or otherwise) immediately shall be applied
provisionally to reduce the Obligations outstanding under Section 2.1, but shall
not be considered a payment on account unless such Collection item is a wire
transfer of immediately available federal funds and is made to the Foothill
Account or unless and until such Collection item is honored when presented for
payment. If, after applying Collections to Obligations then due, a credit
remains, and if no Event of Default has occurred and is continuing, Foothill
shall transfer such credit, in immediately available funds, to Borrower's
Designated Account. From and after the Closing Date, Foothill shall be entitled
to charge Borrower for 2 Business Days of `clearance' or `float' at the rate set
forth in Section 2.6(a)(i) or Section 2.6(b)(i), as applicable, on all
Collections that are received by Foothill (regardless of whether forwarded by
the Lockbox Banks to Foothill, whether provisionally applied to reduce the
Obligations under Section 2.1, or otherwise). This across-the-board 2 Business
Day clearance or float charge on all Collections is acknowledged by the parties
to constitute an integral aspect of the pricing of Foothill's financing of
Borrower, and shall apply irrespective of the characterization of whether
receipts are owned by a Borrower or Foothill, and whether or not there are any
outstanding Advances, the effect of such clearance or float charge being the
equivalent of charging 2 Business Days of interest on such Collections. Should
any Collection item not be honored when presented for payment, then Borrower
shall be deemed not to have made such payment, and interest shall be
recalculated accordingly. Anything to the contrary contained herein
notwithstanding, any Collection item shall be deemed received by Foothill only
if it is received into the Foothill Account on a Business Day on or before 11:00
a.m. California time. If any Collection item is received into the Foothill
Account on a non-Business Day or after 11:00 a.m. California time on a Business
Day, it shall be deemed to have been received by Foothill as of the opening of
business on the immediately following Business Day.
2.9 Designated Account. Foothill is authorized to make the Advances and
the Term Loan under this Agreement based upon telephonic or other instructions
received from anyone purporting to be an Authorized Person, or without
instructions if pursuant to Section 2.6(d). Borrower agrees to establish and
maintain the Designated Account with the Designated Account Bank for the purpose
of receiving the proceeds of the Advances requested by Borrower and made by
Foothill hereunder. Unless otherwise agreed by Foothill and Borrower, any
Advance requested by Borrower and made by Foothill hereunder shall be made to
the Designated Account.
2.10 Maintenance of Loan Account; Statements of Obligations. Foothill
shall maintain an account on its books in the name of Borrower (the "Loan
Account") on which Borrower will be charged with all Advances and the Term Loan
made by Foothill to Borrower or for Borrower's account, including, accrued
interest, Foothill Expenses, and any other payment Obligations of Borrower. In
accordance with Section 2.8, the Loan Account will be credited with all payments
received by Foothill from Borrower or for Borrower's account, including all
amounts received in the Foothill Account from any Lockbox Bank. Foothill shall
render statements regarding the Loan Account to Borrower, including principal,
interest, fees, and including an itemization of all charges and expenses
constituting Foothill Expenses owing, and such statements shall be conclusively
presumed to be correct and accurate and constitute an account stated between
Borrower and Foothill unless, within 30 days after receipt thereof by Borrower,
Borrower shall deliver to Foothill written objection thereto describing the
error or errors contained in any such statements.
2.11 Fees. Borrower shall pay to Foothill the following fees:
(a) Origination Fee. Unless previously paid to Foothill pursuant to
the terms of the Commitment Letter, on the Closing Date, an origination fee of
$150,000;
(b) Financial Examination and Appraisal Fees. Foothill's customary
fee of $650 per day per examiner, plus out-of-pocket expenses for each financial
analysis and examination (i.e., audits) of Borrower performed by personnel
employed by Foothill; Foothill's customary appraisal fee of $1,500 per day per
appraiser, plus out-of-pocket expenses for each appraisal of the Collateral
performed by personnel employed by Foothill; and the actual charges paid or
incurred by Foothill if it elects to employ the services of one or more third
Persons to perform such financial analyses and examinations (i.e., audits) of
Borrower or to appraise the Collateral; provided, however, that, in the absence
of an Event of Default, such financial examination and appraisal fees, in the
aggregate, shall not exceed $15,000 per year; and
(c) Servicing Fee. On the first day of each month during the term
of this Agreement, commencing on May 1, 1997 and continuing thereafter so long
as any Obligations are outstanding, a servicing fee in an amount equal to
$5,000.
3. CONDITIONS; TERM OF AGREEMENT
3.1 Conditions Precedent to the Initial Advance and the Term Loan. The
obligation of Foothill to make the initial Advance or the Term Loan is subject
to the fulfillment, to the satisfaction of Foothill and its counsel, of each of
the following conditions on or before the Closing Date:
(a) the Closing Date shall occur on or before March 31, 1997;
(b) Foothill shall have received searches reflecting the filing of
its financing statements and fixture filings;
(c) Foothill shall have received each of the following documents,
duly executed, and each such document shall be in full force and effect:
1. the Lockbox Agreements;
2. the Disbursement Letter;
3. the Pay-Off Letter, together with any UCC termination
statements and other documentation evidencing the termination
by Existing Lender of its Liens in and to the properties and
assets of Borrower;
4. the Guaranty;
5. the Stock Pledge Agreement;
6. the Copyright Security Agreements;
7. the Patent Security Agreements;
8. the Trademark Security Agreements;
9. the Warrants;
10. the Suretyship Agreement; and
11. the IBM Consent.
(d) Foothill shall have received the original certificates
representing or evidencing all of the Pledged Shares (as defined in the Stock
Pledge Agreement) of each Issuer (as defined in the Stock Pledge Agreement) that
is not a Non-Material Subsidiary, together with stock powers or equivalent
assignments with respect thereto duly endorsed in blank;
(e) Foothill shall have received a certificate from the Secretary
or other officer acceptable to Foothill of each Borrower and of Guarantor
attesting to the resolutions of such Borrower's or Guarantor's Board of
Directors authorizing its execution, delivery, and performance of this Agreement
and the other Loan Documents to which such Borrower or Guarantor is a party and
authorizing specific officers of such Borrower or Guarantor to execute the same;
(f) Foothill shall have received copies of each Borrower's and of
Guarantor's Governing Documents, as amended, modified, or supplemented to the
Closing Date, certified by the Secretary or other officer acceptable to Foothill
of such Borrower or Guarantor, as applicable;
(g) Foothill shall have received a certificate of status with
respect to each Borrower and Guarantor, dated within 10 days of the Closing
Date, such certificate to be issued by the appropriate officer of the
jurisdiction of organization of such Borrower or Guarantor, as applicable, which
certificate shall indicate that such Borrower or Guarantor, as applicable, is in
good standing in such jurisdiction;
(h) Foothill shall have received certificates of status with
respect to each Borrower and Guarantor, each dated within 15 days of the Closing
Date, such certificates to be issued by the appropriate officer of the
jurisdictions in which its failure to be duly qualified or licensed would
constitute a Material Adverse Change, which certificates shall indicate that
such Borrower or Guarantor, as applicable, is in good standing in such
jurisdictions;
(i) Foothill shall have received a certificate of insurance,
together with the endorsements thereto, as are required by Section 6.10, the
form and substance of which shall be satisfactory to Foothill and its counsel;
(j) Foothill shall have received a certificate from the Secretary
or other officer acceptable to Foothill of Guarantor certifying to Foothill that
Guarantor does not own or hold any patents, trademarks, or copyrights, or any
applications or licenses in respect of any of the foregoing.
(k) [intentionally omitted];
(l) Foothill shall have received an opinion of Borrower's counsel
in form and substance satisfactory to Foothill in its sole discretion;
(m) Foothill shall have received satisfactory evidence (which
evidence may be in the form of a certificate of the Chief Financial Officer of
Borrower to such effect) that all tax returns required to be filed by Borrower
have been timely filed and all taxes upon Borrower or its properties, assets,
income, and franchises (including real property taxes and payroll taxes) have
been paid, except such taxes that are the subject of a Permitted Protest;
(n) Foothill shall have received the original of each Existing
Purchase Agreement;
(o) Foothill shall have received LaserSight's 1996 fiscal year-end
consolidated, audited financial statements, the contents of which shall not be
materially different from the draft version of such financial statements
previously delivered to Foothill;
(p) Foothill shall have received a set of projections as to the
projected financial performance of Borrower (after giving effect to the
transactions contemplated hereby) for a period of 18 months following the
Closing Date, which projections shall be (i) in form and substance satisfactory
to Lender, and (ii) certified by the chief financial officer of Borrower as
being such officer's good faith best estimate of the financial performance of
Borrower during such period, provided that Foothill acknowledges that such
projections may be subject to certain variables and assumptions beyond the
control of Borrower;
(q) Foothill shall have received the results of reference checks on
key management personnel of Borrower, which results shall be satisfactory to
Foothill in is sole discretion;
(r) Foothill shall have received a copy the Intercompany Agreement,
together with a certificate of an appropriate officer of Technologies certifying
that the same is true, correct, and complete and that such agreement is in full
force and effect;
(s) Foothill shall have received copies of the IBM License
Agreement and the IBM Option Agreement, together with a certificate of an
appropriate officer of LaserSight certifying that each of the same is true,
correct, and complete and that each such agreement is in full force and effect;
and
(t) all other documents and legal matters in connection with the
transactions contemplated by this Agreement shall have been delivered, executed,
or recorded and shall be in form and substance satisfactory to Foothill and its
counsel.
3.2 Conditions Precedent to all Advances and the Term Loan. The
following shall be conditions precedent to all Advances and the Term Loan
hereunder:
(a) the representations and warranties contained in this Agreement
and the other Loan Documents shall be true and correct in all material respects
on and as of the date of such extension of credit, as though made on and as of
such date (except to the extent that such representations and warranties relate
solely to an earlier date);
(b) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result from
the making thereof; and
(c) no injunction, writ, restraining order, or other order of any
nature prohibiting, directly or indirectly, the extending of such credit shall
have been issued and remain in force by any governmental authority against
Borrower, Foothill, or any of their Affiliates.
3.3 Conditions Subsequent. As conditions subsequent to initial closing
hereunder, Borrower shall perform or cause to be performed the following (the
failure by Borrower to so perform or cause to be performed constituting an Event
of Default):
(a) within 30 days of the Closing Date, deliver to Foothill the
certified copies of the policies of insurance, together with the endorsements
thereto, as are required by Section 6.10, the form and substance of which shall
be satisfactory to Foothill and its counsel;
(b) within 45 days of the Closing Date, deliver to Foothill such
fully executed Collateral Access Agreements from lessors, warehousemen, bailees,
and other third persons as Foothill reasonably may require;
(c) (i) on or before the date on which the transactions
contemplated by the IBM Option Agreement are consummated, Foothill and Borrower
shall have amended the schedules to the Patent Security Agreement, as necessary,
to reflect any and all additional Patent Collateral (as defined in the Patent
Security Agreement) acquired by Borrower in connection with the IBM Option
Agreement, and (ii) within 10 days of the date on which the Patent Security
Agreement has been amended pursuant to clause (i) above, such amendment shall
have been recorded with the U.S. Patent and Trademark Office;
(d) within 120 days of the Closing Date, Foothill and Borrower
shall have negotiated in good faith to establish and shall have established
mutually agreeable criteria with respect to (i) the timing and amount of the
down payment required of Account Debtors in connection with the purchase of
goods from Borrower, and (ii) the underwriting requirements to be applied by
Borrower with respect to new Account Debtors;
(e) within 45 days of the Closing Date, in the case of each
Borrower Letter of Credit outstanding on the Closing Date, or within 45 days of
the date on which a Borrower Letter of Credit is issued, in the case of each
Borrower Letter of Credit issued after the Closing Date, (i) deliver to Foothill
the original of such Borrower Letter of Credit, or (ii) cause each Person in
possession of a Borrower Letter of Credit (which Person shall not be an
Affiliate of any Borrower or the issuer of such Borrower Letter of Credit) to
enter into a bailment agreement, in form and substance satisfactory to Foothill,
pursuant to which agreement such Person shall acknowledge that it is holding
such Borrower Letter of Credit as a bailee for Foothill; and
(f) within 30 days of the Closing Date, Foothill shall have
received the original certificates representing or evidencing all of the Pledged
Shares (as defined in the Stock Pledge Agreement) of each Issuer (as defined in
the Stock Pledge Agreement) that is a Non-Material Subsidiary, together with
stock powers or equivalent assignments with respect thereto duly endorsed in
blank.
3.4 Term. This Agreement shall become effective upon the execution and
delivery hereof by each Borrower and Foothill and shall continue in full force
and effect for a term ending on the date (the "Maturity Date") that is the
earlier of (a) 18 months from the Closing Date, and (b) the date on which the
sale of Technologies by LaserSight is consummated. The foregoing
notwithstanding, Foothill shall have the right to terminate its obligations
under this Agreement immediately and without notice upon the occurrence and
during the continuation of an Event of Default.
3.5 Effect of Termination. On the date of termination of this Agreement,
all Obligations immediately shall become due and payable without notice or
demand. No termination of this Agreement, however, shall relieve or discharge
Borrower of Borrower's duties, Obligations, or covenants hereunder, and
Foothill's continuing security interests in the Collateral shall remain in
effect until all Obligations have been fully and finally discharged and
Foothill's obligation to provide additional credit hereunder is terminated.
3.6 Early Termination by Borrower. The provisions of Section 3.4 that
allow termination of this Agreement by Borrower only on the Maturity Date
notwithstanding, Borrower has the option, at any time upon 30 days prior written
notice to Foothill, to terminate this Agreement by paying to Foothill, in cash,
the Obligations, in full, together with a premium (the "Early Termination
Premium") equal to (a) $10,000 times the number of months (either full or
partial, and including the month in which the termination occurs) remaining from
the date of the termination to the Maturity Date, if termination occurs on or
prior to the first anniversary of the Closing Date; provided, however, that in
the event that the Agreement is terminated as a result of the sale of
Technologies during such time, the Early Termination Premium instead shall be
$50,000, irrespective of the number of such months remaining, and (b) -0-, if
the termination occurs after the first anniversary of the Closing Date.
3.7 Termination Upon Event of Default. If Foothill terminates this
Agreement upon the occurrence of an Event of Default, in view of the
impracticability and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Foothill's
lost profits as a result thereof, Borrower shall pay to Foothill upon the
effective date of such termination, a premium in an amount equal to the Early
Termination Premium. The Early Termination Premium shall be presumed to be the
amount of damages sustained by Foothill as the result of the early termination
and Borrower agrees that it is reasonable under the circumstances currently
existing. The Early Termination Premium provided for in this Section 3.7 shall
be deemed included in the Obligations.
4. CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Each Borrower hereby grants to Foothill
a continuing security interest in all currently existing and hereafter acquired
or arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by such Borrower of each
of its covenants and duties under the Loan Documents. Foothill's security
interests in the Collateral shall attach to all Collateral without further act
on the part of Foothill or such Borrower. Anything contained in this Agreement
or any other Loan Document to the contrary notwithstanding, except for Permitted
Dispositions, Borrower has no authority, express or implied, to dispose of any
item or portion of the Collateral.
4.2 Negotiable Collateral. In the event that any Collateral, including
proceeds, is evidenced by or consists of Negotiable Collateral, Borrower,
immediately upon the request of Foothill, shall endorse and deliver physical
possession of such Negotiable Collateral to Foothill.
4.3 Collection of Accounts, General Intangibles, and Negotiable
Collateral. At any time, Foothill or Foothill's designee may (a) notify
customers or Account Debtors of Borrower that the Accounts, General Intangibles,
or Negotiable Collateral have been assigned to Foothill or that Foothill has a
security interest therein, and (b) collect the Accounts, General Intangibles,
and Negotiable Collateral directly and charge the collection costs and expenses
to the Loan Account. Each Borrower agrees that it will hold in trust for
Foothill, as Foothill's trustee, any Collections that it receives and
immediately will deliver said Collections to Foothill in their original form as
received by such Borrower.
4.4 Delivery of Additional Documentation Required. At any time upon the
request of Foothill, each Borrower shall execute and deliver to Foothill all
financing statements, continuation financing statements, fixture filings,
security agreements, pledges, assignments, endorsements of certificates of
title, applications for title, affidavits, reports, notices, schedules of
accounts, letters of authority, and all other documents that Foothill reasonably
may request, in form satisfactory to Foothill, to perfect and continue perfected
Foothill's security interests in the Collateral, and in order to fully
consummate all of the transactions contemplated hereby and under the other the
Loan Documents.
4.5 Power of Attorney. Each Borrower hereby irrevocably makes,
constitutes, and appoints Foothill (and any of Foothill's officers, employees,
or agents designated by Foothill) as such Borrower's true and lawful attorney,
with power to (a) if such Borrower refuses to, or fails timely to execute and
deliver any of the documents described in Section 4.4, sign the name of such
Borrower on any of the documents described in Section 4.4, (b) at any time that
an Event of Default has occurred and is continuing or Foothill deems itself
insecure, sign such Borrower's name on any invoice or bill of lading relating to
any Account or contract receivable, drafts against Account Debtors, schedules
and assignments of Accounts or contract receivables, verifications of Accounts
or contract receivables, and notices to Account Debtors, (c) send requests for
verification of Accounts or contract receivables, (d) endorse such Borrower's
name on any Collection item that may come into Foothill's possession, (e) at any
time that an Event of Default has occurred and is continuing or Foothill deems
itself insecure, notify the post office authorities to change the address for
delivery of such Borrower's mail to an address designated by Foothill, to
receive and open all mail addressed to such Borrower, and to retain all mail
relating to the Collateral and forward all other mail to such Borrower, (f) at
any time that an Event of Default has occurred and is continuing or Foothill
deems itself insecure, make, settle, and adjust all claims under such Borrower's
policies of insurance and make all determinations and decisions with respect to
such policies of insurance, and (g) at any time that an Event of Default has
occurred and is continuing or Foothill deems itself insecure, settle and adjust
disputes and claims respecting the Accounts or contract receivables directly
with Account Debtors, for amounts and upon terms that Foothill determines to be
reasonable, and Foothill may cause to be executed and delivered any documents
and releases that Foothill determines to be necessary. The appointment of
Foothill as Borrower's attorney, and each and every one of Foothill's rights and
powers, being coupled with an interest, is irrevocable until all of the
Obligations have been fully and finally repaid and performed and Foothill's
obligation to extend credit hereunder is terminated.
4.6 Right to Inspect. Foothill (through any of its officers, employees,
or agents) shall have the right, from time to time hereafter to inspect
Borrower's Books and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, quality, value, condition
of, or any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce Foothill to enter into this Agreement, Borrower makes
the following representations and warranties which shall be true, correct, and
complete in all respects as of the date hereof, and shall be true, correct, and
complete in all respects as of the Closing Date, and at and as of the date of
the making of each Advance or Term Loan made thereafter, as though made on and
as of the date of such Advance or Term Loan, (except to the extent that such
representations and warranties relate solely to an earlier date) and such
representations and warranties shall survive the execution and delivery of this
Agreement:
5.1 No Encumbrances. Borrower has good and indefeasible title to the
Collateral, free and clear of Liens except for Permitted Liens.
5.2 Eligible Contract Receivables. The Eligible Contract Receivables are
bona fide existing obligations created by the sale and delivery of Inventory or
the rendition of services to Account Debtors in the ordinary course of
Technologies' business, unconditionally owed to Technologies without defenses,
disputes, offsets, counterclaims, or rights of return or cancellation. The
property giving rise to such Eligible Contract Receivables has been delivered to
the Account Debtor, or to the Account Debtor's agent for immediate shipment to
and unconditional acceptance by the Account Debtor. Technologies has not
received notice of actual or imminent bankruptcy, insolvency, or material
impairment of the financial condition of any Account Debtor regarding any
Eligible Contract Receivable.
5.3 Purchase Agreements. Each Existing Purchase Agreement is in full
force and effect and constitutes the only original agreement executed and
delivered by Technologies and the Account Debtor party thereto (other than any
original agreement given to such Account Debtor at the time of execution).
5.4 Equipment. All of the Equipment is used or held for use in
Borrower's business and is fit for such purposes.
5.5 Location of Inventory and Equipment. The Inventory and Equipment are
located only at the locations identified on Schedule 6.12 or otherwise permitted
by Sections 6.12 and 7.10. Except for Inventory, in an amount not to exceed
$300,000 in the aggregate, that is located at one or more of the locations
identified on Schedule 6.12 as being a warehouse and as to which Borrower timely
has delivered to Foothill a Collateral Access Agreement from such bailee, none
of the Inventory or Equipment is stored with a bailee, warehouseman, or similar
party (without Foothill's prior written consent).
5.6 Inventory Records. Borrower keeps correct and accurate records
itemizing and describing the kind, type, quality, and quantity of the Inventory,
and Borrower's cost therefor.
5.7 Location of Chief Executive Offices; FEINs. The chief executive
office of each Borrower is located at the address indicated in the preamble to
this Agreement. LaserSight's FEIN is 65-0273162, Technologies' FEIN is
59-3250400, MEC's FEIN is 52-1618385, LSI's FEIN is 22-3434291, Centers' FEIN is
63-0138090, and MRF's FEIN is 43-1561764.
5.8 Due Organization and Qualification; Subsidiaries.
(a) Each Borrower is duly organized and existing and in good standing
under the laws of the jurisdiction of its incorporation and qualified and
licensed to do business in, and in good standing in, any state where the failure
to be so licensed or qualified reasonably could be expected to have a Material
Adverse Change.
(b) The authorized capital stock of LaserSight consists of the number of
shares of each class of common and preferred stock set forth on Schedule 5.8,
which schedule also sets forth the number of such shares outstanding or held in
its treasury as of the date hereof. No shares of such capital stock are entitled
to preemptive rights by reason of any provision of the General Corporation Law
of the State of Delaware or the certificate of incorporation of LaserSight. To
the best of our knowledge, except as disclosed in LaserSight's Annual Report on
Form 10-K for the year-ended December 31, 1996 or as described on Schedule 5.8,
there are no outstanding options, warrants, scrip, rights to subscribe to,
calls, or commitments of any character whatsoever relating to, or securities or
rights convertible into, shares of any capital stock of LaserSight, or
contracts, commitments, understandings, or arrangements by which LaserSight is
or may become bound to issue additional shares of its capital stock.
(c) Set forth on Schedule 5.8 is a complete and accurate list of
LaserSight's direct and indirect Subsidiaries, showing: (i) the jurisdiction of
their incorporation; (ii) the number of shares of each class of common and
preferred stock authorized for each of such Subsidiaries; and (iii) the number
and the percentage of the outstanding shares of each such class owned directly
or indirectly by LaserSight. All of the outstanding capital stock of each such
Subsidiary has been validly issued and is fully paid and non-assessable.
(d) Except as set forth on Schedule 5.8, no capital stock (or any
securities, instruments, warrants, options, purchase rights, conversion or
exchange rights, calls, commitments or claims of any character convertible into
or exercisable for capital stock) of any direct or indirect Subsidiary of
LaserSight is subject to the issuance of any security, instrument, warrant,
option, purchase right, conversion or exchange right, call, commitment or claim
of any right, title, or interest therein or thereto.
(e) No direct or indirect Subsidiary of LaserSight, other than
Non-Material Subsidiaries, (i) owns any property or assets with a book value in
excess of $50,000, (ii) currently engages in any material business activity, or
(iii) intends in the future to engage in any material business activity.
5.9 Due Authorization; No Conflict.
(a) The execution, delivery, and performance by each Borrower of this
Agreement and the Loan Documents to which it is a party have been duly
authorized by all necessary corporate action.
(b) The execution, delivery, and performance by each Borrower of this
Agreement and the Loan Documents to which it is a party do not and will not (i)
violate any provision of federal, state, or local law or regulation (including
Regulations G, T, U, and X of the Federal Reserve Board) applicable to such
Borrower, the Governing Documents of such Borrower, or any order, judgment, or
decree of any court or other Governmental Authority binding on such Borrower,
(ii) conflict with, result in a breach of, or constitute (with due notice or
lapse of time or both) a default under any material contractual obligation or
material lease of such Borrower, (iii) result in or require the creation or
imposition of any Lien of any nature whatsoever upon any properties or assets of
such Borrower, other than Permitted Liens, or (iv) require any approval of
stockholders or any approval or consent of any Person under any material
contractual obligation of such Borrower.
(c) Other than the filing of appropriate financing statements, fixture
filings, and mortgages, the execution, delivery, and performance by each
Borrower of this Agreement and the Loan Documents to which such Borrower is a
party do not and will not require any registration with, consent, or approval
of, or notice to, or other action with or by, any federal, state, foreign, or
other Governmental Authority or other Person.
(d) This Agreement and the Loan Documents to which Borrower is a party,
and all other documents contemplated hereby and thereby, when executed and
delivered by each Borrower will be the legally valid and binding obligations of
such Borrower, enforceable against such Borrower in accordance with their
respective terms, except as enforcement may be limited by equitable principles
or by bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors' rights generally.
(e) The Liens granted by Borrower to Foothill in and to its properties
and assets pursuant to this Agreement and the other Loan Documents are validly
created, perfected, and first priority Liens, subject only to Permitted Liens.
5.10 Litigation. There are no actions or proceedings pending by or
against Borrower before any court or administrative agency and Borrower does not
have knowledge or belief of any pending, threatened, or imminent litigation,
governmental investigations, or claims, complaints, actions, or prosecutions
involving Borrower or any guarantor of the Obligations, except for: (a) ongoing
collection matters in which Borrower is the plaintiff; (b) matters specifically
disclosed in writing to Foothill before the Closing Date or on Schedule 5.10;
and (c) matters arising after the date hereof that, if decided adversely to
Borrower, would not have a Material Adverse Change.
5.11 No Material Adverse Change. All financial statements relating to
Borrower or any guarantor of the Obligations that have been delivered by
Borrower to Foothill have been prepared in accordance with GAAP (except, in the
case of unaudited financial statements, for the lack of footnotes and being
subject to year-end audit adjustments) and fairly present Borrower's (or such
guarantor's, as applicable) financial condition as of the date thereof and
Borrower's results of operations for the period then ended. There has not been a
Material Adverse Change with respect to Borrower (or such guarantor, as
applicable) since the date of the latest financial statements submitted to
Foothill on or before the Closing Date.
5.12 Solvency. Borrower is Solvent. No transfer of property is being
made by Borrower and no obligation is being incurred by Borrower in connection
with the transactions contemplated by this Agreement or the other Loan Documents
with the intent to hinder, delay, or defraud either present or future creditors
of Borrower.
5.13 Employee Benefits. None of Borrower, any of its Subsidiaries, or
any of their ERISA Affiliates maintains or contributes to any Benefit Plan,
other than those listed on Schedule 5.13. Borrower, each of its Subsidiaries,
and each ERISA Affiliate have satisfied the minimum funding standards of ERISA
and the IRC with respect to each Benefit Plan to which it is obligated to
contribute. No ERISA Event has occurred nor has any other event occurred that
may result in an ERISA Event that reasonably could be expected to result in a
Material Adverse Change. None of Borrower or its Subsidiaries, any ERISA
Affiliate, or any fiduciary of any Plan is subject to any direct or indirect
liability with respect to any Plan under any applicable law, treaty, rule,
regulation, or agreement. None of Borrower or its Subsidiaries or any ERISA
Affiliate is required to provide security to any Plan under Section 401(a)(29)
of the IRC.
5.14 Environmental Condition. None of Borrower's properties or assets
has ever been used by Borrower or, to the best of Borrower's knowledge, by
previous owners or operators in the disposal of, or to produce, store, handle,
treat, release, or transport, any Hazardous Materials except in compliance with
all Environmental Laws in all material respects. None of Borrower's properties
or assets has ever been designated or identified in any manner pursuant to any
environmental protection statute as a Hazardous Materials disposal site, or a
candidate for closure pursuant to any environmental protection statute. No Lien
arising under any environmental protection statute has attached to any revenues
or to any real or personal property owned or operated by Borrower. Borrower has
not received a summons, citation, notice, or directive from the Environmental
Protection Agency or any other federal or state governmental agency concerning
any action or omission by Borrower resulting in the releasing or disposing of
Hazardous Materials into the environment.
<PAGE>
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, and
unless Foothill shall otherwise consent in writing, Borrower shall do all of the
following:
6.1 Accounting System. Maintain a standard and modern system of
accounting that enables Borrower to produce financial statements in accordance
with GAAP, and maintain records pertaining to the Collateral that contain
information as from time to time may be requested by Foothill. Borrower also
shall keep a modern inventory reporting system that shows all additions, sales,
claims, returns, and allowances with respect to the Inventory.
6.2 Collateral Reporting. Provide Foothill with the following documents
at the following times in form satisfactory to Foothill: (a) on a weekly basis,
a sales journal, collection journal, and credit register since the last such
schedule and a calculation of the Borrowing Base as of such date, (b) on a
monthly basis and, in any event, by no later than the 15th day of each month
during the term of this Agreement, (i) a detailed calculation of the Borrowing
Base, and (ii) a detailed aging, by total, of the contract receivables, together
with a reconciliation to the detailed calculation of the Borrowing Base
previously provided to Foothill, (c) on a monthly basis and, in any event, by no
later than the 15th day of each month during the term of this Agreement, a
summary aging, by vendor, of Borrower's accounts payable and any book overdraft,
(d) on a weekly basis, notice of all returns, disputes, or claims, (e) upon
request, copies of invoices in connection with the contract receivables,
customer statements, credit memos, remittance advices and reports, deposit
slips, shipping and delivery documents in connection with the contract
receivables and for Inventory and Equipment acquired by Borrower, purchase
orders and invoices, and (f) such other reports as to the Collateral or the
financial condition of Borrower as Foothill may request from time to time.
6.3 Financial Statements, Reports, Certificates. Deliver to Foothill:
(a) as soon as available, but in any event within 45 days after the end of each
month during each of LaserSight's fiscal years, a company prepared consolidated
balance sheet, consolidated income statement, and consolidated statement of cash
flow covering Lasersight's consolidated operations during such period; (b) as
soon as available, but in any event within 45 days after the end of each month
during each of Technologies fiscal years, a company prepared balance sheet,
income statement, and statement of cash flow covering Technologies' operations
during such period; and (c) as soon as available, but in any event within 90
days after the end of each of LaserSight's fiscal years, consolidated financial
statements of LaserSight for each such fiscal year, audited by independent
certified public accountants reasonably acceptable to Foothill and certified,
without any qualifications, by such accountants to have been prepared in
accordance with GAAP, together with a certificate of such accountants addressed
to Foothill stating that such accountants do not have knowledge of the existence
of any Default or Event of Default. Such audited financial statements shall
include a consolidated balance sheet, consolidated profit and loss statement,
and consolidated statement of cash flow and, if prepared, such accountants'
letter to management. In addition to the financial statements referred to above,
LaserSight agrees to deliver annual financial statements prepared on a
consolidating basis so as to present each Borrower separately, and on a
consolidated basis.
Together with the above, Borrower also shall deliver to Foothill
LaserSight's Form 10-Q Quarterly Reports, Form 10-K Annual Reports, and Form 8-K
Current Reports, and any other filings made by LaserSight with the Securities
and Exchange Commission, if any, within 2 Business Days of the date that the
same are filed, or any other information that is provided by LaserSight to its
shareholders, and any other report reasonably requested by Foothill relating to
the financial condition of LaserSight and its Subsidiaries.
Each month, together with the consolidated financial statements provided
pursuant to Section 6.3(a), LaserSight shall deliver to Foothill a certificate
signed by its chief financial officer to the effect that: (i) all consolidated
financial statements delivered or caused to be delivered to Foothill hereunder
have been prepared in accordance with GAAP (except, in the case of unaudited
financial statements, for the lack of footnotes and being subject to year-end
audit adjustments) and fairly present the financial condition of LaserSight and
its Subsidiaries, (ii) the representations and warranties of Borrower contained
in this Agreement and the other Loan Documents are true and correct in all
material respects on and as of the date of such certificate, as though made on
and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date), (iii) for each month that also is
the date on which a financial covenant in Sections 7.20 and 7.21 is to be
tested, a Compliance Certificate demonstrating in reasonable detail compliance
at the end of such period with the applicable financial covenants contained in
Sections 7.20 and 7.21, and (iv) on the date of delivery of such certificate to
Foothill there does not exist any condition or event that constitutes a Default
or Event of Default (or, in the case of clauses (i), (ii), or (iii), to the
extent of any non-compliance, describing such non-compliance as to which he or
she may have knowledge and what action Borrower has taken, is taking, or
proposes to take with respect thereto).
LaserSight shall have issued written instructions to its independent
certified public accountants authorizing them to communicate with Foothill and
to release to Foothill whatever financial information concerning LaserSight and
its Subsidiaries that Foothill may request in accordance with such certified
public accountants' policies and procedures. Each Borrower hereby irrevocably
authorizes and directs all auditors, accountants, or other third parties to
deliver to Foothill, at Borrower's expense, copies of such Borrower's financial
statements, papers related thereto, and other accounting records of any nature
in their possession, and to disclose to Foothill any information they may have
regarding such Borrower's business affairs and financial conditions.
6.4 Tax Returns. Deliver to Foothill copies of each of LaserSight's
future federal income tax returns, and any amendments thereto, within 30 days of
the filing thereof with the Internal Revenue Service.
6.5 Guarantor Reports. Cause any guarantor of any of the Obligations to
deliver its annual financial statements at the time when Borrower provides its
audited financial statements to Foothill and copies of all federal income tax
returns as soon as the same are available and in any event no later than 30 days
after the same are required to be filed by law.
6.6 Returns. Cause returns and allowances, if any, as between Borrower
and its Account Debtors to be on the same basis and in accordance with the usual
customary practices of Borrower, as they exist at the time of the execution and
delivery of this Agreement. If, at a time when no Event of Default has occurred
and is continuing, any Account Debtor returns any Inventory to Borrower,
Borrower promptly shall determine the reason for such return and, if Borrower
accepts such return, issue a credit memorandum (with a copy to be sent to
Foothill) in the appropriate amount to such Account Debtor. If, at a time when
an Event of Default has occurred and is continuing, any Account Debtor returns
any Inventory to Borrower, Borrower promptly shall determine the reason for such
return and, if Foothill consents (which consent shall not be unreasonably
withheld), issue a credit memorandum (with a copy to be sent to Foothill) in the
appropriate amount to such Account Debtor.
6.7 [Intentionally Omitted]
6.8 Maintenance of Equipment. Maintain the Equipment in good operating
condition and repair (ordinary wear and tear excepted), and make all necessary
replacements thereto so that the value and operating efficiency thereof shall at
all times be maintained and preserved. Other than those items of Equipment that
constitute fixtures on the Closing Date, Borrower shall not permit any item of
Equipment to become a fixture to real estate or an accession to other property,
and such Equipment shall at all times remain personal property.
6.9 Taxes. Cause all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Borrower
or any of its property to be paid in full, before delinquency or before the
expiration of any extension period, except to the extent that the validity of
such assessment or tax shall be the subject of a Permitted Protest. Borrower
shall make due and timely payment or deposit of all such federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Foothill, on demand, appropriate certificates attesting
to the payment thereof or deposit with respect thereto. Borrower will make
timely payment or deposit of all tax payments and withholding taxes required of
it by applicable laws, including those laws concerning F.I.C.A., F.U.T.A., state
disability, and local, state, and federal income taxes, and will, upon request,
furnish Foothill with proof satisfactory to Foothill indicating that Borrower
has made such payments or deposits.
6.10 Insurance.
(a) (i) At its expense, keep the Collateral insured against loss or
damage by fire, theft, explosion, and sprinklers, and in such amounts, as are
ordinarily insured against by other owners in similar businesses. Borrower also
shall maintain public liability, product liability, and property damage
insurance relating to Borrower's ownership and use of the Collateral.
(ii) At its or Guarantor's expense, cause Guarantor to keep the
assets and operations of Guarantor insured against loss or damage by fire,
theft, explosion, and sprinklers, and in such amounts, as are ordinarily insured
against by other owners in similar businesses. Borrower also shall cause
Guarantor to maintain business interruption, public liability, product
liability, and property damage insurance relating to Guarantor's ownership and
use of its assets.
(b) All such policies of insurance shall be in such form, with such
companies, and in such amounts as may be reasonably satisfactory to Foothill.
All hazard insurance and such other insurance as Foothill shall specify, shall
contain a California Form 438BFU (NS) mortgagee endorsement, or an equivalent
endorsement satisfactory to Foothill, showing Foothill as sole loss payee
thereof, and shall contain a waiver of warranties. Every policy of insurance
referred to in this Section 6.10 shall contain an agreement by the insurer that
it will not cancel such policy except after 30 days prior written notice to
Foothill and that any loss payable thereunder shall be payable notwithstanding
any act or negligence of Borrower, Guarantor, or Foothill which might, absent
such agreement, result in a forfeiture of all or a part of such insurance
payment. Borrower shall deliver to Foothill certified copies of such policies of
insurance and evidence of the payment of all premiums therefor.
(c) Original policies or certificates thereof satisfactory to
Foothill evidencing such insurance shall be delivered to Foothill at least 30
days prior to the expiration of the existing or preceding policies. Borrower
shall give Foothill prompt notice of any loss covered by such insurance, and
Foothill shall have the right to adjust any loss. Foothill shall have the
exclusive right to adjust all losses payable under any such insurance policies
without any liability to Borrower whatsoever in respect of such adjustments. Any
monies received as payment for any loss under any insurance policy including the
insurance policies mentioned above, shall be paid over to Foothill to be applied
at the option of Foothill either to the prepayment of the Obligations without
premium, in such order or manner as Foothill may elect, or shall be disbursed to
Borrower under stage payment terms satisfactory to Foothill for application to
the cost of repairs, replacements, or restorations. All repairs, replacements,
or restorations shall be effected with reasonable promptness and shall be of a
value at least equal to the value of the items or property destroyed prior to
such damage or destruction. Upon the occurrence of an Event of Default, Foothill
shall have the right to apply all prepaid premiums to the payment of the
Obligations in such order or form as Foothill shall determine.
(d) Borrower shall not take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
under this Section 6.10, unless Foothill is included thereon as named insured
with the loss payable to Foothill under a standard California 438BFU (NS)
Mortgagee endorsement, or its local equivalent. Borrower immediately shall
notify Foothill whenever such separate insurance is taken out, specifying the
insurer thereunder and full particulars as to the policies evidencing the same,
and originals of such policies immediately shall be provided to Foothill.
6.11 No Setoffs or Counterclaims. Make payments hereunder and under the
other Loan Documents by or on behalf of Borrower without setoff or counterclaim
and free and clear of, and without deduction or withholding for or on account
of, any federal, state, or local taxes.
6.12 Location of Inventory and Equipment. Keep the Inventory and
Equipment only at the locations identified on Schedule 6.12; provided, however,
that Borrower may amend Schedule 6.12 so long as such amendment occurs by
written notice to Foothill not less than 30 days prior to the date on which the
Inventory or Equipment is moved to such new location, so long as such new
location is within the continental United States, and so long as, at the time of
such written notification, Borrower provides any financing statements or fixture
filings necessary to perfect and continue perfected Foothill's security
interests in such assets and also provides to Foothill a Collateral Access
Agreement.
6.13 Compliance with Laws. Comply with the requirements of all
applicable laws, rules, regulations, and orders of any governmental authority,
including the Fair Labor Standards Act and the Americans With Disabilities Act,
other than laws, rules, regulations, and orders the non-compliance with which,
individually or in the aggregate, would not have and could not reasonably be
expected to have a Material Adverse Change.
6.14 Employee Benefits.
(a) Cause to be delivered to Foothill, each of the following: (i)
promptly, and in any event within 10 Business Days after any Borrower knows or
has reason to know that an ERISA Event has occurred that reasonably could be
expected to result in a Material Adverse Change, a written statement of the
chief financial officer of LaserSight describing such ERISA Event and any action
that is being taking with respect thereto by any Borrower or an ERISA Affiliate,
and any action taken or threatened by the IRS, Department of Labor, or PBGC,
(ii) promptly, and in any event within 3 Business Days after the filing thereof
with the IRS, a copy of each funding waiver request filed with respect to any
Benefit Plan and all communications received by any Borrower or, to the
knowledge of any Borrower, any ERISA Affiliate with respect to such request, and
(iii) promptly, and in any event within 3 Business Days after receipt by any
Borrower or, to the knowledge of any Borrower, any ERISA Affiliate, of written
notice of the PBGC's intention to terminate a Benefit Plan or to have a trustee
appointed to administer a Benefit Plan, copies of each such notice. Borrower or
any ERISA Affiliate, as applicable, shall be deemed to know all facts known by
the administrator of any Benefit Plan of which it is the plan sponsor.
(b) Cause to be delivered to Foothill, upon Foothill's request,
each of the following: (i) a copy of each Plan (or, where any such plan is not
in writing, complete description thereof) (and, if applicable, related trust
agreements or other funding instruments) and all amendments thereto, all written
interpretations thereof and written descriptions thereof that have been
distributed to employees or former employees of Borrower; (ii) the most recent
determination letter issued by the IRS with respect to each Benefit Plan; (iii)
for the three most recent plan years, annual reports on Form 5500 Series
required to be filed with any governmental agency for each Benefit Plan; (iv)
all actuarial reports prepared for the last 3 plan years for each Benefit Plan;
(v) a listing of all Multiemployer Plans, with the aggregate amount of the most
recent annual contributions required to be made by any Borrower or any ERISA
Affiliate to each such plan and copies of the collective bargaining agreements
requiring such contributions; (vi) any information that has been provided to any
Borrower or any ERISA Affiliate regarding withdrawal liability under any
Multiemployer Plan; and (vii) the aggregate amount of the most recent annual
payments made to former employees of Borrower under any Retiree Health Plan.
6.15 Leases. Pay when due all rents and other amounts payable under any
leases to which Borrower is a party or by which Borrower's properties and assets
are bound, unless such payments are the subject of a Permitted Protest. To the
extent that Borrower fails timely to make payment of such rents and other
amounts payable when due under its leases, Foothill shall be entitled, in its
discretion, to reserve an amount equal to such unpaid amounts against the
Borrowing Base.
6.16 Purchase Agreements. Within 5 days of the execution and delivery of
any Purchase Agreement between Technologies and an Account Debtor, Technologies
shall deliver physical possession of such agreement to Foothill.
6.17 Broker Indemnity. Pay any and all brokerage commission or finders
fees incurred in connection with or as a result of Borrower's obtaining
financing from Foothill under this Agreement.
7. NEGATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, such
Borrower will not do any of the following without Foothill's prior written
consent:
7.1 Indebtedness. Create, incur, assume, permit, guarantee, or otherwise
become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement;
(b) Indebtedness set forth in the latest financial statements of
LaserSight and its Subsidiaries submitted to Foothill on or prior to the Closing
Date;
(c) Indebtedness secured by Permitted Liens; and
(d) refinancings, renewals, or extensions of Indebtedness permitted
under clauses (b) and (c) of this Section 7.1 (and continuance or renewal of any
Permitted Liens associated therewith) so long as: (i) the terms and conditions
of such refinancings, renewals, or extensions do not materially impair the
prospects of repayment of the Obligations by Borrower, (ii) the net cash
proceeds of such refinancings, renewals, or extensions do not result in an
increase in the aggregate principal amount of the Indebtedness so refinanced,
renewed, or extended, (iii) such refinancings, renewals, refundings, or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, and (iv) to the extent that
Indebtedness that is refinanced was subordinated in right of payment to the
Obligations, then the subordination terms and conditions of the refinancing
Indebtedness must be at least as favorable to Foothill as those applicable to
the refinanced Indebtedness.
7.2 Liens. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its property or assets, of any
kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens (including Liens that are replacements of
Permitted Liens to the extent that the original Indebtedness is refinanced under
Section 7.1(d) and so long as the replacement Liens only encumber those assets
or property that secured the original Indebtedness).
7.3 Restrictions on Fundamental Changes. Enter into any merger,
consolidation, reorganization, or recapitalization, or reclassify its capital
stock, or liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, assign, lease, transfer, or otherwise dispose of,
in one transaction or a series of transactions, all or any substantial part of
its property or assets; provided, however, that any Non-Material Subsidiary may
merge with and into any Borrower, so long as that Borrower is the surviving
corporation. For the avoidance of any doubt, the consummation of a Permitted
Patent Acquisition Transaction shall not be deemed to violate this Section 7.3.
7.4 Disposal of Assets. Except for Permitted Dispositions, sell, lease,
assign, transfer, or otherwise dispose of any of Borrower's properties or
assets.
7.5 Change Name. Change any Borrower's name, FEIN, corporate structure
(within the meaning of Section 9402(7) of the Code), or identity, or add any new
fictitious name.
7.6 Guarantee. Guarantee or otherwise become in any way liable with
respect to the obligations of any third Person except by endorsement of
instruments or items of payment for deposit to the account of any Borrower or
which are transmitted or turned over to Foothill.
7.7 Nature of Business. (a) Make any change in the principal nature of
Technologies' business, or (b) make any change in the principal nature of
Borrower's business taken as a whole. For the avoidance of any doubt, a
Permitted Patent Acquisition Transaction shall not be deemed to violate this
Section 7.7.
7.8 Prepayments and Amendments.
(a) Except in connection with a refinancing permitted by Section
7.1(d), prepay, redeem, retire, defease, purchase, or otherwise acquire any
Indebtedness owing to any third Person, other than the Obligations in accordance
with this Agreement, and
(b) Directly or indirectly, amend, modify, alter, increase, or
change any of the terms or conditions of any agreement, instrument, document,
indenture, or other writing evidencing or concerning Indebtedness permitted
under Sections 7.1(b), (c), or (d).
7.9 Change of Control. Cause, permit, or suffer, directly or indirectly,
any Change of Control.
7.10 Consignments. Consign any Inventory or sell any Inventory on bill
and hold, sale or return, sale on approval, or other conditional terms of sale.
For the avoidance of doubt, LaserSight's practice of providing an excimer laser
for offshore tradeshows, clinical trials, or research and development, in each
case, in the ordinary course of business, shall not be deemed to violate this
Section 7.10.
7.11 Distributions. Make any distribution or declare or pay any
dividends (in cash or other property, other than capital stock) on, or purchase,
acquire, redeem, or retire any of any Borrower's capital stock, of any class,
whether now or hereafter outstanding.
7.12 Accounting Methods. Modify or change its method of accounting or
enter into, modify, or terminate any agreement currently existing, or at any
time hereafter entered into with any third party accounting firm or service
bureau for the preparation or storage of any Borrower's accounting records
without said accounting firm or service bureau agreeing to provide Foothill
information regarding the Collateral or such Borrower's financial condition.
Each Borrower waives the right to assert a confidential relationship, if any, it
may have with any accounting firm or service bureau in connection with any
information requested by Foothill pursuant to or in accordance with this
Agreement, and agrees that Foothill may contact directly any such accounting
firm or service bureau in order to obtain such information in accordance with
such accounting firm's or service bureau's policies and procedures.
7.13 Investments. Other than with respect to Guarantor or in connection
with a Permitted Patent Acquisition Transaction, directly or indirectly make,
acquire, or incur any liabilities (including contingent obligations) for or in
connection with (a) the acquisition of the securities (whether debt or equity)
of, or other interests in, a Person, (b) loans, advances, capital contributions,
or transfers of property to a Person, or (c) the acquisition of all or
substantially all of the properties or assets of a Person.
7.14 Transactions with Affiliates. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of any Borrower
except for (a) transactions entered into prior to the Closing Date as set forth
in detail on Schedule 7.14(a), or (b) transactions that are in the ordinary
course of a Borrower's business, upon fair and reasonable terms, that are fully
disclosed to Foothill, and that are no less favorable to such Borrower than
would be obtained in an arm's length transaction with a non-Affiliate.
7.15 Suspension. Suspend or go out of all or substantially all of its
business.
7.16 Compensation. (a) Increase the annual fee or per-meeting fees paid
to directors during any year by more than 15% over the prior year.
(b) Pay or accrue total cash compensation, during any year, to
officers and senior management employees in an aggregate amount in excess of
115% of that paid or accrued in the prior year; provided, however, that if any
Borrower hires or appoints an officer (who is not a replacement for another such
officer), the total cash compensation paid or accrued by such Borrower with
respect to such individual (the "Additive Amount") during such year of hire or
appointment (the "Hire Year") shall not be included in the aggregate amount of
total cash compensation paid or accrued by Borrower for purposes of calculating
whether Borrower exceeded the aggregate amount of total cash compensation
allowable during such year; provided further, however, that, in the year
following the Hire Year, the Additive Amount (annualized if the individual was
hired or appointed for less than a full year) shall be included in the aggregate
amount of total cash compensation paid or accrued by such Borrower for the Hire
Year solely for the purpose of calculating the total cash compensation paid or
accrued by such Borrower for the prior year.
7.17 Use of Proceeds. Use the proceeds of the Advances and the Term Loan
made hereunder for any purpose other than (a) on the Closing Date, (i) to repay
in full the outstanding principal, accrued interest, and accrued fees and
expenses owing to Existing Lender, and (ii) to pay transactional costs and
expenses incurred in connection with this Agreement, and (b) thereafter,
consistent with the terms and conditions hereof, for its lawful and permitted
corporate purposes.
7.18 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees. Relocate its chief executive office to a new location
without providing 30 days prior written notification thereof to Foothill and so
long as, at the time of such written notification, such Borrower provides any
financing statements or fixture filings necessary to perfect and continue
perfected Foothill's security interests and also provides to Foothill a
Collateral Access Agreement with respect to such new location. The Inventory and
Equipment shall not at any time now or hereafter be stored with a bailee,
warehouseman, or similar party without Foothill's prior written consent, except
for Inventory, in an amount not to exceed $300,000 in the aggregate, that is
located at one or more of the locations identified on Schedule 6.12 as being a
warehouse and as to which Borrower timely has delivered to Foothill a Collateral
Access Agreement from such bailee.
7.19 No Prohibited Transactions Under ERISA. Directly or indirectly:
(a) engage, or permit any Subsidiary of LaserSight to engage, in
any prohibited transaction which is reasonably likely to result in a civil
penalty or excise tax described in Sections 406 of ERISA or 4975 of the IRC for
which a statutory or class exemption is not available or a private exemption has
not been previously obtained from the Department of Labor;
(b) permit to exist with respect to any Benefit Plan any
accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of
the IRC), whether or not waived;
(c) fail, or permit any Subsidiary of LaserSight to fail, to pay
timely required contributions or annual installments due with respect to any
waived funding deficiency to any Benefit Plan;
(d) terminate, or permit any Subsidiary of LaserSight to terminate,
any Benefit Plan where such event would result in any liability of LaserSight,
any of its Subsidiaries, or any ERISA Affiliate to the PBGC under Title IV of
ERISA;
(e) fail, or permit any Subsidiary of LaserSight to fail, to make
any required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary of LaserSight to fail, to pay
any required installment or any other payment required under Section 412 of the
IRC on or before the due date for such installment or other payment;
(g) amend, or permit any Subsidiary of LaserSight to amend, a Plan
resulting in an increase in current liability for the plan year such that either
of LaserSight, any Subsidiary of LaserSight, or any ERISA Affiliate is required
to provide security to such Plan under Section 401(a)(29) of the IRC; or
(i) withdraw, or permit any Subsidiary of LaserSight to withdraw,
from any Multiemployer Plan where such withdrawal is reasonably likely to result
in any liability of any such entity under Title IV of ERISA;
which, individually or in the aggregate, results in or reasonably would be
expected to result in a claim against or liability of LaserSight, any of its
Subsidiaries, or any ERISA Affiliate in excess of $1.00.
7.20 Financial Covenants. Commencing with the fiscal quarter ending June
30, 1997 and thereafter, fail to maintain:
(a) Current Ratio. A ratio of Consolidated Current Assets divided
by Consolidated Current Liabilities of at least 1.5 : 1.0, measured on a fiscal
quarter-end basis;
(b) Unit and Revenue Volume. Minimum unit sales of ophthalmic laser
systems and consolidated revenue (after laser commissions) during the following
periods, as measured on a cumulative basis at the end of each fiscal quarter:
Minimum Consolidated
Fiscal Quarter Minimum Unit Volume Net Revenue
- -------------- ------------------- -----------
June 30, 1997 14 $ 5,291,000
September 30, 1997 28 $11,674,000
December 31, 1997 42 $18,793,000
March 31, 1998 60 $27,560,000
June 30, 1998 77 $37,025,000
September 30, 1998 109 $50,760,000
(c) Consolidated EBITDA. Minimum consolidated EBITDA during the
following periods, as measured on a cumulative basis at the end of each fiscal
quarter:
Fiscal Quarter Minimum Consolidated EBITDA
- -------------- ---------------------------
June 30, 1997 $ (355,000)
September 30, 1997 $ 552,000
December 31, 1997 $1,747,000
March 31, 1998 $2,942,000
June 30, 1998 $4,203,000
September 30, 1998 $7,515,000
(d) Contract Receivable Maintenance. An amount, in the aggregate,
due and payable to Technologies pursuant to Purchase Agreements then in effect
of not less than 120% of the aggregate amount of the Obligations then
outstanding under this Agreement, measured on a fiscal quarter-end basis.
7.21 Capital Expenditures. Make capital expenditures in any fiscal year
in excess of $900,000.
7.22 Non-Material Subsidiaries. Cause, suffer, or permit any
Non-Material Subsidiary to have any property or assets with an aggregate book
value in excess of $50,000 or to engage in any material business activity.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
8.1 If Borrower fails to pay when due and payable or when declared due
and payable, any portion of the Obligations (whether of principal, interest
(including any interest which, but for the provisions of the Bankruptcy Code,
would have accrued on such amounts), fees and charges due Foothill,
reimbursement of Foothill Expenses, or other amounts constituting Obligations);
provided, however, that in the case of Overadvances that are caused by the
charging of interest, fees, or Foothill Expenses to the Loan Account, such event
shall not constitute an Event of Default if, within 5 Business Days of incurring
such Overadvance, Borrower repays, or otherwise eliminates, such Overadvance;
8.2 (a) If Borrower fails or neglects to perform, keep, or observe any
term, provision, condition, covenant, or agreement contained in Sections 6.2
(Collateral Reporting), 6.3 (Financial Statements, Reports, Certificates), 6.4
(Tax Returns), 6.12 (Location of Inventory and Equipment), 6.13 (Compliance with
Laws), 6.14 (Employee Benefits), or 6.15 (Leases) of this Agreement and such
failure continues for a period of 5 Business Days; (b) If Borrower fails or
neglects to perform, keep, or observe any term, provision, condition, covenant,
or agreement contained in Sections 6.1 (Accounting System) or 6.8 (Maintenance
of Equipment) of this Agreement and such failure continues for a period of 15
Business Days; or (c) If Borrower or Guarantor fails or neglects to perform,
keep, or observe any other term, provision, condition, covenant, or agreement
contained in this Agreement, or in any of the other Loan Documents (giving
effect to any grace periods, cure periods, or required notices, if any,
expressly provided for in such Loan Documents); in each case, other than any
such term, provision, condition, covenant, or agreement that is the subject of
another provision of this Section 8, in which event such other provision of this
Section 8 shall govern); provided that, during any period of time that any such
failure or neglect of Borrower or Guarantor referred to in this paragraph
exists, even if such failure or neglect is not yet an Event of Default by virtue
of the existence of a grace or cure period or the pre-condition of the giving of
a notice, Foothill shall not be required during such period to make Advances to
Borrower;
8.3 If there is a Material Adverse Change;
8.4 If any material portion of Borrower's properties or assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any third Person;
8.5 If an Insolvency Proceeding is commenced by Borrower;
8.6 If an Insolvency Proceeding is commenced against Borrower and any of
the following events occur: (a) Borrower consents to the institution of the
Insolvency Proceeding against it; (b) the petition commencing the Insolvency
Proceeding is not timely controverted; (c) the petition commencing the
Insolvency Proceeding is not dismissed within 45 calendar days of the date of
the filing thereof; provided, however, that, during the pendency of such period,
Foothill shall be relieved of its obligation to extend credit hereunder; (d) an
interim trustee is appointed to take possession of all or a substantial portion
of the properties or assets of, or to operate all or any substantial portion of
the business of, Borrower; or (e) an order for relief shall have been issued or
entered therein;
8.7 If Borrower is enjoined, restrained, or in any way prevented by
court order from continuing to conduct all or any material part of its business
affairs;
8.8 If a notice of Lien, levy, or assessment is filed of record with
respect to any of Borrower's properties or assets by the United States
Government, or any department, agency, or instrumentality thereof, or by any
state, county, municipal, or governmental agency, or if any taxes or debts owing
at any time hereafter to any one or more of such entities becomes a Lien,
whether choate or otherwise, upon any of Borrower's properties or assets and the
same is not paid on the payment date thereof;
8.9 If a judgment or other claim becomes a Lien or encumbrance upon any
material portion of Borrower's properties or assets;
8.10 If there is a default in any material agreement to which Borrower
is a party with one or more third Persons and such default (a) occurs at the
final maturity of the obligations thereunder, or (b) results in a right by such
third Person(s), irrespective of whether exercised, to accelerate the maturity
of Borrower's obligations thereunder;
8.11 If Borrower makes any payment on account of Indebtedness that has
been contractually subordinated in right of payment to the payment of the
Obligations, except to the extent such payment is permitted by the terms of the
subordination provisions applicable to such Indebtedness;
8.12 If any material misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or report made to Foothill
by Borrower or any officer, employee, agent, or director of Borrower, or if any
such warranty or representation is withdrawn; or
8.13 If the obligation of any guarantor under its guaranty or other
third Person under any Loan Document is limited or terminated by operation of
law or by the guarantor or other third Person thereunder, or any such guarantor
or other third Person becomes the subject of an Insolvency Proceeding.
9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence, and during the
continuation, of an Event of Default Foothill may, at its election, without
notice of its election and without demand, do any one or more of the following,
all of which are authorized by each Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement,
by any of the other Loan Documents, or otherwise, immediately due and payable;
(b) Cease advancing money or extending credit to or for the benefit
of Borrower under this Agreement, under any of the Loan Documents, or under any
other agreement between Borrower and Foothill;
(c) Terminate this Agreement and any of the other Loan Documents as
to any future liability or obligation of Foothill, but without affecting
Foothill's rights and security interests in the Collateral and without affecting
the Obligations;
(d) Settle or adjust disputes and claims directly with Account
Debtors for amounts and upon terms which Foothill considers advisable, and in
such cases, Foothill will credit Borrower's Loan Account with only the net
amounts received by Foothill in payment of such disputed contract receivables
after deducting all Foothill Expenses incurred or expended in connection
therewith;
(e) Cause Borrower to hold all returned Inventory in trust for
Foothill, segregate all returned Inventory from all other property of Borrower
or in Borrower's possession and conspicuously label said returned Inventory as
the property of Foothill;
(f) Without notice to or demand upon Borrower or any guarantor,
make such payments and do such acts as Foothill considers necessary or
reasonable to protect its security interests in the Collateral. Each Borrower
agrees to assemble the Collateral if Foothill so requires, and to make the
Collateral available to Foothill as Foothill may designate. Each Borrower
authorizes Foothill to enter the premises where the Collateral is located, to
take and maintain possession of the Collateral, or any part of it, and to pay,
purchase, contest, or compromise any encumbrance, charge, or Lien that in
Foothill's determination appears to conflict with its security interests and to
pay all expenses incurred in connection therewith. With respect to any of
Borrower's owned or leased premises, each Borrower hereby grants Foothill a
license to enter into possession of such premises and to occupy the same,
without charge, for up to 120 days in order to exercise any of Foothill's rights
or remedies provided herein, at law, in equity, or otherwise;
(g) Without notice to Borrower (such notice being expressly
waived), and without constituting a retention of any collateral in satisfaction
of an obligation (within the meaning of Section 9505 of the Code), set off and
apply to the Obligations any and all (i) balances and deposits of Borrower held
by Foothill (including any amounts received in the Lockbox Accounts), or (ii)
indebtedness at any time owing to or for the credit or the account of Borrower
held by Foothill;
(h) Hold, as cash collateral, any and all balances and deposits of
Borrower held by Foothill, and any amounts received in the Lockbox Accounts, to
secure the full and final repayment of all of the Obligations;
(i) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Foothill hereby is granted a license or other right to
use, without charge, Borrower's labels, patents, copyrights, rights of use of
any name, trade secrets, trade names, trademarks, service marks, and advertising
matter, or any property of a similar nature, as it pertains to the Collateral,
in completing production of, advertising for sale, and selling any Collateral
and Borrower's rights under all licenses and all franchise agreements shall
inure to Foothill's benefit;
(j) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Foothill
determines is commercially reasonable. It is not necessary that the Collateral
be present at any such sale;
(k) Foothill shall give notice of the disposition of the Collateral
as follows:
(1) Foothill shall give Borrower and each holder of a security
interest in the Collateral who has filed with Foothill a written request for
notice, a notice in writing of the time and place of public sale, or, if the
sale is a private sale or some other disposition other than a public sale is to
be made of the Collateral, then the time on or after which the private sale or
other disposition is to be made;
(2) The notice shall be personally delivered or mailed, postage
prepaid, to Borrower as provided in Section 12, at least 5 days before the date
fixed for the sale, or at least 5 days before the date on or after which the
private sale or other disposition is to be made; no notice needs to be given
prior to the disposition of any portion of the Collateral that is perishable or
threatens to decline speedily in value or that is of a type customarily sold on
a recognized market. Notice to Persons other than Borrower claiming an interest
in the Collateral shall be sent to such addresses as they have furnished to
Foothill;
(3) If the sale is to be a public sale, Foothill also shall
give notice of the time and place by publishing a notice one time at least 5
days before the date of the sale in a newspaper of general circulation in the
county in which the sale is to be held;
(l) Foothill may credit bid and purchase at any public sale; and
(m) Any deficiency that exists after disposition of the Collateral
as provided above will be paid immediately by Borrower. Any excess will be
returned, without interest and subject to the rights of third Persons, by
Foothill to Borrower.
9.2 Remedies Cumulative. Foothill's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Foothill shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Foothill of one
right or remedy shall be deemed an election, and no waiver by Foothill of any
Event of Default shall be deemed a continuing waiver. No delay by Foothill shall
constitute a waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES
If Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to make
any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, to the extent that Foothill
determines that such failure by Borrower could result in a Material Adverse
Change, in its discretion and without prior notice to Borrower, Foothill may do
any or all of the following: (a) make payment of the same or any part thereof;
(b) set up such reserves in Borrower's Loan Account as Foothill deems necessary
to protect Foothill from the exposure created by such failure; or (c) obtain and
maintain insurance policies of the type described in Section 6.10, and take any
action with respect to such policies as Foothill deems prudent. Any such amounts
paid by Foothill shall constitute Foothill Expenses. Any such payments made by
Foothill shall not constitute an agreement by Foothill to make similar payments
in the future or a waiver by Foothill of any Event of Default under this
Agreement. Foothill need not inquire as to, or contest the validity of, any such
expense, tax, or Lien and the receipt of the usual official notice for the
payment thereof shall be conclusive evidence that the same was validly due and
owing.
11. WAIVERS; INDEMNIFICATION
11.1 Demand; Protest; etc. Each Borrower waives demand, protest, notice
of protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of accounts, documents, instruments, chattel paper, and guarantees at any time
held by Foothill on which such Borrower may in any way be liable.
11.2 Foothill's Liability for Collateral. So long as Foothill complies
with its obligations, if any, under Section 9207 of the Code, Foothill shall not
in any way or manner be liable or responsible for: (a) the safekeeping of the
Collateral; (b) any loss or damage thereto occurring or arising in any manner or
fashion from any cause; (c) any diminution in the value thereof; or (d) any act
or default of any carrier, warehouseman, bailee, forwarding agency, or other
Person. All risk of loss, damage, or destruction of the Collateral shall be
borne by Borrower.
11.3 Indemnification. Each Borrower shall pay, indemnify, defend, and
hold Foothill, each Participant, and each of their respective officers,
directors, employees, counsel, agents, and attorneys-in-fact (each, an
"Indemnified Person") harmless (to the fullest extent permitted by law) from and
against any and all claims, demands, suits, actions, investigations,
proceedings, and damages, and all reasonable attorneys fees and disbursements
and other costs and expenses actually incurred in connection therewith (as and
when they are incurred and irrespective of whether suit is brought), at any time
asserted against, imposed upon, or incurred by any of them in connection with or
as a result of or related to the execution, delivery, enforcement, performance,
and administration of this Agreement and any other Loan Documents or the
transactions contemplated herein, and with respect to any investigation,
litigation, or proceeding related to this Agreement, any other Loan Document, or
the use of the proceeds of the credit provided hereunder (irrespective of
whether any Indemnified Person is a party thereto), or any act, omission, event
or circumstance in any manner related thereto (all the foregoing, collectively,
the "Indemnified Liabilities"). Borrower shall have no obligation to any
Indemnified Person under this Section 11.3 with respect to any Indemnified
Liability that a court of competent jurisdiction finally determines to have
resulted from the gross negligence or willful misconduct of such Indemnified
Person. This provision shall survive the termination of this Agreement and the
repayment of the Obligations.
12. NOTICES
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other Loan Document shall be in
writing and (except for financial statements and other informational documents
which may be sent by first-class mail, postage prepaid) shall be personally
delivered or sent by registered or certified mail (postage prepaid, return
receipt requested), overnight courier, or telefacsimile to Borrower or to
Foothill, as the case may be, at its address set forth below:
If to any Borrower: c/o LASERSIGHT INCORPORATED
12161 Lackland Road
St. Louis, Missouri 63146
Attn: Mr. Gregory Wilson
Fax No. 314.576.1073
with copies to: SONNENSCHEIN NATH & ROSENTHAL
1 Metropolitan Square
Suite 3000
St. Louis, Missouri 63102
Attn: Alan Bornstein, Esq.
Fax No. 314.259.5959
If to Foothill: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn: Business Finance Division Manager
Fax No. 310.478.9788
with copies to: BROBECK, PHLEGER & HARRISON LLP
550 South Hope Street
Los Angeles, California 90071
Attn: John Francis Hilson, Esq.
Fax No. 213.745.3345
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other. All notices or demands sent in accordance with this Section 12, other
than notices by Foothill in connection with Sections 9504 or 9505 of the Code,
shall be deemed received on the earlier of the date of actual receipt or 5 days
after the deposit thereof in the mail. Borrower acknowledges and agrees that
notices sent by Foothill in connection with Sections 9504 or 9505 of the Code
shall be deemed sent when deposited in the mail or personally delivered, or,
where permitted by law, transmitted telefacsimile or other similar method set
forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN AN ANOTHER LOAN DOCUMENT), THE
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS
OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER
OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. THE
PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE
STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN WHICH
FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT
MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF BORROWER AND
FOOTHILL WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH
MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO
THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13.
BORROWER AND FOOTHILL HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN
DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH OF BORROWER AND FOOTHILL REPRESENTS THAT IT HAS REVIEWED
THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF
THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS
Except as provided in the immediately following sentence, all documents,
schedules, invoices, agings, or other papers delivered to Foothill may be
destroyed or otherwise disposed of by Foothill 4 months after they are delivered
to or received by Foothill, unless Borrower requests, in writing, the return of
said documents, schedules, or other papers and makes arrangements, at Borrower's
expense, for their return. Upon the payment in full in cash of the Obligations
and the irrevocable termination of Foothill's commitment to extend credit
hereunder, Foothill shall, at Borrower's expense, return all originals of
Purchase Agreements, Borrower Letters of Credit, and negotiable instruments
previously delivered by Borrower to Foothill pursuant to this Agreement.
15. GENERAL PROVISIONS
15.1 Effectiveness. This Agreement shall be binding and deemed effective
when executed by each Borrower and Foothill.
15.2 Successors and Assigns. This Agreement shall bind and inure to the
benefit of the respective successors and assigns of each of the parties;
provided, however, that no Borrower may assign this Agreement or any of its
rights or duties hereunder without Foothill's prior written consent and any
prohibited assignment shall be absolutely void. No consent to an assignment by
Foothill shall release any Borrower from its Obligations. Foothill may assign
this Agreement and its rights and duties hereunder and no consent or approval by
Borrower is required in connection with any such assignment. Foothill reserves
the right to sell, assign, transfer, negotiate, or grant participations in all
or any part of, or any interest in Foothill's rights and benefits hereunder. In
connection with any such assignment or participation, Foothill may disclose all
documents and information which Foothill now or hereafter may have relating to
Borrower or Borrower's business. To the extent that Foothill assigns its rights
and obligations hereunder to a third Person, Foothill thereafter shall be
released from such assigned obligations to Borrower and such assignment shall
effect a novation between Borrower and such third Person.
15.3 Section Headings. Headings and numbers have been set forth herein
for convenience only. Unless the contrary is compelled by the context,
everything contained in each section applies equally to this entire Agreement.
15.4 Interpretation. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Foothill or Borrower,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.
15.5 Severability of Provisions. Each provision of this Agreement shall
be severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
15.6 Amendments in Writing. This Agreement can only be amended by a
writing signed by Foothill and each Borrower.
15.7 Counterparts; Telefacsimile Execution. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement.
15.8 Revival and Reinstatement of Obligations. If the incurrence or
payment of the Obligations by Borrower or any guarantor of the Obligations or
the transfer by either or both of such parties to Foothill of any property of
either or both of such parties should for any reason subsequently be declared to
be void or voidable under any state or federal law relating to creditors'
rights, including provisions of the Bankruptcy Code relating to fraudulent
conveyances, preferences, and other voidable or recoverable payments of money or
transfers of property (collectively, a "Voidable Transfer"), and if Foothill is
required to repay or restore, in whole or in part, any such Voidable Transfer,
or elects to do so upon the reasonable advice of its counsel, then, as to any
such Voidable Transfer, or the amount thereof that Foothill is required or
elects to repay or restore, and as to all reasonable costs, expenses, and
attorneys fees of Foothill related thereto, the liability of Borrower or such
guarantor automatically shall be revived, reinstated, and restored and shall
exist as though such Voidable Transfer had never been made.
15.9 Integration. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in Los Angeles, California.
LASERSIGHT INCORPORATED,
a Delaware corporation
By /s/ Michael R. Farris
-----------------------
Title: President/Chief Executive Officer
LASERSIGHT TECHNOLOGIES, INC.,
a Delaware corporation
By /s/ Gregory L. Wilson
-----------------------
Title: Vice President
MEC HEALTH CARE, INC.,
a Maryland corporation
By /s/ Gregory L. Wilson
-----------------------
Title: Vice President
LSI ACQUISITION, INC.,
a New Jersey corporation
By /s/ Gregory L. Wilson
-----------------------
Title: Secretary/Treasurer
LASERSIGHT CENTERS INCORPORATED,
a Delaware corporation
By /s/ Gregory L. Wilson
-----------------------
Title: Vice President
MRF, INC.,
a Missouri corporation
By /s/ Gregory L. Wilson
------------------------
Title: Secretary/Treasurer
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/ Rhonda R. Foreman
-----------------------
Title: Vice President
CONSENT AND AMENDMENT NUMBER ONE TO
LOAN AND SECURITY AGREEMENT
---------------------------
THIS CONSENT AND AMENDMENT NUMBER ONE TO LOAN AND SECURITY AGREEMENT
(this "Consent and Amendment") is entered into as of July 28, 1997 (but
effective only in accordance with the terms and conditions of Section 4 of this
Consent and Amendment), by and among FOOTHILL CAPITAL CORPORATION, a California
corporation ("Foothill"), LASERSIGHT INCORPORATED, a Delaware corporation
("LaserSight"), LASERSIGHT TECHNOLOGIES, INC., a Delaware corporation
("Technologies"), MEC HEALTH CARE, INC., a Maryland corporation ("MEC"), LSI
ACQUISITION, INC., a New Jersey corporation ("LSI"), LASERSIGHT CENTERS
INCORPORATED, a Delaware corporation ("Centers"), and MRF, INC., a Missouri
corporation ("MRF," together with LaserSight, Technologies, MEC, LSI, and
Centers, individually and collectively, jointly and severally, "Borrower"), with
reference to the following facts:
A. Foothill and Borrower heretofore have entered into that certain Loan and
Security Agreement, dated as of March 31, 1997 (the "Loan Agreement");
B. Borrower has requested that Foothill consent to the following
transactions (collectively, the "Transactions") being contemplated by
Borrower and to the amendment of the Loan Agreement as required thereby:
(i) the formation by LaserSight of its wholly-owned Subsidiary, Photomed
Acquisition, Inc., a Delaware corporation ("Photomed-A"); (ii) the
merger of Photomed, Inc., a Pennsylvania corporation ("Photomed"), with
and into Photomed-A, which corporation shall be the surviving entity,
and which merger shall be effected in accordance with the terms and
conditions of that certain Agreement and Plan of Merger, dated as of
July 15, 1997, among LaserSight, Photomed-A, Photomed, Frederic B.
Kremer, M.D., an individual ("Kremer"), Linda Kremer, an individual,
Robert Satalof, Trustee for Alan Stewart Kremer, u/t/d December 27,
1991, and Robert Satalof, Trustee for Mark Adam Kremer, u/t/d December
27, 1991 (the "Merger Agreement"); (iii) the acquisition by LaserSight
of that certain U.S. letters patent known as number 5,586,980, dated
December 24, 1996, (together with related foreign counterparts
pertaining to a microkeratome) (the "Acquired Patent") pursuant to the
terms and conditions of that certain Patent Purchase Agreement, dated as
of July 15, 1997, between LaserSight and Kremer (the "Kremer Patent
Purchase Agreement"); and (iv) the entry by LaserSight into a consulting
arrangement with Kremer pursuant to the terms and conditions of that
certain Consulting Agreement, dated as of July __, 1997, between
LaserSight and Kremer (the "Consulting Agreement").
C. Borrower also has requested that Foothill waive the Events of Default
that have occurred prior to the date hereof as a result of Borrower's
failure to keep or observe certain financial covenants contained in
Section 7.20 of the Loan Agreement (the "Existing Events of Default").
D. Foothill is willing to consent to the Transactions, to provide such
waivers, and to amend the Loan Agreement, in each case, in accordance
with the terms and conditions hereof; and
E. All capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Loan Agreement, as amended hereby.
NOW, THEREFORE, in consideration of the above recitals and the mutual
premises contained herein, Foothill and Borrower hereby agree as follows:
1. Amendments to the Loan Agreement.
a. Section 1.1 of the Loan Agreement hereby is amended to include
the following defined terms:
"Kremer" means Frederic B. Kremer, M.D., an individual.
"Kremer Patent Purchase Agreement" means that certain Patent Purchase
Agreement, dated as of July 15, 1997, between LaserSight and Kremer, in form and
substance satisfactory to Foothill.
"LST" means LST Laser, S.A. (Costa Rica), a corporation.
"Photomed-A" means Photomed Acquisition, Inc., a Delaware corporation.
b. The defined term "Guarantor" set forth in Section 1.1 of the
Loan Agreement hereby is amended in its entirety to read as follows:
"Guarantor" means LST and Photomed-A, individually and collectively.
c. The defined term "Guaranty" set forth in Section 1.1 of the Loan
Agreement hereby is amended in its entirety to read as follows:
"Guaranty" means that certain General Continuing Guaranty, in form and
substance satisfactory to Foothill, executed and delivered by LST in favor of
Foothill.
d. All references to the defined term "Guarantor" set forth in the
following sections of the Loan Agreement shall be amended to read "LST": the
definition of "Intercompany Agreement" set forth in Section 1.1 and Sections
3.1(e), (f), (g), (h), and (j).
e. The defined term "Permitted Disposition" set forth in Section
1.1 of the Loan Agreement hereby is amended in its entirety to read as follows:
"Permitted Dispositions" means: (a) the sale of Inventory to buyers in
the ordinary course of business; (b) the sale or other disposition of obsolete
or substantially worn-out Equipment in the ordinary course of business; (c) the
sale of Technologies if and only if this Agreement is terminated pursuant to
Section 3.4 and all Obligations have been fully and finally discharged; and (d)
so long as no Default or Event of Default has occurred and is continuing, the
sale by LaserSight of that certain U.S. letters patent known as number
5,586,980, dated December 24, 1996, to a third Person for consideration of not
less than $3,000,000 and which sale shall otherwise be on terms and conditions
satisfactory to Foothill.
f. The defined term "Permitted Patent Acquisition Transaction" set
forth in Section 1.1 of the Loan Agreement hereby is amended in its entirety to
read as follows:
"Permitted Patent Acquisition Transaction" means (a) the acquisition
of the patents and related rights contemplated under the IBM Option Agreement
made by: (i) a joint venture including Borrower (the "Joint Venture"), so long
as (x) Borrower has granted to Foothill a security interest with respect to all
of Borrower's right, title, and interest in and to the Joint Venture, (y) the
Joint Venture and Technologies have executed and delivered a license agreement,
in form and substance satisfactory to Foothill, pursuant to which the Joint
Venture licenses to Technologies the right to use the acquired patents, and (z)
Technologies has granted to Foothill a security interest in all of its right,
title, and interest in and to such licenses; or (ii) LaserSight utilizing the
proceeds of purchase money financing from a Person (that is not a Borrower or an
Affiliate thereof), so long as (x) LaserSight and Technologies have executed and
delivered a license agreement, in form and substance satisfactory to Foothill,
pursuant to which LaserSight licenses to Technologies the right to use the
acquired patents, (y) Technologies has granted to Foothill a security interest
in all of its right, title, and interest in and to such licenses, and (z) if
such purchase money Foothill requires the subordination by Foothill of
Foothill's security interest in the acquired patents in favor of the interests
therein of such purchase money Foothill (the terms and conditions of which
subordination shall be reasonably satisfactory to Foothill), such purchase money
Foothill has executed and delivered a non-disturbance and attornment agreement,
in form and substance satisfactory to Foothill, in respect of the licenses
granted by LaserSight to Technologies pursuant to clause (ii)(x) above; and (b)
the acquisition of the patent and related rights contemplated under the Kremer
Patent Purchase Agreement; provided, however, that LaserSight shall not enter
into any license agreement with any Person in respect of such patent and related
rights without the prior written consent of Foothill.
g. Schedule 5.8 of the Loan Agreement hereby is deleted in its
entirety and the replacement Schedule 5.8 attached hereto as Exhibit A is
substituted in lieu therefor.
2. Foothill's Consent and Waivers.
a. Foothill hereby consents to the Transactions, and agrees that
the Transactions shall be deemed not to cause any Default or Event of Default
under the Loan Agreement, as amended by this Consent and Amendment.
b. Foothill hereby agrees to waive any Default or Event of Default
that has occurred prior to the date hereof as a result of Borrower's failure to
keep or observe certain of the financial covenants contained in Section 7.19 of
the Loan Agreement.
3. Representations and Warranties. Borrower hereby represents and
warrants to Foothill that (a) the execution, delivery, and performance of this
Consent and Amendment and of the Loan Agreement, as amended by this Consent and
Amendment, are within its corporate powers, have been duly authorized by all
necessary corporate action, and are not in contravention of any law, rule, or
regulation, or any order, judgment, decree, writ, injunction, or award of any
arbitrator, court, or governmental authority, or of the terms of its charter or
bylaws, or of any contract or undertaking to which it is a party or by which any
of its properties may be bound or affected, and (b) this Consent and Amendment
and the Loan Agreement, as amended by this Consent and Amendment, constitute
Borrower's legal, valid, and binding obligation, enforceable against Borrower in
accordance with its terms.
4. Conditions Precedent to the Effectiveness of this Consent and
Amendment. The effectiveness of this Consent and Amendment is subject to the
fulfillment, to the satisfaction of Foothill and its counsel, of each of the
following conditions:
a. Foothill shall have received each of the following documents,
duly executed, and each such document shall be in full force and effect:
(1) a General Continuing Guaranty, in form and substance
satisfactory to Foothill, executed and delivered by Photomed-A in favor of
Foothill (the "Photomed-A Guaranty");
(2) a Security Agreement, in form and substance satisfactory to
Foothill, executed and delivered by Photomed-A and Foothill;
(3) a Patent Security Agreement, in form and substance
satisfactory to Foothill, executed and delivered by Photomed-A and Foothill;
(4) a Pledge Amendment in the form of Exhibit B attached hereto;
and
(5) an Amendment to Patent Security Agreement in the form of
Exhibit C attached hereto;
b. Foothill shall have received the original certificates
representing or evidencing all of the Pledged Shares (as defined in the Stock
Pledge Agreement) of Photomed-A, together with stock powers or equivalent
assignments with respect thereto duly endorsed in blank;
c. Foothill shall have received a certificate from the Secretary or
other officer acceptable to Foothill of Photomed-A attesting to the resolutions
of Photomed-A's Board of Directors authorizing its execution, delivery, and
performance of the Photomed-A Guaranty and the other Loan Documents to which
Photomed-A is a party and authorizing specific officers of Photomed-A to execute
the same;
d. Foothill shall have received copies of Photomed-A's Governing
Documents, as amended, modified, or supplemented to the date hereof, certified
by the Secretary or other officer acceptable to Foothill of Photomed-A;
e. Foothill shall have received a certificate of status with
respect to Photomed-A, dated within 30 days of the date hereof, such certificate
to be issued by the appropriate officer of the State of Delaware, which
certificate shall indicate that Photomed-A is in good standing in such
jurisdiction;
f. Foothill shall have received certificates of status with respect
to Photomed-A, each dated within 30 days of the date hereof, such certificates
to be issued by the appropriate officer of the jurisdictions in which its
failure to be duly qualified or licensed would constitute a Material Adverse
Change, which certificates shall indicate that Photomed-A is in good standing in
such jurisdictions;
g. Photomed-A shall have executed and delivered to Foothill such
UCC-1 Financing Statements as Foothill may require;
h. Foothill shall have received copies, certified by an appropriate
officer of LaserSight or Photomed-A, as the case may be, as being true and
correct, of the Merger Agreement, the Kremer Patent Purchase Agreement, the
Consulting Agreement, and any other documents or instruments executed and/or
delivered in connection therewith, each of which shall be in form and substance
satisfactory to Foothill;
i. Other than with respect to the Existing Events of Default, no
Material Adverse Change in the financial condition of Borrower or in the value
of the Collateral shall have occurred;
j. Other than with respect to the Existing Events of Default, the
representations and warranties in this Consent and Amendment, the Loan Agreement
as amended by this Consent and Amendment, and the other Loan Documents shall be
true and correct in all respects on and as of the date hereof, as though made on
such date (except to the extent that such representations and warranties relate
solely to an earlier date);
k. Other than the Existing Events of Default, no Event of Default
or event which with the giving of notice or passage of time would constitute an
Event of Default shall have occurred and be continuing on the date hereof, nor
shall result from the consummation of the transactions contemplated herein; and
l. No injunction, writ, restraining order, or other order of any
nature prohibiting, directly or indirectly, the consummation of the transactions
contemplated herein shall have been issued and remain in force by any
governmental authority against Borrower, Foothill, or any of their Affiliates.
5. Condition Subsequent to the Effectiveness of this Consent and
Amendment. As a condition subsequent to the effectiveness of this Consent and
Amendment, Borrower shall perform or cause to be performed the following (the
failure by Borrower to so perform or cause to be performed constituting an Event
of Default):
a. On or before August 5, 1997, Foothill shall have received a set
of projections as to the projected financial performance of Borrower.
6. Effect on Loan Agreement. The Loan Agreement, as amended hereby,
shall be and remain in full force and effect in accordance with its respective
terms and hereby is ratified and confirmed in all respects. The execution,
delivery, and performance of this Consent and Amendment shall not operate as a
waiver of or, except as expressly set forth herein, as an amendment, of any
right, power, or remedy of Foothill under the Loan Agreement, as in effect prior
to the date hereof.
7. Further Assurances. Borrower shall execute and deliver all
agreements, documents, and instruments, in form and substance satisfactory to
Foothill, and take all actions as Foothill may reasonably request from time to
time, to perfect and maintain the perfection and priority of Foothill's security
interests in the Collateral and to fully consummate the transactions
contemplated under this Consent and Amendment and the Loan Agreement, as amended
by this Consent and Amendment.
8. Miscellaneous.
a. Upon the effectiveness of this Consent and Amendment, each
reference in the Loan Agreement to "this Agreement," "hereunder," "herein,"
"hereof," or words of like import referring to the Loan Agreement shall mean and
refer to the Loan Agreement as amended by this Consent and Amendment.
b. Upon the effectiveness of this Consent and Amendment, each
reference in the Loan Documents to the "Loan Agreement," "thereunder,"
"therein," "thereof," or words of like import referring to the Loan Agreement
shall mean and refer to the Loan Agreement as amended by this Consent and
Amendment.
c. This Consent and Amendment shall be governed by and construed in
accordance with the laws of the State of California.
d. This Consent and Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Consent and Amendment
by signing any such counterpart.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Consent and Amendment to be duly executed as of the date first written above.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/ Albert R. Joseph
------------------------
Title: Vice President
---------------------
LASERSIGHT INCORPORATED,
a Delaware corporation
By: /s/ Michael R. Farris
------------------------
Michael R. Farris
Title: President/Chief Executive Officer
----------------------------------
LASERSIGHT TECHNOLOGIES, INC.,
a Delaware corporation
By: /s/ Gregory L. Wilson
------------------------
Gregory L. Wilson
Title: Vice President
---------------------
MEC HEALTH CARE, INC.,
a Maryland corporation
By: /s/ Gregory L. Wilson
------------------------
Gregory L. Wilson
Title: Vice President
---------------------
LSI ACQUISITION, INC.,
a New Jersey corporation
By: /s/ Gregory L. Wilson
------------------------
Gregory L. Wilson
Title: Secretary/Treasurer
---------------------
LASERSIGHT CENTERS INCORPORATED,
a Delaware corporation
By: /s/ Gregory L. Wilson
------------------------
Gregory L. Wilson
Title: Vice President
---------------------
MRF, INC.,
a Missouri corporation
By: /s/ Gregory L. Wilson
------------------------
Gregory L. Wilson
Title: Secretary/Treasurer
---------------------
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE
EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED,
(iii) RECEIPT OF A NO-ACTION LETTER(S) FROM THE APPROPRIATE
GOVERNMENTAL AUTHORITY(IES), OR (iv) OTHERWISE COMPLYING WITH THE
PROVISIONS OF SECTION 7 OF THIS WARRANT.
LASERSIGHT INCORPORATED
-----------------------
WARRANT TO PURCHASE 500,000 SHARES
OF COMMON STOCK (this "Warrant")
LASERSIGHT INCORPORATED, a Delaware corporation (the "Company"), hereby
certifies that, for value received, Foothill Capital Corporation, a California
corporation, or registered assigns, is the registered holder of warrants (the
"Warrants") to subscribe for and purchase Five Hundred Thousand (500,000) shares
of the fully paid and nonassessable Common Stock (as adjusted pursuant to
Section 4 hereof, the "Shares") of the Company, at a price equal to $6.0667 per
share (such price and such other price as shall result, from time to time, from
the adjustments specified in Section 4 hereof is herein referred to as the
"Warrant Price"), subject to the provisions and upon the terms and conditions
hereinafter set forth. As used herein, (a) the term "Common Stock" shall mean
the Company's presently authorized Common Stock, $0.001 par value per share, and
any stock into or for which such Common Stock may hereafter be converted or
exchanged, (b) the term "Date of Grant" shall mean March 31, 1997, and (c) the
term "Other Warrants" shall mean any warrant issued upon transfer or partial
exercise of this Warrant. The term "Warrant" as used herein shall be deemed to
include Other Warrants unless the context hereof or thereof clearly requires
otherwise.
1. Term. The purchase right represented by this Warrant is exercisable, in
whole or in part, at any time and from time to time from the first anniversary
of the Date of Grant through and including the fifth anniversary thereof, at
which time the Warrant (to the extent unexercised at such time) will be
repurchased by the Company in accordance with Section 10.4(a) hereof; provided,
however, that from and after the date of the Company's giving notice in
accordance with the terms of Section 10.4(c) of its repurchase of certain
unexercised Warrants in accordance with the terms of Section 10.4(b), so long as
there is not default in the payment of the repurchase price therefor, this
Warrant shall cease to be exercisable as to the number of shares of Common Stock
specified in such notice (or, if different, such number of shares as are
actually repurchased).
2. Method of Exercise; Payment; Issuance of New Warrant. Subject to Section
1 hereof, the purchase right represented by this Warrant may be exercised by the
holder hereof, in whole or in part and from time to time, by the surrender of
this Warrant (with the notice of exercise form attached hereto as Exhibit A duly
executed) at the principal office of the Company and by the payment to the
Company of an amount equal to the then applicable Warrant Price multiplied by
the number of Shares then being purchased. The person or persons in whose
name(s) any certificate(s) representing shares of Common Stock shall be issuable
upon exercise of this Warrant shall be deemed to have become the holder(s) of
record of, and shall be treated for all purposes as the record holder(s) of, the
shares represented thereby (and such shares shall be deemed to have been issued)
immediately prior to the close of business on the date or dates upon which this
Warrant is exercised. In the event of any exercise of the rights represented by
this Warrant, certificates for the shares of stock so purchased shall be
delivered to the holder hereof as soon as possible and in any event within
thirty (30) days after such exercise and, unless this Warrant has been fully
exercised or expired, a new Warrant representing the portion of the Shares, if
any, with respect to which this Warrant shall not then have been exercised shall
also be issued to the holder hereof as soon as possible and in any event within
such thirty-day period.
3. Stock Fully Paid; Reservation of Shares. All Shares that may be issued
upon the exercise of the rights represented by this Warrant will, upon issuance
pursuant to the terms and conditions herein, be fully paid and nonassessable,
and free from all taxes, liens, charges, and pre-emptive rights with respect to
the issue thereof. The Company shall pay all transfer taxes, if any,
attributable to the issuance of Shares upon the exercise of the Warrants. During
the period within which the rights represented by this Warrant may be exercised,
the Company will at all times have authorized, and reserved for the purpose of
the issue upon exercise of the purchase rights evidenced by this Warrant, a
sufficient number of shares of its Common Stock to provide for the exercise of
the rights represented by this Warrant.
4. Adjustment of Warrant Price and Number of Shares. The number and kind of
securities purchasable upon the exercise of this Warrant and the Warrant Price
shall be subject to adjustment from time to time upon the occurrence of certain
events on and after the Date of Grant, as follows:
a. Reclassification or Merger. In case of any reclassification, change
or conversion of securities of the class issuable upon exercise of this Warrant
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination), or in
case of any merger of the Company with or into another corporation (other than a
merger with another corporation in which the Company is the acquiring and the
surviving corporation and which does not result in any reclassification or
change of outstanding securities issuable upon exercise of this Warrant), or in
case of any sale of all or substantially all of the assets of the Company, the
Company, or such successor or purchasing corporation, as the case may be, shall
duly execute and deliver to the holder of this Warrant a new Warrant (in form
and substance reasonably satisfactory to the holder of this Warrant), so that
the holder of this Warrant shall have the right to receive, at a total purchase
price not to exceed that payable or to be payable upon the exercise of the
unexercised portion of this Warrant, and in lieu of the shares of Common Stock
theretofore issuable upon exercise of this Warrant, the kind and amount of
shares of stock, other securities, money and property receivable upon such
reclassification, change or merger by a holder of the number of shares of Common
Stock then purchasable under this Warrant. Such new Warrant shall provide for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 4. The provisions of this subparagraph
(a) shall similarly apply to successive reclassifications, changes, mergers and
transfers.
b. Subdivision or Combination of Shares. If the Company at any time
while this Warrant remains outstanding and unexpired shall subdivide or combine
its outstanding shares of Common Stock, the Warrant Price shall be
proportionately decreased in the case of a subdivision or increased in the case
of a combination, effective at the close of business on the date the subdivision
or combination becomes effective.
c. Stock Dividends and Other Distributions. If the Company at any time
while this Warrant is outstanding and unexpired shall (i) pay a dividend with
respect to Common Stock payable in Common Stock, or (ii) make any other
distribution with respect to Common Stock (except any distribution specifically
provided for in the foregoing subparagraphs (a) and (b)) of Common Stock, then
the Warrant Price shall be adjusted, from and after the date of determination of
shareholders entitled to receive such dividend or distribution, to that price
determined by multiplying the Warrant Price in effect immediately prior to such
date of determination by a fraction (i) the numerator of which shall be the
total number of shares of Common Stock outstanding immediately prior to such
dividend or distribution, and (ii) the denominator of which shall be the total
number of shares of Common Stock outstanding immediately after such dividend or
distribution.
d. Rights Offerings. In case the Company shall issue rights, options
or warrants to any person or persons who are at the time of such issuance the
holders of equity securities of the Company, entitling them to subscribe for or
purchase shares of Common Stock (or securities convertible or exchangeable into
Common Stock) at a price per share of Common Stock (or having a conversion or
exchange price per share of Common Stock if a security convertible or
exchangeable into Common Stock) less than the fair market value per share of
Common Stock on the record date for such issuance (or the date of issuance, if
there is no record date), the Warrant Price to be in effect on and after such
record date (or issuance date, as the case may be) shall be determined by
multiplying the Warrant Price in effect immediately prior to such record date
(or issuance date, as the case may be) by a fraction (i) the numerator of which
shall be the number of shares of Common Stock outstanding on such record date
(or issuance date, as the case may be) plus the number of shares of Common Stock
which the aggregate offering price of the total number of shares of such Common
Stock so to be offered (or the aggregate initial exchange or conversion price of
the exchangeable or convertible securities so to be offered) would purchase at
such fair market value on such record date (or issuance date, as the case may
be) and (ii) the denominator of which shall be the number of shares of Common
Stock outstanding on such record date (or issuance date, as the case may be)
plus the number of additional shares of Common Stock to be offered for
subscription or purchase (or into which the convertible securities to be offered
are initially exchangeable or convertible). In case such subscription price may
be paid in part or in whole in a form other than cash, the fair value of such
consideration shall be determined by the Board of Directors of the Company in
good faith as set forth in a duly adopted board resolution certified by the
Company's Secretary or Assistant Secretary. Such adjustment shall be made
successively whenever such an issuance occurs; and in the event that such
rights, options, warrants, or convertible or exchangeable securities are not so
issued or expire or cease to be convertible or exchangeable before they are
exercised, converted, or exchanged (as the case may be), then the Warrant Price
shall again be adjusted to be the Warrant Price that would then be in effect if
such issuance had not occurred, but such subsequent adjustment shall not affect
the number of Shares issued upon any exercise of Warrants prior to the date such
subsequent adjustment is made.
e. Special Distributions. In case the Company shall fix a record date
for the making of a distribution to all holders of shares of Common Stock
(including any such distribution made in connection with a consolidation or
merger in which the Company is the surviving corporation) of evidences of
indebtedness or assets (other than dividends and distributions referred to in
subparagraphs (b) and (c) above and other than cash dividends) or of
subscription rights, options, warrants, or exchangeable or convertible
securities containing the right to subscribe for or purchase shares of any class
of equity securities of the Company (excluding those referred to in subparagraph
(d) above), the Warrant Price to be in effect on and after such record date
shall be adjusted by multiplying the Warrant Price in effect immediately prior
to such record date by a fraction (i) the numerator of which shall be the fair
market value per share of Common Stock on such record date, less the fair value
(as determined by the Board of Directors of the Company in good faith as set
forth in a duly adopted board resolution certified by the Company's Secretary or
Assistant Secretary) of the portion of the assets or evidences of indebtedness
so to be distributed or of such subscription rights, options, warrants, or
exchangeable or convertible securities applicable to one (1) share of the Common
Stock outstanding as of such record date, and (ii) the denominator of which
shall be such fair market value per share of Common Stock. Such adjustment shall
be made successively whenever such a record date is fixed; and in the event that
such distribution is not so made, the Warrant Price shall again be adjusted to
be the Warrant Price which would then be in effect if such record date had not
been fixed, but such subsequent adjustment shall not affect the number of Shares
issued upon any exercise of Warrants prior to the date such subsequent
adjustment was made.
f. Other Issuances of Securities. In case the Company or any
subsidiary shall issue shares of Common Stock, or rights, options, warrants or
convertible or exchangeable securities containing the right to subscribe for or
purchase shares of Common Stock (excluding (i) shares, rights, options,
warrants, or convertible or exchangeable securities described in subparagraphs
(f) or (g) of Section 11 hereof or issued in any of the transactions described
in subparagraphs (b), (c), (d) or (e) above, (ii) shares issued upon the
exercise of such rights, options or warrants or upon conversion or exchange of
such convertible or exchangeable securities, and (iii) the Warrants and any
shares issued upon exercise thereof), at a price per share of Common Stock
(determined in the case of such rights, options, warrants, or convertible or
exchangeable securities by dividing (x) the total amount receivable by the
Company in consideration of the sale and issuance of such rights, options,
warrants, or convertible or exchangeable securities, plus the total minimum
consideration payable to the Company upon exercise, conversion, or exchange
thereof by (y) the total maximum number of shares of Common Stock covered by
such rights, options, warrants, or convertible or exchangeable securities) lower
than the fair market value per share of Common Stock on the date the Company
fixes the offering price of such shares, rights, options, warrants, or
convertible or exchangeable securities, then the Warrant Price shall be adjusted
so that it shall equal the price determined by multiplying the Warrant Price in
effect immediately prior thereto by a fraction (i) the numerator of which shall
be the sum of (A) the number of shares of Common Stock outstanding immediately
prior to such sale and issuance plus (B) the number of shares of Common Stock
which the aggregate consideration received (determined as provided below) for
such sale or issuance would purchase at such fair market value per share, and
(ii) the denominator of which shall be the total number of shares of Common
Stock outstanding immediately after such sale and issuance. Such adjustment
shall be made successively whenever such an issuance is made. For the purposes
of such adjustment, the maximum number of shares of Common Stock which the
holder of any such rights, options, warrants or convertible or exchangeable
securities shall be entitled to subscribe for or purchase shall be deemed to be
issued and outstanding as of the date of such sale and issuance and the
consideration received by the Company therefor shall be deemed to be the
consideration received by the Company for such rights, options, warrants, or
convertible or exchangeable securities, plus the minimum consideration or
premium stated in such rights, options, warrants, or convertible or exchangeable
securities to be paid for the shares of Common Stock covered thereby. In case
the Company shall sell and issue shares of Common Stock, or rights, options,
warrants, or convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock for a consideration consisting,
in whole or in part, of property other than cash or its equivalent, then in
determining the price per share of Common Stock and the consideration received
by the Company for purposes of the first sentence of this subparagraph (f), the
Board of Directors of the Company shall determine, in good faith, the fair value
of said property, and such determination shall be described in a duly adopted
board resolution certified by the Company's Secretary or Assistant Secretary. In
case the Company shall sell and issue rights, options, warrants, or convertible
or exchangeable securities containing the right to subscribe for or purchase
shares of Common Stock together with one or more other securities as a part of a
unit at a price per unit, then in determining the price per share of Common
Stock and the consideration received by the Company for purposes of the first
sentence of this subparagraph (f), the Board of Directors of the Company shall
determine, in good faith, which determination shall be described in a duly
adopted board resolution certified by the Company's Secretary or Assistant
Secretary, the fair value of the rights, options, warrants, or convertible or
exchangeable securities then being sold as part of such unit. Such adjustment
shall be made successively whenever such an issuance occurs, and in the event
that such rights, options, warrants, or convertible or exchangeable securities
expire or cease to be convertible or exchangeable before they are exercised,
converted, or exchanged (as the case may be), then the Warrant Price shall again
be adjusted to the Warrant Price that would then be in effect if such sale and
issuance had not occurred, but such subsequent adjustment shall not affect the
number of Shares issued upon any exercise of Warrants prior to the date such
subsequent adjustment is made. Notwithstanding the foregoing, the provisions of
this Section 4(f) shall not apply with respect to director or employee benefit
plans of the Company, to the extent (i) authorized and in existence as of the
Date of Grant, which (except in the case of certain tax-qualified plans) have
been approved by the Company's stockholders as of the Date of Grant, or (ii)
securities are granted under a director or employee benefit plan for
consideration (or at an exercise price) equal to 100% of the fair market value
of such securities on the date of grant, as determined in good faith by the
Board of Directors of the Company without giving effect to Section 4(h) hereof;
provided that for the purposes of this clause (ii) such consideration must equal
at least 95% of the fair market value of the Common Stock as of the date of
grant as determined pursuant to Section 4(h).
g. Adjustment of Number of Shares. Upon each adjustment in the Warrant
Price (other than pursuant to Section 4(a)), the number of Shares of Common
Stock purchasable hereunder shall be adjusted, to the nearest whole share, to
the product obtained by multiplying the number of Shares purchasable immediately
prior to such adjustment in the Warrant Price by a fraction, the numerator of
which shall be the Warrant Price immediately prior to such adjustment and the
denominator of which shall be the Warrant Price immediately thereafter.
h. Determination of Fair Market Value. For purposes of this Section 4,
for determining the Warrant Price of this Warrant, and for the purposes of
Section 10.4 hereof, "fair market value" of a share of Common Stock as of a
particular date (the "Determination Date") shall mean (i) if shares of Common
Stock are traded as a national securities exchange (an "Exchange"), the average
of the closing prices of a share of the Common Stock of the Company on each of
the fifteen (15) trading days prior to the Determination Date reported on such
Exchange as reported in The Wall Street Journal, or (ii) if shares of Common
Stock are not traded on an Exchange but trade in the over-the-counter market and
such shares are quoted on the National Association of Securities Dealers
Automated Quotations System ("NASDAQ"), (A) the average of the last sale prices
reported on NASDAQ or (B) if such shares are an issue for which last sale prices
are not reported on NASDAQ, the average of the closing bid and ask prices, in
each case on each of the fifteen (15) trading days (or if the relevant price or
quotation did not exist on any of such days, the relevant price or quotation on
the next preceding business day on which there was such a price or quotation)
prior to the Determination Date as reported in The Wall Street Journal.
i. De Minimis Adjustments. In the event any adjustment to the Warrant
Price pursuant to this Section 4 (without regard to this subparagraph (i)), if
combined with any other adjustments to the Warrant Price not made as a result of
the operation of this subparagraph (i) (such other adjustments, the "Carried
Forward Adjustments"), would result in a change in the Warrant Price of less the
$.01, then notwithstanding any other provision of this Section 4, neither the
Warrant Price nor the number of Shares of Common Stock purchasable hereunder
shall be adjusted; provided, however, that in the event an adjustment to the
Warrant Price pursuant to this Section 4 (without regard to this subparagraph
(i)) would, when combined with the Carried Forward Adjustments, result in a
change in the Warrant Price of $.01 or more, then the Warrant Price and the
number of Shares of Common Stock purchasable hereunder shall be adjusted to
reflect such adjustment and the Carried Forward Adjustments as if this
subparagraph (i) had not applied to any such adjustments.
5. Notice of Adjustments. Whenever the Warrant Price or the number of
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall make a certificate signed by its chief financial officer setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
Warrant Price and the number of Shares purchasable hereunder after giving effect
to such adjustment, which shall be mailed (without regard to Section 13 hereof,
by first class mail, postage prepaid) to the holder of this Warrant.
6. Fractional Shares. No fractional shares of Common Stock will be issued
in connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor based on the fair market value
(as determined in accordance with Section 4(h) above) of a share of Common Stock
on the date of exercise.
7. Compliance with Securities Act; Disposition of Warrant or Shares of
Common Stock.
a. Compliance with Securities Act. The holder of this Warrant, by
acceptance hereof, agrees that this Warrant and the shares of Common Stock to be
issued upon exercise hereof are being acquired for investment and that such
holder will not offer, sell or otherwise dispose of this Warrant, or any shares
of Common Stock to be issued upon exercise hereof except under circumstances
which will not result in a violation of the Securities Act of 1933, as amended
(the "Act"). Upon exercise of this Warrant, the holder hereof shall confirm in
writing, by executing the form attached as Schedule 1 to Exhibit A hereto, that
the shares of Common Stock so purchased are being acquired for investment and
not with a view toward distribution or resale. This Warrant and all shares of
Common Stock issued upon exercise of this Warrant (unless registered under the
Act) shall be stamped or imprinted with a legend in substantially the following
form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO
SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR
THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED, (iii) RECEIPT OF A NO-ACTION LETTER(S)
FROM THE APPROPRIATE GOVERNMENTAL AUTHORITY(IES), OR (iv) OTHERWISE
COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THE WARRANT UNDER WHICH
THESE SECURITIES WERE ISSUED DIRECTLY OR INDIRECTLY."
In addition, in connection with the issuance of this Warrant, the
holder specifically represents to the Company by acceptance of this Warrant as
follows:
(1) The holder is aware of the Company's business affairs
and financial condition, and has acquired information about the Company
sufficient to reach an informed and knowledgeable decision to acquire this
Warrant. The holder is acquiring this Warrant for its own account for investment
purposes only and not with a view to, or for the resale in connection with, any
"distribution" thereof for purposes of the Act.
(2) The holder understands that this Warrant and the Shares
have not been registered under the Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of the holder's investment intent as expressed herein. In this
connection, the holder understands that, in the view of the Securities and
Exchange Commission (the "SEC"), the statutory basis for such exemption may be
unavailable if the holder's representation was predicated solely upon a present
intention to hold the Warrant and the Shares for the minimum capital gains
period specified under applicable tax laws, for a deferred sale, for or until an
increase or decrease in the market price of the Warrant and the Shares, or for a
period of one (1) year or any other fixed period in the future.
(3) The holder further understands that this Warrant and the
Shares must be held indefinitely unless subsequently registered under the Act
and any applicable state securities laws, or unless exemptions from registration
are otherwise available.
(4) The holder is aware of the provisions of Rule 144 and
144A, promulgated under the Act, which, in substance, permit limited public
resale of "restricted securities" acquired, directly or indirectly, from the
issuer thereof (or from an affiliate of such issuer), in a non-public offering
subject to the satisfaction of certain conditions, if applicable, including,
among other things: the availability of certain public information about the
Company, the resale occurring not less than two (2) years after the party has
purchased and paid for the securities to be sold; the sale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly with
a market maker (as said term is defined under the Securities Exchange Act of
1934, as amended) and the amount of securities being sold during any three-month
period not exceeding the specified limitations stated therein.
(5) The holder further understands that at the time it
wishes to sell this Warrant and the Shares there may be no public market upon
which to make such a sale, and that, even if such a public market then exists,
the Company may not be satisfying the current public information requirements of
Rule 144 and 144A, and that, in such event, the holder may be precluded from
selling this Warrant and the Shares under Rule 144 and 144A even if the two-year
minimum holding period had been satisfied.
(6) The holder further understands that in the event all of
the requirements of Rule 144 and 144A are not satisfied, registration under the
Act, compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 and 144A is not
exclusive, the Staff of the SEC has expressed its opinion that persons proposing
to sell private placement securities other than in a registered offering and
otherwise than pursuant to Rule 144 and 144A will have a substantial burden of
proof in establishing that an exemption from registration is available for such
offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.
b. Disposition of Warrant or Shares. With respect to any offer, sale
or other disposition of this Warrant, or any Shares acquired pursuant to the
exercise of this Warrant prior to registration of such Warrant or Shares, the
holder hereof and each subsequent holder of this Warrant agrees to give written
notice to the Company prior thereto, describing briefly the manner thereof,
together with a written opinion of such holder's counsel (in form and substance
reasonably satisfactory to the Company), if reasonably requested by the Company,
to the effect that such offer, sale or other disposition may be effected without
registration or qualification (under the Act as then in effect or any federal or
state law then in effect) of this Warrant or such Shares and indicating whether
or not under the Act certificates for this Warrant or such Shares to be sold or
otherwise disposed of require any restrictive legend as to applicable
restrictions on transferability in order to ensure compliance with applicable
law. Promptly upon receiving such written notice and reasonably satisfactory
opinion, if so requested, the Company, as promptly as practicable, shall notify
such holder that such holder may sell or otherwise dispose of this Warrant or
such Shares, all in accordance with the terms of the notice delivered to the
Company. If a determination has been made pursuant to this subsection (b) that
the opinion of counsel for the holder is not reasonably satisfactory to the
Company, the Company shall so notify the holder promptly after such
determination has been made. The foregoing notwithstanding, this Warrant or such
Shares may, as to such federal laws, be offered, sold or otherwise disposed of
in accordance with Rule 144 and 144A under the Act, provided that the Company
shall have been furnished with such information as the Company may reasonably
request to provide a reasonable assurance that the provisions of Rule 144 and
144A have been satisfied. Each certificate representing this Warrant or the
Shares thus transferred (except a transfer pursuant to Rule 144) shall bear a
legend as to the applicable restrictions on transferability in order to ensure
compliance with such laws, unless in the aforesaid opinion of counsel for the
holder, such legend is not required in order to ensure compliance with such
laws. The Company may issue stop transfer instructions to its transfer agent or,
if acting as its own transfer agent, the Company may stop transfer on its
corporate books, in connection with such restrictions.
8. Rights as Shareholders; Information. No holder of this Warrant, as such,
shall be entitled to vote or receive dividends or be deemed the holder of Common
Stock or any other securities of the Company which may at any time be issuable
on the exercise hereof for any purpose, nor shall anything contained herein be
construed to confer upon the holder of this Warrant, as such, any of the rights
of a shareholder of the Company or any right to vote for the election of the
directors or upon any matter submitted to shareholders at any meeting thereof,
or to receive notice of meetings, or to receive dividends or subscription rights
or otherwise until this Warrant shall have been exercised and the Shares
purchasable upon the exercise hereof shall have become deliverable, as provided
herein. The foregoing notwithstanding, the Company will transmit to the holder
of this Warrant such information, documents and reports as are generally
distributed to the holders of any class or series of the securities of the
Company concurrently with the distribution thereof to the shareholders.
9. Registration Rights.
9.1. Demand Registration.
a. The Company covenants and agrees that at any time after
receipt of a written request (a "Demand Registration Request") from the holders
of this Warrant and the Other Warrants and/or holders of Shares (this Warrant,
the Other Warrants, and the Shares are referred to herein, collectively, as the
"Securities") (hereinafter, the "Securityholders") constituting at least fifty
percent (50%) of the Securities outstanding on such date (determined on an
as-exercised basis) and then eligible for inclusion in a registration pursuant
to this Section 9.1, stating that the Initiating Securityholders (as defined
below) desire and intend to transfer all or a portion of the Securities held by
them under such circumstances, the Company shall give notice (the "Registration
Notice") to all of the Securityholders within fifteen (15) days of the Company's
receipt of such registration request, and the Company shall cause to be included
in such requested registration all Securities requested to be included therein
by any such Securityholder within fifteen (15) days after such Registration
Notice is effective (subject to the provisions of the final sentence of this
Section 9.1(a)). After such second 15-day period, the Company shall file as
promptly as practicable a registration statement and use its reasonable best
efforts to cause such registration statement to become effective under the Act
and remain effective for one hundred and twenty (120) days or such shorter
period as may be required if all such Securities covered by such registration
statement are sold prior to the expiration of such 120-day period; provided that
the Company shall not be obligated to effect any such registration pursuant to
this Section 9.1 (i) after the Company has effected two (2) such registrations
pursuant to this Section 9.1 or (ii) after the fifth anniversary of the Date of
Grant (provided that a registration effective on or before such anniversary date
shall remain effective for the full 120-day period (or such shorter period) as
is provided for in this sentence above). Each Securityholder making a demand for
registration under this Section 9.1 is referred to herein as an "Initiating
Securityholder." For purposes of this Section 9, a registration shall not be
deemed to have been effected unless a registration statement with regard thereto
has been declared effective and remained effective for a period of one hundred
and twenty (120) days (or such shorter period as is permitted in the second
sentence of this Section 9.1). The foregoing notwithstanding, in the event of an
underwritten offering pursuant to this Section 9.1, if the managing underwriter
of such offering shall advise the Securityholders in writing that, in its
opinion, the distribution of a specified portion of the securities requested to
be included in the registration would materially adversely affect the
distribution of such securities by increasing the aggregate amount of the
offering in excess of the maximum amount of securities which such managing
underwriter believes can reasonably be sold in the contemplated distribution,
then the securities to be included in the registration shall be included in the
following order: (i) first, all of the Securities requested to be included
therein by the Initiating Securityholders, (ii) second, the Securities requested
to be included therein by the other Securityholders, pro rata among such
Securityholders according to the number of Securities requested to be included
by each such Securityholder requesting inclusion therein, and (iii) third, the
securities the Company proposes to include therein and (iv) fourth, such other
securities requested to be included therein, pro rata among the holders of such
other securities according to the number of securities requested to be included
by each such holder requesting inclusion therein.
b. For purposes of this Section 9.1, the Securityholders who have
requested registration of Warrants, or Shares to be acquired upon the exercise
of Warrants not theretofore exercised, shall furnish the Company with an
undertaking that they or the underwriters or other persons to whom such Warrants
will be transferred have undertaken to exercise such Warrants within a 120-day
period determined in accordance with Section 9.1(a).
c. In the event of an underwritten offering pursuant to this
Section 9.1, the Initiating Securityholders requesting registration of the
Securities being registered shall be entitled to select the underwriter;
provided, that the underwriter so selected shall be subject to approval by the
Company, which approval shall not be withheld unreasonably.
d. Notwithstanding the terms of Section 9.1(a), the Company shall
not be required to register the Securities of Securityholders pursuant to
Section 9.1, if the Company elects, at its sole option and to the extent that it
may legally do so, to purchase such Securities and completes such purchase
pursuant to the provisions of this Section 9.1(d). Within fifteen (15) days
after receipt of a Demand Registration Request, the Company may elect to
purchase all and not less than all of the Securities that would otherwise be
subject to registration pursuant to Section 9.1(a) by providing written notice
(the "Purchase Notice") to all of the Securityholders setting forth (i) its
election to purchase such Securities, (ii) the purchase price of the Securities,
and (iii) the closing date for such purchase. The Company shall thereafter
purchase all of the Securities requested to be included in such purchase by the
Securityholders within fifteen (15) days after the Purchase Notice becomes
effective. The purchase price for each Share shall be the fair market value (as
defined in Section 4) of a share of Common Stock on the date of the Demand
Registration Request; the purchase price for each Warrant shall be (x) the fair
market value (as defined in Section 4) of a share of Common Stock on the date of
the Demand Registration Request less (y) the Warrant Price as of such date. The
closing of the purchase of the Securities shall take place on the date set forth
in the Purchase Notice, which date shall be not less than fifteen (15) not more
than forty-five (45) days after the date of the Purchase Notice. At the closing,
the Company shall deliver to each Securityholder, in cash, the purchase price
for the Securities surrendered by such Securityholder.
9.2. Piggy-Back Registration Rights.
a. The Company covenants and agrees with the Securityholders that
in the event, and in each such event, that the Company proposes to file a
registration statement under the Act with respect to any of its equity
securities (other than pursuant to registration statements on Form S-4 or Form
S-8 or any successor or similar forms), whether or not for its own account, then
the Company shall give written notice of such proposed filing to all
Securityholders promptly (and in any event at least twenty (20) days before the
anticipated filing date). Such notice shall offer to such Securityholders,
together with others who have similar rights, the opportunity to include in such
registration statement such number of Securities as they may request. The
Company shall cause the managing underwriter of a proposed underwritten offering
(unless the offering is an underwritten offering of a class of the Company's
equity securities other than Common Stock and the managing underwriter has
advised the Company in writing that, in its opinion, the inclusion in such
offering of Common Stock would materially adversely affect the distribution of
such offering) to permit the holders of Securities requested to be included in
the registration to include such Securities in the proposed offering and the
Company shall use its reasonable best efforts to include such Securities in such
proposed offering on the same terms and conditions as any similar securities of
the Company included therein. If the offering of which the Company gives notice
is a public offering involving an underwriter, the right of a Securityholder to
registration pursuant to this Section 9.2 shall be conditioned upon such
Securityholder's participation in such underwriting and the inclusion of the
Securities to be sold by such Securityholder in the underwriting. All
Securityholders proposing to distribute Securities through such underwriting
shall enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters. The foregoing
notwithstanding, in the case of a firm commitment offering on underwriting terms
appropriate for such a transaction, other than a registration requested by
Securityholders pursuant to Section 9.1, if any such managing underwriter of
recognized standing shall advise the Company and the Securityholders in writing
that, in its opinion, the distribution of all or a specified portion of the
Securities requested to be included in the registration concurrently with the
securities being registered by the Company would materially adversely affect the
distribution of such securities by increasing the aggregate amount of the
offering in excess of the maximum amount of securities which such managing
underwriter believes can reasonably be sold in the contemplated distribution,
then the securities to be included in a registration which is a primary
underwritten offering on behalf of the Company shall be included in the
following order: (i) first, the securities the Company proposes to include
therein and (ii) second, such other securities (including the Securities)
requested to be included, pro rata among the holders (including the
Securityholders) of such other securities according to the aggregate number of
securities held by each such holder requesting inclusion therein.
b. In the event that a holder or holders of the Company's
securities (other than a Securityholder or Securityholders) requests, pursuant
to rights granted to such holder or holders, that the Company file a
registration statement for the public offering of securities and the Company and
the other holders of the Company's securities (including the Securityholders)
who have rights to be included in such registration, request to be included in
such registration and the managing underwriter of such offering shall advise the
Company and the holders requesting inclusion in the offering that, in its
opinion, the distribution of a specified portion of the securities requested to
be included in the registration would materially adversely affect the
distribution of such securities by increasing the aggregate amount of the
offering in excess of the maximum amount of securities which such managing
underwriter believes can reasonably be sold in the contemplated distribution
then, the securities to be included in the registration shall be included in the
following order: (i) first, all of the securities requested to be included
therein by the holder or holders making the initial request for the
registration, and (ii) second, such other securities requested to be included
therein by the holders of such other securities, pro rata among the holders of
such other securities according to the aggregate number of securities held by
each such holder requesting inclusion therein.
9.3. Company Covenants; Registration Right Provisions.
a. In connection with the registration of Securities on behalf of
the holders thereof (such Securityholders being referred to herein as "Sellers")
in accordance with Section 9.1 or Section 9.2 above, the Company agrees to:
(i) enter into a cross-indemnity agreement, in customary
form, with each underwriter, if any, and each Seller;
(ii) subject to the provisions of Section 9.1(a) and Section
9.2(a) regarding reductions by the managing underwriter, include in the
registration statement filed with the SEC, the Securities for which requests for
registration have been made; provided, however, that promptly after filing a
registration statement or prospectus or any amendments or supplements thereto,
the Company shall furnish to each Seller copies of all such documents filed
including documents incorporated by reference in the registration statement; and
notify each Seller of any stop order issued or threatened by the SEC and use its
best efforts to prevent the entry of such stop order or to remove it if entered;
(iii) prepare and file with the SEC such amendments of and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective (A)
in the case of a registration pursuant to Section 9.1, for a period of one
hundred and twenty (120) days, or, in the case of a registration pursuant to
Section 9.2, for a period of ninety (90) days or such shorter period as such
registration may be required of or desired by the Company to be effective or (B)
such shorter period as may be required if all such Securities covered by such
registration statement are sold prior to the expiration of such periods, and
comply with the provisions of the Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the Sellers set forth in
such registration statement; provided, however, that the Company shall not be
required to file any registration statement in accordance with Section 9.1
hereof before the first anniversary of the Date of Grant;
(iv) furnish to each Seller and each underwriter, if any,
without charge, such number of copies of the registration statement, each
amendment and supplement thereto (in each case including all exhibits thereto),
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such Seller may reasonably
request in order to facilitate the disposition of the Securities proposed to be
sold by such Seller;
(v) use its reasonable best efforts to register or qualify
such Securities under such other securities or Blue Sky laws of such
jurisdictions as any Seller or any such underwriter reasonably requests and keep
such registrations or qualifications in effect for so long as such registration
statement remains in effect and do any and all acts and things which may be
reasonably necessary or advisable to enable such Seller to consummate the
disposition in such jurisdictions of the Securities owned by such Seller;
provided, however, that the Company shall not be required to (i) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this subsection (v), (ii) subject itself to taxation
in any such jurisdiction, or (iii) consent to general service of process in any
jurisdiction;
(vi) notify each Seller, at any time when a prospectus
relating to such Seller's Securities is required to be delivered under the Act,
of the occurrence of any event as a result of which the prospectus included in
such registration statement contains an untrue statement of a material fact or
omits to state any material fact necessary to make the statements therein not
misleading, and as soon as practicable prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Securities, such prospectus will not contain an untrue statement of a material
fact or omit to state any material fact necessary to make the statements therein
not misleading;
(vii) cause all such Securities to be listed on any Exchange
on which similar securities issued by the Company are then listed (which shall
not apply to the Warrants unless similar warrants are then listed);
(viii) provide a transfer agent, registrar and CUSIP number
for all such Securities not later than the effective date of such registration
statement;
(ix) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other actions that
the Sellers or the underwriters, if any, reasonably request in order to expedite
or facilitate the disposition of such Securities;
(x) make available for inspection by the Sellers and their
counsel, any underwriter participating in any disposition pursuant to such
registration statement, and any counsel retained by any such underwriter, all
pertinent financial and other information and corporate documents of the
Company, and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such Seller, underwriter or counsel in
connection with such registration statement;
(xi) use its reasonable best efforts to obtain a "cold
comfort" letter from the Company's independent public accountants in customary
form and covering such matters of the type customarily covered by "cold comfort"
letters as the Sellers or any underwriter may reasonably request;
(xii) in the event of an underwritten registration, obtain
an opinion of counsel to the Company, addressed to the Sellers and any
underwriter, in customary form and including such matters as are customarily
covered by such opinions in underwritten registered offerings of equity
securities as the Sellers or any underwriter may reasonably request, such
opinion to be reasonably satisfactory in form and substance to each Seller; and
(xiii) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
securityholders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months subsequent to the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Act and Rule 158 thereunder.
b. Any other provisions of this Section 9 notwithstanding, upon
receipt by the Securityholders of a written notice signed by the chief executive
officer, chief operating officer or chief financial officer of the Company to
the effect set forth below, the Company shall not be obligated during a
reasonable period of time thereafter to effect any registrations pursuant to
this Section 9, and the Securityholders agree that they will immediately suspend
sales of shares under any effective registration statement for a reasonable
period of time, in either case not to exceed ninety (90) days, at any time at
which, in the Company's reasonable judgment, (i) there is a development
involving the Company or any of its affiliates which is material but which has
not yet been publicly disclosed or (ii) sales pursuant to the registration
statement would materially and adversely affect an underwritten public offering
for the account of the Company or any other material financing project or a
proposed or pending material merger or other material acquisition or material
business combination or material disposition of the Company's assets, to which
the Company or any of its affiliates is, or is expected to be, a party. In the
event a registration is postponed or sales by the Securityholders pursuant to an
effective registration statement are suspended in accordance with this Section
9.3(b), there shall be added (i) to the period during which the Company is
obligated to keep a registration effective and (ii) to the period in which the
Sellers may request the Company effect a registration pursuant to Section
9.1(a), the number of days for which the registration was postponed or sales
were suspended pursuant to this Section 9.3(b).
c. The Company may require each Seller to furnish to the Company
such information regarding the distribution of the Securities proposed to be
sold by such Seller and the ownership of the Securities by the Seller as the
Company may from time to time reasonably request in writing.
d. Each Seller agrees that, upon receipt of any notice from the
Company of the occurrence of any event of the kind described in subsection (vi)
of Section 9.3(a) above, such Seller shall forthwith discontinue disposition of
Securities pursuant to the registration statement covering such Securities until
such Seller's receipt of copies of the supplemented or amended prospectus
contemplated by Section 9.3(a)(vi) above and, if so directed by the Company,
such Seller will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies in such Seller's possession, of the prospectus
covering such Securities current at the time of receipt of such notice. In the
event the Company shall give any such notice, the period mentioned in Section
9.3(a)(iii) above shall be extended by the number of days during the period from
and including the date of giving of such notice to and including the date when
each Seller shall have received the copies of the supplemented or amended
prospectus contemplated by Section 9.3(a)(vi) above.
e. The Company shall not file or permit the filing of any
registration or comparable statement which refers to any Seller by name or
otherwise as the Seller of any securities of the Company unless such reference
to such Seller is specifically required by the Act or any similar federal
statute, rules or regulation then in force.
9.4 Expenses. All expenses incident to the Company's performance of or
compliance with this Warrant, including without limitation all registration and
filing fees, fees and expenses relating to filings with any Exchange, fees and
expenses of compliance with securities or Blue Sky laws in jurisdictions
reasonably requested by any Seller or underwriter pursuant to Section 9.3(a)(v)
(including reasonable fees and disbursements of counsel in connection with Blue
Sky qualifications of the Securities), all word processing, duplicating and
printing expenses, messenger and delivery expenses, fees and disbursements of
counsel for the Company and one (1) counsel for the Sellers, independent public
accountants (including the expenses of any special audit or "cold comfort"
letters required by or incident to such performance) and underwriters (excluding
discounts, commissions or fees of underwriters, selling brokers, dealer managers
or similar securities industry professionals attributable to the securities
being registered, or legal expenses of any person other than the Company and the
Sellers, but including liability insurance if the Company so desires), all the
Company's internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expense of any annual audit, the expense of any liability insurance (if the
Company determines to obtain such insurance) and the fees and expenses incurred
in connection with the listing of the securities to be registered on each
Exchange on which such securities issued by the Company are then listed, the
reasonable fees and expenses of any special experts (including attorneys)
retained by the Company (if it so desires) in connection with such registration
and fees and expenses of other persons retained by the Company (all such
expenses being herein called "Registration Expenses"), shall be borne by the
Company. Notwithstanding the foregoing, the Company shall bear the expenses,
fees and disbursements of one (1) counsel for all of the Sellers to the extent,
and only to the extent, such expenses, fees and disbursements are reasonable.
9.5 Registration Statement Preparation; Investigation. In connection
with the preparation and filing of each registration statement under the Act
pursuant to this Section 9, upon the reasonable request of the original holder
of the Warrant, the Company shall give such holder under such registration
statement, its underwriters, if any, and its counsel and accountants, the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and each
amendment thereof or supplement thereto, and will give each of them such access
to its books and records and such opportunities to discuss the business of the
Company with its officers and the independent public accountants who have
certified its financial statements as shall be necessary, in the opinion of such
holders' and such underwriters' respective counsel, to conduct a reasonable
investigation within the meaning of the Act.
9.6 Indemnification.
a. In the event of any registration of any securities of the
Company under the Act, the Company shall, and hereby does, indemnify and hold
harmless in the case of any registration statement filed pursuant to Section 9.1
or Section 9.2, the Seller of any Securities covered by such registration
statement, its directors, officers and employees, each other person who
participates as an underwriter in the offering or sale of such Securities and
each other person, if any, who controls such Seller or any such underwriter
within the meaning of the Act against any losses, claims, damages, or
liabilities (or actions or proceedings whether commenced or threatened in
respect thereof), joint or several, to which such Seller or any such director or
officer or underwriter or controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages, or liabilities (or actions
or proceedings, whether commenced or threatened, in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
Securities were registered under the Act, any preliminary prospectus, final
prospectus or summary prospectus contained therein, 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, and the Company shall reimburse such Seller and each
such director, officer, employee, underwriter and controlling person for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action, or
proceeding; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage, liability (or action or
proceeding, whether commenced or threatened in respect thereof), or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment, or
supplement in reliance upon and in conformity with written information furnished
to the Company through an instrument duly executed by such Seller specifically
stating it is for use in the preparation thereof and, provided, further, that
the Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding, whether commenced or
threatened, in respect thereof), or expense arises out of such person's failure
to send or give a copy of the final prospectus, as the same may be then
supplemented or amended, within the time required by the Act to the person
asserting an untrue statement or alleged untrue statement or omission or alleged
omission if such statement or omission was corrected in such final prospectus.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Seller or any such director, officer,
underwriter or controlling person and shall survive the transfer of such
Securities by such Seller.
b. The Company may require, as a condition to including any
Securities in any registration statement filed pursuant to Section 9.3, that the
Company shall have received an undertaking satisfactory to it from the
prospective Seller, to indemnify and hold harmless (in the same manner and to
the same extent as set forth in Section 9.6(a)) the Company, each director,
officer and employee of the Company, and each other person, if any, who controls
the Company within the meaning of the Act, with respect to any statement or
alleged statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus, or summary prospectus
contained therein, or any amendment or supplement thereto, if such statement or
alleged statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Company through an
instrument duly executed by such Seller specifically stating that it is for use
in the preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment, or supplement. Such indemnity shall
remain in full force and effect, regardless of any investigation made by or on
behalf of the Company or any such director, officer, or controlling person and
shall survive the transfer of such Securities by such Seller. In no event shall
the liability of any selling Seller hereunder (including without limitation
indemnification liability in connection with Section 9.6(d) hereof) be in the
aggregate greater in amount than the dollar amount, if any, by which (1) the
proceeds received by such Seller upon the sale of the Securities giving rise to
such indemnification obligation exceed (2) the purchase or exercise price paid
by such Seller for such Securities. The Company shall be entitled to receive
indemnities from underwriters, selling brokers, dealer managers, and similar
securities industry professionals participating in the distribution to the same
extent as provided above with respect to information so furnished in writing by
such persons specifically for inclusion in any prospectus or registration
statement.
c. Promptly after receipt by an indemnified party of notice of
the commencement of any action or proceeding involving a claim referred to in
this Section 9.6, such indemnified party shall, if a claim in respect thereof is
to be made against an indemnifying party, give written notice to the latter of
the commencement of such action; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of this
Section 9.6, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an indemnified party, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist in respect of such claim, the indemnifying party shall be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified, to the extent that the indemnifying
party may wish, with counsel reasonably satisfactory to such indemnified party,
and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation. If, in the indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist in respect of such claim, the indemnified party may assume the
defense of such claim, jointly with any other indemnified party that reasonably
determines such conflict of interest to exist, and the indemnifying party shall
be liable to such indemnified parties for the reasonable legal fees and expenses
of one counsel for all such indemnified parties and for other expenses
reasonably incurred in connection with the defense thereof incurred by the
indemnified party. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
of any such action which 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, or a covenant not to sue, in respect of such claim or litigation.
No indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying party.
d. Indemnification and contribution similar to that specified in
this Section 9.6 (with appropriate modifications) shall be given by the Company
and may be required of each Seller with respect to any required registration or
other qualification of Securities under any Federal or state law or regulation
of any governmental authority, other than the Act.
e. The indemnification required by this Section 9.6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred.
f. If the indemnification provided for in this Section 9.6 from
the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities, or expenses referred to
herein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of losses, claims, damages, liabilities, or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified party in connection with the actions which resulted in
such losses, claims, damages, liabilities, or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified party, and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities,
and expenses referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding. In no event shall the liability of any Seller
hereunder (including without limitation contribution liability in connection
with Section 9.6(d) hereof) be in the aggregate greater in amount than the
dollar amount, if any, by which (1) the proceeds received by such Seller upon
the sale of the Securities giving rise to such contribution obligation exceed
(2) the purchase or exercise price paid by such Seller for such Securities. The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 9.6(f) were determined by pro rata allocation or by any
other method of allocation which does not take into account the equitable
considerations referred to in this Section 9.6(f). No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person or entity who was not guilty
of such fraudulent misrepresentation.
9.7 Conflicting Rights. The Company hereby represents and covenants
that, prior to and as of the Date of Grant the Company has not granted, and
after the Date of Grant the Company shall not grant, any registration rights
which conflict with the rights under this Section 9.
9.8 Lock-up Period. If requested by the managing underwriter of an
offering for which Shares of such Securityholder have been registered, a
Securityholder shall not sell or otherwise transfer or dispose of any Securities
held by such Securityholder (other than those included in the registration)
during such period following the effective date of such registration as is usual
and customary at such time in similar public offerings of similar securities;
provided, however, that the Company shall use its reasonable best efforts to
cause each holder of a material number of shares of Common Stock to enter into
similar "lock-up" agreements in respect of such offering. The obligations
described in this Section 9.8 shall not apply to offerings pursuant to a
registration statement on Form S-4 or Form S-8 or any successor or similar form.
10. Additional Rights of the Company and Warrant Holder.
10.1 Secondary Sales. The Company agrees that it will make reasonable
efforts to cooperate with the holder of this Warrant in obtaining liquidity if
opportunities to make secondary sales of the Company's securities become
available. To this end, the Company will promptly provide the holder of this
Warrant with notice of any offer to acquire from the Company's security holders
more than five percent (5%) of the total voting power of the Company and will
make reasonable efforts to cooperate with the holder in arranging the sale of
this Warrant to the person or persons making such offer; provided that such
notice may be delayed as necessary to comply with state corporate and Federal
securities laws.
10.2 Mergers. In the event that the Company undertakes to (i) sell,
lease, exchange, convey or otherwise dispose of all or substantially all of its
property or business, or (ii) merge into or consolidate with any other
corporation (other than a wholly-owned subsidiary of the Company), or effect any
transaction (including a merger or other reorganization) or series of related
transactions, in which more than 50% of the voting power of the Company is
disposed of, the Company will use its reasonable best efforts to provide at
least thirty (30) days notice of the terms and conditions of the proposed
transaction. The Company will make reasonable efforts to cooperate with the
holder in consummating the sale of this Warrant in connection with any such
transaction.
10.3 Right to Convert Warrant into Common Stock; Net Issuance.
a. Right to Convert. In addition to and without limiting the
rights of the holder under the terms of this Warrant, the holder shall have the
right (the "Conversion Right"), at any time and from time to time while the
Warrant is exercisable, to convert this Warrant (but only as to an aggregate of
one half (or any lesser portion thereof) of the original number of Shares
represented by this Warrant (as adjusted pursuant to Section 4 hereof) (the "Net
Issuance Warrant")) into shares of Common Stock as provided in this Section
10.3. Upon exercise of the Conversion Right with respect to a particular number
of shares subject to this Warrant (the "Converted Warrant Shares"), the Company
shall deliver to the holder (without payment by the holder of any exercise price
or any cash or other consideration) that number of shares of fully paid and
nonassessable Common Stock equal to the quotient obtained by dividing (i) the
value of the Net Issuance Warrant (or the specified portion hereof) on the
Conversion Date (as defined in subsection (b) hereof), which value shall be
equal to (A) the aggregate fair market value of the Converted Warrant Shares
issuable upon exercise of the Net Issuance Warrant (or the specified portion
hereof) on the Conversion Date less (B) the aggregate Warrant Price of the
Converted Warrant Shares immediately prior to the exercise of the Conversion
Right by (ii) the fair market value of one share of Common Stock on the
Conversion Date.
<PAGE>
Expressed as a formula, such conversion shall be computed as follows:
X = A - B
-----
Y
Where: X = the number of shares of Common Stock that may be issued to
holder
Y = the fair market value (FMV) of one share of Common Stock
A = the aggregate FMV (i.e., FMV x Converted Warrant Shares)
B = the aggregate Warrant Price (i.e., Converted Warrant Shares
x Warrant Price)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date. For purposes of Section 9 of this
Warrant, shares issued pursuant to the Conversion Right shall be treated as if
they were issued upon the exercise of this Warrant.
b. Method of Exercise. The Conversion Right may be exercised by
the holder by the surrender of this Warrant at the principal office of the
Company together with a written statement specifying that the holder thereby
intends to exercise the Conversion Right and indicating the number of shares
subject to the Net Issuance Warrant which are being surrendered (referred to in
subsection (a) hereof as the Converted Warrant Shares) in exercise of the
Conversion Right. Such conversion shall be effective upon receipt by the Company
of this Warrant together with the aforesaid written statement, or on such later
date as is specified therein (the "Conversion Date"). Certificates for the
shares issuable upon exercise of the Conversion Right and, if applicable, a new
warrant evidencing the balance of the shares remaining subject to this Warrant,
shall be issued as of the Conversion Date and shall be delivered to the holder
within thirty (30) days following the Conversion Date.
c. Determination of Fair Market Value. For purposes of this
Section 10.3, "fair market value" of a share of Common Stock shall have the
meaning set forth in Section 4(h) above.
d. Determination of Net Issuance Warrant; Exercise-Only Warrant.
The portion of the Warrant that is not the Net Issuance Warrant is referred to
herein as the Exercise-Only Warrant, with respect to which Section 10.3 hereof
shall not apply. In the event a Warrant holder exercises any portion of its
Warrant, or if same is repurchased, such exercise or repurchase shall be deemed
to consist of the exercise or repurchase of Exercise-Only Warrants, to the
maximum extent possible, unless the Company is otherwise notified by such holder
prior to such exercise or repurchase. In the event a Warrant holder transfers
any portion of its Warrant, such transfer shall be deemed to consist of the
transfer of Exercise-Only Warrants, to the maximum extent possible, unless the
Company is otherwise notified by such holder prior to such transfer. In case of
any transfer, partial repurchase or partial exercise of this Warrant, the
Company shall be entitled to include in any new Warrant a provisions indicating
the extent to which, in accordance with the provisions of this Section 10.3(d),
such new Warrant is deemed a Net Issuance Warrant or an Exercise-Only Warrant.
10.4 Warrant Repurchase by the Company.
a. Mandatory Repurchase. The Company will repurchase, from any
source of funds legally available therefore, all outstanding and unexercised
Warrants at 5:00 pm (Los Angeles time) on the fifth anniversary of the Date of
Grant, in accordance with the provisions of Section 10.4(c) below. The Company
shall effect such repurchase by paying to the holder of each unexercised Warrant
an amount in cash equal to $1.50 (subject to adjustment pursuant to Section 4
hereof as if such amount were a Warrant Price) multiplied by the number of
shares of Common Stock for which such Warrant could be exercised (by the payment
of the Warrant Price therefor) as of such date (such product, the "Repurchase
Price").
b. Optional Repurchase. Prior to the second anniversary of the
Date of Grant, at the option of the Company, the Company may repurchase certain
of the unexercised Warrants at a repurchase price (the "Repurchase Price") set
forth in the table below, in the event that the fair market value of a share of
Common Stock at the time of the exercise of such optional repurchase right
exceeds the "Minimum Fair Market Value" (as set forth in the table below), in
accordance with the provisions of Section 10.4(c) below. The maximum number of
Warrants repurchasable pursuant to this Section 10.4(b) shall be such number as
could be exercised (by the payment of the Warrant Price therefor) for 250,000
shares of Common Stock (subject to adjustment pursuant to Section 4 hereof) as
of the date of such repurchase. The Company shall effect such repurchase by
paying to the holder of each repurchased unexercised Warrant an amount in cash
equal to the applicable Repurchase Price (set forth below) multiplied by the
number of shares of Common Stock for which such Warrant could be exercised (by
the payment of the Warrant Price therefor) as of the date of such repurchase:
Minimum Fair Market Value Number of Shares Purchasable
Vablue of Common Stock upon Exercise of
on Repurchase Date* Repurchasable Warrants* Repurchase Price*
------------------- ----------------------- -----------------
$12.00 62,500 $1.50
$15.00 62,500 $2.00
$18.00 62,500 $2.50
$21.00 62,500 $3.00
* As adjusted by the application of Section 4 hereof.
c. Method of Repurchase. At least 10 but no more than 20 days
prior to the repurchase of any unexercised Warrant pursuant to this Section
10.4, written notice shall be mailed, first class postage prepaid, to each
holder of record (at the close of business on the business day next preceding
the day on which notice is given) of any unexercised Warrant to be repurchased,
at the address last shown on the records of the Company for such holder,
notifying such holder of the repurchase to be effected, specifying the number of
shares of Common Stock for which the Warrant being repurchased could be
exercised (by the payment of the Warrant Price therefor) as of such date, the
date and time of such repurchase, the Repurchase Price, and the place at which
payment may be obtained, calling upon such holder to surrender to the Company,
in the manner and place designated, such unexercised Warrants being repurchased
pursuant to this Section 10.4; provided, however, that (i) the number of shares
of Common Stock for which the Warrant being repurchased could be exercised (by
the payment of the Warrant Price therefor) as of such date and (ii) the
Repurchase Price, as each is set forth in such notice, shall be estimates only,
the actual amounts being determined pursuant to Section 10.4(a) or 10.4(b), as
applicable, on and as of the date set forth for such repurchase. With respect to
Section 10.4(b) above, the fair market value of a share of Common Stock
(purchasable upon exercise of the Warrants proposed to be repurchased) must
equal or exceeded the Minimum Fair Market Value on the date of such notice as
well as on the date of the noticed repurchase for such repurchase to occur. On
or after the date designated for repurchase, each holder of Warrants to be
repurchased shall surrender to the Company certificates or other documents
representing such Warrants, in the manner and at the place designated in the
repurchase notice, and thereupon (i) the Repurchase Price with respect to such
repurchased Warrant shall be payable to the order of the holder of record of
such Warrant, and each repurchased Warrant shall be cancelled. In the event less
than all of the unexercised Warrants represented by any such certificate or
other document is repurchased, a new certificate or document shall be issued
representing the Warrants to the extent not repurchased. From and after the
designated repurchase date, unless there shall have been a default in the
payment of the Repurchase Price, all rights of the holders of unexercised
Warrants designated for repurchase, as holders of such Warrants, shall cease
except with respect to the right to receive the Repurchase Price therefor. Any
repurchase of Warrants pursuant to this Section 10.4 shall be made pro rata with
respect to all holders of record of unexercised Warrants as of the date of
repurchase.
11. Representations and Warranties. The Company represents and
warrants to the holder of this Warrant as follows, as of the Date of Grant:
a. This Warrant has been duly authorized and executed by the
Company and is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and the rules of law or
principles at equity governing specific performance, injunctive relief and other
equitable remedies;
b. The Shares have been duly authorized and reserved for issuance
by the Company and, when issued in accordance with the terms hereof, will be
validly issued, fully paid and nonassessable;
c. The rights, preferences, privileges and restrictions granted
to or imposed upon the Common Stock and the holders thereof are as set forth in
the articles or certificate of incorporation of the Company, as amended to the
Date of Grant (as so amended, the "Charter"), a true and complete copy of which
has been delivered to the original holder of this Warrant;
d. (1) The execution and delivery of this Warrant are not, and
the issuance of the Shares upon exercise of this Warrant (to the extent such
Warrant is then held by Foothill Capital Corporation) in accordance with the
terms hereof will not be, inconsistent with the Charter or by-laws of the
Company, do not and will not contravene, in any material respect, any
governmental rule or regulation, judgment or order applicable to the Company,
and do not and will not conflict with or contravene any provision of, or
constitute a default under, any indenture, mortgage, contract or other
instrument of which the Company is a party or by which it is bound or require
the consent or approval of, the giving of notice to, the registration or filing
with or the taking of any action in respect of or by, any Federal, state or
local government authority or agency or other person, except for the filing of
notices pursuant to federal and state securities laws, which filings will be
effected by the time required thereby;
(1) The issuance of the Shares upon exercise of this Warrant
(to the extent such Warrant has been transferred by Foothill Capital
Corporation) in accordance with the terms hereof will not be inconsistent with
the Charter or by-laws of the Company, do not and will not contravene, in any
material respect, any governmental rule or regulation, judgment or order
applicable to the Company, and do not and will not conflict with or contravene
any provision of, or constitute a default under, any indenture, mortgage,
contract or other instrument of which the Company is a party or by which it is
bound or require the consent or approval of, the giving of notice to, the
registration or filing with or the taking of any action in respect of or by, any
Federal, state or local government authority or agency or other person, except
for the filing of notices (which filings will be effected by the time required
thereby), or the filing of registration statements and the delivery of
prospectuses, pursuant to federal and state securities laws;
e. There are no actions, suits, audits, investigations or
proceedings pending or, to the knowledge of the Company, threatened against the
Company in any court or before any governmental commission, board or authority
which, if adversely determined, will have a material adverse effect on the
ability of the Company to perform its obligations under this Warrant;
f. The authorized capital stock of the Company consists of Twenty
Million (20,000,000) shares of Common Stock, $0.001 par value per share, of
which approximately Eight Million Nine Hundred Fourteen Thousand Five Hundred
Fifty-Seven (8,914,557) shares were issued and outstanding as of the close of
business on the Date of Grant, and Ten Million (10,000,000) shares of Preferred
Stock, $0.001 par value per share, of which Eight (8) shares of Series A
Convertible Preferred Stock were issued and outstanding as of the Date of Grant.
All such outstanding shares have been validly issued and are fully paid,
nonassessable shares free of preemptive rights;
g. Other than the Warrants, pursuant to director or employee
benefit plans of the Company which (except in the case of certain tax-qualified
plans) have been approved by the Company's stockholders, or as disclosed in the
Company's most recent Proxy Statement and Form 10-K, there are no subscriptions,
rights, options, warrants, or calls relating to any shares of the Company's
capital stock, including any right of conversion or exchange under any
outstanding security or other instrument; and
h. Other than the Warrants or except as disclosed in the
Company's most recent Proxy Statement and Form 10-K, the Company is not subject
to any obligation (contingent or otherwise) to repurchase or otherwise acquire
or retire any shares of its capital stock or any security convertible into or
exchangeable for any of its capital stock.
12. Modification and Waiver. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
13. Notices. Any notice, request, communication or other document required
or permitted to be given or delivered to the holder hereof or the Company shall
be delivered, or shall be sent by private courier or certified or registered
mail, postage prepaid, to each such holder at its address as shown on the books
of the Company or to the Company at the address indicated therefor on the
signature page of this Warrant.
14. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Common Stock issuable upon the exercise or
conversion of this Warrant shall survive the exercise, conversion and
termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the successors and assigns of the holder
hereof. The Company will, at the time of the exercise or conversion of this
Warrant, in whole or in part, upon request of the holder hereof but at the
Company's expense, acknowledge in writing its continuing obligation to the
holder hereof in respect of any rights to which the holder hereof shall continue
to be entitled after such exercise or conversion in accordance with this
Warrant; provided, that the failure of the holder hereof to make any such
request shall not affect the continuing obligation of the Company to the holder
hereof in respect of such rights.
15. Lost Warrants or Stock Certificates. The Company covenants to the
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any loss, theft or destruction, upon
receipt of an executed lost securities bond or indemnity reasonably satisfactory
to the Company, or in the case of any such mutilation upon surrender and
cancellation of such Warrant or stock certificate, the Company will make and
deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant or stock certificate.
16. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
17. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Delaware.
18. Survival of Representations, Warranties and Agreements. All
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative.
19. Remedies. In case any one or more of the covenants and agreements
contained in this Warrant shall have been breached, the holders hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by a
holder), may proceed to protect and enforce their or its rights either by suit
in equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach and/or an action for specific performance
of any such covenant or agreement contained in this Warrant.
20. Acceptance. Receipt of this Warrant by the holder hereof shall
constitute acceptance of and agreement to the foregoing terms and conditions.
21. No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
holder of this Warrant against impairment.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, LaserSight Incorporated has caused this
Warrant to be executed on its behalf by one of its officers thereunto duly
authorized.
LASERSIGHT INCORPORATED
By: /s/ Michael R. Farris
------------------------
Name: Michael Farris
Title: President/Chief Executive Officer
Address: 12161 Lackland Road
St. Louis, Missouri 63146
Date: March 31, 1997
LICENSE AGREEMENT
-----------------
This Agreement is entered into by and between VISX, INCORPORATED, a
Delaware corporation ("LICENSOR"), and LASERSIGHT, INCORPORATED, a Delaware
corporation ("LICENSEE").
RECITALS:
---------
LICENSOR is the owner of certain patents and patent applications issued
in countries other than the United States (hereinafter Licensed Patents)
covering developments in the field of ophthalmological laser surgery generally
referred to as Phototherapeutic Keratectomy ("PTK") and Photorefractive
Keratectomy ("PRK").
LICENSEE or its Affiliates manufacture and sell, and desire to continue
to manufacture and sell, ophthalmological laser surgical equipment. LICENSOR and
LICENSEE are presently engaged in litigation in the Federal Court of Canada,
Trial Division, entitled VISX, Incorporated v. LaserSight, Incorporated, et.
al., No. T-1876-95 ("the Canadian Action"), wherein LICENSOR asserts and
LICENSEE denies that LICENSEE has infringed certain of the LICENSED PATENTS.
LICENSOR and LICENSEE wish to settle the Canadian Action and any other
disputes that may exist between them relating to said LICENSED PATENTS.
IT IS, THEREFORE, AGREED:
ARTICLE 1
GENERAL DEFINITIONS
-------------------
1.1 Affiliate. The term "Affiliate" shall mean, with respect to any
person or entity, any other person or entity that, directly or indirectly,
controls, is under common control with, or is controlled by that person or
entity. For purposes of this definition, "control" (including, with correlative
meaning, the terms "controlled by" and "under common control with"), as used
with respect to any person or entity, shall mean the possession, directly or
indirectly, of the power to direct and/or cause the direction of the management
and policies of such person or entity, whether through the ownership of voting
securities, by contract or otherwise.
1.2 Claim. The term "Claim" shall mean a patent claim which has not
expired and which has not been disclaimed, canceled, or finally held invalid or
unenforceable by a court of competent jurisdiction from which no further appeal
is possible or has been taken within the time period provided under applicable
law for such appeal.
1.3 Effective Date. The "Effective Date" of this Agreement shall be May
1, 1997.
1.4 Equipment Royalty. The term "Equipment Royalty" shall mean the
royalty to be charged for the sale, lease, and other disposition of Licensed
Products.
1.5 Excluded Patents. The term "Excluded Patents" shall mean any patent
issued in the United States, owned by LICENSOR or a LICENSOR Affiliate and
listed on Exhibit A or as to which the exclusive rights therein have been
granted to Pillar Point Partners.
1.6 LIBOR Rate. The term "LIBOR Rate" shall mean a fixed rate of
interest per annum offered for one-year dollar deposits in the London market, in
effect on the applicable date of reference thereto hereunder, as quoted in the
Wall Street Journal.
1.7 Licensed Patents. The term "Licensed Patents" shall mean and
include the patents and patent applications listed on Exhibit B attached hereto
together with all reissues, re-examinations, divisions, continuations,
continuations-in-part, renewals, extensions of, and additions thereto.
1.8 Licensed Procedure. The term "Licensed Procedure" shall mean any
procedure for performing ultraviolet laser corneal surgery which is performed
outside the United States and is covered by at least one Claim of a Licensed
Patent.
1.9 Licensed Product. The term "Licensed Product" shall mean any
ultraviolet light generating instrumentality that is covered by at least one
Claim of any Licensed Patent, including but not limited to the product(s) more
specifically described in Exhibit C. The term "ultraviolet light generating
instrumentality" when used in this agreement shall mean the entire machine used
for performing ultraviolet laser surgery, and not merely a component or other
part of such machine.
1.10 Net Selling Price. The term "Net Selling Price" shall mean, with
respect to any Licensed Product, the price for the Licensed Product, including
any component thereof (such as, without limitation, power supplies, gas tanks,
and software), excluding, without limitation, any bona fide charges with respect
to the Licensed Product for packing, transportation, insurance, installation,
training, duties, commissions to third-party distributors or representatives,
use or sales taxes, excise taxes, goods and services taxes, prompt payment
discounts, quantity discounts, amounts allowed for returns or credited for
trade-ins of Licensed Products on which a Equipment Royalty already has been
paid (or was not otherwise due), and other similar charges. For purposes of the
preceding sentence, the "price" for a Licensed Product and the related "charges"
shall be determined as follows:
(a) If LICENSEE or a LICENSEE Affiliate sells the Licensed
Product to a person or entity which is not LICENSEE's Affiliate, the
price shall be the amount paid to LICENSEE or the LICENSEE Affiliate
for the Licensed Product.
(b) If LICENSEE or a LICENSEE Affiliate leases the Licensed
Product or licenses the use of the Licensed Product to a person or
entity that is not a LICENSEE Affiliate, sells or leases or licenses
the use of the Licensed Product to a LICENSEE Affiliate, or sells,
leases, licenses the use of, or exchanges the Licensed Product for
consideration other than money, then the Net Selling Price for the
Licensed Product shall be the average actual Net Selling Price realized
by LICENSEE and its Affiliates during the immediately preceding twelve
(12) full calendar months for the same Licensed Products or comparable
Licensed Products of LICENSEE if no sales of the same Licensed Products
have occurred during that period. If there were no actual sale for
money of the same or comparable Licensed Product to a person or entity
that is not a LICENSEE Affiliate during the preceding twelve (12)
calendar months, then the Net Selling Price for the Licensed Product
shall be the average Net Selling Price realized by LICENSEE and its
affiliates during the twelve (12) months prior to and including the
date on which the last sale for money of the Licensed Product or a
comparable Licensed Product was made to a person or entity that is not
a LICENSEE Affiliate.
(c) If the Licensed Product is a component of a larger system
with components which are not Licensed Products, then the price with
respect to the component shall be the price at which LICENSEE or
LICENSEE's Affiliates ordinarily sell the component separately to their
customers. If LICENSEE does not sell the component separately, then the
price shall be the fair market value of the component as of the date of
the subject transaction. Any charges shall be allocated to the
component in the same proportion as the price of the component, as so
determined, bears to the price of the entire larger system.
(d) The price shall not include the price of service
contracts, replacement or ancillary components, such as laser
excitation gases, filters, patient disposables, and the like which may
be sold to LICENSEE's customers from time to time and which are not
themselves Licensed Products.
(e) On or before the date of the first report due under
Section 4.7 below, LICENSEE will provide to LICENSOR an example of
LICENSEE's calculations of the Net Selling Price for LICENSEE's current
Licensed Product.
1.11 Overdue Rate. The term "Overdue Rate" shall mean the LIBOR Rate,
plus three and one-half percent (3.5%).
1.12 Pillar Point Partners. The term "Pillar Point Partners" shall mean
the general partnership formed under an Agreement dated June 3, 1992 between
LICENSOR and Summit Technology, Inc.
1.13 United States. The term "United States" shall mean all fifty (50)
states of the United States of America, the District of Columbia, Puerto Rico
and any other territory or possession or US military base or installation of the
United States of America.
1.14 User. The term "User" shall mean any user of any Licensed Product
in a country other than the United States.
ARTICLE 2
RELEASES
--------
Subject to the payment of the initial payment as set forth in
Section 4.1 of this Agreement, LICENSOR does hereby fully release, acquit, and
forever discharge LICENSEE and LICENSEE's Affiliates and their respective
officers, directors, shareholders, agents, employees, customers, distributors,
dealers, vendees, suppliers, and Users from any and all claims or liability,
known or unknown, arising out of or related in any way to (a) any matter which
could be considered an infringement or form the basis of an action or claim of
infringement under the Licensed Patents occurring prior to the Effective Date
and/or (b) the manufacture, use, offer to sell, or sale of any ultraviolet light
generating instrumentality in any country in which any of the Licensed Patents
is issued as of the Effective Date. This Agreement effects a settlement of
claims which are contested and denied. Nothing herein shall be construed as an
admission by any party of any liability of any kind to the other party. This
Agreement shall not be admissible as evidence against any party hereto in any
proceeding other than in a proceeding to enforce an obligation of a party
hereunder. Notwithstanding anything herein to the contrary, the provisions of
this Article 2 shall survive the expiration or termination of the Agreement.
ARTICLE 3
GRANT
-----
3.1 Worldwide except the United States.
(a) Licensed Products. The LICENSOR hereby grants to LICENSEE
the non-exclusive right and license under the Licensed Patents to make,
have made, use, offer to sell, sell, lease and otherwise dispose of any
and all Licensed Products and other apparatus covered by the Licensed
Patents during the term hereof in all countries of the world except the
United States. The foregoing grant excludes the right to sublicense
with the following exceptions:
(i) LICENSEE shall have the right to sublicense any
of its rights under the foregoing grant to any one or more
LICENSEE Affiliate, on such terms and conditions as LICENSEE
in its sole discretion deems appropriate, to the full extent,
and subject to all the limitations and conditions (including
the obligation to pay Equipment Royalties), of the grant to
LICENSEE hereunder. Each sublicense to a LICENSEE Affiliate
under the immediately preceding sentence shall be treated as
if the applicable LICENSEE Affiliate separately entered into
this Agreement with the LICENSOR, but any such separate
agreement shall not be construed to diminish in any respect
LICENSEE's rights or obligations under this Agreement.
(ii) LICENSEE, and any Affiliate sublicensed in
accordance with Section 3.1(a)(i), shall have the right to
license, offer to sell, sell, lease, or otherwise dispose of
Licensed Products to Users, and other persons or entities
directly or indirectly through distributors or other resellers
or by other means.
(b) Licensed Procedures. The LICENSOR hereby grants to
LICENSEE the non-exclusive right and license under the Licensed Patents
to perform any and all Licensed Procedures during the term hereof in
all countries of the world except the United States. The foregoing
grant excludes the right to sublicense to others with the following
exceptions:
(i) LICENSEE shall have the right to sublicense any
of its rights under the foregoing grant to any one or more
LICENSEE Affiliate, on such terms and conditions as LICENSEE
in its sole discretion deems appropriate to the full extent,
and subject to all the limitations and conditions, of the
grant to LICENSEE hereunder. Each sublicense to a LICENSEE
Affiliate under the immediately preceding sentence shall be
treated as if the applicable LICENSEE Affiliate separately
entered into this Agreement with the LICENSOR, but any such
separate agreement shall not be construed to diminish in any
respect LICENSEE's rights or obligations under this Agreement.
(ii) LICENSEE, and any LICENSEE Affiliate sublicensed
in accordance with Section 3.1(b)(i), shall have the right to
sublicense Users, and other persons and entities to perform
Licensed Procedures.
(c) Labeling. LICENSEE or its applicable Affiliates shall
affix to each Licensed Product which is sold, leased, licensed or
otherwise disposed of after the Effective Date by LICENSEE or any
LICENSEE Affiliate any label reasonably requested by the LICENSOR
respecting the Licensed Patents. Nothing in this Agreement shall be
construed to prevent LICENSEE from pointing out that Licensee is the
manufacturer of the Licensed Product.
3.2 Excluded Patents.
(a) Notwithstanding anything herein to the contrary, nothing
in this Agreement shall be construed as granting LICENSEE or any
LICENSEE Affiliate a right to practice under any of the Excluded
Patents. The parties acknowledge that LICENSOR and Summit Technology,
Inc. ("SUMMIT") have exclusively licensed to Pillar Point Partners
their respective rights under their United States patents relating to
any ultraviolet light-generating instrumentality used to perform
corneal surgery. It is the stated policy of the Pillar Point Partners
to award third party sublicense agreements to all persons qualified to
make, have made, use, sell, lease and otherwise dispose of and perform
(including the right to license others to perform) procedures
practicing the subject matter defined by the so-licensed patents, on
reasonable, nondiscriminatory terms, consistent with those prevailing
in the market for apparatus or methods for performing ultraviolet laser
corneal surgery at the time any third party sublicense agreement is to
be entered into. All Pillar Point Partners decisions require, and are
made by, the unanimous agreement of LICENSOR and SUMMIT. Upon written
request by LICENSEE, LICENSOR agrees to use reasonable efforts to
secure for LICENSEE a third party sublicense from the Pillar Point
Partners on the terms available to third parties at that time.
(b) In the event that LICENSEE or its Affiliates acquire a
third party sublicense from Pillar Point Partners, then LICENSEE's
obligations to LICENSOR to pay royalties to LICENSOR on a Licensed
Product sold, leased or otherwise disposed of for use in the United
States shall be excused to the extent that LICENSEE actually pays
royalties on the same equipment to Pillar Point Partners.
3.3 Efforts. LICENSEE's only obligation under this Agreement with
respect to producing, promoting, selling and marketing Licensed Product is to
use such reasonable efforts as LICENSEE in the exercise of its sole discretion
deems appropriate.
3.4 Nonassertion. With respect to (a) any patent (other than the
Excluded Patents) issued in any country which on the Effective Date, LICENSOR
owns or under which it has the right to grant licenses or (b) any patent (other
than the Excluded Patents) which may later issue in any country other than the
United States on a pending patent application which, on the Effective Date or
during the term of this Agreement, LICENSOR owns or under which it has the right
to grant licenses, LICENSOR shall not assert any claims for infringement against
LICENSEE, any LICENSEE Affiliate, or any of their respective shareholders,
employees, agents, suppliers, vendees, licensees, lessees, customers or Users
based on the manufacture, sale, or use of any ultraviolet light generating
instrumentality upon which a royalty has been paid in accordance with Article 4.
The provisions of this Section 3.4 shall be binding upon and inure to the
benefit of the LICENSOR and LICENSEE and their respective successors and
permitted assigns.
3.5 Withdrawal of Pending Actions. Any claims or causes of action
between LICENSOR and LICENSEE for infringement of patents, which infringement
occurred prior to the Effective Date, shall be deemed to have been fully and
completely released and settled between them. The parties shall within thirty
(30) days of the execution of this Agreement consent to an order discontinuing
the Canadian Action and providing that each party will bear its own costs and
attorneys fees related to the action.
ARTICLE 4
PAYMENTS AND ROYALTIES
----------------------
4.1 Initial Payment. LICENSEE shall pay to LICENSOR, a non-refundable
sum in the amount of two hundred and thirty thousand four hundred dollars
(US$230,400.00) as payment for any and all claims or liability for the Release
set forth in Article 2, above. Such sum shall be payable in eight (8) equal
quarterly payments of twenty-eight thousand eight hundred dollars (US$28,800),
plus accrued interest on unpaid amounts as of the date of payment at the LIBOR
Rate in effect at the beginning of each quarterly period.
4.2 Equipment Royalty. With respect to all Licensed Products made,
used, sold, leased, or otherwise disposed of after the Effective Date of this
Agreement outside the United States, LICENSEE shall pay to LICENSOR an equipment
royalty as follows:
(a) for Licensed Products sold, leased or otherwise disposed
of for use outside of the United States, Canada or Japan, an Equipment
Royalty of six percent (6%) of the Net Selling Price of such Licensed
Products.
(b) for Licensed Products sold, leased or otherwise disposed
of for use in Japan, an Equipment Royalty of nine percent (9%) of the
Net Selling Price of such Licensed Products.
(c) for Licensed Products sold, leased or otherwise disposed
of for use in Canada, an Equipment Royalty of thirty thousand Canadian
dollars (CN$30,000.00) for each such Licensed Product sold, leased or
otherwise disposed of.
Without limitation, a Licensed Product shall also be deemed to be "otherwise
disposed of" if it is not sold but delivered by LICENSEE or a LICENSEE Affiliate
to others for consideration other than money (including by barter or exchange)
regardless of the basis of compensation, or put into commercial use by LICENSEE
or any LICENSEE Affiliate.
4.3 Equipment Royalty Credit. In the event that any Licensed Product
for which an Equipment Royalty has been paid by LICENSEE is returned and
accepted by LICENSEE for credit, LICENSEE shall be entitled to a credit from
LICENSOR for any Equipment Royalty paid to LICENSOR with respect to the returned
Licensed Product, provided each of the following requirements are satisfied by
LICENSEE:
(a) The particular Licensed Product was returned within one
hundred eighty (180) days after the installation thereof at the place
of business of the returning party; and
(b) LICENSEE makes a written application to LICENSOR for such
a credit in the form reasonably specified by LICENSOR from time to time
for such purpose, accompanied by documentary evidence in form and
substance reasonably acceptable to LICENSOR, confirming that the return
has occurred and that LICENSEE has made a refund of any payment
received by LICENSEE with respect to the returned Licensed Product.
4.4 Multiple Claims and Transactions. Anything in this Agreement to the
contrary notwithstanding, a single Equipment Royalty shall be payable under this
Agreement for each single Licensed Product, regardless of the number of Claims
of the Licensed Patents which that Licensed Product may embody, the number of
transfers (including transfers to any LICENSEE Affiliate) of that Licensed
Product, or any other circumstance. If the Net Selling Price for the Licensed
Product is payable in installments, under either an installment sale contract, a
lease, or any similar arrangement, then for purposes of the preceding sentence,
the sum of all Equipment Royalties payable with respect to all the installments
shall be considered a single Equipment Royalty.
4.5 Conversion to Licensed Product. If an ultraviolet laser apparatus
is not a Licensed Product at the time it is sold, leased, licensed or otherwise
disposed of by LICENSEE or any LICENSEE Affiliate, but a modification is made to
the apparatus by LICENSEE or any LICENSEE Affiliate to convert it into a
Licensed Product, then the event of modification shall be deemed a sale, lease,
license or other disposition of the apparatus occurring on the day of the
modification event for purposes of this Agreement. Thereupon, the apparatus so
becoming a Licensed Product shall be subject to the payment of an Equipment
Royalty pursuant to Section 4.2. However, for purposes of computing the
Equipment Royalty on that Licensed Product, the Net Selling Price thereof shall
be the cost of the apparatus when first sold, leased, licensed or otherwise
disposed of (depreciated on a straight-line basis over a five-year period), plus
the additional cost paid with respect thereto upon any modification thereof as
provided in this section, each such cost computed under the rules set forth in
the definition of the term Net Selling Price.
4.6 Deferred Payments of Equipment Royalties. If any Licensed Product
is sold, leased, licensed or otherwise disposed of in a transaction in which the
consideration therefor, and the Equipment Royalty with respect thereto, is
payable in installments, as herein contemplated, then:
(a) The Equipment Royalty payable pursuant to Section 4.6
shall be payable at the same royalty percentage as set forth in Section
4.2 applied to each installment payment as such installment payment is
received.
(b) The maximum amount of Equipment Royalty payable under
Section 4.6 with respect to the transaction shall be computed, as of
the date the transaction was entered into, on the aggregate of all
installments to be paid for the Licensed Product under the terms of the
transaction.
(c) Any portion of the Equipment Royalty computed under
Section 4.2 the payment of which is deferred under Section 4.6 shall
accrue interest during the period commencing on the date such
transaction was entered into and extending through the date of the
payment of the deferred portion, at the LIBOR Rate in effect from time
to time during that period.
(d) Each Equipment Royalty installment payable hereunder with
respect to the transaction shall be accompanied by a payment of any
interest accrued to the date of the Equipment Royalty installment due
date.
(e) It is understood that Sections 4.6 (c) and (d) shall only
apply if the installment sale, lease, license or other disposition does
not include a separately calculated finance charge, whether stated or
not, at least equal to the LIBOR Rate at the time the transaction is
entered into. If the finance charge is less than the LIBOR Rate at the
time of the transaction entered into, then such sections shall only
apply to compensate LICENSOR for the difference between such finance
charge and the LIBOR Rate.
4.7 Reports and Payments.
(a) Quarterly and Final Reports of Transactions.
(i) Within sixty (60) days after the end of each
calendar quarter, and within sixty (60) days after the
expiration of the term of this Agreement as provided in
Article 12, LICENSEE shall deliver to the LICENSOR a written
report pertaining to all transactions which occurred in that
calendar quarter, or in the period ending on such expiration
date for which a quarterly report has not previously been
furnished to the LICENSOR, as the case may be, with respect to
Licensed Products subject to Equipment Royalties.
(ii) Each report provided under this Section 4.7
shall:
(A) Contain information sufficient to
calculate all Equipment Royalties earned by the
LICENSOR during the period to which it relates with
respect to each category of Licensed Products.
(B) Contain any other information reasonably
specified by the LICENSOR from time to time.
(C) Be in form and substance acceptable to
reasonable requirements of the LICENSOR's independent
public accounting firm acting in such capacity from
time to time during the term of this Agreement.
(D) Be certified as to accuracy by the Chief
Financial Officer of LICENSEE or any other officer of
equal or higher rank.
(b) Payments. Within sixty (60) days after the end of each
calendar quarter, and within sixty (60) days after the expiration of
the term of this Agreement as provided in Article 12, LICENSEE shall
pay to the LICENSOR an amount equal to the sum of all Equipment
Royalties (plus applicable interest, if any) accrued and earned during
the calendar quarter, or during the period ending on the expiration
date, as the case may be. All payments shall be payable at LICENSOR's
address for notice specified in Article 8 or at such place as the
LICENSOR may designate in writing to LICENSEE from time to time.
(c) Taxes. If LICENSEE is required to withhold any taxes from
any sum payable to the LICENSOR hereunder, LICENSEE shall withhold such
taxes and pay same to the appropriate tax authorities for the account
of the LICENSOR. LICENSEE shall obtain, and promptly furnish to the
LICENSOR, a receipt evidencing each such tax payment.
(d) Form of Payment. All payments shall be paid in United
States dollars. Net Selling Price shall first be determined in the
currency in which the Licensed Products were manufactured and then
converted into its equivalent in United States currency each month, at
the average monthly conversion rate for such foreign currency computed
based on the conversion rates as published in The Wall Street Journal
for such month.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
------------------------------
5.1 LICENSOR's Representations. LICENSOR represents and warrants to
LICENSEE that LICENSOR is the sole and exclusive owner of the entire right,
title and interest in and to the Licensed Patents, subject to certain
non-exclusive licenses granted to qualified parties, and that LICENSOR has the
right to grant to LICENSEE the rights and licenses granted hereunder.
5.2 LICENSEE's Representations. LICENSEE represents and warrants to
LICENSOR that, as of the Effective Date, LICENSEE has not manufactured, used or
sold more than thirty-five (35) Licensed Products for use in any country in
which any of the Licensed Patents is issued as of the Effective Date. LICENSEE
further represents and warrants that the accessory equipment listed on Exhibit C
is always sold for a purchase price that is in addition to the purchase price of
the Licensed Product.
5.3 Mutual Representations. LICENSOR and LICENSEE each represents and
warrants to the other that it has full power and authority to enter into this
Agreement and carry out the transactions contemplated hereby.
ARTICLE 6
RECORDS AND INSPECTIONS
-----------------------
6.1 Records. LICENSEE shall keep and maintain complete books and
records, utilizing generally accepted accounting principles, and other accepted
accounting practices appropriate to the business being conducted by LICENSEE,
showing with respect to each Licensed Product sold, leased or otherwise disposed
of by LICENSEE or any LICENSEE Affiliate for the eight (8) most recent calendar
quarters prior to the date of any inspection pursuant to Section 6.2(b), all
information reasonably necessary to calculate each Equipment Royalty which is
payable to the LICENSOR under this Agreement.
6.2 Inspection.
(a) Selection of Inspector. The LICENSOR acting in good faith
shall, at its own expense, have the right at any time to designate an
internationally recognized accounting firm (an "inspector") who is
independent of LICENSOR and is reasonably approved by LICENSEE, without
unreasonable delay, to conduct an inspection as outlined in this
Section 6.2. LICENSOR shall provide LICENSEE reasonable advance notice
prior to conducting any inspection and such inspection shall only be
conducted during reasonable business hours.
(b) Scope of Inspection. The inspector shall have the right,
exercisable by the LICENSOR not more frequently than once every fiscal
year of LICENSEE during the term of this Agreement, on behalf of the
LICENSOR to inspect all books and records of LICENSEE and its
Affiliates maintained as required under Section 6.1, for the eight (8)
most recent calendar quarters prior to the date of such inspection, and
make copies of same as the inspector deems appropriate.
(c) Cooperation. LICENSEE hereby agrees to cooperate with any
inspection conducted by the inspector as herein provided and comply
with all reasonable requests of the inspector.
(d) Confidentiality Requirements. Prior to commencing any
inspection as herein permitted, LICENSEE may require the LICENSOR to
provide it with a written agreement, consistent with the provisions of
Articles 6 and 7 and signed by the inspector, under which the inspector
agrees to hold in confidence and not disclose to the LICENSOR, any of
its partners, any Affiliates of any partner or LICENSOR, or any other
person or entity, and not to use except for purposes of the inspection,
any confidential information provided to or acquired by the inspector
in connection with any such inspection, except that the inspector may
prepare a report of the results of the inspection which shall report to
LICENSOR only as to the accuracy of the Equipment Royalty computations
made in the report or reports being inspected.
6.3 Inspection Fee. If the LICENSOR orders an inspection of LICENSEE's
or its Affiliates' books and records under Section 6.2 which reveals that
LICENSEE has underpaid any Equipment Royalties due during the inspection period,
LICENSEE shall immediately pay to the LICENSOR the unpaid amount plus interest
on the underpaid amount for the period from the date the underpaid amount was
originally due to the date of payment thereof. If the underpaid amount is more
than ten (10%) of the Equipment Royalties actually paid to the LICENSOR during
the inspection period, then LICENSEE shall also pay to the LICENSOR the cost of
the inspection. If an inspection under Section 6.2 reveals that LICENSEE has
overpaid any Equipment Royalties due during the inspection period, LICENSOR
shall, at LICENSEE's election, either credit the overpayment to LICENSEE or
immediately pay to the LICENSEE the overpaid amount plus interest on the
overpaid amount for the period from the date of payment to the date of the
inspection.
ARTICLE 7
CONFIDENTIAL INFORMATION
------------------------
7.1 Confidential Information. LICENSOR shall not disclose to any third
party or use except in furtherance of this Agreement any confidential
information disclosed in connection with the Agreement by LICENSEE, or any
LICENSEE Affiliate, except that the LICENSOR may disclose any such confidential
information to the extent necessary to comply with its existing license
agreements or an order of a court or government agency, provided that, no later
than thirty (30) days after it is so ordered but in any case at least ten (10)
days prior to such disclosure, the LICENSOR notifies LICENSEE of its intention
to make the disclosure and precisely the confidential information the LICENSOR
intends to disclose and cooperates with LICENSEE on reasonable measures to
protect the confidentiality of such information. The LICENSOR shall take
reasonable steps to limit access to any such confidential information to only
persons having a need to know the confidential information for the purpose of
carrying out this Agreement and who are obligated to retain the confidentiality
of such information under a written agreement with LICENSOR on terms at least as
restrictive as the provisions contained herein. LICENSOR agrees to return to
LICENSEE upon termination or expiration of this Agreement all tangible copies of
confidential information acquired from LICENSEE or its Affiliates.
7.2 Non-Confidential Information. The LICENSOR and any inspector shall
be under no obligation with respect to any portion of such confidential
information which:
(a) Through no act or failure to act on the part of the
LICENSOR or the inspector, becomes known or available to the public.
(b) Is known by the LICENSOR or the inspector (preferably
shown by contemporaneous written records) prior to the time of
receiving such information.
(c) Is furnished to the LICENSOR by any person not legally
precluded from making the disclosure without restriction on disclosure.
ARTICLE 8
NOTICES
-------
Any notice given pursuant to this Agreement shall be in writing and,
except as otherwise expressly provided herein, shall be deemed to have been duly
delivered if delivered in person or by certified or registered or overnight
express mail, postage and mailing expense prepaid, or by facsimile transmission
with hard copy to follow by regular mail, and, if given or rendered to LICENSEE
addressed to:
LaserSight Incorporated
12161 Lackland Road
St. Louis, MO 63146
Attention: President
and to:
LaserSight Technologies, Inc.
12249 Science Drive
Suite 160
Orlando, FL 32828
Attention: President
or, if given or rendered to LICENSOR addressed to:
VISX, Incorporated
3400 Central Expressway
Santa Clara, CA 95051
Attention: Chief Executive Officer
Either party may specify a different address by notifying the other in writing
of such different address.
ARTICLE 9
MOST FAVORED LICENSEE
---------------------
If subsequent to the Effective Date, LICENSOR grants to another manufacturer of
excimer laser systems similarly situated to LICENSEE a license under any of the
Licensed Patents which provides to said manufacturer a more favorable Equipment
Royalty or Net Selling Price than that provided to LICENSEE for Licensed
Products, then LICENSEE may, at its option, adopt the more favorable Equipment
Royalty or Net Selling Price as of the effective date of such subsequent
license. Also, if subsequent to the Effective Date, LICENSOR grants another
manufacturer of excimer laser systems similarly situated to LICENSEE a license
under any of the Licensed Patents which provides to said manufacturer more
favorable other terms and conditions than those terms and conditions provided
herein to LICENSEE for Licensed Products, then LICENSEE may, at its option,
adopt the subsequent license in its entirety, mutatis mutandis, as of the
effective date of such subsequent license. LICENSOR shall notify LICENSEE in
writing of the execution of any such license agreement or amendment thereto
between LICENSOR and a third party which relates to the Licensed Patents within
thirty (30) days of the execution thereof. Such written notice shall include in
reasonable detail the terms of such license and LICENSOR's opinion as to the
applicability of this Article 9 to such license. LICENSEE shall be entitled to
demand confirmation, at LICENSEE's sole expense, from LICENSOR's inspectors that
the information provided to LICENSEE from the LICENSOR is reasonably complete
and accurate.
ARTICLE 10
INDEMNIFICATION
---------------
10.1 LICENSEE Indemnity. LICENSEE shall indemnify, defend and hold
harmless the LICENSOR, and its successors and assigns, from and against any
loss, damage, cost or expense of whatsoever kind or nature (including reasonable
attorneys' fees and professional expenses) incurred by the LICENSOR by reason
of:
(a) Any product liability claim arising out of the
manufacture, use, sale, lease, license or other disposition of Licensed
Products manufactured or marketed by LICENSEE or any LICENSEE Affiliate
or any distributor of LICENSEE or any LICENSEE Affiliate.
(b) Any breach by LICENSEE or any LICENSEE Affiliate of any of
its obligations under this Agreement.
The foregoing indemnification and agreement to defend and hold harmless shall
include, without limitation, any cost or expense incurred or to be incurred by
the LICENSOR by reason of its having been or being made a party or being
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative in
connection with any actual or alleged act or omission in connection with any
such manufacture, use, sale, lease or other disposition of Licensed Products or
performance of any Licensed Procedure. The foregoing indemnification and
agreement to defend and hold harmless shall not extend to (a) any acts or
omissions by or on behalf of the LICENSOR in bad faith or as a result of
negligence, (b) any claims relating to the validity or enforceability of any of
the Licensed Patents, or (c) any other claim not attributable to the conduct by
LICENSEE or its Affiliates of their respective business.
10.2 LICENSOR Indemnity. LICENSOR shall indemnify, defend and hold
harmless the LICENSEE, its Affiliates, and its successors and assigns, from and
against any loss, damage, cost or expense of whatsoever kind or nature
(including reasonable attorneys' fees and professional expenses) incurred by the
LICENSEE by reason of any breach by LICENSOR or any LICENSOR Affiliate of any of
its obligations under this Agreement.
10.3 Interest On Amounts Due. Any amount payable under any provision of
this Article 10, Article 4, or any other provision of this Agreement shall be
paid to the party entitled to the payment with simple interest at the Overdue
Rate, computed and payable for the period commencing, in the case of a payment
due under Article 4, sixty (60) days after the payment is due under that
Article, and in all other cases fourteen (14) days from the date on which the
party entitled to the payment demands payment in writing, through the date of
actual payment. In the case of any legal action between any of the parties, the
party prevailing in such action shall be entitled to receive, in addition to any
payment provided under other provisions of this Agreement, interest, compounded
quarterly, at the Overdue Rate on all costs incurred by the prevailing party in
maintaining or defending such legal action which are indemnified against under
any provision of this Article 10, for the period commencing on the date on which
any such cost is incurred until full payment thereof as otherwise provided in
this Article 10.
10.4 Other. A party claiming indemnification shall not be entitled to
indemnification with respect to any action to which it consented in writing or
any claim as to which it did not give written notice to the party from which
indemnification is sought within ninety (90) days after having received notice
of such claim. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES. In the event any claim for
indemnification arises from a claim of a third party, the party from whom
indemnification is sought shall have the right to defend against such third
party claim and, in such event, the party seeking indemnification shall
cooperate with all reasonable requests in the defense thereof at the expense of
the party from whom indemnification is sought.
ARTICLE 11
ASSIGNMENTS AND TRANSFERS
-------------------------
11.1 Transfers/Generally. Except as provided in this Article 11,
neither party has the right to assign or transfer any of its rights or to
delegate any of its obligations or duties under this Agreement without the
express written consent of the other party.
11.2 Transfers/Exceptions. Either party may assign all, but not less
than all, of its rights and obligations under this Agreement to any one or more
of its Affiliates, provided that each such Affiliate executes an instrument by
which it agrees to be bound by the provisions of this Agreement. In addition,
either party (and any of its assignees hereunder) may assign all, but not less
than all, of its rights and obligations under this Agreement to any successor by
way of merger, consolidation or acquisition of substantially all of the party's
assets associated with its Licensed Products and Licensed Procedures business,
which executes an instrument by which it agrees to be bound by the provisions of
this Agreement. Upon any such assignee's agreement to perform all of the
assigning party's obligations hereunder, the assigning party's liability
hereunder through the effective date of the assignment shall nevertheless
continue until expressly released by the non-assigning party, which release
shall not be unreasonably withheld. Nothing in this Section 11.2 shall prevent
LICENSEE from effecting a sublicense of less than all of its rights under this
Agreement as permitted in Sections 3.1(a) or 3.1(b) of this Agreement.
ARTICLE 12
TERM AND TERMINATION
--------------------
12.1 General. The term of this Agreement shall commence on the
Effective Date hereof and unless sooner terminated as herein provided shall end
on the date on which the last to expire of the Licensed Patents covering the
Licensed Products and/or Licensed Procedures.
12.2 Termination. LICENSEE shall have the right on each anniversary of
the Effective Date to terminate this Agreement or any of the licenses granted by
this Agreement, by providing to LICENSOR at least three (3) months advance
written notice of LICENSEE's intent to terminate. Such termination shall be
effective on the anniversary of the Effective Date following LICENSOR's timely
receipt of such notice.
12.3 Limited Survival of Agreement. Notwithstanding the expiration of
the term of this Agreement as provided in this Article 12, any provisions of
this Agreement with respect to the subject matter described below in this
Section 12.3 shall continue in effect after such expiration to the degree
necessary to permit their complete fulfillment or discharge.
(a) Any LICENSEE obligation to maintain records and to provide
all reports required under this Agreement which relate to any period
ending on or before such expiration, and the LICENSOR's right to
conduct any inspection with respect thereto.
(b) The LICENSOR's right to receive or recover, and LICENSEE's
obligation to pay, any amounts due to it under this Agreement which
accrued and were earned at any time prior to such expiration, including
any amounts which may be due by reason of any adjustment arising from
an inspection pursuant to this Agreement.
(c) Licenses, releases, and agreements of nonassertion or
immunity (running through the period ending on such expiration or such
later period as set forth herein) in favor of LICENSEE, its Affiliates,
Users, and any other person which acted on behalf of or for the benefit
of LICENSEE or its Affiliates with respect to Licensed Products or
Licensed Procedures.
(d) Any agreement, including under the provisions of Article
7, in effect at the time of such expiration with respect to
confidential information of any party to this Agreement.
(e) Any cause of action or claim or remedies of the LICENSOR
or LICENSEE arising from any breach of or failure to perform any
obligation under this Agreement.
(f) Any right, duty or obligation of either party hereto which
is expressly stated elsewhere in this Agreement to survive expiration or
termination hereof.
12.4 Failure to Pay; New Products.
(a) In the event of a failure by LICENSEE to make any payment
in full and in a prompt manner as provided in Article 4 of this
Agreement, if such failure is not corrected within thirty (30) days
after the date written notice complaining thereof is sent to LICENSEE,
the licenses granted to LICENSEE and its Affiliates and Users pursuant
to this Agreement and to which such non-payment pertains may, at
LICENSOR's option, be terminated forthwith by LICENSOR upon sending
written notice to that effect to LICENSEE.
(b) If, after the date of this Agreement, LICENSEE develops a
product which LICENSEE reasonably believes does not infringe the
Licensed Patents (a "New Product"), then LICENSEE may notify LICENSOR
of the development of the New Product and request LICENSOR to make a
determination as to the issue of infringement. Under such
circumstances, and notwithstanding anything in Section 12.4(a) to the
contrary, LICENSEE may pay the royalties due for the New Product into
an escrow fund established at Citibank N.A., New York, New York (or
such other financial institution as the parties may mutually agree),
pending the outcome of LICENSOR's evaluation of the New Product.
LICENSOR agrees to sign any reasonable confidentiality agreement
requested by LICENSEE before receiving proprietary information about
the New Product. If after six months following the establishment of the
escrow fund, LICENSEE and LICENSOR cannot agree whether the New Product
infringes the Licensed Patents, then the funds in escrow shall
automatically be paid over to LICENSOR, and the matter shall be
resolved using the dispute resolution proceedings set forth in Article
13. Nothing in this Section 12.4 shall affect LICENSEE's right to
terminate this Agreement as set forth in Section 12.2.
12.5 Insolvency. In the event that LICENSEE shall become insolvent, or
admit in writing its inability to pay its debts as they mature, or make an
assignment for the benefit of creditors, or be declared bankrupt, or go into
liquidation or receivership, or become a party to a dissolution proceeding or be
admitted to any statutory procedure for the settlement of its debts, and such
condition continues for at least sixty (60) days, such shall constitute a
material breach of this Agreement and LICENSOR shall have the right and option
upon sending written notice to LICENSEE to terminate forthwith the licenses
granted to LICENSEE and its Affiliates pursuant to this Agreement.
12.6 Default. In the event of a breach of any material obligation of
this Agreement by either party (other than a failure to pay by LICENSEE as
described at Section 12.4), the non-breaching party in such event may at its
option terminate any of the licenses to which the breach pertains upon ninety
(90) days written notice unless such default is corrected within ninety (90)
days after the date written notice complaining thereof is sent to the breaching
party.
12.7 No Release. Expiration or termination of this Agreement or the
licenses hereunder pursuant to this Article 12 shall not release either party
hereto from any liability which as of the date of expiration or termination has
already accrued to that party.
12.8 Sales After Termination. On termination or expiration of this
Agreement for any reason, LICENSEE shall have the right to sell, lease, license
or otherwise dispose of any remaining Licensed Products which it or any of its
Affiliates has in its possession or control, or which are in the process of
being manufactured, provided however, that LICENSEE shall remain obligated for
any and all amounts that would have be due LICENSOR hereunder but for the
termination or expiration of this Agreement upon the sale, lease, license or
other disposition of the Licensed Products.
12.9 Challenge. In the event that LICENSEE elects to challenge the
validity of any Licensed Patent during the term of this Agreement, LICENSOR
shall have the right to terminate this Agreement by providing at least one (1)
month advance written notice to LICENSEE of LICENSOR's intent to terminate, and
the termination shall be effective on the date provided in such written notice.
If LICENSOR does not exercise LICENSOR's right to terminate, LICENSEE agrees to
continue payment of royalties as required under this Agreement for as long as
LICENSEE elects to remain licensed under this Agreement.
ARTICLE 13
DISPUTES
--------
13.1 Mediation. In the event of any disagreement between LICENSOR and
LICENSEE arising out of the provisions of this Agreement (including a
disagreement about its existence, validity, enforceability, or interpretation)
which LICENSOR and LICENSEE are unable to resolve within a reasonable period of
time to settle amicably, either LICENSOR or LICENSEE may serve notice to the
other requiring the disagreement to be referred to mediators appointed by
J.A.M.S. in Santa Clara County, California and approved by both LICENSOR and
LICENSEE and the disagreement shall be so referred to the mediators to
facilitate a resolution thereof.
13.2 Arbitration. Any controversy or claim not successfully mediated in
accordance with Section 13.1 and arising out of, in connection with or relating
to the interpretation, performance or breach of this Agreement or of any
document or agreement delivered under this Agreement, including any claim or
controversy based on contract, tort or statute, but excluding any claim or
controversy concerning the validity, coverage (i.e., range of protection) or the
interpretation of intellectual property rights under the laws of any nation
(which shall be governed by Section 13.4 below), shall be settled by
arbitration. Any controversy concerning whether a dispute is an arbitrable
dispute shall be determined by the arbitrator. The parties intend that this
agreement to arbitrate be valid, specifically enforceable and irrevocable. Such
arbitration shall be conducted in the City of New York, New York, in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
(the "AAA"), as modified below:
(a) Disputes shall be heard and determined by a
single neutral arbitrator, who shall be a retired or former judge of
any Federal Court appointed under Article III of the United States
Constitution or a retired or former judge of the New York Court of
Appeals, selected in accordance with the Commercial Arbitration Rules
of the AAA, and disputes shall proceed under such rules, as
supplemented by the Supplementary Procedures for International
Commercial Arbitration.
(b) Neither party shall communicate separately with
the arbitrator. All communications between a party and the arbitrator
will be directed to the AAA for transmittal to the arbitrator.
(c) Any party to an arbitration may (i) seek any
provisional remedies available under the United States Federal
Arbitration Act, and (ii) petition the competent courts to confirm,
correct or vacate the award solely on the grounds stated in the United
States Federal Arbitration Act. Judgment upon the arbitrator's award
may be entered in any court having jurisdiction thereof and, where
applicable, shall be in accordance with the U.N. Convention on the
Recognition and Enforcement of Foreign Arbitral Awards.
(d) At the conclusion of the arbitration proceedings,
the arbitrator shall render an award in writing and shall specify the
factual and legal basis for the award.
(e) The arbitrator shall not be authorized or
entitled to include as part of any award any special, exemplary,
punitive or consequential damages, regardless of the nature or form of
the claim that has been submitted to arbitration.
13.3 Costs of Arbitration. The arbitrator shall award to the prevailing
party, if any, as determined by the arbitrator, all of such prevailing party's
costs and fees. "Costs and fees" means all reasonable pre-award expenses of the
arbitration, including the arbitrator's fees, administrative fees, travel
expenses, out-of-pocket expenses such as copying and telephone, court costs,
witness fees and reasonable attorneys' fees and expenses. Notwithstanding the
foregoing, the arbitrator may make such different award of costs and fees as the
arbitrator may determine is required under the indemnification provisions of
this Agreement.
13.4 Venue in Intellectual Property Disputes. With respect to any
dispute concerning the validity, coverage (i.e., range of protection) and the
interpretation of intellectual property rights under the laws of any nation,
such dispute shall be under the jurisdiction of the courts of the nation where
the intellectual property rights are protected.
ARTICLE 14
ENFORCEMENT
-----------
In the event that any of the Licensed Patents is infringed by a third
party, the party to this agreement having notice of such infringement shall
promptly notify the other in writing, which notice shall set forth the facts of
such infringement in reasonable detail. LICENSOR agrees to use its best efforts
to license any such infringer of the Licensed Patents or to take prompt
reasonable steps, including litigation, to abate such infringement. LICENSOR
shall exercise its best efforts in diligently prosecuting such litigation. If
(but only if) LICENSOR fails to prosecute infringers according to this
Agreement, then no royalties shall accrue or be owing by LICENSEE in those
countries in which infringement occurs while such infringement continues to be
ongoing.
ARTICLE 15
GENERAL PROVISIONS
------------------
15.1 Binding Effect/Further Actions. The Agreement shall be binding
upon and inure to the benefit of the LICENSOR and LICENSEE and their respective
successors and permitted assigns. Each and every successor to the interest of
any party hereto shall hold such interest subject to the terms and provisions of
this Agreement.
15.2 Entire Agreement. This Agreement constitutes the entire agreement
of the parties hereto with respect to the subject matter hereof. This Agreement
supersedes any prior agreements or understandings among the parties hereof. It
may be amended or modified only by written instrument signed by all the parties.
15.3 Waiver. A failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of the Agreement or to
exercise any right or remedy consequent upon a breach thereof shall not
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
15.4 Governing Law. The Agreement and the rights of the parties
hereunder shall be governed by and interpreted in accordance with the laws of
California.
15.5 Invalidity. If any provisions of this Agreement, or the
application of such provision to any person or circumstance, shall be held to be
invalid, the remainder of this Agreement, or the application of such provision
to such persons or circumstances other than those to which it is held invalid,
shall not be affected thereby, provided that such invalid provisions shall be
replaced by valid and enforceable provisions which will achieve as far as
possible the economic and business intentions of the parties to this Agreement.
15.6 No Agency. Nothing in this Agreement shall be deemed to appoint or
authorize LICENSEE to act as an agent of the LICENSOR or to assume or incur any
liability or obligation in the name or on behalf of the LICENSOR, this sentence
shall not be construed to in any manner diminish any rights granted to LICENSEE
under this Agreement.
15.7 Headings. The headings of the several articles and sections are
inserted for the convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
15.8 Singular/Plural. Whenever in the context it appears appropriate,
each term stated either in the singular or the plural shall include both the
singular and the plural.
15.9 Public Disclosure. Except for such disclosure as is deemed
necessary, in the reasonable judgment of legal counsel of a party hereto to
comply with applicable law or regulation and any disclosure to be provided by
LICENSEE to its Users, no announcement, news release, public statement,
publication or presentation relating to the existence of this Agreement, the
subject matter hereof, or either party's performance hereunder will be made
without the other party's prior written approval, which approval shall not be
unreasonably withheld. The parties agree that they will use reasonable efforts
to coordinate the initial announcement or press release relating to the
existence of this Agreement so that such initial announcement or press release
by each is made contemporaneously.
15.10 Assistance. LICENSOR and LICENSEE recognize that third parties
own and control patents in countries throughout the world other than the United
States which may relate to the Licensed Products manufactured by LICENSEE. While
LICENSEE is of the opinion that the Licensed Products presently manufactured
and/or sold by LICENSEE and its Affiliates do not infringe any of these third
party patents, in the event that any third party attempts to assert or asserts
any patent (other than Excluded Patents under this Agreement) against LICENSEE,
then LICENSOR, at LICENSEE's request, agrees to provide technical and legal
assistance to LICENSEE in defense of such attempt to assert or assertion.
LICENSEE agrees to reimburse LICENSOR for any and all costs and expenses
reasonably incurred by LICENSOR in providing such requested assistance.
15.11 Counterparts. This Agreement may be executed in separate
counterparts, each of which shall be considered an original but all of which
shall constitute one agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the dates
indicated.
LICENSEE
LaserSight Incorporated
By: /s/ Michael R. Farris Date: 5/20/97
------------------------- --------------
Name: Michael R. Farris
------------------------
Title: President & CEO
-----------------------
LICENSOR
VISX, Incorporated
By: /s/ Elizabeth Davila Date: 5/27/97
------------------------- --------------
Elizabeth Davila
Executive Vice President and
Chief Operating Officer
<PAGE>
LIST OF ATTACHMENTS
-------------------
Exhibit A - Excluded Patents
Exhibit B - Licensed Patents
Exhibit C - Licensed Product
<PAGE>
EXHIBIT A
to License Agreement Between
VISX, Incorporated and LaserSight, Incorporated
EXCLUDED PATENTS
1. All United States patents licensed to Pillar Point Partners
2. The following additional United States VISX patents:
Patent No. Application No. Title
---------- --------------- -----
4,885,471 185,867 Ultraviolet Radiometer
4,902,123 125,240 Topography Measuring Apparatus
4,905,711 165,535 Eye Restraining Device
4,916,319 185,152 Beam Intensity Profilometer
4,993,826 344,368 Topography Measuring Apparatus
4,998,819 347,348 Topography Measuring Apparatus
5,009,660 407,566 Gas Purging, Eye Fixation Hand Piece
5,106,183 416,136 Topography Measuring Apparatus
5,339,121 07/786,650 Rectilinear Photokeratoscope
5,474,548 091,670 Method of Establishing a Unique Machine
Independent Reference Frame for the Eye
5,391,165 833,604 System for Scanning a Surgical Laser Beam
5,286,964 945,207 System for Detecting, Correcting and
Measuring Depth Movement of a Target
5,283,598 842,879 Illumination of the Cornea for Profilometry
5,170,193 656,722 Apparatus and Method of Identifying Signals
in Biological Tissues
5,162,641 655,919 System and Method for Detecting, Correcting
and Measuring Depth Movement of Target
Tissue in a Laser Surgical System
5,157,428 719,924 Spectral Division of Reflected Light in
Complex Optical Diagnostic and Therapeutic
Systems
5,098,426 307,315 Method and Apparatus for Precision Laser
Surgery
5,054,907 456,109 Ophthalmic Diagnostic Apparatus and Method
5,048,946 523,799 Spectral Division of Reflected Light in
Complex Optical Diagnostic and Therapeutic
Systems
4,309,998 046,630 Process and Apparatus for Ophthalmic Surgery
3. All pending United States VISX patent applications
4. The following non-United States VISX patents and patent applications
Patent/Application No. Country Title
---------------------- ------- -----
2,080,668 Canada Rectilinear Photokeratoscope
<PAGE>
EXHIBIT B
to License Agreement Between
VISX, Incorporated and LaserSight, Incorporated
LICENSED PATENTS
ARGENTINA (AR)
Application No. 328,108, filed 05/04/94
Application No. 0334659, filed 12/15/95
BELGIUM (BE)
Patent No. 0 151 869, expires 11/16/04
Patent No. 0 207 648, expires 06/05/06
Patent No. 0 274 205, expires 11/20/06
BRAZIL (BR)
Application No. PI 9401668, filed 05/02/94
Application No. PI 9600020, filed 01/03/96
CANADA (CN)
Patent No. 1243732, expires 10/25/05
Patent No. 1254658, expires 05/23/06
Patent No. 1259105, expires 09/05/06
Patent No. 1271813, expires 07/17/07
Patent No. 1278046, expires 12/18/07
Patent No. 1288481, expires 09/03/08
Patent No. 1300689, expires 05/12/09
Patent No. 1308948, expires 10/20/09
Patent No. 1325832, expires 01/04/11
Application No. 2061976, filed 02/27/92
Application No. 2073802, filed 07/14/92
Application No. 2165515, filed 12/18/95
CHILE (CH)
Application No. 512-94, filed 04/12/94
Application No. 205595, filed 12/28/95
COLOMBIA (CO)
Application No. 015,296, filed 04/15/94
Application No. 95058,466, filed 12/12/95
EUROPEAN PATENT OFFICE (EP)
Application No. 92301690.1, filed 02/28/92, Publication No. 503802
Application No. 92307055.1, filed 08/03/92, Publication No. 529822
Application No. 94303256.5, filed 05/05/94, Publication No. 628298
Application No. 96300031.0, filed 01/03/96, Publication No. 721129
FRANCE (FR)
Patent No. 0 151 869, expires 11/16/04
Patent No. 0 207 648, expires 06/05/06
Patent No. 0 218 427, expires 09/26/06
Patent No. 0 257 836, expires 07/31/07
Patent No. 0 274 205, expires 11/20/07
Patent No. 0 346 116, expires 06/08/09
GERMANY (GE)
Patent No. P3491164.8 (EPO 0 151869), expires 11/16/04
Patent No. P3673470.5 (EPO 0 207648), expires 06/05/06
Patent No. P3687155.9 (EPO 0 218427), expires 09/26/06
Patent No. P3688792.7 (EPO 0 247260), expires 05/29/06
Patent No. P3782887.8 (EPO 0 257836), expires 07/31/07
Patent No. P3785568.9 (EPO 0274205), expires 11/20/07
Patent No. P68917998.7 (EPO 0 346116), expires 06/08/09
GREAT BRITAIN (GB)
Patent No. 0 151 869, expires 11/16/04
Patent No. 0 207 648, expires 06/05/06
Patent No. 0 218 427, expires 09/26/06
Patent No. 0 247 260, expires 05/29/06
Patent No. 0 257 836, expires 07/31/07
Patent No. 0 274 205, expires 11/20/07
Patent No. 0 346 116, expires 06/08/09
ISRAEL (IS)
Patent No. 79223, expires 06/24/06
Patent No. 79034, expires 06/24/06
Patent No. 79224, expires 06/24/06
Patent No. 80124, expires 09/23/06
Patent No. 83185, expires 07/14/07
Application No. 116,547, filed 12/25/95
ITALY (IT)
Patent No. 0 151 869, expires 11/16/04
Patent No. 0 207 648, expires 06/05/06
Patent No. 0 274 205, expires 11/20/07
JAPAN (JP)
Patent No. 1641614, expires 12/25/05, Appl. No. 86132613,
Disclosure No. 62057549
Patent No. 1641615, expires 01/07/06, Appl. No. 86146259,
Disclosure No. 62053650
Patent No. 1684306, expires 07/08/06, Appl. No. 91044534,
Disclosure No. 63150069
Patent No. 1685517, expires 11/15/04, Appl. No. 91043904,
Disclosure No. 60119935
Patent No. 1685541, expires 05/15/06, Appl. No. 91033015,
Disclosure No. 62101247
Patent No. 1685545, expires 07/08/06, Appl. No. 91044533,
Disclosure No. 63073955
Patent No. 1689674, expires 07/02/06, Appl. No. 61154260,
Disclosure No. 63011130
Patent No. 1723225, expires 11/27/06, Appl. No. 89144287
Patent No. 1728594, expires 03/06/07, Appl. No. 88312126
Application No. 85019/92, filed 03/09/92
Application No. 237639/92, filed 08/14/92
Application No. 94972/94, filed 05/09/94
Application No. 352250/95, filed 12/28/95
NETHERLANDS (NE)
Patent No. 0 151 869, expires 11/16/04
Patent No. 0 207 648, expires 06/05/06
SOUTH AFRICA (SA)
Patent No. 84/7841, expires 05/29/08
Patent No. 86/4253, expires 06/06/06
Patent No. 86/4337, expires 06/10/06
Patent No. 86/4710, expires 06/24/06
Patent No. 86/7364, expires 09/26/06
Patent No. 87/5690, expires 07/31/07
SOUTH KOREA (SK)
Patent No. 62950, expires 09/25/01
Patent No. 68188, expires 06/27/01
Patent No. 73041, expires 11/20/08
Patent No. 70796, expires 06/05/01
Patent No. 70795, expires 06/23/01
Application No. 3696/92, filed 03/06/92
Application No. 14394/92, filed 08/11/92
SPAIN (SP)
Patent No. 2002375, expires 09/25/06
Patent No. 555742, expires 10/27/07, Appl. No. 8801109
Patent No. 556431, expires 12/16/07, Appl. No. 8801981
Patent No. 556652, expires 09/02/07, Appl. No. 8800834
Patent No. 556680, expires 12/09/07, Appl. No. 8801576
SWEDEN (SW)
Patent No. 86304315.4 (0 207 648), expires 06/05/06
Patent No. 87310283.4 (0 274 205), expires 11/20/07
SWITZERLAND (SZ)
Patent No. 0 151 869, expires 11/16/04
Patent No. 0 207 648, expires 06/05/06
TAIWAN (TW)
Patent No. 031283, expires 01/20/04
Patent No. 031324, expires 01/31/04
Patent No. 032592, expires 05/21/04
Utility Model No. 57303, expires 10/23/98
<PAGE>
EXHIBIT C
to License Agreement Between
VISX, Incorporated and LaserSight, Incorporated
EXAMPLES OF LICENSED PRODUCTS
Compak-200 mini-excimer laser system
LS300 excimer laser system
Laser Scan 2000 excimer laser system
The following accessory equipment items are not considered part of the Licensed
Product and will not be included in the Net Selling Price:
1. Corneal Topography System
2. Video Eye Tracking System
3. Video Display Camera
4. Lensometer
5. Uninterrupted Power Supply
6. Doctor's Chair
7. Dehumidifier
8. Microkeratome
9. Patient Chair
EXHIBIT 11
<TABLE>
LASERSIGHT INCORPORATED
COMPUTATION OF PER SHARE EARNINGS
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
-------------------------------- -----------------------------
PRIMARY
<S> <C> <C> <C> <C>
Weighted average shares outstanding 9,381,000 7,051,000 9,103,000 7,035,000
Net effect of dilutive stock options and warrants -- -- -- --
-------------------------------- -----------------------------
9,381,000 7,051,000 9,103,000 7,035,000
================================ =============================
Net loss ($2,442,510) ($24,940) ($3,090,532) ($1,256,704)
Dividends on preferred stock (3,487) (138,075) (13,350) (268,020)
-------------------------------- -----------------------------
Adjusted loss ($2,445,997) ($163,015) ($3,103,882) ($1,524,724)
================================ =============================
Primary loss per share ($0.26) ($0.02) ($0.34) ($0.22)
================================ =============================
Additional Primary Calculation:
Net loss, as adjusted per computation above ($2,445,997) ($163,015) ($3,103,882) ($1,524,724)
================================ =============================
Additional adjustment to weighted average # of shares:
Weighted average # of shares as adjusted per above 9,381,000 7,051,000 9,103,000 7,035,000
Dilutive effect of contingently issuable shares and
stock options 164,000 742,000 166,000 748,000
-------------------------------- -----------------------------
Weighted average # of shares, as adjusted 9,545,000 7,793,000 9,269,000 7,783,000
================================ =============================
Primary loss per share, as adjusted ($0.26) ($0.02)(A) ($0.33) ($0.20)(A)
================================ =============================
FULLY DILUTED
Weighted average shares outstanding 9,381,000 7,089,000 9,103,000 7,084,000
Net effect of dilutive stock options and warrants -- -- -- --
Effect of preferred conversions from beginning of
period to date of conversion 43,000 -- 73,000 --
-------------------------------- -----------------------------
9,424,000 7,089,000 9,176,000 7,084,000
================================ =============================
Net loss ($2,442,510) ($24,940) ($3,090,532) ($1,256,704)
Dividends on preferred stock, net of dividends
on preferred stock converted during period -- (138,075) -- (268,020)
-------------------------------- -----------------------------
Adjusted loss ($2,442,510) ($163,015) ($3,090,532) ($1,524,724)
================================ =============================
Fully diluted loss per share ($0.26) ($0.02) ($0.34) ($0.22)
================================ =============================
Additional Fully Diluted Calculation:
Net loss, as adjusted per computation above ($2,442,510) ($163,015) ($3,090,532) ($1,524,724)
================================ =============================
Additional adjustment to weighted average # of
shares:
Weighted average # of shares as adjusted per above 9,424,000 7,089,000 9,176,000 7,084,000
Dilutive effect of contingently issuable shares, stock
options and convertible preferred stock 172,000 1,316,000 175,000 1,322,000
-------------------------------- -----------------------------
Weighted average # of shares, as adjusted 9,596,000 8,405,000 9,351,000 8,406,000
================================ =============================
Fully diluted loss per share, as adjusted ($0.25) ($0.02)(A) ($0.33) ($0.18)(A)
================================ =============================
(A) - This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although it is contrary to paragraph 40 of APB Opinion No.
15 because it produces an anti-dilutive result.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,091,169
<SECURITIES> 0
<RECEIVABLES> 8,456,354
<ALLOWANCES> 1,130,691
<INVENTORY> 3,685,758
<CURRENT-ASSETS> 15,047,989
<PP&E> 3,196,229
<DEPRECIATION> 1,103,912
<TOTAL-ASSETS> 37,985,212
<CURRENT-LIABILITIES> 8,673,423
<BONDS> 0
0
0
<COMMON> 9,599
<OTHER-SE> 27,076,746
<TOTAL-LIABILITY-AND-EQUITY> 37,985,212
<SALES> 11,926,714
<TOTAL-REVENUES> 11,926,714
<CGS> 4,685,742
<TOTAL-COSTS> 4,685,742
<OTHER-EXPENSES> 10,033,097
<LOSS-PROVISION> 68,106
<INTEREST-EXPENSE> 428,172
<INCOME-PRETAX> (3,090,532)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,090,532)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,090,532)
<EPS-PRIMARY> (0.34)
<EPS-DILUTED> (0.34)
</TABLE>
