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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the quarter ended June 30, 1997.
Commission file number 1-11388
PLC SYSTEMS INC.
(Exact name of registrant as specified in its charter)
BRITISH COLUMBIA, CANADA 04-3153858
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10 FORGE PARK, FRANKLIN, MASSACHUSETTS 02038
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508) 541-8800
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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 s uch filing
requirements for the past 90 days.
YES __X__ NO ______.
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practical date.
Class Outstanding at August 12, 1997
----- ------------------------------
Common Stock, no par value 16,656,450
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PLC SYSTEMS INC.
Index
Part I.Financial Information:
Item 1.
Condensed Consolidated Balance Sheets . . . . . . . . . . . . . .3
Condensed Consolidated Statements of Operations . . . . . . . . .4
Condensed Consolidated Statements of Cash Flows . . . . . . . . .5
Notes to Condensed Consolidated Financial Statements. . . . . . .6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations . . . . 8-11
Part II. Other Information:
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . 12
Item 2. Changes in Securities. . . . . . . . . . . . . . . . 12
Item 3. Defaults by the Company Upon its Senior Securities . 12
Item 4. Submission of Matters to a Vote of Security Holders. 12
Item 5. Other Information. . . . . . . . . . . . . . . . . . 13
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 13
-2-
ITEM 1. FINANCIAL STATEMENTS
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PLC SYSTEMS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................ $ 1,680 $ 3,039
Marketable securities .................................... -- 5,470
Accounts receivable, net ................................. 3,786 2,635
Inventories .............................................. 3,052 2,345
Prepaid expenses and other current assets ................ 589 679
-------- --------
Total current assets .................................... 9,107 14,168
Equipment, furniture and leasehold improvements, net ........ 5,153 4,712
Other assets ................................................ 671 537
-------- --------
Total assets ............................................ $ 14,931 $ 19,417
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .......................................... $ 1,672 $ 867
Accrued clinical costs .................................... 1,070 935
Accrued compensation ...................................... 331 467
Deferred revenue .......................................... 268 339
Other accrued liabilities ................................. 376 315
-------- --------
Total current liabilities ............................... 3,717 2,923
Capital lease obligations ................................... 21 27
Commitments and contingencies
Stockholders' equity:
Common stock, no par value, 25,000 shares authorized,
16,646 and 16,419 shares issued and outstanding at June 30,
1997 and December 31, 1996, respectively ................. 54,639 54,030
Accumulated deficit ......................................... (42,848) (37,129)
Foreign currency translation ................................ (598) (434)
-------- --------
11,193 16,467
-------- --------
Total liabilities and stockholders' equity .................. $ 14,931 $ 19,417
======== ========
</TABLE>
The accompanying notes are an integral part
of the condensed consolidated financial statements.
-3-
PLC SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Product sales ........................ $ 2,525 $ 769 $ 3,296 $ 4,966
Placement and service fees ........... 897 662 1,714 1,294
-------- -------- -------- --------
Total revenues ..................... 3,422 1,431 5,010 6,260
Cost of revenues:
Product sales ........................ 905 174 1,241 1,260
Placement and service fees ........... 565 202 1,059 506
-------- -------- -------- --------
Total cost of revenues ............ 1,470 376 2,300 1,766
Gross profit ........................... 1,952 1,055 2,710 4,494
Operating expenses:
Selling, general and administrative .. 3,518 1,591 6,335 3,042
Research and development ............. 1,146 559 2,217 1,318
-------- -------- -------- --------
Total operating expenses .......... 4,664 2,150 8,552 4,360
-------- -------- -------- --------
Income (loss) from operations .......... (2,712) (1,095) (5,842) 134
Other income:
Interest income, net ................. 42 161 133 299
Gain (loss) from foreign currency, net (27) 16 (10) (55)
-------- -------- -------- --------
15 177 123 244
-------- -------- -------- --------
Income (loss) before income taxes ...... (2,697) (918) (5,719) 378
Provision (benefit) for income taxes ... -- (15) -- 4
-------- -------- -------- --------
Net income (loss) ...................... $ (2,697) $ (903) $ (5,719) $ 374
======== ======== ======== ========
Net income (loss) per share ............ $ (0.16) $ (0.05) $ (0.36) $ 0.02
Shares used to compute net income (loss)
per share ............................ 16,632 16,441 16,021 17,214
</TABLE>
The accompanying notes are an integral part
of the condensed consolidated financial statements.
-4-
PLC SYSTEMS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------
1997 1996
------- ------
<S> <C> <C>
Operating activities:
Net income (loss) .................................................... $ (5,719) $ 374
Adjustments to reconcile net income (loss) to net cash provided (used)
for operating activities:
Depreciation and amortization ....................................... 843 524
Change in assets and liabilities:
Accounts receivable ............................................... (1,092) 5,920
Inventory ......................................................... (682) (1,100)
Prepaid expenses and other assets ................................. (41) (654)
Accounts payable .................................................. 790 860
Deferred revenue .................................................. (99) 106
Accrued liabilities ............................................... 60 (538)
-------- --------
Net cash provided (used) for operating activities ..................... (5,940) 5,492
Investing activities:
Purchase of marketable securities ................................... -- (16,442)
Maturities of marketable securities ................................. 5,470 13,501
Purchase of fixed assets ............................................ (1,257) (1,122)
-------- --------
Net cash provided (used) for investing activities ..................... 4,213 (4,063)
Financing activities:
Net proceeds from sales of shares ................................... 609 2,264
Repayment of stockholder notes ...................................... -- 110
Principal payments on capital lease obligations ..................... (6) (4)
-------- --------
Net cash provided by financing activities ............................. 603 2,370
Effect of exchange rate changes on cash and cash equivalents .......... (235) (196)
-------- --------
Net increase (decrease) in cash and cash equivalents .................. (1,359) 3,603
Cash and cash equivalents at beginning of period ...................... 3,039 704
-------- --------
Cash and cash equivalents at end of period ............................ $ 1,680 $ 4,307
======== ========
</TABLE>
The accompanying notes are an integral part
of the condensed consolidated financial statements.
-5-
PLC SYSTEMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six month periods ended June
30, 1997 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1997. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10- K for the year ended December 31, 1996.
2. NET INCOME (LOSS) PER SHARE
Net income per share is calculated using the weighted average number of
shares and share equivalents outstanding during the period which consist of
stock options and stock warrants. The net loss per share is calculated using the
weighted average number of shares outstanding during the period and does not
include share equivalents.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share," which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method currently
used to compute earnings per share and to restate all prior pe riods. Under the
new requirements for calculating primary earnings per share, the dilutive effect
of stock options will be excluded. There is not expected to be a change to the
net income (loss) per share for the three or six months ended June 30, 1997 or
June 30, 1996 as a result of the new requirements.
3. INVENTORY
Inventories consist of the following (in thousands):
June 30, December 31,
1997 1996
-------- ------------
Raw materials . . . . . . . . . . . . . . $1,682 $1,043
Work in process . . . . . . . . . . . . . 616 306
Finished goods. . . . . . . . . . . . . . 754 996
------ ------
$3,052 $2,345
====== ======
-6-
PLC SYSTEMS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
4. ISSUANCE OF CONVERTIBLE DEBENTURES
In July, 1997, the Company entered into a $20 million financing commitment.
Under the terms of the financing, The Company received $10,075,000 in July 1997
and will receive an additional $10,075,000 in August 1997 from the issuance of
convertible debentures to accredited investors through Smith Barney Inc. as
placement agent. The first tranche of debentures are due July 17, 2002 and the
second tranche of debentures are due August 14, 2002. The debentures are
convertible into common shares under a predetermined formula. The first tranche
of the debentures are convertible into common shares at the lesser of (a)
$25.98, or (b) the market price of the Company's Common Stock at the time of
conversion, with no more than 1,007,500 shares of Common Stock issuable in full
payment of all accrued interest and principal. The second tranche of the
debentures are convertible into common shares at the lesser of (a) $14.60, or
(b) the market price of the Company's Common Stock at the time of conversion,
with no more than 1,507,500 shares of Common Stock issuable in full payment of
all accrued interest and principal.
The Company has further agreed that should the Company 1.) receive a
recommendation of non-approval of its Pre-Market Application for its Heart Laser
System from the Circulatory Systems Advisory Panel of the U.S. Food and Drug
Administration (the "Panel") or 2.) not receive a recommendation of approval
from the Panel or FDA approval of its Pre-Market Application for its Heart Laser
System by August 14, 1998 then the maximum number of shares of Common Stock
which the Company shall be obligated to issue upon conversion of the tranche 2
debentures shall be increased from 1,507,500 to 2,007,500.
The convertible debentures will accrue interest at 5% per annum, payable in
cash or common stock at the Company's option, at the time of conversion. In
connection with the issuance of the first tranche of convertible debentures, the
Company has issued 69,875 redeemable warrants to these accredited investors to
purchase shares of its Common Stock at $27. 81 per share. In connection with the
issuance of the second tranche of convertible debentures, the Company has issued
80,125 redeemable warrants to these accredited investors to purchase shares of
its Common Stock at $15.78 per share. If the average closing sale price of its
Common Stock for any consecutive 30 trading day period commencing January 17,
1999 exceeds the exercise price by more than 50%, the Company has the right,
exercisable at any time upon 30 days notice to the holder to redeem the warrant
at a price of $.10 per warrant share. The warrants issued in connection with the
first tranche expire on July 17, 2002. The warrants issued in connection with
the second tranche expire on August 14, 2002.
The Company has agreed to register the shares of common stock underlying
the debentures and the warrants. As compensation for its services as placement
agent, Smith Barney Inc. receives a placement fee equal to 6 % of the gross
proceeds of all securities sold. The foregoing transaction was exempt from
registration under the Securities Act of 1933, as amended by virtue of Rule 506
promulgated under Regulation D.
5. LEGAL PROCEEDINGS
The Company and certain of its officers have been named as defendants in
eleven purported class action lawsuits each filed in August 1997 in the United
States District Court for the District of Massachusetts. The suits allege
violations of the federal securities laws. The plaintiffs are seeking damages in
connection with such alleged violations. Although the outcome of these suits is
not currently predictable, management believes that the Company has meritorious
defenses, and intends to vigorously defend the suits.
-7-
ITEM 2.
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PLC SYSTEMS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company has two marketing strategies for selling the Heart Laser 1 TMR
System and its related components and sterile kits: placement contracts and
product sales. The Company's preferred strategy is to be reimbursed for the use
of the Heart Laser TMR System on a per procedure basis under a contractual
agreement whereby the customer commits to a minimum number of procedures on a
yearly basis. These contracts typically run for a minimum of three to five years
and allow for the customer to exceed the contractual minimums. These contracts,
referred to as placement contracts, are prefe rred to the sale strategy as the
Company believes that over time, the potential revenue stream is greater and
more profitable. Sterile handpieces and other disposables are included in the
per procedure fee. Revenues from these contracts are classified as placement
fees.
In foreign countries where credit risk is high or where health care is not
reimbursed by the government or insurance, the Heart Laser TMR System is sold as
capital equipment and the related sterile handpieces and other disposables are
sold separately for each procedure. The Company sells Hear t Laser TMR Systems
directly and through distributors. These sales are classified as product sales.
RESULTS OF OPERATIONS
Total revenues for the quarter ended June 30, 1997 were $3,422,000, an
increase of 139% when compared to $1,431,000 for the quarter ended June 30,
1996. Product sales for the quarter ended June 30, 1997 were $2,525,000, an
increase of 228% when compared to $769,000 for the quarter ended June 30, 1996.
The major factors in both of these increases are the number of Heart Laser TMR
Systems shipped and the method of sale. For the quarter ended June 30, 1997,
there were eight TMR Systems shipped; five of which were sales as compared with
four TMR Systems shipped in the quarter ended June 30, 1996, one of which was a
sale.
Total revenues for the six month period ended June 30, 1997 were $5,010,000,
a decrease of 20% when compared to $6,260,000 for the six months ended June 30,
1996. Product sales for the six month period ended June 30, 1997 were
$3,296,000, a decrease of 34% when compared to $4,966,000 for the six months
ended June 30, 1996. The major factors in both of these year to date decreases
are the number of TMR Systems sold and the customer mix. For the six months
ended June 30, 1997, the Company sold six Heart Laser TMR Systems to
distributors as compared to the sale of seven Heart Laser TMR S ystems for the
six months ended June 30, 1996 of which
- --------------------
1. The Heart Laser is a trademark of PLC Medical Systems, Inc.
-8-
PLC SYSTEMS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
six were sold directly to customers and one was sold to a distributor. Heart
Laser TMR Systems sold directly to customers typically generate higher sales
dollars then those sold to a distributor.
Placement and service fees for the three and six months ended June 30, 1997
were $897,000 and $1,714,000, respectively, an increase of 35% and 32% when
compared with $662,000 and $1,294,000 for the same periods in fiscal 1996. These
increases reflect the continued adoption of the placement co ntract as the
method of sale for the Heart Laser TMR Systems.
Total gross profit for the three and six month periods ended June 30, 1997
approximated 57% and 54%, respectively, down from 74% and 72% for the comparable
periods in fiscal 1996. This decrease resulted from two factors. First, the
total gross margin declined due to unfavorable capacity and manufacturing
variances. These variances resulted from the high level of overhead expenses
associated with the new facility coupled with increased staffing. The Company
anticipates that after PMA approval, of which no assurance can be given,
production will increase to levels which will adequate ly absorb manufacturing
overhead and mitigate these variances. Secondly, as previously discussed, the
Company shipped less units under the sales strategy in 1997 than in 1996 and the
mix was primarily to distributors in 1997 as compared to direct sales in 1996.
Heart Laser TMR Systems sold direct ly to customers typically carry a higher
gross profit then those sold through distributors.
Selling, general and administrative expenditures of $3,518,000 and
$6,335,000 for the three and six month periods ending June 30, 1997 increased
121% and 108% respectively when compared to fiscal 1996 expenditures of
$1,591,000 and $3,042,000. In anticipation of the U.S. launch of the Heart L
aser TMR System, the Company increased its domestic sales and marketing efforts
and its administrative expenses by approximately $1,870,000 and $2,874,000,
respectively for the three and six months ended June 30, 1997 as compared to the
same periods in 1996. The increase is primarily due to increa sed staffing,
increased use of outside consultants, and other expenses.
Research and development expenditures for the three and six months ended
June 30, 1997 was $1,146,000 and $2,217,000, respectively, an increase of 105%
and 68% when compared to research spending of $559,000 and $1,318,000 for the
comparable periods in fiscal 1996. This increase is related to increased
staffing requirements associated with growing demands for clinical study
compilation and the development of new products.
For the three and six month periods ended June 30, 1997, interest income of
$42,000 and $133,000, respectively, decreased when compared to $161,000 and
$299,000 for the comparable periods in fiscal 1996 due to a lower cash balance
in 1997 as compared with the 1996 periods.
-9-
PLC SYSTEMS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
The Company records transactions in several foreign currencies, which
resulted in currency fluctuation gains of $27,000 and $10,000 for the three and
six months ended June 30, 1997 as compared to a loss of $16,000 for the three
months ended June 30, 1996 and a gain of $55,000 for the six mont hs ended June
30, 1996.
The Company did not record an income tax provision for the three or six
months ended June 30, 1997 due to its net loss of $2,697,000 and $5,719,000,
respectively. The Company believes it has sufficient net operating loss
carryforwards to offset taxable income, if any, for the year ended Decem ber 31,
1997. A provision for income tax was made in the first quarter of 1996 to cover
the tax liability under the alternative minimum tax regulations which cannot be
offset by net operating loss carryforwards. With the $1,095,000 operating loss
incurred in the quarter ended June 30, 1996, this provision was subsequently
adjusted in the quarter ended June 30, 1996.
The net loss of $2,697,000 for the quarter ended June 30, 1997 increased
199% when compared to the net loss of $903,000 for the quarter ended June 30,
1996. For the six month period ended June 30, 1997, the Company had a net loss
of $5,719,000 as compared with a net profit of $374,000 for the six month period
ended June 30, 1996. As previously discussed in more detail, the following
resulted in a higher loss for both the three and six month periods in 1997;
lower mix of sales contracts at distributor pricing, unfavorable capacity and
manufacturing variances, and higher overall expenses.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company had cash and cash equivalents of $1,680,000.
On July 17, 1997, the Company entered into a $20 million financing commitment
and received $10 million through the issuance of convertible debentures due July
17, 2002. On August 14, 1997, the remaining $10 million was committed through
the issuance of Convertible debenture due August 14, 2002. See Note 4 in the
accompanying financial statements.
For the six months ended June 30, 1997, the Company incurred a loss of
$5,719,000 which resulted in the use of approximately $5,900,000 to support
operations. Cash provided by investing activities was approximately $4,200,000
principally related to the maturities of marketable securities offs et by
investment in fixed assets of $1,300,000 primarily related to its placement
contract activity. Cash provided by financing activities was approximately
$600,000 from the exercise of stock options and warrants.
In February 1997, the Company's PreMarket Approval application ("PMA") was
filed by the FDA. In anticipation of a possible FDA approval, the Company had
been increasing its overall operating expenses and overhead to be positioned to
further increase its production
-10-
PLC SYSTEMS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
capacities. In order to be adequately positioned to meet these demands, the
Company secured financing in July 1997.
On July 28, 1997, an FDA Advisory Panel reviewed the data collected to date
on the Heart Laser TMR System. The Advisory Panel recommended a non-approval
with the requirement of additional data to complete the randomized study. The
Panel did not recommend a new study. The Heart Laser TMR Sy stem remains on the
expedited review path and will continue to be used by its clinical
investigators. The Company intends to meet with the FDA shortly to seek to
finalize a plan for the re-submission, and hopes to submit the data to the FDA
from the completed study later in the fall of 1997.
As a result of the recent FDA Advisory Panel decision, a revised time frame
for possible FDA approval has not been projected. Given this delay, the Company
will monitor its operating expenses closely and will minimize increases to
expenses and overhead during this period. With the $20 millio n financing
commitment secured in July, the Company believes that it has sufficient
resources to meet its working capital demands for a least the next twelve
months.
Unanticipated decreases in operating revenues, increases in expenses, or a
further delay in the expected FDA approval, may adversely impact the Company's
cash position. The Company may seek additional financing through the issuance
and sale of debt or equity securities, bank financing, joint ventures or by
other means. The availability of such financing and the reasonableness of any
related terms in comparison to market conditions cannot be assured.
The Company believes that operating losses are likely until after such time
as the Company receives its PMA from the FDA for the Heart Laser TMR System.
Although the Heart Laser TMR System has been granted "expedited review" status
by the FDA, the Company cannot project when, if at all, such approval will be
granted or that any approval will include desirable claims. Any failure or delay
in receiving any such approval would have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
the Company must also convince health care p rofessionals, third party payors
and the general public of the medical and economic benefits of the Heart Laser
TMR System. No assurance can be given that the Company will be successful in
marketing the Heart Laser TMR System or that the Company will be able to operate
profitably on a consistent b asis.
This report contains forward-looking statements regarding anticipated
increases in revenues, marketing of products and proposed products and other
matters. These statements, in addition to statements made in conjunction with
the words "anticipate," "except," "intend," believe," "seek," "estimate" and
similar expressions are forward-looking statements that involve a number of
risks and uncertainties. The following is a list of factors, among others, that
would cause actual results to differ materially from the foward-looking
statements: approval by the U.S. Food and Drug Administration, business
conditions and growth in certain market segments and general economy, an
increase in competition, increased or continued market acceptance of the
Company's products and proposed products, and other risks and uncertainties
indicated from time to time in the Company's filings with the Securities and
Exchange Commission.
-11-
PLC SYSTEMS INC.
Part II Other Information
ITEM 1. LEGAL PROCEEDINGS.
The Company and certain of its officers have been named as defendants in
eleven purported class action lawsuits each filed in August 1997 in the
United States District Court for the District of Massachusetts. The
suits allege violations of the federal securities laws. The plaintiffs
are seeki ng damages in connection with such alleged violations.
Although the outcome of these suits is not currently predictable,
management believes that the Company has meritorious defenses, and
intends to vigorously defend the suits.
ITEM 2. CHANGES IN SECURITIES.
In July, 1997, the Company entered into a $20 million financing
commitment. Under the terms of the financing, The Company received
$10,075,000 in July 1997 and will receive an additional $10,075,000 in
August 1997 from the issuance of convertible debentures to accredited
investors through Smith Barney Inc. as placement agent. The first
tranche of debentures are due July 17, 2002 and the second tranche of
debentures are due August 14, 2002. The debentures are convertible into
common shares under a predetermined formula. The first tranche of the
debentures are convertible into common shares at the lesser of (a)
$25.98, or (b) the market price of the Company's Common Stock at the
time of conversion, with no more than 1,007,500 shares of Common Stock
issuable in full payment of all accrued interest and principal. The
second tranche of the debentures are convertible into common shares at
the lesser of (a) $14.60, or (b) the market price of the Company's
Common Stock at the time of conversion, with no more than 1,507,500
shares of Common Stock issuable in full payment of all accrued interest
and principal.
The Company has further agreed that should the Company 1.) receive a
recommendation of non-approval of its Pre-Market Application for its
Heart Laser System from the Circulatory Systems Advisory Panel of the
U.S. Food and Drug Administration (the "Panel") or 2.) not receive a
recommendation of approval from the Panel or FDA approval of its
Pre-Market Application for its Heart Laser System by August 14, 1998
then the maximum number of shares of Common Stock which the Company
shall be obligated to issue upon conversion of the tranche 2 debentures
shall be increased from 1,507,500 to 2,007,500.
The convertible debentures will accrue interest at 5% per annum, payable
in cash or common stock at the Company's option, at the time of
conversion. In connection with the issuance of the first tranche of
convertible debentures, the Company has issued 69,875 redeemable
warrants to these accredited investors to purchase shares of its Common
Stock at $27. 81 per share. In connection with the issuance of the
second tranche of convertible debentures, the Company has issued 80,125
redeemable warrants to these accredited investors to purchase shares of
its Common Stock at $15.78 per share. If the average closing sale price
of its Common Stock for any consecutive 30 trading day period commencing
January 17, 1999 exceeds the exercise price by more than 50%, the
Company has the right, exercisable at any time upon 30 days notice to
the holder to redeem the warrant at a price of $.10 per warrant share.
The warrants issued in connection with the first tranche expire on July
17, 2002. The warrants issued in connection with the second tranche
expire on August 14, 2002.
The Company has agreed to register the shares of common stock underlying
the debentures and the warrants. As compensation for its services as
placement agent, Smith Barney Inc. receives a placement fee equal to 6 %
of the gross proceeds of all securities sold. The foregoing transaction
was exempt from registration under the Securities Act of 1933, as
amended by virtue of Rule 506 promulgated under Regulation D.
ITEM 3. DEFAULTS BY THE COMPANY UPON ITS SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
On June 30, 1997, the Company held its Annual General Meeting of
Stockholders to vote on the following proposals:
1. To elect two members of the Board of Directors. Nominees for
Director were: (a) Patricia L. Murphy and (b) Kenneth J. Pulkonik
("Proposal No.1");
2. To appoint Ernst & Young LLP as auditors for Fiscal Year 1997 and to
authorize the Directors to fix the remuneration to be paid to the
auditors ("Proposal No. 2");
Of the 16,627,537 shares of the Company's Common Stock of record as of
May 23, 1997 able to be voted at the meeting, a total of approximately
12,295,713 shares were voted, or approximately 73.9% of the Company's issued and
outstanding shares of Common Stock entitled to vote on these matters. Each of
the proposals was adopted, with the vote total as follows:
-12-
PLC SYSTEMS INC. Part
II Other Information - Continued
SHARES SHARES SHARES
PROPOSAL VOTING FOR VOTING AGAINST ABSTAINING
-------- ---------- -------------- ----------
NO. 1
(a) Patricia L. Murphy 12,020,533 0 275,180
(b) Kenneth J. Pulkonik 12,037,637 0 258,076
NO. 2 12,112,130 73,363 110,220
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a.) Exhibits
--------
(I) The following exhibits are filed herewith:
Exhibit
No. Title
------- --------
10a Convertible Debenture Agreement.
10b First Amendment to Convertible Debenture Agreement.
10c Second Amendment to Convertible Debenture Agreement.
10d Form of Convertible Debenture.
10e Form of Redeemable Warrant.
10f Registration Rights Agreement.
11 Statement re computation of per-share earnings.
27 Financial Data Schedule.
b.) Reports on Form 8-K
None
-13-
PLC SYSTEMS INC.
Part II Other Information
(Continued)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PLC SYSTEMS INC.
Registrant
Date: August 14, 1997 /s/ Patricia L. Murphy
------------------------ -------------------------------
Patricia L. Murphy
(Chief Financial Officer)
-14-
Exhibit 10a
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
Among
PLC SYSTEMS INC.,
SOUTHBROOK INTERNATIONAL INVESTMENTS, LTD.,
HBK CAYMAN L.P.
and
HBK OFFSHORE FUND LTD.
------------------------------
July 17, 1997
------------------------------
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT, dated as of July 17, 1997
(this "Agreement"), among PLC Systems Inc., a corporation organized and existing
under the laws of British Columbia, Canada (the "Company"), Southbrook
International Investments, Ltd., a British Virgin Islands corporation
("Southbrook"), HBK Cayman L.P., a Cayman Islands exempt limited partnership
("HBK Cayman"), and HBK Offshore Fund Ltd., a Cayman Islands exempt company
("HBK Offshore"). Southbrook, HBK Cayman and HBK Offshore are each sometimes
referred to herein as a "Purchaser" and collectively as the "Purchasers".
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers and the
Purchasers desire to purchase up to an aggregate principal amount of $20,000,000
of the Company's to be created 5% Convertible Debentures, due July 17, 2002 (the
"Convertible Debentures"), which are convertible into shares of the Company's
common stock, no par value (the "Common Stock").
IN CONSIDERATION of the mutual covenants and agreements set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF CONVERTIBLE DEBENTURES
1.1 Purchase and Sale. Subject to the terms and conditions set
forth herein, the Company shall issue and sell to the Purchasers and the
Purchasers shall purchase an aggregate principal amount of up to $20,000,000 of
Convertible Debentures, in denominations of $250,000 and integral multiples of
$50,000 in excess thereof, at the closings described below. All references
herein to "dollars" or "$" shall be to U.S. dollars (U.S.$) unless otherwise
specified.
1.2 The Closings.
(a) The Tranche 1 Closing. (i) Subject to the terms and
conditions set forth in this Agreement, the Company shall issue and sell to the
Purchasers and the Purchasers shall purchase an aggregate principal amount of
$10,000,000 of Convertible Debentures (the "Tranche 1 Debentures") for an
aggregate purchase price of $10,000,000, each Purchaser being obligated to pay a
purchase price equal to the principal amount of Tranche 1 Debentures to be
issued and sold to it at the Tranche 1 Closing (as defined below). The closing
of the purchase and sale of the Tranche 1 Debentures (the "Tranche 1 Closing")
shall take place at the offices of Robinson Silverman Pearce Aronsohn & Berman
LLP ("Robinson Silverman"), 1290 Avenue of the Americas, New York, New York
10104, immediately following the
execution hereof or such later date as the parties shall agree. The date of the
Tranche 1 Closing is hereinafter referred to as the "Tranche 1 Closing Date."
(ii) At the Tranche 1 Closing, (a) the Company shall
deliver (A) to Southbrook (1) $5,000,000 aggregate principal amount of Tranche 1
Debentures and the Southbrook Tranche 1 Warrant (as defined in Section 3.17),
each registered in the name of the Southbrook, (2) the legal opinion of Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C. and of DuMoulin, Black,
substantially in the form attached hereto as Exhibit E (the "Tranche 1
Opinion"), and (3) all other documents, instruments and writings required to
have been delivered at or prior to the Tranche 1 Closing by the Company to
Southbrook pursuant to this Agreement; (B) to HBK Cayman (1) $2,500,000
aggregate principal amount of Tranche 1 Debentures and the Tranche 1 HBK Cayman
Warrant (as defined in Section 3.17), each registered in the name of HBK Cayman,
(2) the Tranche 1 Opinion, and (3) all other documents, instruments and writings
required to have been delivered at or prior to the Tranche 1 Closing by the
Company to HBK Cayman pursuant to this Agreement; (C) to HBK Offshore (1)
$2,500,000 aggregate principal amount of Tranche 1 Debentures and the HBK
Offshore Tranche 1 Warrant (as defined in Section 3.17), each registered in the
name of HBK Offshore, (2) the Tranche 1 Opinion, and (3) all other documents,
instruments and writings required to have been delivered at or prior to the
Tranche 1 Closing by the Company to HBK Offshore pursuant to this Agreement, and
(b) each Purchaser shall deliver to the Company (1) the purchase price for the
Tranche 1 Debentures being purchased by it at the Tranche 1 Closing, determined
in accordance with Section 1.2(a)(i), in United States dollars in immediately
available funds by wire transfer to an account designated in writing by the
Company for such purpose on or prior to the Tranche 1 Closing Date, and (2) all
documents, instruments and writings required to have been delivered at or prior
to the Tranche 1 Closing by such Purchaser pursuant to this Agreement.
(b) The Tranche 2 Closing. (i) Subject to the terms and
conditions set forth in this Agreement, the Company shall have the right by
delivery of a written notice to the Purchasers (a "Subsequent Tranche Notice")
to require the Purchasers to purchase Convertible Debentures in such aggregate
principal amount up to $10,000,000 as the Company may designate in such notice
(the "Tranche 2 Debentures"), each Purchaser being obligated (subject to the
terms and conditions hereof) to purchase such portion of the aggregate principal
amount of such Convertible Debentures as equals such Purchaser's pro rata
portion of the aggregate principal amount of Tranche 1 Debentures issued and
sold at the Tranche 1 Closing. The Company may deliver a Subsequent Tranche
Notice no earlier than the expiration of the 60th Trading Day after the date
that a registration statement (an "Underlying Securities Registration
Statement") contemplated by the Registration Rights Agreement, dated the date
hereof, among the Purchasers and the Company substantially in the form of
Exhibit B attached hereto (the "Registration Rights Agreement") covering, among
other things, the shares of Common Stock issuable upon conversion of the Tranche
1 Debentures and the shares of Common Stock issuable upon exercise of the
Tranche 1 Warrants (as defined in Section 3.17) has been declared effective by
the Securities and Exchange Commission (the "Commission") (provided, that
Trading Days during which any Purchaser (or its successors, permitted assigns or
other successors in interest) is unable to resell securities under such
Underlying Securities
3
Registration Statement shall be added to such 60 Trading Day period), and no
later than February 28, 1998 (the "Tranche 2 Closing Expiration Date"). The
closing of the purchase and sale of the Tranche 2 Debentures (the "Tranche 2
Closing") shall take place at the offices of Robinson Silverman on such date
(which may not be prior to the fifteenth Trading Day after receipt by the
Purchasers of the Subsequent Tranche Notice); provided that in no case shall the
Tranche 2 Closing take place unless and until the conditions listed in Section
4.1 have been satisfied or waived by the appropriate party. The date of the
Tranche 2 Closing is hereinafter referred to as the "Tranche 2 Closing Date."
Notwithstanding anything to the contrary contained herein, the Company may, by
written notice to each Purchaser provided prior to the Tranche 2 Closing Date,
revoke such Subsequent Tranche Notice in the event that the closing sale price
of the Common Stock, as reported by the American Stock Exchange or any other
exchange or market on which the Common Stock is then traded, decreases by more
than 20% from the date of the delivery of the Subsequent Tranche Notice and
prior to the Tranche 2 Closing Date.
(ii) At the Tranche 2 Closing, (a) the Company shall
deliver (A) to each Purchaser (1) a pro rata portion of the principal amount
(determined by reference to the principal amount of Tranche 1 Debentures issued
and sold at the Tranche 1 Closing) of the Tranche 2 Debentures to be issued and
sold thereat (or such other principal amount upon which the parties may agree)
and the applicable Tranche 2 Warrant (as defined in Section 3.17), each
registered in the name of the appropriate Purchaser, (2) the legal opinion
referenced in Section 4.1(k), substantially in the form attached hereto as
Exhibit E, and (3) all other documents, instruments and writings required to
have been delivered at or prior to the Tranche 2 Closing by the Company to the
Purchasers pursuant to this Agreement; and (b) each Purchaser shall deliver to
the Company (1) the purchase price for the Tranche 2 Debentures being purchased
by it at the Tranche 2 Closing, determined in accordance with Section 1.2(a)(i),
in United States dollars in immediately available funds by wire transfer to an
account designated in writing by the Company for such purpose on or prior to the
Tranche 2 Closing Date and (2) all documents, instruments and writings required
to have been delivered at or prior to the Tranche 2 Closing by such Purchaser
pursuant to this Agreement. In the event that a Purchaser ("Defaulting
Purchaser") fails to purchase Tranche 2 Debentures in accordance with this
Section 1.2(b)(ii) despite the performance by the Company of its obligations
under this Section and the satisfaction by the Company of the conditions set
forth in Section 4.1, the Company shall notify the non-Defaulting Purchaser of
such failure whereby the non-Defaulting Purchaser shall have the option to
purchase all or any portion of the remaining Tranche 2 Debentures within 5
Business Days from the later of the date it receives notice of such option and
the Tranche 2 Closing Date. If the non-Defaulting Purchaser does not elect to
purchase the remaining Tranche 2 Debentures, the Company may then assign the
Defaulting Purchaser's rights hereunder to a third party, which party shall be
reasonably acceptable to the non-Defaulting Purchaser, without further
obligation to the Defaulting Purchaser to purchase the Tranche 2 Debentures.
Failure by any Purchaser to buy Tranche 2 Debentures shall not affect the
Company's obligations with respect to the Tranche 1 Debentures acquired by such
Purchaser, which shall remain unaffected thereby.
4
1.3 Form of Debentures. The Tranche 1 Debentures shall be in the
form of Exhibit A attached hereto. The Tranche 2 Debentures shall be identical
to the Tranche 1 Debentures, mutatis mutandis, except that the Conversion Price
(as defined below) for the Tranche 2 Debentures shall be reset as of the
Original Issue Date (as defined below) for the Tranche 2 Debentures.
For purposes of this Agreement, "Conversion Price," "Original
Issue Date," "Trading Day" and "Per Share Market Value" shall have the meanings
set forth in the Tranche 1 Debentures.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The
Company hereby makes the following representations and warranties to the
Purchasers:
(a) Organization and Qualification. The Company is a
corporation, duly incorporated, validly existing and in good standing under the
laws of British Columbia, Canada, with the requisite corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. The Company has no subsidiaries other than as set forth
in Schedule 2.1(a) (collectively, the "Subsidiaries"). Each of the Subsidiaries
is a corporation, duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization (as
applicable), with the full corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted. Each
of the Company and the Subsidiaries is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which the nature
of the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not, individually or in the aggregate reasonably be
expected to (x) adversely affect the legality, validity or enforceability of
this Agreement, the Convertible Debentures, the Warrants (as defined in Section
3.17), the Registration Rights Agreement and the documents setting forth the
terms of any preferred stock in which the Convertible Debentures are
exchangeable as provided under the Convertible Debentures, if any (collectively,
the "Transaction Documents"), (y) have or result in a material adverse effect on
the results of operations, assets, prospects, or financial condition of the
Company and the Subsidiaries, taken as a whole, or (z) adversely impair the
Company's ability to perform fully on a timely basis its obligations under the
Transaction Documents (a "Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action
5
on the part of the Company. Each of the Transaction Documents has been duly
executed by the Company and when delivered in accordance with the terms hereof
shall constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application. Neither the Company nor any Subsidiary is in violation of any of
the provisions of its respective certificate of incorporation, articles, by-laws
or other charter documents (or their foreign equivalents).
(c) Capitalization. The authorized, issued and outstanding
capital stock of the Company is set forth in Schedule 2.1(c). No shares of
Common Stock are entitled to preemptive or similar rights, nor is any holder of
the Common Stock entitled to preemptive or similar rights arising out of any
agreement or understanding with the Company by virtue of any of the Transaction
Documents. Except as disclosed in Schedule 2.1(c), there are no outstanding
options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or, except as a result of the purchase and
sale of the Convertible Debentures and Warrants hereunder, securities, rights or
obligations convertible into or exchangeable for, or giving any person any right
to subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock. To
the knowledge of the Company, except as specifically disclosed in the SEC
Documents (as defined below) or Schedule 2.1(c), no Person (as defined below)
beneficially owns (as determined pursuant to Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) or has the
right to acquire by agreement with or by obligation binding upon the Company
beneficial ownership of in excess of 5% of the Common Stock. A "Person" means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any kind.
(c) Issuance of Convertible Debentures and Warrants. The
Convertible Debentures and the Warrants are duly authorized, and, when issued
and paid for in accordance with the terms hereof, shall be validly issued, fully
paid and nonassessable. The Company, as at the Tranche 1 Closing Date and
Tranche 2 Closing Date, as the case may be (each, a "Closing Date" and,
collectively, the "Closing Dates"), has and at all times while the Convertible
Debentures and the Warrants are outstanding will maintain an adequate reserve of
duly authorized shares of Common Stock to enable it to perform its conversion,
exercise and other obligations under this Agreement, the Warrants and the
Convertible Debentures, and in no circumstances shall such reserved and
available shares of Common Stock be less than the sum of (i) 1,000,000 shares of
Common Stock for issuance upon conversion of the Tranche 1 Debentures and to
enable the Company to pay interest on the Tranche 1 Debentures and (ii) the
number of shares of Common Stock which would be issuable upon exercise in full
of the Tranche 1 Warrants. The Company and the Purchasers agree that all penalty
interest, liquidated damages and early redemption or repayment amounts payable
pursuant to any
6
Transaction Documents shall be paid in cash unless otherwise consented to by the
Purchasers. The shares of Common Stock issuable upon conversion of Convertible
Debentures and upon exercise of the Warrants are collectively referred to herein
as the "Underlying Shares." When issued in accordance with the terms of the
Convertible Debentures and the Warrants, the Underlying Shares will be duly
authorized, validly issued, fully paid and nonassessable. The Convertible
Debentures, Warrants and Underlying Shares are collectively referred to herein
as the "Securities."
(d) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of its Certificate of Incorporation or Articles (each as
amended through the date hereof) or (ii) subject to obtaining the Required
Approvals (as defined below), conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company is
a party, or (iii) to the knowledge of the Company, result in a violation of any
law, rule, regulation, order, judgment, injunction, decree or other restriction
of any court or governmental authority to which the Company is subject
(including Federal, state and foreign securities laws and regulations), or by
which any material property or asset of the Company is bound or affected, except
in the case of each of clauses (ii) and (iii), such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as could
not, individually or in the aggregate, have or result in a Material Adverse
Effect. Neither the business of the Company nor any Subsidiary is being
conducted in violation of any applicable law, ordinance or regulation of any
governmental authority which could, individually or in the aggregate, have a
Material Adverse Effect.
(e) Consents and Approvals. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or order of,
or make any filing or registration with, any court or other Federal, state,
local, foreign or other governmental authority or other Person in connection
with the execution, delivery and performance by the Company of the Transaction
Documents other than (i) the filing of the Underlying Securities Registration
Statements with the Commission, which shall be filed in the time periods set
forth in the Registration Rights Agreement, (ii) the applications for the
listing of the Underlying Shares with the American Stock Exchange (and with any
other national securities exchange or market on which the Common Stock is then
listed), and (iii) other than, in all other cases, where the failure to obtain
such consent, waiver, authorization or order, or to give or make such notice or
filing, could not reasonably be expected to have or result in, individually or
in the aggregate, a Material Adverse Effect and to deliver to the Purchasers the
Convertible Debentures or the Warrant (and, upon conversion or exercise thereof,
the Underlying Shares) in the manner contemplated hereby and by the Registration
Rights Agreement free and clear of all liens and encumbrances of any nature
whatsoever (the "Required Approvals").
(f) Litigation; Proceedings. Except as specifically disclosed
in the Disclosure Materials (as defined below), there is no action, suit, notice
of violation, proceeding or investigation pending or, to the best knowledge of
the Company, threatened
7
against, or affecting the Company or any of its Subsidiaries or any of their
respective properties before or by any court, governmental or administrative
agency or regulatory authority (Federal, state, local or foreign) which (i)
adversely affects to or challenges the legality, validity or enforceability of
any of the Transaction Documents or the Securities or (ii) could, individually
or in the aggregate, have or result in a Material Adverse Effect.
(g) No Default or Violation. Neither the Company nor any
Subsidiary (i) is in default under or in violation of any indenture, loan or
credit agreement or any other agreement or instrument to which it is a party or
by which it or any of its properties is bound, (ii) is in violation of any order
of any court, arbitrator or governmental body (Federal, state, local or
foreign), or (iii) is in violation of any statute, rule or regulation of any
governmental authority, except in each case as could not reasonably be expected
to individually or in the aggregate have or result in, individually or in the
aggregate, a Material Adverse Effect.
(h) Private Offering. Neither the Company nor any Person
acting on its behalf has taken or will take any action which might subject the
offering, issuance or sale of the Securities to the registration requirements of
the Securities Act of 1933, as amended (the "Securities Act").
(i) SEC Documents. The Company has filed all reports required
to be filed by it under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), including pursuant to Section 13(a) or 15(d) thereof, for the
two years preceding the date hereof (or such shorter period as the Company was
required by law to file such material) (the foregoing materials being
collectively referred to herein as the "SEC Documents" and, together with the
Schedules to this Agreement and the Confidential Private Placement Memorandum
dated July 1, 1997 furnished by or on behalf of the Company, the "Disclosure
Materials") on a timely basis, or has received a valid extension of such time of
filing. As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Securities Act and the Exchange Act and
the rules and regulations of the Commission promulgated thereunder, and none of
the SEC Documents, when filed, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of the Company
included in the SEC Documents comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto. Such financial statements have been prepared in accordance with
United States generally accepted accounting principles applied on a consistent
basis during the periods involved, except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all material
respects the financial position of the Company and the Subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods shown, subject, in the case of unaudited statements, to normal year-end
audit adjustments. Since the date of the financial statements included in the
Company's last filed Quarterly Report on Form 10-Q, there has been no event,
occurrence or development that has had or that could have or result in a
Material Adverse Effect which has not been specifically disclosed in writing to
the Purchasers by the Company.
8
The Company last filed audited financial statements with the Commission on April
15, 1997, and has not received any comments from the Commission in respect
thereof.
(j) Investment Company. The Company is not, and is not an
Affiliate of an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(k) Certain Fees. Other than fees due and payable to Smith
Barney, Inc. as set forth in the engagement letter previously furnished to the
Purchasers, no fees or commissions will be payable by the Company to any broker,
financial or investment advisor, placement agent finder, investment banker, bank
or any other Person acting in a similar capacity with respect to the
transactions contemplated by this Agreement. The Purchasers shall have no
obligation with respect to such fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this Section that may
be due in connection with the transactions contemplated by this Agreement. The
Company shall indemnify and hold harmless each of the Purchasers, their
respective employees, officers, directors, agents, and partners, and their
respective Affiliates (as such term is defined under Rule 405 promulgated under
the Securities Act), from and against all claims, losses, damages, costs
(including the costs of preparation and reasonable attorney's fees) and expenses
suffered in respect of any such claimed or existing fees.
(l) Solicitation Materials. The Company has not (i)
distributed any offering materials in connection with the offering and sale of
the Securities other than the Disclosure Materials or (ii) solicited any offer
to buy or sell the Securities by means of any form of general solicitation or
advertising.
(m) Form S-3 Eligibility. The Company is, and at each Closing
Date will be, eligible to register securities for resale with the Commission
under Form S-3 promulgated under the Securities Act.
(n) Exclusivity. The Company shall not issue and sell the
Convertible Debentures to any Person other than the Purchasers and their
respective Affiliates and managed funds, if any, other than with the specific
prior written consent of the Purchasers.
(o) Listing and Maintenance Requirements Compliance. The
Company has not in the two years preceding the date hereof received written
notice from any stock exchange or market on which the Common Stock is or has
been listed (or on which it has been quoted) to the effect that the Company is
not in compliance with the listing or maintenance requirements of such exchange
or market.
2.2 Representations and Warranties of the Purchasers. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as follows:
(a) Organization; Authority. Such Purchaser is a corporation
duly incorporated or a limited partnership duly formed, validly existing and in
good standing under
9
the laws of the jurisdiction of its incorporation or formation with the
requisite power and authority to enter into and to consummate the transactions
contemplated hereby and by the Registration Rights Agreement and otherwise to
carry out its obligations hereunder and thereunder. The purchase by such
Purchaser of the Securities to be purchased by it hereunder has been duly
authorized by all necessary action on the part of such Purchaser. Each of this
Agreement and the Registration Rights Agreement has been duly executed and
delivered by such Purchaser and constitutes the valid and legally binding
obligation of such Purchaser, enforceable against such Purchaser, in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights generally and to general principles of equity.
(b) Investment Intent. Such Purchaser is acquiring the
Securities to be purchased by it hereunder for its own account for investment
purposes only and not with a view to or for distributing or reselling such
Securities or any part thereof or interest therein, without prejudice, however,
to such Purchaser's right, subject to the provisions of this Agreement and the
Registration Rights Agreement, at all times to sell or otherwise dispose of all
or any part of such Securities pursuant to an effective registration statement
under the Securities Act and in compliance with applicable state securities laws
or under an exemption from such registration.
(c) Purchaser Status. At the time such Purchaser was offered
the Convertible Debentures and the Tranche 1 Warrant to be purchased by it
hereunder, it was, and at the date hereof, it is, and at each Closing Date (and
on the Tranche 2 Closing Expiration Date, if applicable), it will be, an
"accredited investor" as defined in Rule 501(a) under the Securities Act.
(d) Experience of Purchaser. Such Purchaser either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment.
(e) Ability of Purchaser to Bear Risk of Investment. Such
Purchaser is able to bear the economic risk of an investment in the Securities,
and, at the present time, is able to afford a complete loss of such investment.
Such Purchaser has received the Confidential Private Placement Memorandum dated
July 1, 1997.
(f) Access to Information. Each Purchaser acknowledges receipt
of the Disclosure Materials and further acknowledges that it has been afforded
(i) the opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms and
conditions of the offering of the Securities, and the merits and risks of
investing in the Securities; (ii) access to information about the Company and
the Company's financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment; and
(iii) the opportunity to obtain such additional information which the Company
possesses or can acquire
10
without unreasonable effort or expense that such Purchaser believes is necessary
to make an informed investment decision with respect to the investment and to
verify the accuracy and completeness of the information contained in the
Disclosure Materials.
(g) Reliance. Each Purchaser understands and acknowledges that
(i) the Convertible Debentures and the Warrants to be sold to it hereunder are
being offered and sold to it in a private placement that is exempt from the
registration requirements of the Securities Act and (ii) the availability of
such exemption depends in part on and the Company will rely upon the accuracy
and truthfulness of, the foregoing representations and such Purchaser hereby
consents to such reliance.
The Company acknowledges and agrees that the Purchasers make
no representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) If any Purchaser should decide to
dispose of any portion of the Securities held by it, each such Purchaser
understands and agrees that it may do so only pursuant to an effective
registration statement under the Securities Act, to the Company or pursuant to
an available exemption from the registration requirements thereof. In connection
with any transfer of any portion of the Securities other than pursuant to an
effective registration statement or to the Company, the transferor shall provide
notice thereof to the Company who may require the transferor thereof to provide
to the Company an opinion of counsel experienced in the area of United States
securities laws selected by the transferor, the form and substance of which
opinion shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under the
Securities Act.
(b) Each Purchaser agrees to the imprinting, so long as
is required by this Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED WITH
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF
11
THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS.
[FOR CONVERTIBLE DEBENTURES ONLY] THIS CONVERTIBLE DEBENTURE IS SUBJECT
TO CERTAIN RESTRICTIONS ON TRANSFER AND CONVERSIONS SET FORTH IN A
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT, DATED AS OF JULY 17, 1997,
EXECUTED BY THE ORIGINAL HOLDER HEREOF. A COPY OF THAT AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICE OF PLC SYSTEMS INC.
The Underlying Shares shall not contain the legend set forth
above (or any other legend) if the conversion of Convertible Debentures or
exercise of Warrants, as the case may be, pursuant to which such Underlying
Shares are to be issued occurs at any time while the Underlying Securities
Registration Statement is effective under the Securities Act or in the event
there is not an effective Underlying Securities Registration Statement at such
time, if in the opinion of counsel to the Company experienced in the area of
United States securities laws such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the Staff of the Commission). The Company agrees that
it will provide the Purchaser, upon request, with a certificate or certificates
representing Underlying Shares, free from any legend at such time as such
legends are no longer required pursuant to this Section.
3.2 Stop Transfer Instruction. The Company may not make any
notation on its records or give instructions to any transfer agent of the
Company which enlarge the restrictions of transfer set forth in Section 3.1.
3.3 Furnishing of Information. As long as any Purchaser owns
Underlying Shares, the Company covenants to timely file (or obtain extensions in
respect thereof) all reports required to be filed by the Company after the date
hereof pursuant to Section 13(a) or 15(d) of the Exchange Act. If the Company is
not at the time required to file reports pursuant to such sections, it will
prepare and furnish to the Purchasers and make publicly available in accordance
with Rule 144(c) promulgated under the Securities Act annual and quarterly
financial statements, together with a discussion and analysis of such financial
statements in form and substance substantially similar to those that would
otherwise be required to be included in reports required by Section 13(a) or
15(d) of the Exchange Act, as well as any other information required thereby, in
the time period that such filings would have been required to have been made
under the Exchange Act.
3.4 Copies and Use of Disclosure Materials. The Company consents
to the use of the Disclosure Materials, and any amendments and supplements
thereto, by the Purchasers in connection with resales of Securities other than
pursuant to an effective Underlying Securities Registration Statement.
3.5 Blue Sky Laws. In accordance with the Registration Rights
Agreement, the Company shall qualify the Underlying Shares under the securities
or Blue Sky laws of such
12
jurisdictions as any Purchaser may reasonably request and shall continue such
qualification at all times through the third anniversary of the last Closing
Date; provided, however, that neither the Company nor its Subsidiaries shall be
required in connection therewith to qualify as a foreign corporation where they
are not now so qualified or to take any action that would subject the Company to
general service of process in any such jurisdiction where it is not then so
subject.
3.6 Integration. The Company shall not and shall use its best
efforts to ensure that no Affiliate of the Company shall sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the issue or sale of any of the Securities to any
Purchaser.
3.7 Purchaser Ownership of Common Stock. No Purchaser may use its
ability to convert Convertible Debentures hereunder or use its ability to
acquire shares of Common Stock upon exercise of the Warrants to the extent that
such conversion or exercise would result in such Purchaser beneficially owning
(for purposes of Rule 13d-3 under the Exchange Act) more than 4.999% of the
outstanding shares of the Common Stock; provided, however, that (i) if (A) an
"Event of Default" (as defined in the Convertible Debentures) is declared by any
Purchaser or (B) the Company defaults in the performance of any of its
obligations under any Transaction Document and (ii) if ten days shall have
elapsed since any Purchaser shall have notified the Company of such Event of
Default or default and, (in the case of such default only) such default shall
not have been cured to such Purchaser's satisfaction during such ten-day period,
then the provisions of this Section 3.7 shall be null and void ab initio.
Notwithstanding anything to the contrary contained herein, the provisions of
this Section 3.7 shall have no effect on the Company's obligation to issue
shares of Common Stock to the Purchasers upon receipt or delivery of any
conversion or exercise notice.
3.8 Listing and Reservation of Underlying Shares. (a) The Company
shall (a) not later than the fifth Business Day following (i) the Tranche 1
Closing Date prepare and file with the American Stock Exchange (as well as any
other national securities exchange or market on which the Common Stock is then
listed or traded) an additional shares listing application covering at least the
sum of 1,065,000 Underlying Shares (comprised of 1,000,000 shares reserved for
issuance upon conversion of Tranche 1 Debentures and the payment of interest
thereon, subject to Section 2.1(d) herein, and 65,000 shares reserved for
issuance upon exercise of Tranche 1 Warrants); and (ii) the Tranche 2 Closing
Date prepare and file with the American Stock Exchange (as well as other
national securities exchange or market in which the Common Stock is then listed
or traded) an additional shares listing application covering at least the sum of
(1) 145% of the number of Underlying Shares as would be issuable upon a
conversion in all of the Tranche 2 Debentures including interest thereon (but
not penalty interest, for which the Company shall reserve additional shares),
assuming such conversion occurred on the Original Issue Date for the Tranche 2
Debentures and (2) the number of Underlying Shares issuable upon exercise in
full of the Tranche 2 Warrants; (b) take all steps necessary to cause such
shares to be approved for listing in the American Stock Exchange (as
13
well as on any other national securities exchange or market on which the Common
Stock is then listed) as soon as possible thereafter; and (c) provide to the
Purchasers evidence of such listing, and the Company shall maintain the listing
of its Common Stock on such exchange. If the Tranche 2 Warrants are issued and
delivered on or after the Tranche 2 Closing Expiration Date, the Company shall
(not later than five Business Days thereafter) prepare and file with the
American Stock Exchange (as well as any other national securities exchange or
market on which the Common Stock is then listed or traded) an additional shares
listing application covering the number of Underlying Shares issuable upon
exercise in full of the Tranche 2 Warrants, and take all steps necessary to
cause such shares to be approved for listing thereon as soon as possible
thereafter.
(b) The Company shall reserve for issuance upon conversion of
the Convertible Debentures, for payment of interest thereupon in shares of
Common Stock pursuant to the terms thereof, and upon exercise of the Warrants in
accordance with their terms the number of shares to be listed on the American
Stock Exchange (and such other national securities exchange or market on which
the Common Stock is then listed or traded) as set forth in Section 3.8(a).
Shares of Common Stock reserved for issuance upon the conversion of the
Convertible Debentures as set forth in Section 3.8(a)(i)(1) and Section
3.8(a)(ii)(1), as the case may be, shall be allocated pro rata to each of the
Purchasers in accordance with the principal amount of Convertible Debentures
issued and delivered to such Purchaser at the Tranche 1 Closing or the Trance 2
Closing, as applicable.
3.9 Conversion Procedures. Exhibit D attached hereto sets forth
the procedures with respect to the conversion of the Convertible Debentures,
including the forms of conversion notice to be provided upon conversion,
instructions as to the procedures for conversion, the form of legal opinion, if
necessary, that shall be rendered by or on behalf of the Company to the
Company's transfer agent and such other information and instructions as may be
reasonably necessary to enable the Purchasers to exercise their right of
conversion smoothly and expeditiously.
3.10 Purchasers' Rights if Trading in Common Stock Is Suspended or
Delisted. If at any time while any Purchaser (or any assignee thereof) owns any
Securities trading in the shares of the Common Stock is suspended on or delisted
from the American Stock Exchange or any other principal market or exchange for
such shares (other than as a result of the suspension of trading in securities
on such market or exchange generally or temporary suspensions pending the
release of material information) for more than three Trading Days, at the option
of any Purchaser exercisable by written notice to the Company delivered within
60 days of notice of such suspension or delisting, the Company shall repay in
cash the entire principal amount of then outstanding Convertible Debentures held
by such Purchaser and redeem all then outstanding Underlying Shares then held by
such Purchaser in cash, at an aggregate purchase price equal to the sum of (I)
the aggregate outstanding principal amount of Convertible Debentures then held
by such Purchaser multiplied by (1) the average Per Share Market Value for the
five (5) Trading Days immediately preceding (a) the day of such notice or (b)
the date of payment in full of the repurchase price calculated under this
Section, whichever is greater, divided by (2) the Conversion Price on the date
of the repurchase notice,
14
(II) the aggregate of all accrued but unpaid interest and other non-principal
amounts then payable in respect of all Convertible Debentures to be repaid,
(III) the number of Underlying Shares then held by such Purchaser multiplied by
the average Per Share Market Value for the five (5) Trading Days immediately
preceding (A) the date of the notice or (B) the date of payment in full by the
Company of the repurchase price calculated under this Section, whichever is
greater, and (IV) interest on the amounts set forth in I - III above accruing
from the 5th day after such notice until the repurchase price under this Section
is paid in full at the rate of 15% per annum. The Company shall provide written
notice of any prepayment demand made pursuant to this Section to each other
holder of Securities within 24 hours of its receipt thereof.
3.11 No Violation of Applicable Law. Notwithstanding any provision
of this Agreement to the contrary, if the repurchase of Convertible Debentures
and/or redemption of Underlying Shares otherwise required under this Agreement
would be prohibited by applicable law, such repurchase shall be effected as soon
as it is permitted under such law; provided, however, that interest payable by
the Company with respect to any such repurchase and/or redemption shall continue
to accrue in accordance with Section 3.10.
3.12 [INTENTIONALLY OMITTED]
3.13 Use of Proceeds. The Company shall use all of the net proceeds
from the placement of the Securities for working capital purposes and not for
the satisfaction of any portion of Company or Subsidiary debt, to redeem Company
equity or equity-equivalent securities or to pay down in excess of $1,000,000 of
trade accounts payable of the Company or any Subsidiary. Pending application of
the proceeds of this placement in the manner permitted hereby the Company will
invest such proceeds in interest bearing accounts and short-term, investment
grade interest bearing securities.
3.14 Notice of Breaches. (a) Each of the Company and each Purchaser
shall give prompt written notice to the other of any breach of any
representation, warranty or other agreement contained in this Agreement or in
the Registration Rights Agreement, as well as any events or occurrences arising
after the date hereof and prior to, with respect to the Tranche 1 Closing, the
Tranche 1 Closing Date with respect to the Tranche 2 Closing, the Tranche 2
Closing Date which would reasonably be likely to cause any representation or
warranty or other agreement of such party, as the case may be, contained herein
to be incorrect or breached as of such Closing Date. The Company shall give such
notice to each Purchaser. However, no disclosure by either party pursuant to
this Section shall be deemed to cure any breach of any representation, warranty
or other agreement contained herein or in the Registration Rights Agreement, and
no such disclosure by any Purchaser shall affect the rights of and obligations
owing to the nondisclosing Purchasers under the Transaction Documents.
(b) Notwithstanding the generality of Section 3.14(a), the
Company shall promptly notify each Purchaser of any notice or claim (written or
oral) that it receives from any lender of the Company to the effect that the
consummation of the transactions contemplated hereby and by the Registration
Rights Agreement violates or would violate any
15
written agreement or understanding between such lender and the Company, and the
Company shall promptly furnish by facsimile to the holders of the Convertible
Debentures a copy of any written statement in support of or relating to such
claim or notice.
(c) The default by any Purchaser of any of its obligations,
representations or warranties under any Transaction Document shall not be
imputed to, and shall have no effect upon, any other Purchaser or affect the
Company's obligations under the Transaction Documents to any non-defaulting
Purchaser.
3.15 Conversion Obligations of the Company. The Company covenants
to honor conversions of Convertible Debentures and exercise of Warrants and to
deliver Underlying Shares in accordance with the terms and conditions and time
period set forth in the respective Convertible Debentures and Warrants.
3.16 Right of First Refusal; Subsequent Registrations; Certain
Company Actions. (a) The Company shall not, directly or indirectly, without the
prior written consent of Brown Simpson, LLC ("Brown Simpson"), offer, sell,
grant any option to purchase, or otherwise dispose (or announce any offer, sale,
grant or any option to purchase or other disposition) of any of its or its
Affiliates equity or equity-equivalent securities at a price which is on the
face thereof or implied therein, less than either the market price or fair
market value for such securities (a "Subsequent Financing") for a period of 100
days after the last to occur of the Tranche 1 Closing Date, Tranche 2 Closing
Date or Tranche 2 Closing Expiration Date, except (i) the granting of options to
employees, officers and directors, and the issuance of shares upon exercise of
options granted, under any stock option plan heretofore or hereinafter duly
adopted by the Company, (ii) shares issued upon exercise of any currently
outstanding options and to the extent disclosed in Schedule 2.1(a), (iii) shares
of Common Stock issued upon conversion of Convertible Debentures and exercise of
Warrants, (iv) shares issued or issuable in connection with any registered
primary public offering of the Company's securities, (v) any securities issued
or issuable to any entity acquired by the Company in a merger, stock or asset
acquisition or similar transaction, or (vi) any securities issued by the Company
in connection with any technology transfer or license agreement or marketing or
similar joint venture agreement, unless (A) the Company delivers to Brown
Simpson a written notice (the "Subsequent Financing Notice") of its intention to
effect such Subsequent Financing, which Subsequent Financing Notice shall
describe in reasonable detail the proposed terms of such Subsequent Financing,
the amount of proceeds intended to be raised thereunder, the Person with whom
such Subsequent Financing shall be affected, and a term sheet or similar
document relating thereto (which shall be attached to such Subsequent Financing
Notice) and (B) Brown Simpson shall not have notified the Company by 5:00 p.m.
(Eastern Time) on the fifth Business Day after its receipt of the Subsequent
Financing Notice of its willingness to provide (or to cause its sole designee to
provide) such Subsequent Financing, subject to completion and negotiation of
definitive documentation therefor, on substantially the terms set forth in the
Subsequent Financing Notice. If Brown Simpson does not notify the Company of its
intention to provide such Subsequent Financing within such time period, the
Company may effect the Subsequent Financing substantially upon the terms and to
the Persons (or Affiliates of such Persons) set forth in the Subsequent
Financing Notice; provided, that the Company shall
16
provide Brown Simpson with a second Subsequent Financing Notice, and Brown
Simpson shall again have the right of first refusal set forth above in this
Section 3.16(a), if the Subsequent Financing subject to the initial Subsequent
Financing Notice shall not have been consummated for any reason on the terms set
forth in such Subsequent Financing Notice within 60 Business Days after the date
of the initial Subsequent Financing Notice with the Person (or an Affiliate of
such Person) identified in the Subsequent Financing Notice.
(b) Other than Underlying Shares and other "Registrable
Securities" (as defined in the Registration Rights Agreement) to be registered
in accordance with the Registration Rights Agreement, the Company shall, for a
period of not less than 90 Trading Days after the date that the Underlying
Shares Registration Statement relating to the securities issued at last to occur
of the Tranche 1 Closing Date, Tranche 2 Closing Date or Tranche 2 Closing
Expiration Date is declared effective by the Commission, not, without the prior
written consent of Purchasers, (i) issue or sell any of its or any of its
Affiliates' equity or equity-equivalent securities pursuant to Regulation S
promulgated under the Securities Act, or (ii) register for resale any securities
of the Company. Any days that any Purchaser is unable to sell Underlying Shares
under an Underlying Securities Registration Statement shall be added to such 90
Trading Day period for the purposes of (i) and (ii) above.
(c) As long as there are Convertible Debentures outstanding,
the Company shall not and shall cause the Subsidiaries not to, without the
consent of Purchasers, (i) amend its certificate of incorporation, bylaws or
other charter documents so as to adversely affect any rights of the Purchasers;
(ii) repay, repurchase or offer to repay, repurchase or otherwise acquire shares
of its Common Stock (except Underlying Shares and shares repurchased from
employees of the Company upon their termination of employment with the Company
not in excess of $1,000,000 in aggregate); or (iii) enter into any agreement
with respect to any of the foregoing. Any repurchase of Convertible Debentures
or Underlying Shares must be offered pro rata among the Purchasers in accordance
with their then held respective principal amount of Convertible Debentures.
3.17 The Warrants. (a) At the Tranche 1 Closing the Company shall issue
and deliver (i) to Southbrook, a Common Stock purchase warrant (the "Tranche 1
Southbrook Warrant") entitling Southbrook to purchase, on the terms and
conditions set forth therein, 32,500 shares of Common Stock at a price per share
equal to the Tranche 1 Warrant Exercise Price (as defined below); (ii) to HBK
Cayman, a Common Stock purchase warrant (the "Tranche 1 HBK Cayman Warrant")
entitling HBK Cayman to purchase, on the terms and conditions set forth therein,
16,250 shares of Common Stock at a price per share equal to the Tranche 1
Warrant Exercise Price; and (iii) to HBK Offshore, a Common Stock purchase
warrant (the "Tranche 1 HBK Offshore Warrant," and together with the Southbrook
Tranche 1 Warrant and the HBK Cayman Tranche 1 Warrant, the "Tranche 1
Warrants") entitling HBK Offshore to purchase, on the terms and conditions set
forth therein, 16,250 shares of Common Stock at an exercise price per share
equal to the Tranche 1 Warrant Exercise Price. The "Tranche 1 Warrant Exercise
Price" shall be equal to 125% of the Per Share Market Value on the Tranche 1
Closing Date.
17
(b) At the earlier to occur of the Tranche 2 Closing Date or
the Tranche 2 Closing Expiration Date, the Company shall issue and deliver (i)
to Southbrook, a Common Stock purchase warrant entitling Southbrook to purchase,
on the terms and conditions set forth therein, a number of shares of Common
Stock equal to (A) if the Tranche 2 Warrants are issued on the Tranche 2 Closing
Date, 7.5% of the purchase price to be paid by Southbrook for the Tranche 2
Debentures to be issued and sold to it at the Tranche 2 Closing (e.g., if it is
to pay $5,000,000 for Tranche 2 Debentures, then such number shall be 32,500
shares) or (B) if the Tranche 2 Warrants are to be issued and delivered on the
Tranche 2 Closing Expiration Date, the number of shares to which the Tranche 1
Southbrook Warrant entitled Southbrook to purchase, at a price per share equal
to the Tranche 2 Warrant Exercise Price (as defined below); (ii) to HBK Cayman,
a Common Stock purchase warrant entitling HBK Cayman to purchase, on the terms
and conditions set forth therein, a number of shares of Common Stock equal to
(A) if the Tranche 2 Warrants are issued and delivered on the Tranche 2 Closing
Date, 7.5% of the purchase price to be paid by HBK Cayman for the Tranche 2
Debentures to be issued and sold to it at the Tranche 2 Closing (e.g., if it is
to pay $2,500,000 for Tranche 2 Debentures, then such number shall be 16,250
shares) or (B) if the Tranche 2 Warrants are to be issued and delivered on the
Tranche 2 Closing Expiration Date, the number of Shares to which the Tranche 1
HBK Cayman Warrant entitled HBK Cayman to purchase, at a price per share equal
to the Tranche 2 Warrant Exercise Price; and (iii) to HBK Offshore, a Common
Stock purchase warrant entitling HBK Offshore to purchase, on the terms and
conditions set forth therein, a number of shares of Common Stock equal to (A) if
the Tranche 2 Warrants are issued on the Tranche 2 Closing Date, 7.5% of the
purchase price to be paid by HBK Offshore for the Tranche 2 Debentures to be
issued and sold to it at the Tranche 2 Closing (e.g., if it is to pay $2,500,000
for Tranche 2 Debentures, then such number shall be 16,250 shares) or (B) if the
Tranche 2 Warrants are to be issued and delivered on the Tranche 2 Closing
Expiration Date, the number to which the Tranche 1 HBK Offshore Warrant entitled
HBK Offshore to purchase, at a price per share equal to the Tranche 2 Warrant
Exercise Price. The "Tranche 2 Warrant Exercise Price" shall equal (a) if the
Tranche 2 Warrants are issued and delivered on the Tranche 2 Closing Date, 125%
of the Per Share Market Value on such date or (b) if the Tranche 2 Warrants are
to be issued and delivered on the Tranche 2 Closing Expiration Date, 125% of the
Per Share Market Value on such date. The Common stock purchase Warrants
described in this paragraph are collectively referred to herein as the "Tranche
2 Warrants, and the Tranche 1 Warrants and the Tranche 2 Warrants are
collectively referred to herein as the "Warrants."
(c) The Warrants shall be substantially in the form of Exhibit
D. The failure of a Tranche 2 Closing with respect to any Purchaser due to a
failure by the Company to timely deliver a Subsequent Tranche Notice or to
satisfy all of the conditions set forth in section 4.1 shall not affect the
Company's obligation to issue and deliver Tranche 2 Warrants on the Tranche 2
Closing Expiration Date.
3.18 Transactions in the Common Stock. The Purchasers will not
establish a short position in the Common Stock during the fifteen (15) Trading
Days after receipt of a Subsequent Funding Notice and prior to the Tranche 2
Closing Date. Any existing short position may be maintained.
18
3.19 Limiting Agreements. So long as Convertible Debentures are
outstanding, the Company will not enter into a contract, agreement or
understanding that would restrict the Company's ability to pay principal,
interest, liquidated damages or penalty interest pursuant to any Transaction
Documents.
ARTICLE IV
CONDITIONS
4.1 Conditions Precedent to the Obligation of the Purchasers to
Purchase the Tranche 2 Debentures. The obligation of each Purchaser hereunder to
acquire and pay for Tranche 2 Debentures is subject to the satisfaction or
waiver by such Purchaser at or before the Tranche 2 Closing of each of the
following conditions:
(a) Tranche 1 Closing. The Tranche 1 Closing shall have
occurred.
(b) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company contained herein shall be true
and correct in all material respects as of the date when made and as of the
Tranche 2 Closing Date as though made on and as of such date;
(c) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company at or prior to the Tranche 2 Closing
Date;
(d) Underlying Securities Registration Statements. The
Underlying Securities Registration Statement with respect to the Underlying
Shares issuable on conversion and exercise of all outstanding Tranche 1
Debentures and Tranche 1 Warrants shall have been declared effective under the
Securities Act by the Commission and such Underlying Registration Statement
shall have remained effective and shall not be subject to any stop order and no
stop order shall be pending or threatened as at the Tranche 2 Closing Date;
(e) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority which prohibits
the consummation of any of the transactions contemplated by this Agreement or
the Registration Rights Agreement relating to the issuance or conversion of any
of the Securities.
(f) Management. Dr. Robert I. Rudko shall not have left the
Company or suffered a voluntary or involuntary material lessening of
responsibility as Chairman, the Purchasers acknowledging the Company's intention
to hire a President and/or Chief Executive Officer.
19
(g) No Suspensions of Trading in Common Stock. The trading in
the Common Stock shall not have been suspended by the Commission or on the
American Stock Exchange (except for any suspension of trading of limited
duration solely to permit dissemination of material information regarding the
Company and except if, at the time there is any suspension on the American Stock
Exchange, the Common Stock is then listed and approved for trading on the New
York Stock Exchange, Nasdaq National Market or Nasdaq SmallCap Market within one
(1) Trading Day thereof);
(h) Listing of Common Stock. The Common Stock shall have been
at all times between the Tranche 1 Closing Date and the Tranche 2 Closing Date,
and on the Tranche 2 Closing Date shall be, listed for trading on the American
Stock Exchange, New York Stock Exchange, Nasdaq National Market or Nasdaq
SmallCap Market.
(i) Change of Control. No Change of Control in the Company
shall have occurred since the Tranche 1 Closing Date. "Change of Control" means
the occurrence of any of (i) an acquisition after the date hereof by an
individual, group (as defined in Rule 13d-1 promulgated under the Exchange Act),
or legal entity of in excess of 30% of the voting securities of the Company,
(ii) a replacement of more than one-half of the members of the Company's board
of directors which is not approved by those individuals who are members of the
board of directors on the date hereof in one or a series of related
transactions, (iii) the merger of the Company with or into another entity,
consolidation or sale of all or substantially all of the assets of the Company
in one or a series of related transactions or (iv) the execution by the Company
of an agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth above in (i), (ii) or (iii).
(j) Legal Opinion. The Company shall have delivered to such
Purchaser an opinion of outside legal counsel to the Company in substantially
the forms attached hereto as Exhibit E and dated the Tranche 2 Closing Date;
(k) Required Approvals. All Required Approvals shall have been
obtained;
(l) Shares of Common Stock. On the Tranche 2 Closing Date the
Company shall have reserved for issuance to the Purchasers the number of shares
of Common Stock specified in Section 3.8(a)(ii);
(m) Delivery of Securities. The Company shall have delivered
to Robinson Silverman (or such other Person acceptable to such Purchaser and the
Company) in escrow pending the Tranche 2 Closing the Convertible Debentures and
Tranche 2 Warrants being purchased at the Tranche 2 Closing by such Purchaser,
registered in the name of such Purchaser, each in form satisfactory to Robinson
Silverman (or such other Person);
(n) Performance of Conversion/Exercise Obligations. The
Company shall have (a) delivered Underlying Shares upon conversion of Tranche 1
Convertible Debentures and exercise of Tranche 1 Warrants and otherwise
performed its obligations in accordance with
20
the terms, conditions and timing requirements of the Tranche 1 Convertible
Debentures and Tranche 1 Warrants; and
(o) Market Price of Common Stock. The closing sale price of
the Common Stock as reported by the American Stock Exchange or any other
exchange or market on which the Common Stock is then listed shall be at least
$10 per share for each of the fifteen (15) Trading Days immediately preceding
each of the date of Subsequent Tranche Notice and the Tranche 2 Closing Date,
provided that all material information regarding the Company has been publicly
disseminated on a timely basis, whether or not the Company has a duty under
federal securities laws to disclose such information.
ARTICLE
MISCELLANEOUS
5.1 Fees and Expenses. Each party shall pay the fees and expenses of
its advisers, counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement, except as set forth in
the Registration Rights Agreement. The Company shall pay all stamp and other
taxes and duties levied in connection with the issuance of the Shares pursuant
hereto.
5.2 Entire Agreement; Amendments. This Agreement, together with the
Exhibits and Schedules hereto, the Registration Rights Agreement, the
Convertible Debentures, the Warrants and the document, if any, setting forth the
terms of the preferred stock into which the Convertible Debentures are
exchangeable as provided under the Convertible Debentures, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters.
5.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 4:30 p.m. (New York City
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in the Purchase Agreement later than 4:30 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City time) on
such date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as follows:
If to the Company: PLC Systems Inc.
10 Forge Park
Franklin, MA 02038
21
Attn: Chief Executive Officer
Facsimile No.: (508) 581-7990
With copies to: Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C.
One Financial Center
Boston, MA 02111
Attn: Neil H. Aronson
Facsimile No.: (617) 542-2241
If to the Southbrook: Southbrook International
Investments, Ltd.
c/o Trippoak Advisors, Inc.
630 Fifth Avenue, Suite 2000
New York, NY 10111
Facsimile No.: (212) 332-3256
Attn: Robert L. Miller
If to HBK Cayman: HBK Cayman L.P.
c/o HBK Investments L.P.
777 Main Street, Suite 2750
Forth Worth, TX 76102
Facsimile No.: (817) 870-6234
Attn: David C. Haley and Michael Reese
If to HBK Offshore: HBK Offshore Fund Ltd.
c/o HBK Investments L.P.
777 Main Street, Suite 2750
Forth Worth, TX 76102
Facsimile No.: (817) 870-6234
Attn: David C. Haley and Michael Reese
With copies
in the case of
Southbrook, HBK
Cayman, and HBK
Offshore to: Robinson Silverman Pearce
Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Attn: Eric L. Cohen
Fax: (212) 541-4630
22
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
5.4 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by both the Company and each of the Purchasers; or, in the case of a waiver, by
the party against whom enforcement of any such waiver is sought. No waiver of
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
5.5 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
5.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each of the Purchasers. No Purchaser may
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Company, except that any Purchaser may assign its rights
hereunder and under the Transaction Documents without the consent of the Company
as long as such assignee demonstrates to the reasonable satisfaction of the
Company its satisfaction of the representations and warranties set forth in
Section 2.2. This provision shall not limit a Purchaser's right to transfer
securities or transfer or assign rights hereunder or under the Registration
Rights Agreement.
5.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and, other than with respect to Section 3.16, which is intended for the
benefit of and which may be enforced by Brown Simpson, LLC, and with respect to
permitted assignees under Section 5.6, is not for the benefit of, nor may any
provision hereof be enforced by, any other Person.
5.8 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York
without regard to the principles of conflicts of law thereof.
5.9 Survival. The agreements and covenants contained in Article III, IV
and this Article V shall survive the delivery and conversion of the Convertible
Debentures pursuant to this Agreement and the representations and warranties of
the Company and the Purchasers contained in Article II shall survive until a
date that is three years after the last Closing Date.
5.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event
23
that any signature is delivered by facsimile transmission, such signature shall
create a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if such
facsimile signature page were an original thereof.
5.11 Publicity. The Company shall consult with each Purchaser and each
Purchaser shall consult with the Company prior to issuing any press releases or
otherwise making public statements with respect to the transactions contemplated
hereby and the Company shall not issue any such press release or otherwise make
any such public statement without the prior written consent of each Purchaser
and the Purchasers shall not issue any such press release or otherwise make any
public statement without the prior written consent of the Company, which consent
shall not be unreasonably withheld or delayed, except that no prior consent
shall be required if such disclosure is required by law, in which such case the
disclosing parties shall provide the other parties with prior notice of such
public statement.
5.12 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision which shall be a reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.
5.13 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific performance of the obligations of the Company under
the Transaction Documents. Each of the Company and the Purchasers (severally and
not jointly) agree that monetary damages would not be adequate compensation for
any loss incurred by reason of any breach of its obligations described in the
foregoing sentence and hereby agrees to waive in any action for specific
performance of any such obligation the defense that a remedy at law would be
adequate.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
24
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first indicated above.
Company:
PLC SYSTEMS INC.
By:
Name:
Title:
Purchasers:
SOUTHBROOK INTERNATIONAL
INVESTMENTS, LTD.
By:
Name:
Title:
HBK CAYMAN L.P.
By:
Name:
Title:
HBK OFFSHORE FUND LTD.
By:
Name:
Title:
25
Schedule 2.1(a)
SUBSIDIARIES
--------------
<TABLE>
<CAPTION>
==================================================== ============================== ================================
Name Jurisdiction Percentage
of of Equity
Organization Securities Owned
by the Company
<S> <C> <C>
==================================================== ============================== ================================
PLC Medical Systems, Inc. Delaware 100%
==================================================== ============================== ================================
PLC Sistemas Medicos Internacionais, Lda Portugal 100%
==================================================== ============================== ================================
PLC Sistemas Medicos GmbH Germany 100%
==================================================== ============================== ================================
PLC Medical Systems AG Switzerland 100%
==================================================== ============================== ================================
PLC Medical Systems Asia/Pacific Pte Ltd. Singapore 100%
==================================================== ============================== ================================
PLC Medical Systems France France 100%
==================================================== ============================== ================================
</TABLE>
EXHIBIT 10b
FIRST AMENDMENT TO CONVERTIBLE
DEBENTURE PURCHASE AGREEMENT
----------------------------
THIS FIRST AMENDMENT TO CONVERTIBLE DEBENTURE PURCHASE AGREEMENT is
entered into this 22nd day of July, 1997 by and among PLC Systems Inc,
Southbrook International Investments, Ltd., HBK Cayman, L.P., HBK Offshore Fund,
Ltd., and Brown Simpson Strategic Growth Fund, LP.
WHEREAS all of the parties, [other than Brown Simpson Strategic Growth
Fund, LP , a New York limited partnership (hereinafter "BSSGF")], have entered
into the Convertible Debenture Purchase Agreement dated July 17, 1997 (the
"Agreement") whereby the Purchasers agreed to purchase, and the Company agreed
to sell up to $20,000,000 of the Convertible Debentures; and
WHEREAS BSSGF desires to participate in the financing upon the same
terms and conditions set forth in the Agreement whereby BSSFG shall invest
$75,000 in the Tranche 1 Closing and up to an additional $75,000 in the Tranche
2 Closing; and
WHEREAS, all of the parties are willing to allow BSSGF to participate
in accordance with the terms and conditions set forth herein;
NOW THEREFORE, for good and valuable consideration, the sufficiency and
receipt whereof are hereby acknowledged, the parties hereby agree as follows:
1. Incorporation of Terms and Conditions. Unless otherwise set forth
herein, all defined terms herein have the meaning ascribed to them
in the Agreement and for purposes of this Amendment, all
representations, warranties and covenants in the Agreement made by
the Company are hereby deemed to be fully made to BSSGF as if made
on the date hereof. All other terms of the Agreement and the
Operative Documents not expressly modified herein are ratified and
confirmed in all respects. This Amendment, the Agreement and the
Operative Documents as referenced therein constitute the complete
and entire agreement among the parties.
2. Additional Financing. BSSGF hereby agrees to invest $75,000 upon
the same terms and conditions, including pricing terms, as
provided in the Tranche 1 Closing. The closing shall take at
Robinson Silverman on or before July 24, 1997. BSSGF also agrees
to invest up to an additional $75,000 upon the same terms and
conditions as provided for the Tranche 2 Closing. All references
in the Agreement and the other Operative Documents referencing
"$10,000,000" in funding for either tranche are hereby amended to
read "$10,075,000" and all references in the Agreement to a
"$20,000,000" aggregate financing are hereby amended to read
"$20,150,000." All references in the Debentures to a maximum of
1,000,000 shares to be issued upon
conversion of the Debentures is hereby amended to read
"1,007,500." Any and all references to Warrants for Tranche 1
Financing shall be increased from warrants to purchase 65,000
shares of Common Stock to warrants to purchase 69,875 shares of
Common Stock with the warrant for the additional 4,875 shares
issuable to BSSGF.
3. Representations by BSSGF. BSSGF hereby agrees to be bound by all
of the terms and conditions set forth in the Agreement, subject to
modification as set forth in this Amendment. BSSGF hereby warrants
and represents that all of its limited partners are accredited
investors within the meaning of Regulation D of the 1933 Act.
BSSGF hereby warrants and represents that its general partner is
Brown Simpson Capital, LLC ("BSC"), and that two of the three
members of BSC are "accredited investors" as defined in Regulation
D but that one of the members is not an "accredited investor"
within the meaning of Regulation D of the 1933 Act. However, BSSGF
hereby warrants and represents to the Company that it and its
general partner have such knowledge and experience in financial
and business matters that they are capable of evaluating the
merits and risks of the prospective investment and that BSSGF and
BSC have not been organized for the purpose of acquiring the
Debentures and Warrants and shares of Common Stock issuable
thereunder.
4. Issuance of Debenture and Warrants; Registration Rights. Upon
receipt of the Tranche 1 funding by BSSGF in the amount of
$75,000.00, the Company shall cause to be issued to BSSGF the
Debenture and Warrant in the forms attached hereto as Exhibits "A"
and "B". Any and all securities issuable to BSSGF hereunder shall
be includable in any and enjoy all of the benefits and privileges
of any and all registration statements as set forth in the
Registration Rights Agreement.
5. Notices. Any notices required under the Agreement shall also be
sent to BSSGF as follows: Brown Simpson Strategic Growth Fund,
L.P., c/o Brown Simpson Capital, LLC., Carnegie Hall Tower, 152
West 57th Street, New York, New York 10019 (Facsimile no.
1-212-247-1329), Attention: Mr. Mitchell Kaye.
6. Exclusivity. By executing this Agreement, each of the Purchasers
set forth in the Agreement hereby consent to the addition of BSSGF
as a Purchaser in accordance with the provisions of Section 2.1(o)
of the Agreement.
[THIS SPACE INTENTIONALLY LEFT BLANK]
2
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.
PLC SYSTEMS INC.
By:_______________________
Name:
Title:
SOUTHBROOK INTERNATIONAL
INVESTMENTS, LTD.
By:_______________________
Name:
Title:
HBK CAYMAN L.P.
By:_______________________
Name:
Title:
HBK OFFSHORE FUND LTD.
By:_______________________
Name:
Title:
BROWN SIMPSON STRATEGIC
GROWTH FUND, LP
By: Brown Simpson Capital LLC,
General Partner
By:_______________________
Matt Brown, Member,
duly authorized
3
Exhibit 10c
SECOND AMENDMENT TO CONVERTIBLE
DEBENTURE PURCHASE AGREEMENT
----------------------------
THIS SECOND AMENDMENT TO CONVERTIBLE DEBENTURE PURCHASE
AGREEMENT dated as of August [ ], 1997, is made by and among PLC Systems Inc.
(the "Company"), Soutbrook International Investments, Ltd. ("Southbrook"), HBK
Cayman L.P. ("HBK Cayman"), HBK Offshore Fund Ltd. ("HBK Offshore") and Brown
Simpson Strategic Growth Fund, LP. ("Brown Simpson"). Southbrook, HBK Cayman and
HBK Offshore are each sometimes referred to herein as a "Initial Purchaser" and
collectively as the "Initial Purchasers" and together with Brown Simpson, the
"Purchasers".
WHEREAS, the Company and the Initial Purchasers are parties to
a certain Convertible Debenture Purchase Agreement, dated as of July 17, 1997,
as amended to include Brown Simpson, dated as of July 22, 1997 (the "Purchase
Agreement"), pursuant to which, among other things, the Company issued and sold
to the Purchasers 5% Convertible Debentures, due July 17, 2002 (the "Tranche 1
Debentures") and 5% Convertible Debentures, due July 22, 2002; and
WHEREAS, capitalized terms not otherwise defined herein shall
have the definitions set forth in the Purchase Agreement.
WHEREAS, the parties hereto desire to amend and modify the
Purchase Agreement as set forth herein.
IN CONSIDERATION of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. The Tranche 2 Closing. The Purchasers hereby agree to waive the
provisions of Section 1.2(b) and the conditions of Sections 4.1 (b) (to the
extent specifically set forth herein), (d), (f) (to the extent specifically set
forth herein), and (i) of the Purchase Agreement in order to allow the Company
to deliver a Subsequent Tranche Notice, on the date hereof, requiring the
Purchasers to purchase Convertible Debentures in such aggregate principal amount
up to $10,075,000 as the Company may designate in such Subsequent Tranche
Notice.
2. Representations and Warranties of the Company. Section 2.1(d) of the
Purchase Agreement is hereby amended and modified as follows:
The Convertible Debentures and the Warrants are duly authorized, and,
when issued and paid for in accordance with the terms hereof, shall be
validly issued, fully paid and nonassessable. The Company, as at the
Tranche 1 Closing Date and Tranche 2 Closing Date, as the case may be
(each, a "Closing Date" and, collectively, the "Closing Dates"), has
and at all times while the Convertible
Debentures and the Warrants are outstanding will maintain an adequate
reserve of duly authorized shares of Common Stock to enable it to
perform its conversion, exercise and other obligations under this
Agreement, the Warrants and the Convertible Debentures, and in no
circumstances shall such reserved and available shares of Common Stock
be less than the sum of (i) 2,515,000 shares of Common Stock (or
3,015,000 shares of Common Stock as provided in Section 4 herein) for
issuance upon conversion of the Tranche 1 Debentures and Tranche 2
Debentures and to enable the Company to pay interest on the Tranche 1
Debentures and Tranche 2 Debentures and (ii) the number of shares of
Common Stock which would be issuable upon exercise in full of the
Tranche 1 Warrants and Tranche 2 Warrants. The Company and the
Purchasers agree that all penalty interest, liquidated damages and
early redemption or repayment amounts payable pursuant to any
Transaction Documents shall be paid in cash unless otherwise consented
to by the Purchasers. The shares of Common Stock issuable upon
conversion of Convertible Debentures and upon exercise of the Warrants
and payable as interest on the Debentures are collectively referred to
herein as the "Underlying Shares." When issued in accordance with the
terms of the Convertible Debentures and the Warrants, the Underlying
Shares will be duly authorized, validly issued, fully paid and
nonassessable. The Convertible Debentures, Warrants and Underlying
Shares are collectively referred to herein as the "Securities."
3. Listing and Reservation of Underlying Shares. Section 3.8(a) of the
Purchase Agreement is hereby amended and modified as follows:
The Company shall (a) not later than the fifth Business Day following
the Tranche 2 Closing Date prepare and file with the American Stock
Exchange (as well as any other national securities exchange or market
on which the Common Stock is then listed or traded) an additional
shares listing application covering at least the sum of 2,665,000
Underlying Shares (or 3,165,000 Underlying Shares as provided in
Section 4 herein) (comprised of 2,515,000 shares (or 3,015,000 shares
as provided in Section 4 herein) reserved for issuance upon conversion
of Tranche 1 Debentures, Tranche 2 Debentures and the payment of
interest thereon (but not penalty interest, for which the Company shall
reserve additional shares), subject to Section 2.1(d) herein, and
150,000 shares reserved for issuance upon exercise of Tranche 1
Warrants and Tranche 2 Warrants); (b) take all steps necessary to cause
such shares to be approved for listing in the American Stock Exchange
(as well as on any other national securities exchange or market on
which the Common Stock is then listed) as soon as possible thereafter;
and (c) provide to the Purchasers evidence of such listing, and the
Company shall maintain the listing of its Common Stock on such
exchange. If the Tranche 2 Warrants are issued and delivered on or
after the Tranche 2 Closing Expiration Date, the Company shall (not
later than five Business Days thereafter) prepare and file with the
American Stock Exchange (as well as any other national
-2-
securities exchange or market on which the Common Stock is then listed
or traded) an additional shares listing application covering the number
of Underlying Shares issuable upon exercise in full of the Tranche 2
Warrants, and take all steps necessary to cause such shares to be
approved for listing thereon as soon as possible thereafter.
4. Registration of Underlying Shares. The Company has agreed to file a
registration statement covering 2,665,000 Underlying Shares (including shares
reserved for issuance upon conversion of the Tranche 1 Debentures, Tranche 2
Debenture and the payment of interest thereon, and shares reserved for issuance
on exercise of the Tranche 1 Warrants and the Tranche 2 Warrants) following the
Tranche 2 Closing in accordance with the Registration Rights Agreement dated
July 17, 1997 among the parties hereto (the "Registration Rights Agreement").
The Company agrees that at any time after this date if either (i) the Company
receives a recommendation of non-approval of its Pre-Market Application for its
Heart Laser System from the Circulatory Systems Advisory Panel of the U.S. Food
and Drug Administration (the "Panel"), or (ii) the Company does not receive a
recommendation of approval of its Pre-Market Application for its Heart Laser
System from the Panel or from the United States Food and Drug Administration by
August 14, 1998, then the maximum number of shares of Common Stock which the
Company shall be obligated to issue upon conversion of the Tranche 1 Debentures
and Tranche 2 Debentures shall be increased from 2,515,000 to 3,015,000. At the
request of any of the Purchasers the Company shall immediately file an
additional registration statement in accordance with the terms of the
Registration Rights Agreement with respect to an additional 500,000 Underlying
Shares.
5. Additional Information. The Company hereby advises the Purchasers of
the following additional developments since July 17, 1997 which have been
disclosed in press releases and which will be stated in the Company's Form 10-Q
filing to be filed with the Securities and Exchange Commission by the end of the
business day on August 14, 1997:
(a) On July 28, 1997, the Panel, by a vote of 9 to 2, voted
against recommending Pre-Market Approval of the Heart Laser System at this time.
There can be no assurance as to when, if ever, the Company will obtain
Pre-Market Approval from the Panel. Although the Company's plans are to submit
additional 12-month follow-up patient data from its Phase III studies to the
U.S. Food and Drug Administration as soon as possible, it is impossible to
ascertain at this time if the U.S. Food and Drug Administration will consider
such data adequate to resubmit the application for Pre Market Approval to the
Panel and to ultimately grant PMA for the Heart Laser System. There can be no
assurance that the Company's Heart Laser System will receive PMA approval on a
timely basis, if at all.
(b) Subsequent to the July 28, 1997 Panel meeting, the Company
and certain of its officers have been named as defendants in eleven purported
class action lawsuits each filed in August 1997 in the United States District
Court for the District of Massachusetts. The suits allege violations of federal
securities laws. The plaintiffs are seeking damages in connection with such
alleged violations. Although the outcome of these suits is not currently
predictable,
-3-
management believes that the Company has meritorious defenses, and intends to
vigorously defend the suits.
6. Miscellaneous.
(a) The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
(b) This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof.
(c) This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
-4-
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first indicated above.
PLC SYSTEMS INC.
By:
---------------------------------
Name:
Title:
SOUTHBROOK INTERNATIONAL
INVESTMENTS, LTD.
By:
---------------------------------
Name:
Title:
HBK CAYMAN L.P.
By:
---------------------------------
Name:
Title:
HBK OFFSHORE FUND LTD.
By:
---------------------------------
Name:
Title:
BROWN SIMPSON STRATEGIC GROWTH
FUND, LP
By: Brown Simpson Capital, LLC
General Partner
By:
---------------------------------
Name:
Title:
-5-
Exhibit 10d
NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.
THIS DEBENTURE IS SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND
CONVERSION SET FORTH IN A CONVERTIBLE DEBENTURE PURCHASE AGREEMENT, DATED AS OF
JULY 17, 1997, AS AMENDED FROM TIME TO TIME, EXECUTED BY THE ORIGINAL HOLDER
HEREOF. A COPY OF THAT AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF PLC
SYSTEMS INC.
No. [ ] U.S. $[ ]
PLC SYSTEMS INC.
5% CONVERTIBLE DEBENTURE DUE [ ], 2002
THIS DEBENTURE is one of a duly authorized issue of debentures of PLC
Systems Inc. a corporation organized and existing under the laws of British
Columbia, Canada, having a principal place of business at 10 Forge Park,
Franklin, MA 02038 (the Company ), designated as its 5% Convertible Debentures,
due [ ], 2002, in an aggregate principal amount of up to $20,150,000 (the
"Debentures").
FOR VALUE RECEIVED, the Company promises to pay to [ ], or registered
assigns (the Holder ), the principal sum of [ ] dollars ($[ ]), on or prior to [
], 2002 or such earlier date as the Debentures are required to be repaid as
provided hereunder (the Maturity Date ) and to pay interest to the Holder on the
principal sum at the rate of 5% per annum, payable upon conversion as provided
hereunder, or on the Maturity Date if not earlier converted. Interest shall
accrue daily commencing on the Original Issue Date (as defined in Section 6)
until payment in full of the principal sum, together with all accrued and unpaid
interest and other amounts which may become due hereunder, has been made.
Interest shall be calculated on the basis of a 360-day year and for the actual
number of days elapsed. Interest hereunder will be paid to the person in whose
name this Debenture (or one or more predecessor Debentures) is registered on the
records of the Company regarding registration and transfers of the Debentures
(the Debenture Register ) on the Conversion Date (as defined below) or the
Maturity Date, as the case may be; provided, however, that the Company's
obligation to a transferee of this Debenture arises
only if such transfer, sale or other disposition is made in accordance with the
terms and conditions hereof and of the Convertible Debenture Purchase Agreement,
dated as of July 17, 1997, as amended from time to time (the "Purchase
Agreement"), executed by the original Holder. All overdue, accrued and unpaid
interest and other amounts due hereunder shall bear interest at the rate of 15%
per annum from the day of conversion hereunder or the Maturity Date or earlier
date on which this Debenture is accelerated through and including the date of
payment. The principal of, and interest on, and other amounts owing in respect
of this Debenture are payable in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts, at the address of the Holder last appearing on the Debenture
Register, except that principal paid on [ ], 2002 and interest due hereunder
may, at the Company's option, be paid in shares of the Common Stock (as defined
in Section 6) calculated based upon the average Per Share Market Value for the
five (5) Trading Days immediately preceding the Conversion Date, Maturity Date
or the date upon which interest shall cease to accrue, as provided below, as the
case may be. All amounts due hereunder shall be paid in cash or in Common Stock
as provided herein. Notwithstanding anything to the contrary contained herein,
the Company may not issue shares of the Common Stock in payment of interest on
the principal amount if: (i) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes, or held as treasury stock,
is insufficient to pay interest hereunder in shares of Common Stock; (ii) such
shares are not registered for resale pursuant to an effective registration
statement that names the recipient of such interest shares as a selling
stockholder thereunder and may not be sold without volume restrictions pursuant
to Rule 144 promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), as determined by counsel to the Company pursuant to a written
opinion letter, addressed to the Holder, in form and substance acceptable to the
Holder; (iii) such shares are not listed on the American Stock Exchange (or the
Nasdaq National Market, Nasdaq National Market or The New York Stock Exchange)
and any other exchange on which the Common Stock is then listed for trading; or
(iv) the issuance of such shares would result in the recipient thereof
beneficially owning more than 4.999% of the issued and outstanding shares of
Common Stock as determined in accordance with Rule 13d-3 under the Securities
Exchange Act of 1934, as amended. Payment of interest on the Debentures in
shares of Common Stock is also subject to the provisions of Section 4(a)(ii). A
transfer of the right to receive principal and interest under this Debenture
shall be transferable only through an appropriate entry in the Debenture
Register as provided herein. Notwithstanding anything to the contrary contained
herein, interest hereunder will cease to accrue if the average Per Share Market
Value for any consecutive 30 Trading Day period commencing after the Original
Issue Date exceeds the Per Share Market Value on the Original Issue Date by more
than 50%. In such event, interest accrued through such date shall be due and
payable.
This Debenture is subject to the following additional provisions:
Section 1. The Debentures are issuable in denominations of Two
Hundred Fifty Thousand Dollars ($250,000) and integral multiples of Fifty
Thousand Dollars ($50,000) in excess thereof. The Debentures are exchangeable
for an equal aggregate amount of preferred shares of the Company which shall
have identical terms to the terms of this
2
Debenture, at any time prior to Maturity at the option of the Company upon 30
Trading Days notice to the Holders, provided, that no such Notice may be given
by the Company at any time after notice of a default which if not timely cured
hereunder would constitute an Event of Default hereunder. No service charge will
be made for such registration of transfer or exchange.
Section 2. This Debenture has been issued subject to certain
investment representations of the original Holders set forth in the Purchase
Agreement and may be transferred or exchanged only in compliance with the
Purchase Agreement. Prior to due presentment to the Company for transfer of this
Debenture, the Company and any agent of the Company may treat the person in
whose name this Debenture is duly registered on the Debenture Register as the
owner hereof for the purpose of receiving payment as herein provided and for all
other purposes, whether or not this Debenture is overdue, and neither the
Company nor any such agent shall be affected by notice to the contrary.
Section 3. Events of Default.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any Federal, state,
local or foreign administrative or governmental body):
(a) any default in the payment of the principal of, interest
on or liquidated damages in respect of, this Debenture, free of any
claim of subordination, as and when the same shall become due and
payable on the Conversion Date or the Maturity Date or by acceleration
or otherwise;
(b) the Company shall fail to observe or perform any warranty
contained in, or any representation of the Company shall prove to have
been incorrect when given under, or the Company shall fail to observe
or perform in any material respect any covenant or agreement under, or
otherwise commit any breach of, this Debenture, the Purchase Agreement,
any Warrant (as defined in the Purchase Agreement) or the Registration
Rights Agreement (as defined in Section 6), and such failure or breach
shall not have been remedied within 10 days after the date on which
notice of such failure or breach shall have been given;
(c) the Company or any of its subsidiaries shall commence, or
there shall be commenced against the Company or any such subsidiary a
case under any applicable bankruptcy or insolvency laws as now or
hereafter in effect or any successor thereto, or the Company commences
any other proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or
similar law of any jurisdiction whether now or hereafter in effect
relating to the Company or any subsidiary thereof or there is commenced
against the Company or any subsidiary thereof any such bankruptcy,
insolvency or other proceeding which remains undismissed for a period
of 60 days; or the Company or any subsidiary thereof is
3
adjudicated insolvent or bankrupt; or any order of relief or other
order approving any such case or proceeding is entered; or the Company
or any subsidiary thereof suffers any appointment of any custodian or
the like for it or any substantial part of its property which continues
undischarged or unstayed for a period of 60 days; or the Company or any
subsidiary thereof makes a general assignment for the benefit of
creditors; or the Company shall fail to pay, or shall state that it is
unable to pay, or shall be unable to pay, its debts generally as they
become due; or the Company or any subsidiary thereof shall call a
meeting of its creditors with a view to arranging a composition or
adjustment of its debts; or the Company or any subsidiary thereof shall
by any act or failure to act indicate its consent to, approval of or
acquiescence in any of the foregoing; or any corporate or other action
is taken by the Company or any subsidiary thereof for the purpose of
effecting any of the foregoing;
(d) the Company shall default in any of its obligations under
any mortgage, credit agreement or other facility, indenture agreement
or other instrument under which there is indebtedness of the Company
exceeding one hundred thousand dollars ($100,000) secured by assets of
the Company (or any Subsidiary thereon), whether such indebtedness now
exists or shall hereafter be created and such default shall result in
such indebtedness becoming or being declared due and payable prior to
the date on which it would otherwise become due and payable;
(e) the Common Stock shall be delisted from the American Stock
Exchange or any other national securities exchange or market on which
such Common Stock is listed for trading or suspended from trading
thereon without being relisted or having such suspension lifted, as the
case may be, within three Trading Days; or
(f) the Company shall be a party to any merger or
consolidation pursuant to which the Company shall not be the surviving
entity or shall dispose of all or substantially all of its assets in
one or more transactions, or shall redeem more than a de minimis number
of shares of Common Stock (other than an aggregate of $1,000,000 of
shares of Common Stock which may be repurchased from employees upon
their termination of employment with the Company, calculated by
reference to the market price of the Common Stock at such time, and
other than redemptions of Underlying Shares (as defined in Section 6)).
If during the time that any portion of this Debenture remains outstanding, any
Event of Default occurs and is continuing, and in every such case, then the
Holders may, by notice to the Company, declare the full principal amount of this
Debenture, together with all accrued but unpaid interest and other amounts owing
hereunder, to the date of acceleration, to be, plus the "Adjustment Amount" (as
defined in Section 6) whereupon the same shall become, immediately due and
payable in cash (notwithstanding anything herein contained to the contrary)
without presentment, demand, protest or other notice of any kind, all of which
are waived by the Company, notwithstanding anything herein contained to the
contrary, and the Holder may immediately and without expiration of any grace
period enforce any and all of its rights and remedies hereunder and all other
remedies available to it under applicable law.
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Such declaration may be rescinded and annulled by Holder at any time prior to
payment hereunder. No such rescission or annulment shall affect any subsequent
Event of Default or impair any right consequent thereon.
Section 4. Conversion.
(a) (i) This Debenture shall be convertible into shares of the
Common Stock (subject to reduction pursuant to Section 4(a)(ii) below and
Section 3.7 of the Purchase Agreement, at the option of the Holder in whole or
in part at any time and from time to time after the Original Issue Date and
prior to the close of business on the Maturity Date. The Holder shall effect
conversions by surrendering the Debentures (or such portions thereof) to be
converted, together with the form of conversion notice attached hereto as
Exhibit A (the "Conversion Notice") to the Company. Each Conversion Notice shall
specify the principal amount of Debentures to be converted (which may not be
less than $100,000 or such less principal amount of Debentures than held by such
Holder) and the date on which such conversion is to be effected, which date may
not be prior to the date such Conversion Notice is deemed to have been delivered
pursuant to Section 4(h) (the "Conversion Date"). If no Conversion Date is
specified in a Conversion Notice, the Conversion Date shall be the date that the
Conversion Notice is deemed delivered pursuant to Section 4(h). Subject to
Sections 4(a)(ii) and 4(b) hereof and Section 3.7 of the Purchase Agreement,
each Conversion Notice, once given, shall be irrevocable. If the Holder is
converting less than all of the principal amount represented by the Debenture(s)
tendered by the Holder with the Conversion Notice, or if a conversion hereunder
cannot be effected in full for any reason, the Company shall honor such
conversion to the extent permissible hereunder and shall promptly deliver to
such Holder (in the manner and within the time set forth in Section 5(b)) a new
Debenture for such principal amount as has not been converted.
(ii) Certain Regulatory Approval. If on the Conversion
Date applicable to any conversion, (A) the Common Stock is then listed for
trading on the American Stock Exchange or Nasdaq National Market or if the rules
of the Nasdaq Stock Market are hereafter amended to extend Rule 4460(i)
promulgated thereby (or any successor or replacement provision thereof) to the
Nasdaq SmallCap Market and the Common Stock is then listed for trading on such
market or exchange, (B) the Conversion Price then in effect is such that the
aggregate number of shares of the Common Stock that would then be issuable upon
conversion of the entire outstanding principal amount of Debentures, together
with any shares of the Common Stock previously issued upon conversion of
Debentures and in respect of payment of interest hereunder would equal or exceed
20% of the number of shares of the Common Stock outstanding on the Original
Issue Date (the "Issuable Maximum"), and (C) the Company has not previously
obtained the Stockholder Approval (as defined below), then the Company shall
issue to the Holder requesting such conversion the Issuable Maximum and, with
respect to any shares of the Common Stock that otherwise would have been
issuable to such holder in respect of the Conversion Notice at issue or in
respect of payment of interest hereunder in excess of the Issuable Maximum, the
Holder shall have the option to require the Company to either (1) as promptly as
possible, but in no event later than 90 days after such Conversion Date, convene
a meeting of the holders of the Common Stock and use its
5
reasonable efforts to obtain the Stockholder Approval or (2) prepay, from funds
legally available therefor at the time of such prepayment, the balance of the
principal amount of the Debentures subject to such Conversion Notice and the
remaining aggregate principal amount of Debentures then outstanding and held by
such Holder at a price equal to the sum of (A) the principal amount of
Debentures then outstanding and held by such Holder multiplied by the product of
(i) the average Per Share Market Value for the five (5) Trading Days immediately
preceding (1) the Conversion Date or (2) the date of payment in full by the
Company of such prepayment price, whichever is greater, divided by (ii) the
Conversion Price calculated on the Conversion Date plus (B) all accrued and
unpaid interest and other amounts then due in respect of such Debentures;
provided, however, that if the Holder has requested that the Company obtain
Stockholder Approval under paragraph (1) above and the Company fails for any
reason to obtain such Stockholder Approval within the time period set forth in
(1) above, the Company shall be obligated to prepay Debentures in accordance
with the provisions of paragraph (2) above, and in such case the interest
contemplated by the immediately succeeding sentence shall be deemed to accrue
from the Conversion Date. If the Holder has requested that the Company prepay
Debentures pursuant to this Section and the Company fails for any reason to pay
the prepayment price under (2) above within seven days after the Conversion
Date, the Company will pay interest on such prepayment price at a rate of 15%
per annum to the converting Holder, accruing from the Conversion Date until the
prepayment price plus any accrued interest thereon is paid in full. The entire
prepayment price, including interest thereon, shall be paid in cash.
"Stockholder Approval" means the approval by a majority of the total votes cast
on the proposal, in person or by proxy, at a meeting of the stockholders of the
Company held in accordance with the Company's Certificate of Incorporation and
by-laws, of the issuance by the Company of shares of the Common Stock exceeding
the Issuable Maximum as a consequence of the conversion of Debentures into the
Common Stock at a price less than the greater of the book or market value on the
Original Issue Date as and to the extent required pursuant to Rule 713 of the
American Stock Exchange or Rule 4460(i) of the Nasdaq Stock Market (or any
successor or replacement provision thereof), as applicable.
(iii) Maximum Conversion Shares. Notwithstanding anything
to the contrary set forth herein, the Company shall not be obligated to issue in
excess of 2,500,000 shares of Common Stock upon conversion of Debentures, which
shares shall constitute payment in full of all accrued interest and payment of
principal due on the expiration date of such Debentures, which number shall be
subject to adjustment pursuant to Section 4 (but not in the event that the
Debentures are accelerated in accordance herewith). Notwithstanding the
foregoing, should the Company receive either (i) a recommendation of new
approval of its Pre-Market Application for its Heart Laser System from the
Circulatory Systems Advisory Panel (the "Panel") of the U.S. Food and Drug
Administration (the "FDA"), or (ii) should the Company not receive a
recommendation of approval of its Pre-Market Application for Heart Laser System
from the Panel or the FDA by August 14, 1998, then the maximum number of shares
of Common Stock which the Company shall be obligated to issue upon conversion of
the Debentures shall be increased from 2,500,000 to 3,000,000. In accordance
with the Purchase Agreement such number of shares shall be available on a pro
rata basis based upon the pro rata purchase price for the Debentures paid by the
Original Holders of Debentures. Shares of Common Stock issued in respect of
penalties and liquidated
6
damages hereunder shall not count towards the share limits referenced in this
paragraph and shall be paid in cash unless otherwise agreed to by the Holders.
(b) Not later than three Trading Days after the Conversion
Date, the Company will deliver to the Holder (i) a certificate or certificates
which shall be free of restrictive legends and trading restrictions (other than
those required by Section 3.1 of the Purchase Agreement) representing the number
of shares of the Common Stock being acquired upon the conversion of Debentures
(subject to reduction pursuant to Section 4(a)(ii) hereof and Section 3.7 of the
Purchase Agreement), (ii) Debentures in a principal amount equal to the
principal amount of Debentures not converted; (iii) a bank check in the amount
of all accrued and unpaid interest (if the Company has elected to pay accrued
interest in cash), together with all other amounts then due and payable in
accordance with the terms hereof, in respect of Debentures tendered for
conversion and (iv) if the Company has elected to pay accrued interest in shares
of the Common Stock, certificates, which shall be free of restrictive legends
and trading restrictions (other than those required by the Purchase Agreement),
representing such number of shares of the Common Stock as equals such interest
divided by the average Per Share Market Value for the five Trading Days
immediately preceding the Conversion Date; provided, however, that the Company
shall not be obligated to issue certificates evidencing the shares of the Common
Stock issuable upon conversion of the principal amount of Debentures until
Debentures are either delivered for conversion to the Company or any transfer
agent for the Debentures or the Common Stock, or the Holder notifies the Company
that such Debenture has been lost, stolen or destroyed and provides a bond (or
other adequate security) reasonably satisfactory to the Company to indemnify the
Company from any loss incurred by it in connection therewith (in which case the
Company shall issue a replacement Debenture in like principal amount). The
Company shall, upon request of the Holder, use its best efforts to deliver any
certificate or certificates required to be delivered by the Company under this
Section electronically through the Depository Trust Corporation or another
established clearing corporation performing similar functions. If in the case of
any Conversion Notice such certificate or certificates, including for purposes
hereof, any shares of the Common Stock to be issued on the Conversion Date on
account of accrued but unpaid interest hereunder, are not delivered to or as
directed by the applicable Holder by the third Trading Day after the Conversion
Date, the Holder shall be entitled by written notice to the Company at any time
on or before its receipt of such certificate or certificates thereafter, to
rescind such conversion, in which event the Company shall immediately return the
Debentures tendered for conversion. If the Company fails to deliver to the
Holder such certificate or certificates pursuant to this Section, including for
purposes hereof, any shares of the Common Stock to be issued on the Conversion
Date on account of accrued but unpaid interest hereunder, prior to the fifth
Trading Day after the Conversion Date, the Company shall pay to such Holder, in
cash, as liquidated damages and not as a penalty, $1,500 for each day after such
fifth Trading Day until such certificates are delivered. If the Company fails to
deliver to the Holder such certificate or certificates pursuant to this Section
prior to the 15th day after the Conversion Date, the Company shall, at the
Holder's option (i) prepay, from funds legally available therefor at the time of
such prepayment, the aggregate of the principal amount of Debentures then held
by such Holder, as requested by such Holder, and (ii) pay all accrued but unpaid
interest on account of the Debentures for which the Company shall have failed to
issue the Common
7
Stock certificates hereunder, in cash. The prepayment price shall be equal to
the sum of (A) the aggregate of all accrued but unpaid interest and other
non-principal amounts then payable in respect of all Debentures to be prepaid
hereunder and for which prepayment hereunder is demanded, plus (B) the aggregate
of the principal amount of Debentures then held by such Holder multiplied by (1)
the average Per Share Market Value for the five (5) Trading Days immediately
preceding (x) the Conversion Date or (y) the date of payment in full by the
Company of such prepayment price, whichever is greater, divided by, (2) the
Conversion Price calculated on the Conversion Date. If the Holder has requested
that the Company prepay Debentures pursuant to this Section and the Company
fails for any reason to pay the prepayment price within seven days after such
notice is deemed delivered pursuant to Section 4(h), the Company will pay
interest on the prepayment price at a rate of 15% per annum, in cash to such
Holder, accruing from such seventh day until the prepayment price and any
accrued interest thereon is paid in full.
(c) (i) The conversion price (the "Conversion Price") in
effect on any Conversion Date shall be the lesser of (a) 120% of the average Per
Share Market Value of the Common Stock for the ten (10) Trading Days immediately
preceding the Original Issue Date (the "Initial Conversion Price") and (b) the
average of the five (5) consecutive lowest Per Share Market Values for the
thirty (30) Trading Days immediately preceding the Conversion Date (which such
thirty (30) Trading Day period must commence on or the issue date of this
Debenture); provided that, (a) if the registration statement registering the
resale of the shares of Common Stock issuable upon conversion of the Debentures
and payment of interest thereunder and naming the Holder as a Selling
Stockholder thereunder (the "Underlying Shares Registration Statement") is not
filed on or prior to the 30th day after the Original Issue Date, or (b) the
Company fails to file with the Securities and Exchange Commission (the
"Commission") a request for acceleration in accordance with Rule 12d1-2
promulgated under the Securities Exchange Act of 1934, as amended, within five
(5) days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that an Underlying Shares Registration
Statement will not be "reviewed" or is not subject to further review or comment
by the Commission, or (c) if the Underlying Shares Registration Statement is not
declared effective by the Commission on or prior to the 90th day after the
Original Issue Date, or (d) if such Underlying Shares Registration Statement is
filed with and declared effective by the Commission but thereafter ceases to be
effective as to all Registrable Securities (as such term is defined in the
Registration Rights Agreement) at any time prior to the expiration of the
"Effectiveness Period" (as such term as defined in the Registration Rights
Agreement), without being succeeded by a subsequent Underlying Shares
Registration Statement filed with and declared effective by the Commission
within 10 Business Days (as defined in Section 6), or (e) if trading in the
Common Stock shall be suspended for any reason for more than three Trading Days,
or (f) if the conversion rights of the Holders of Debentures hereunder are
suspended for any reason (any such failure being referred to as an "Event," and
for purposes of clauses (a), (c) and (f) the date on which such Event occurs, or
for purposes of clause (b) the date on which such five (5) days period is
exceeded, or for purposes of clause (d) the date which such 10 Business
Day-period is exceeded, or for purposes of clause (e) the date on which such
three Trading Day period is exceeded, being referred to as "Event Date"), the
Conversion Price shall be decreased by 2.5% on the Event Date and each monthly
8
anniversary thereof until the earlier to occur of the second month anniversary
after the Event Date and such time as the applicable Event is cured (i.e., the
Conversion Price would decrease by 2.5% as of the Event Date and 5% as of the
one month anniversary of such Event Date). Commencing the second month
anniversary after the Event Date, at the option of each Holder for each
applicable monthly period either (a) the Company shall pay to the Holders 2.5%
of the product of the principal amount of outstanding Debentures (each Holder
being entitled to receive such portion of such amount as equals its pro rata
portion of Debentures then outstanding), in cash or (b) the Conversion Price
shall be decreased by 2.5% for each additional such month (to be effective in
full on the monthly applicable Event Date) as liquidated damages, and not as a
penalty on the first day of each monthly anniversary of the Event Date in either
case until such time as the applicable Event is cured. Any decrease in the
Conversion Price pursuant to this Section shall remain in effect notwithstanding
the fact that the Event causing such decrease has been subsequently cured and
further monthly decreases have ceased. The provisions of this Section are not
exclusive and shall in no way limit the Company's obligations under the
Registration Rights Agreement.
(iii) If the Company, at any time while any Debentures are
outstanding, (a) shall pay a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of the Common Stock, (b) subdivide
outstanding shares of the Common Stock into a larger number of shares, (c)
combine outstanding shares of the Common Stock into a smaller number of shares,
or (d) issue by reclassification of shares of the Common Stock any shares of
capital stock of the Company, the Initial Conversion Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of the Common
Stock (excluding treasury shares, if any) outstanding before such event and of
which the denominator shall be the number of shares of the Common Stock
outstanding after such event. Any adjustment made pursuant to this Section
4(c)(ii) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.
(iv) If the Company, at any time while any Debentures are
outstanding, shall issue rights or warrants to all holders of the Common Stock
(and not to Holders of Debentures) entitling them to subscribe for or purchase
shares of the Common Stock at a price per share less than the Per Share Market
Value of the Common Stock at the record date mentioned below, the Initial
Conversion Price shall be multiplied by a fraction, of which the denominator
shall be the number of shares of the Common Stock (excluding treasury shares, if
any) outstanding on the date of issuance of such rights or warrants plus the
number of additional shares of the Common Stock offered for subscription or
purchase, and of which the numerator shall be the number of shares of the Common
Stock (excluding treasury shares, if any) outstanding on the date of issuance of
such rights or warrants plus the number of shares which the aggregate offering
price of the total number of shares so offered would purchase at such Per Share
Market Value. Such adjustment shall be made whenever such rights or warrants are
issued, and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights or warrants.
However, upon the
9
expiration of any right or warrant to purchase shares of the Common Stock the
issuance of which resulted in an adjustment in the Initial Conversion Price
pursuant to this Section 4(c)(iii), if any such right or warrant shall expire
and shall not have been exercised, the Initial Conversion Price shall
immediately upon such expiration be recomputed and effective immediately upon
such expiration be increased to the price which it would have been (but
reflecting any other adjustments in the Initial Conversion Price made pursuant
to the provisions of this Section 4 after the issuance of such rights or
warrants) had the adjustment of the Initial Conversion Price made upon the
issuance of such rights or warrants been made on the basis of offering for
subscription or purchase only that number of shares of the Common Stock actually
purchased upon the exercise of such rights or warrants actually exercised.
(v) If the Company, at any time while Debentures are
outstanding, shall distribute to all holders of the Common Stock (and not to
Holders of Debentures) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security (excluding those referred to
in Sections 4(c)(ii) and (iii) above), then in each such case the Initial
Conversion Price at which Debentures shall thereafter be convertible shall be
determined by multiplying the Initial Conversion Price in effect immediately
prior to the record date fixed for determination of stockholders entitled to
receive such distribution by a fraction of which the denominator shall be the
Per Share Market Value of the Common Stock determined as of the record date
mentioned above, and of which the numerator shall be such Per Share Market Value
of the Common Stock on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of the Common Stock as
determined by the Board of Directors in good faith; provided, however, that in
the event of a distribution exceeding ten percent (10%) of the net assets of the
Company, such fair market value shall be determined by a nationally recognized
or major regional investment banking firm or firm of independent certified
public accountants of recognized standing (which may be the firm that regularly
examines the financial statements of the Company) (an "Appraiser") selected in
good faith by the holders of a majority in interest of Debentures then
outstanding; and provided, further, that the Company, after receipt of the
determination by such Appraiser shall have the right to select an additional
Appraiser, in good faith, in which case the fair market value shall be equal to
the average of the determinations by each such Appraiser. In either case the
adjustments shall be described in a statement provided to the holders of
Debentures of the portion of assets or evidences of indebtedness so distributed
or such subscription rights applicable to one share of the Common Stock. Such
adjustment shall be made whenever any such distribution is made and shall become
effective immediately after the record date mentioned above.
(vi) All calculations under this Section 4 shall be made
to the nearest cent or the nearest 1/100th of a share, as the case may be.
(vii) Whenever the Initial Conversion Price is adjusted
pursuant to Section 4(c)(ii),(iii) or (iv), the Company shall promptly mail to
each Holder of Debentures in accordance with Section 5(h), a notice setting
forth the Initial Conversion Price after such adjustment and setting forth a
brief statement of the facts requiring such adjustment.
10
(viii) In case of any reclassification of the Common Stock
or any compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, the Holder of this Debenture shall have
the right thereafter to, at its option, (A) convert the then outstanding
principal amount, together with all accrued but unpaid interest and any other
amounts then owing hereunder in respect of this Debenture only into the shares
of stock and other securities, cash and property receivable upon or deemed to be
held by holders of the Common Stock following such reclassification or share
exchange, and the Holders of the Debentures shall be entitled upon such event to
receive such amount of securities, cash or property as the shares of the Common
Stock of the Company into which the then outstanding principal amount, together
with all accrued but unpaid interest and any other amounts then owing hereunder
in respect of this Debenture could have been converted immediately prior to such
reclassification or share exchange would have been entitled or (B) require the
Company to prepay, from funds legally available therefor at the time of such
prepayment, all of its Debentures at a price equal to the sum of (i) the
aggregate of the principal amount of Debentures then held by the Holder
multiplied by (a) the average Per Share Market Value for the five (5) Trading
Days immediately preceding (1) the effective date of the reclassification or
share exchange triggering such prepayment right or (2) the date of payment in
full by the Company of the prepayment price hereunder, whichever is greater,
divided by (b) the Conversion Price calculated on such effective date, plus (ii)
the aggregate of all accrued but unpaid interest and other amounts then payable
in respect of all Debentures to be repaid hereunder. The entire redemption price
shall be paid in cash, and the terms of payment of such redemption price shall
be subject to the provisions set forth in Section 5(b). The terms of any such
reclassification or share exchange shall include such terms so as to continue to
give to the Holder the right to receive the securities, cash or property set
forth in this Section 4(c)(vii) upon any conversion following such event. This
provision shall similarly apply to successive reclassifications or share
exchanges.
(ix) If:
A. the Company shall declare a dividend
(or any other distribution) on its
Common Stock; or
B. the Company shall declare a special
nonrecurring cash dividend on or a
redemption (other than redemptions of
the stock of employees upon their
termination of employment with the
Company in an aggregate amount not to
exceed $1,000,000, calculated by
reference to the market price of the
Common Stock at such time) of its
Common Stock; or
C. the Company shall authorize the
granting to all holders of the Common
Stock rights or warrants to subscribe
for or purchase any shares of capital
stock of any class or of any rights;
or
11
D. the approval of any stockholders of
the Company shall be required in
connection with any reclassification
of the Common Stock of the Company,
any consolidation or merger to which
the Company is a party, any sale or
transfer of all or substantially all
of the assets of the Company, of any
compulsory share of exchange whereby
the Common Stock is converted into
other securities, cash or property;
or
E. the Company shall authorize the
voluntary or involuntary dissolution,
liquidation or winding up of the
affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of the Debentures, and shall cause to be mailed to the
Holders of Debentures at their last addresses as they shall appear upon the
stock books of the Company, at least 30 calendar days prior to the applicable
record or effective date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as
of which the holders of the Common Stock of record to be entitled to such
dividend, distributions, redemption, rights or warrants are to be determined or
(y) the date on which such reclassification, consolidation, merger, sale,
transfer or share exchange is expected to become effective or close, and the
date as of which it is expected that holders of the Common Stock of record shall
be entitled to exchange their shares of the Common Stock for securities, cash or
other property deliverable upon such reclassification, consolidation, merger,
sale, transfer or share exchange; provided, however, that the failure to mail
such notice or any defect therein or in the mailing thereof shall not affect the
validity of the corporate action required to be specified in such notice.
Holders are entitled to convert Debentures during the 30-day period commencing
the date of such notice to the effective date of the event triggering such
notice.
(d) If at any time conditions shall arise by reason of action
taken by the Company which in the opinion of the Board of Directors are not
adequately covered by the other provisions hereof and which might materially and
adversely affect the rights of the Holders (different than or distinguished from
the effect generally on rights of holders of any class of the Company's capital
stock) or if at any time any such conditions are expected to arise by reason of
any action contemplated by the Company, the Company shall mail a written notice
briefly describing the action contemplated and the material adverse effects of
such action on the rights of the Holders at least 30 calendar days prior to the
effective date of such action, and an Appraiser mutually acceptable to the
Holders of majority in interest of the Debentures and the Company shall give its
opinion as to the adjustment, if any (not inconsistent with the standards
established in this Section 4), of the Conversion Price (including, if
necessary, any adjustment as to the securities into which Debentures may
thereafter be convertible) and any distribution which is or would be required to
preserve without diluting the rights of the Holders. The determination of the
Appraiser shall be final.
12
(e) The Company covenants that it will at all times reserve
and keep available out of its authorized and unissued shares of the Common Stock
solely for the purpose of issuance upon conversion of the Debentures and payment
of interest on the Debentures, each as herein provided, free from preemptive
rights or any other actual contingent purchase rights of persons other than the
Holders, the sum of 3,000,000 shares of Common Stock for issuance (on a pro rata
basis as described in Section 4(a)(iii) upon conversion of Debentures (taking
into account the adjustments and restrictions of Section 4(c)) and payment of
interest hereunder in Common Stock. The Company covenants that all shares of the
Common Stock that shall be so issuable shall, upon issue, be duly and validly
authorized, issued and fully paid, nonassessable and, if the Underlying Shares
Registration Statement has been declared effective under the Securities Act,
freely tradeable.
(f) Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares of the
Common Stock, but may if otherwise permitted, make a cash payment in respect of
any final fraction of a share based on the Per Share Market Value at such time.
If the Company elects not, or is unable, to make such a cash payment, the holder
shall be entitled to receive, in lieu of the final fraction of a share, one
whole share of Common Stock.
(g) The issuance of certificates for shares of the Common
Stock on conversion of the Debentures shall be made without charge to the
Holders thereof for any documentary stamp or similar taxes that may be payable
in respect of the issue or delivery of such certificate, provided that the
Company shall not be required to pay any tax that may be payable in respect of
any transfer involved in the issuance and delivery of any such certificate upon
conversion in a name other than that of the Holder of such Debentures so
converted and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
(h) Any and all notices or other communications or deliveries
to be provided by the Holders of the Debentures hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered personally,
by facsimile, sent by a nationally recognized overnight courier service or sent
by certified or registered mail, postage prepaid, addressed to the Company, at
10 Forge Park, Franklin, MA 02038 (facsimile number (508) 581-7990, attention
Chief Executive Officer with copy to Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C., attention Neil H. Aronson (facsimile number (617) 542-2241), or
such other address or facsimile number as the Company may specify for such
purposes by notice to the Holders delivered in accordance with this Section. Any
and all notices or other communications or deliveries to be provided by the
Company hereunder shall be in writing and delivered personally, by facsimile,
sent by a nationally recognized overnight courier service or sent by certified
or registered mail, postage prepaid, addressed to each Holder of the Debentures
at the facsimile telephone number or address of such Holder appearing on the
books of the Company, or if no such facsimile telephone number or address
appears, at the
13
principal place of business of the holder. Any notice or other communication or
deliveries hereunder shall be deemed given and effective on the earliest of (i)
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior to
4:30 p.m. (New York City time), (ii) the date after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 4:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) four days after deposit in the United States mails, (iv) the Business Day
following the date of mailing, if send by nationally recognized overnight
courier service, or (v) upon actual receipt by the party to whom such notice is
required to be given.
Section 5. Company Conversion.
Provided that the average Per Share Market Value for any
consecutive 30 Trading Day period commencing on the Original Issue Date exceeds
the Initial Conversion Price by more than 50%, this Debenture shall be
convertible in whole or in part into a number of shares of Common Stock at the
Conversion Price at the option of the Company; provided, however, that the
Company is not permitted to deliver a Company Conversion Notice (as defined
below) within 10 days after issuing any press release or other public statement
relating to such conversion or at any time when the Underlying Securities
Registration Statement is not then effective or shares of Common Stock are not
listed for trading. The Company shall effect such conversion by delivering to
the Holder a written notice in the form attached hereto as Exhibit B (the
"Company Conversion Notice"), which Company Conversion Notice, once given, shall
be irrevocable. Each Company Conversion Notice shall specify the principal
amount together with accrued interest of Debentures to be converted. The Company
shall deliver such Company Conversion Notice at least two (2) Trading Days
before the Maturity Date or the date of conversion (such date is hereinafter
referred to as the "Company Conversion Date"). Upon its receipt of a Company
Conversion Notice, the Holder shall surrender the principal amount of Debentures
subject to such notice at the office of the Company or of any transfer agent for
the Debentures or Common Stock. If the Company is converting less than the
aggregate principal amount of all Debentures, the Company shall, upon conversion
of the principal amount of Debentures subject to such Company Conversion Notice
and receipt of the Debentures surrendered for conversion, deliver to the Holder,
a replacement Debenture for such principal amount of Debentures as have not been
converted. Each of a Holder Conversion Notice and a Company Conversion Notice is
sometimes referred to herein as a "Conversion Notice," and each of a "Holder
Conversion Date" and a "Company Conversion Date" is sometimes referred to herein
as a "Conversion Date."
Section 6. Definitions. For the purposes hereof, the following
terms shall have the following meanings:
"Adjustment Amount" is equal to (i) the aggregate principal
amount of Debentures then outstanding multiplied by (A) the average Per Share
Market Value for the five Trading Days immediately preceding (1) the applicable
Trigger Date or (2) the date of payment of all amounts due as a result of such
Event of Default, whichever is greater, divided
14
by (B) the Conversion Price with respect to the aggregate principal amount of
Debentures then outstanding calculated on the applicable Trigger Date, minus
(ii) the aggregate principal amount of Debentures then outstanding, plus all
accrued and unpaid interest thereon and all other amounts due, except for those
referred to in (i) above pursuant to the terms hereof.
"Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in New
York City or in the Province of British Columbia, Canada are authorized or
required by law or other government action to close.
"Common Stock" means the Company's common stock, without par
value, of the Company and stock of any other class into which such shares may
hereafter have been reclassified or changed.
"Original Issue Date" shall mean the date of the first
issuance of any Debentures regardless of the number of transfers of any
Debenture and regardless of the number of instruments which may be issued to
evidence such Debenture.
"Per Share Market Value" means on any particular date (a) the
closing bid price per share of the Common Stock on such date on the American
Stock Exchange or other stock exchange or quotation system on which the Common
Stock is then listed or if there is no such price on such date, then the closing
bid price on such exchange or quotation system on the date nearest preceding
such date, or (b) if the Common Stock is not listed then on the American Stock
Exchange or any stock exchange or quotation system, the closing bid price for a
share of Common Stock in the over-the-counter market, as reported by the Nasdaq
Stock Market or in the National Quotation Bureau Incorporated or similar
organization or agency succeeding to its functions of reporting prices) at the
close of business on such date, or (c) if the Common Stock is not then reported
by the National Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices), then the average of the "Pink
Sheet" quotes for the relevant conversion period, as determined in good faith by
the Holder, or (d) if the Common Stock is not then publicly traded the fair
market value of a share of Common Stock as determined by an appraiser selected
in good faith by the Holders of a majority in interest of the Debentures;
provided, however, that the Company, after receipt of the determination by such
appraiser, shall have the right to select an additional appraiser, in which
case, the fair market value shall be equal to the average of the determinations
by each such appraiser.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated July 17, 1997, among the Company and the original holders of
Debentures.
15
"Trading Day" means (a) a day on which the Common Stock is
traded on the American Stock Exchange or other stock exchange or market on which
the Common Stock has been listed, or (b) if the Common Stock is not listed on
the Nasdaq SmallCap Market or any stock exchange or market, a day on which the
Common Stock is traded in the over-the-counter market, as reported by the OTC
Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin
Board, a day on which the Common Stock is quoted in the over-the-counter market
as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices).
"Trigger Date" shall mean, (i) with respect to an Event of
Default caused by an event described in Section 3(a), the date the payment of
principal or interest at issue was due, (ii) with respect to an Event of Default
caused by an event described in Section 3(b), the date specified in any other
provision of this Debenture, the Purchase Agreement or the Registration Rights
Agreement that require prepayment of the outstanding principal amount of this
Debenture as a result of an event so contemplated, if not, the date such event
becomes an Event of Default pursuant to Section 3(b), and (iii) with respect to
an Event of Default caused by an event described in Section 3(c), (d), (e) and
(f), the date such event becomes an Event of Default pursuant to such Sections.
"Underlying Shares" means the number of shares of Common Stock
into which the Debentures are convertible in accordance with the terms hereof
and the Purchase Agreement.
Section 7. Except as expressly provided herein, no provision
of this Debenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, and interest on, this
Debenture at the time, place, and rate, and in the coin or currency, herein
prescribed. This Debenture is a direct obligation of the Company. This Debenture
ranks pari passu with all other Debentures now or hereafter issued under the
terms set forth herein. The Company may only voluntarily prepay the outstanding
principal amount on the Debentures in accordance with Section 5 hereof.
Section 8. This Debenture shall not entitle the Holder to any
of the rights of a stockholder of the Company, including without limitation, the
right to vote, to receive dividends and other distributions, or to receive any
notice of, or to attend, meetings of stockholders or any other proceedings of
the Company, unless and to the extent converted into shares of Common Stock in
accordance with the terms hereof.
Section 9. If this Debenture shall be mutilated, lost, stolen
or destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Debenture, or in lieu of
or in substitution for a lost, stolen or destroyed debenture, a new Debenture
for the principal amount of this Debenture so mutilated, lost, stolen or
destroyed but only upon receipt of evidence of such loss, theft or destruction
of such Debenture, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Company.
16
Section 10. This Debenture shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
conflicts of laws thereof.
Section 11. Any waiver by the Company or the Holder of a
breach of any provision of this Debenture shall not operate as or be construed
to be a waiver of any other breach of such provision or of any breach of any
other provision of this Debenture. The failure of the Company or the Holder to
insist upon strict adherence to any term of this Debenture on one or more
occasions shall not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other term of
this Debenture. Any waiver must be in writing.
Section 12. If any provision of this Debenture is invalid,
illegal or unenforceable, the balance of this Debenture shall remain in effect,
and if any provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and circumstances.
Section 13. Whenever any payment or other obligation hereunder
shall be due on a day other than a Business Day, such payment shall be made on
the next succeeding Business Day (or, if such next succeeding Business Day falls
in the next calendar month, the preceding Business Day in the appropriate
calendar month).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE TO FOLLOW]
17
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed by an officer thereunto duly authorized as of the date first
above indicated.
PLC SYSTEMS INC.
By:________________________________
Name:
Title:
Attest:
By:___________________________
Name:
Title:
18
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby elects to convert Debenture No. [ ] into shares of Common
Stock, no par value per share (the "Common Stock"), of PLC Systems Inc. (the
"Company") according to the conditions hereof, as of the date written below. If
shares are to be issued in the name of a person other than undersigned, the
undersigned will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates and opinions as reasonably requested by
the Company in accordance therewith. No fee will be charged to the holder for
any conversion, except for such transfer taxes, if any.
Conversion calculations:
----------------------------------------------------
Date to Effect Conversion
----------------------------------------------------
Principal Amount of Debentures to be Converted
----------------------------------------------------
Number of shares of Common Stock to be Issued
----------------------------------------------------
Applicable Conversion Price
----------------------------------------------------
Signature
----------------------------------------------------
Name
----------------------------------------------------
Address
The Company undertakes to promptly upon its receipt of this conversion notice
(and, in any case prior to the time it effects the conversion requested hereby),
notify the converting holder by facsimile of the number of shares of Common
Stock outstanding on such date and the number of shares of Common Stock which
would be issuable to the holder if the conversion requested in this conversion
notice were effected in full, whereupon, if the Company determines that such
conversion would result in it owning in excess of 4.999% of the outstanding
shares of Common Stock on such date, the Company shall convert up to an amount
equal to 4.999% of the outstanding shares of Common Stock and issue to the
holder one or more certificates representing Debentures which have not been
converted as a result of this provision.
19
EXHIBIT B
PLC SYSTEMS INC.
NOTICE OF CONVERSION
AT THE ELECTION OF THE COMPANY
The undersigned in the name and on behalf of PLC SYSTEMS INC. (the "Company")
hereby notifies the addressee hereof that the Company hereby elects to exercise
its right to convert the above Debenture No. [ ] into shares of Common Stock, no
par value per share (the Common Stock ), of the Company according to the
conditions hereof, as of the date written below. No fee will be charged to the
Holder for any conversion hereunder, except for such transfer taxes, if any,
which may be incurred by the Company if shares are to be issued in the name of a
person other than the person to whom this notice is addressed.
Conversion calculations:
----------------------------------------------------
Date to Effect Conversion
----------------------------------------------------
Principal Amount of Debentures to be Converted
----------------------------------------------------
Number of shares of Common Stock to be Issued
----------------------------------------------------
Applicable Conversion Price
----------------------------------------------------
Signature
----------------------------------------------------
Name:
----------------------------------------------------
Address:
EXHIBIT 10e
NEITHER THIS WARRANT NOR THE SECURITIES INTO WHICH THIS WARRANT IS EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
PLC SYSTEMS INC.
REDEEMABLE WARRANT
------------------
Warrant No. 003 Dated July 17, 1997
PLC Systems Inc., a corporation organized and existing under the laws
of British Columbia, Canada (the "Company"), hereby certifies that, for value
received, HBK Offshore Fund Ltd., or its registered assigns ("Holder"), is
entitled, subject to the terms set forth below, to purchase from the Company up
to a total of 16,250 shares of Common Stock, no par value (the "Common Stock"),
of the Company (each such share, a "Warrant Share" and all such shares, the
"Warrant Shares") at an exercise price equal to $27.81 per share (as adjusted
from time to time as provided in Section 8, the "Exercise Price"), at any time
and from time to time from and after the date hereof and through and including
July 17, 2002 or earlier as provided herein (the "Expiration Date"), and subject
to the following terms and conditions:
1. Registration of Warrant. The Company shall register this Warrant,
upon records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, and the Company shall not be affected by
notice to the contrary.
2. Registration of Transfers and Exchanges.
(a) The Company shall register the transfer of any portion of
this Warrant in the Warrant Register, upon surrender of this Warrant, with the
Form of Assignment attached hereto duly completed and signed, to the Company at
the office specified in or pursuant to Section 3(b). Upon any such registration
or transfer, a new warrant to purchase Common
Stock, in substantially the form of this Warrant (any such new warrant, a "New
Warrant"), evidencing the portion of this Warrant so transferred shall be issued
to the transferee and a New Warrant evidencing the remaining portion of this
Warrant not so transferred, if any, shall be issued to the transferring Holder.
The acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance of such transferee of all of the rights and obligations of a holder
of a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof by
the Holder to the office of the Company specified in or pursuant to Section 3(b)
for one or more New Warrants, evidencing in the aggregate the right to purchase
the number of Warrant Shares which may then be purchased hereunder. Any such New
Warrant will be dated the date of such exchange.
3. Duration, Exercise of Warrants and Redemption.
(a) This Warrant shall be exercisable by the registered Holder
on any business day before 5:30 P.M., New York time, at any time and from time
to time on or after the date hereof to and including the Expiration Date. At
5:30 P.M., New York time on the Expiration Date, the portion of this Warrant not
exercised prior thereto shall be and become void and of no value.
(b) Subject to Sections 2(b), 6 and 10, upon surrender of this
Warrant, with the Form of Election to Purchase attached hereto duly completed
and signed, to the Company at its office at 10 Forge Park, Franklin, MA 02038,
Attention: Chief Financial Officer, or at such other address as the Company may
specify in writing to the then registered Holder, and upon payment of the
Exercise Price multiplied by the number of Warrant Shares that the Holder
intends to purchase hereunder, in lawful money of the United States of America,
in cash or by certified or official bank check or checks, all as specified by
the Holder in the Form of Election to Purchase, the Company shall promptly (but
in no event later than 3 business days after the Date of Exercise (as defined
herein)) issue or cause to be issued and cause to be delivered to or upon the
written order of the Holder and in such name or names as the Holder may
designate, a certificate for the Warrant Shares issuable upon such exercise,
free of restrictive legends other than as required by the Purchase Agreement of
even date herewith between the Holder and the Company. Any person so designated
by the Holder to receive Warrant Shares shall be deemed to have become holder of
record of such Warrant Shares as of the Date of Exercise of this Warrant.
A "Date of Exercise" means the date on which the Company shall
have received (i) this Warrant (or any New Warrant, as applicable), with the
Form of Election to Purchase attached hereto (or attached to such New Warrant)
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Warrant Shares so indicated by the holder hereof to be
purchased.
(c) This Warrant shall be exercisable, either in its entirety
or, from time to time, for a portion of the number of Warrant Shares. If less
than all of the Warrant Shares
2
which may be purchased under this Warrant are exercised at any time, the Company
shall issue or cause to be issued, at its expense, a New Warrant evidencing the
right to purchase the remaining number of Warrant Shares for which no exercise
has been evidenced by this Warrant.
(d) If the average closing sale price of the Common Stock for
any consecutive 30 Trading Day period commencing January 17, 1999 exceeds the
Exercise Price by more than 50%, the Company shall have the right, exercisable
at any time upon 30 days notice to the Holder given at any time after January
17, 1999, to redeem this Warrant at a price of $.10 per Warrant Share. Any
portion of this Warrant not exercised by 5:00 p.m. (New York time) on the 30th
day following such notice (the "Redemption Date") shall be returned to the
Company and the Company shall issue therefor in full and complete satisfaction
of its obligations under such remaining portion to the Holder an amount equal to
the number of shares of Common Stock then issuable hereunder multiplied by $.10
per share (the "Redemption Price"). The Redemption Price shall be payable to the
Holder and shall be mailed to such persons at their address of record, and the
Warrant shall be cancelled. The Holder may exercise this Warrant during the
period from the date of such call notice through the 29th day thereafter.
4. Piggyback Registration Rights. During the term of this Warrant the
Company may not file any registration statement with the Securities and Exchange
Commission (other than registration statements of the Company filed on Form S-8
or Form S-4 including supplements thereto) at any time when there is not an
effective registration statement covering the resale of the Warrant Shares and
naming the Holder as a selling stockholder thereunder, but not additionally
filed registration statements in respect of such securities), each as
promulgated under the Securities Act of 1933, as amended, pursuant to which the
Company is registering securities pursuant to a Company employee benefit plan or
pursuant to a merger, acquisition or similar transaction) unless the Company
provides the Holder with not less than 20 days notice to each of the Holder and
Robinson Silverman Peace Aronsohn & Berman LLP, attention Eric L. Cohen, notice
of its intention to file such registration statement and provides the Holder the
option to include any or all of the applicable Warrant Shares therein. The
piggyback registration rights granted to the Holder pursuant to this Section
shall continue until all of the Holder's Warrant Shares have been sold in
accordance with an effective registration statement or upon the expiration of
this Warrant. The Company will pay all registration expenses in connection
therewith.
5. Payment of Taxes. The Company will pay all documentary stamp taxes
attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of
the Holder, and the Company shall not be required to issue or cause to be issued
or deliver or cause to be delivered the certificates for Warrant Shares unless
or until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid. The Holder shall be
responsible for all other tax
3
liability that may arise as a result of holding or transferring this Warrant or
receiving Warrant Shares upon exercise hereof.
6. Replacement of Warrant. If this Warrant is mutilated, lost, stolen
or destroyed, the Company may in its discretion issue or cause to be issued in
exchange and substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
indemnity, if reasonably satisfactory to it. Applicants for a New Warrant under
such circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as the Company may prescribe.
7. Reservation of Warrant Shares. The Company covenants that it will at
all times reserve and keep available out of the aggregate of its authorized but
unissued Common Stock, solely for the purpose of enabling it to issue Warrant
Shares upon exercise of this Warrant as herein provided, the number of Warrant
Shares which are then issuable and deliverable upon the exercise of this entire
Warrant, free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holders (taking into account the adjustments
and restrictions of Section 8). The Company covenants that all Warrant Shares
that shall be so issuable and deliverable shall, upon issuance and the payment
of the applicable Exercise Price in accordance with the terms hereof, be duly
and validly authorized, issued and fully paid and nonassessable.
8. Certain Adjustments. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section 8. Upon each such adjustment of the Exercise
Price pursuant to this Section 8, the Holder shall thereafter prior to the
Expiration Date be entitled to purchase, at the Exercise Price resulting from
such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(a) If the Company, at any time while this Warrant is
outstanding, (i) shall pay a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock (as defined below) or on any other
class of capital stock and not the Common Stock) payable in shares of Common
Stock, (ii) subdivide outstanding shares of Common Stock into a larger number of
shares, or (iii) combine outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price shall be multiplied by a fraction of which
the numerator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding before such event and of which the denominator shall
be the number of shares of Common Stock (excluding treasury shares, if any)
outstanding after such event. Any adjustment made pursuant to this Section shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision or
combination, and shall apply to successive subdivisions and combinations.
4
(b) In case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person, the sale or
transfer of all or substantially all of the assets of the Company in which the
consideration therefor is equity or equity equivalent securities or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities or property, then the Holder shall have the right thereafter to
exercise this Warrant only into the shares of stock and other securities and
property receivable upon or deemed to be held by holders of Common Stock
following such reclassification, consolidation, merger, sale, transfer or share
exchange, and the Holder shall be entitled upon such event to receive such
amount of securities or property equal to the amount of Warrant Shares such
Holder would have been entitled to had such Holder exercised this Warrant
immediately prior to such reclassification, consolidation, merger, sale,
transfer or share exchange. The terms of any such consolidation, merger, sale,
transfer or share exchange shall include such terms so as to continue to give to
the Holder the right to receive the securities or property set forth in this
Section 8(b) upon any exercise following any such reclassification,
consolidation, merger, sale, transfer or share exchange.
(c) If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to holders
of this Warrant) evidences of its indebtedness or assets or rights or warrants
to subscribe for or purchase any security (excluding those referred to in
Sections 8(a), (b) and (d)), then in each such case the Exercise Price shall be
determined by multiplying the Exercise Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the Exercise Price
determined as of the record date mentioned above, and of which the numerator
shall be such Exercise Price on such record date less the then fair market value
at such record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined by
a nationally recognized or major regional investment banking firm or firm of
independent certified public accountants of recognized standing (which may be
the firm that regularly examines the financial statements of the Company) (an
"Appraiser") mutually selected in good faith by the holders of a majority in
interest of the Warrants then outstanding and the Company. Any determination
made by the Appraiser shall be final..
(d) If, at any time while this Warrant is outstanding, the
Company shall issue or cause to be issued rights or warrants to acquire or
otherwise sell or distribute shares of Common Stock to all holders of Common
Stock for a consideration per share less than the Exercise Price then in effect,
then, forthwith upon such issue or sale, the Exercise Price shall be reduced to
the price (calculated to the nearest cent) determined by dividing (i) an amount
equal to the sum of (A) the number of shares of Common Stock outstanding
immediately prior to such issue or sale multiplied by the Exercise Price, and
(B) the consideration, if any, received or receivable by the Company upon such
issue or sale by (ii) the total number of shares of Common Stock outstanding
immediately after such issue or sale.
(e) For the purposes of this Section 8, the following clauses
shall also be applicable:
5
(i) Record Date. In case the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them (A)
to receive a dividend or other distribution payable in Common Stock or in
securities convertible or exchangeable into shares of Common Stock, or (B) to
subscribe for or purchase Common Stock or securities convertible or exchangeable
into shares of Common Stock, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(ii) Treasury Shares. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
(f) All calculations under this Section 8 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
If:
(i) the Company shall declare a dividend (or any
other distribution) on its Common Stock; or
(ii) the Company shall declare a special
nonrecurring cash dividend on or a redemption
(other than redemptions of the stock of
employees upon their termination of employment
with the Company in an aggregate amount not to
exceed $1,000,000, calculated by reference to
the market price of the Common Stock at such
time) of its Common Stock; or
(iii) the Company shall authorize the granting to
all holders of the Common Stock rights or
warrants to subscribe for or purchase any
shares of capital stock of any class or of any
rights; or
(iv) the approval of any stockholders of the
Company shall be required in connection with
any reclassification of the Common Stock of
the Company, any consolidation or merger to
which the Company is a party, any sale or
transfer of all or substantially all of the
assets of the Company, or any compulsory share
exchange whereby the Common Stock is converted
into other securities, cash or property; or
6
(v) the Company shall authorize the voluntary
dissolution, liquidation or winding up of the
affairs of the Company,
then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least 30 calendar days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up; provided, however, that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the
corporate action required to be specified in such notice.
9. Fractional Shares. The Company shall not be required to issue or
cause to be issued fractional Warrant Shares on the exercise of this Warrant.
The number of full Warrant Shares which shall be issuable upon the exercise of
this Warrant shall be computed on the basis of the aggregate number of Warrant
Shares purchasable on exercise of this Warrant so presented. If any fraction of
a Warrant Share would, except for the provisions of this Section 9, be issuable
on the exercise of this Warrant, the Company shall, at its option, (i) pay an
amount in cash equal to the Exercise Price multiplied by such fraction or (ii)
round the number of Warrant Shares issuable, up to the next whole number.
10. Notices. Any and all notices or other communications or deliveries
hereunder shall be in writing and shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section prior to 4:30 p.m. (Eastern Standard Time) on a business day, (ii) the
business day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section later than 4:30 p.m. (Eastern Standard Time) on any date and earlier
than 11:59 p.m. (Eastern Standard Time) on such date, (iii) the business day
following the date of mailing, if sent by nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The addresses for such communications shall be: (1) if to
the Company, to PLC Systems Inc., 10 Forge Park, Franklin, MA 02038, Attention:
Chief Financial Officer, or to facsimile no. (508) 541-7990 with a copy to
Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C., One Financial Center, Boston,
MA 02111, Attention: Neil H. Aronson or (ii) if to the Holder, to the Holder at
the address or facsimile number appearing on the Warrant Register or such other
address or facsimile number as the Holder may provide to the Company in
accordance with this Section 10.
11. Warrant Agent.
7
(a) The Company shall serve as warrant agent under this
Warrant. Upon thirty (30) days' notice to the Holder, the Company may appoint a
new warrant agent.
(b) Any corporation into which the Company or any new warrant
agent may be merged or any corporation resulting from any consolidation to which
the Company or any new warrant agent shall be a party or any corporation to
which the Company or any new warrant agent transfers substantially all of its
corporate trust or shareholders services business shall be a successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder's last
address as shown on the Warrant Register.
12. Miscellaneous.
(a) This Warrant shall be binding on and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
This Warrant may be amended only in writing signed by the Company and the
Holder.
(b) Subject to Section 12(a), above, nothing in this Warrant
shall be construed to give to any person or corporation other than the Company
and the Holder any legal or equitable right, remedy or cause under this Warrant;
this Warrant shall be for the sole and exclusive benefit of the Company and the
Holder.
(c) This Warrant shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof.
(d) The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.
(e) In case any one or more of the provisions of this Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
8
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.
PLC SYSTEMS INC.
By:__________________________________
Name:________________________________
Title:_______________________________
9
FORM OF ELECTION O PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To PLC Systems Inc.:
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of Common Stock ("Common Stock"), no par value, of PLC Systems Inc. and
encloses herewith $________ in cash or certified or official bank check or
checks, which sum represents the aggregate Exercise Price (as defined in the
Warrant) for the number of shares of Common Stock to which this Form of Election
to Purchase relates, together with any applicable taxes payable by the
undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common
Stock issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
________________________________
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
_______________________________________________________________________________
If the number of shares of Common Stock issuable upon this exercise
shall not be all of the shares of Common Stock which the undersigned is entitled
to purchase in accordance with the enclosed Warrant, the undersigned requests
that a New Warrant (as defined in the Warrant) evidencing the right to purchase
the shares of Common Stock not issuable pursuant to the exercise evidenced
hereby be issued in the name of and delivered to:
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
_______________________________________________________________________________
Dated:____________,____ Name of Holder:
(Print)____________________________
(By:)______________________________
(Name:)____________________________
(Title:)___________________________
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant)
10
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of PLC Systems Inc. to
which the within Warrant relates and appoints ________________ attorney to
transfer said right on the books of PLC Systems Inc. with full power of
substitution in the premises.
Dated:
_______________, ____
--------------------------------------------------
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
--------------------------------------------------
Address of Transferee
--------------------------------------------------
--------------------------------------------------
In the presence of:
- ----------------------------------
11
EXHIBIT 10f
REGISTRATION RIGHTS AGREEMENT
-----------------------------
This Registration Rights Agreement (this "Agreement") is made and
entered into as of July 17, 1997, among PLC Systems Inc., a corporation
organized and existing under the laws of British Columbia, Canada (the
"Company"), Southbrook International Investments, Ltd., a corporation existing
under the laws of the British Virgin Islands ("Southbrook"), HBK Cayman L.P., a
Cayman Islands exempt limited partnership ("HBK Cayman"), and HBK Offshore Fund
Ltd., a Cayman Islands exempt company ("HBK Offshore"). Southbrook, HBK Cayman
and HBK Offshore are each referred to herein as a "Purchaser" and collectively
as the "Purchasers".
This Agreement is made pursuant to the Convertible Debenture Purchase
Agreement, dated as of the date hereof among the Company and the Purchasers (the
"Purchase Agreement").
The Company and the Purchasers hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein shall
have the meanings given such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"Advice" shall have meaning set forth in Section 3(o).
"Affiliate" means, with respect to any Person, any other
Person that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "control," when
used with respect to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms of "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.
"Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
state of New York generally are authorized or required by law or other
government actions to close.
"Closing Date" shall have the meaning set forth in the
Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, without par
value.
"Debentures" means Tranche 1 and Tranche 2 Convertible
Debentures of the Company issued to the Purchasers pursuant to the Purchase
Agreement.
"Effectiveness Date" means (i) with respect to the
Registration Statement to be filed with respect to the Tranche 1 Debentures, the
90th day following the Tranche 1 Closing Date and (ii) with respect to the
Registration Statement to be filed with respect to the Tranche 2 Debentures, the
90th day following the Tranche 2 Closing Date.
"Effectiveness Period" shall have the meaning set forth in
Section 2(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Filing Date" means (i) with respect to the shares of Common
Stock issuable upon conversion of the Tranche 1 Debentures and exercise of the
Tranche 1 Warrants, the 30th day following the Tranche 1 Closing Date and (ii)
with respect to the shares of Common Stock issuable upon conversion of the
Tranche 2 Debentures and exercise of the Tranche 2 Warrants, the 30th day
following the Tranche 2 Closing Date.
"Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in
Section 5(c).
"Indemnifying Party" shall have the meaning set forth in
Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
2
"Registrable Securities" means (a) with respect to the
Registration Statement to be filed after the Tranche 1 Closing, the shares of
Common Stock issuable upon (i) conversion of the Tranche 1 Debentures, (ii)
exercise of the Tranche 1 Warrants issued by the Company to the Purchasers,
(iii) payment of interest in respect of such Tranche 1 Debentures and (iv) upon
exercise of common stock purchase warrants issued by the Company to Brown
Simpson, LLC, (b) with respect to the Registration Statement to be filed after
the Tranche 2 Closing, the shares of Common Stock issuable upon (i) conversion
of the Tranche 2 Debentures, (ii) exercise of the Tranche 2 Warrants issued by
the Company to the Purchasers and (iv) payment of interest with respect to such
Debentures; provided, however that in order to account for the fact that the
number of shares of Common Stock that are issuable upon conversion of Debentures
is determined in part upon the market price of the Common Stock at the time of
conversion, in the case of each of (a) and (b), Registrable Securities shall
include (but not be limited to) a number of shares of Common Stock equal to no
less than the sum of (1) two times the number of shares of Common Stock into
which the applicable tranche of Debentures are convertible, assuming such
conversion occurred on the particular Closing Date for such tranches of
Debentures, (2) the number of shares of Common Stock issuable on payment of
interest on such Debentures during the period after the applicable Closing Date
and (3) the number of shares of Common Stock issuable upon exercise in full of
the Warrants issued at the applicable Closing Date described herein, or such
other number of shares of Common Stock as agreed to by the parties to the
Purchase Agreement; provided, further that the Company shall not be obligated to
register, (A) in respect of the Tranche 1 Closing, in excess of the sum of (i)
1,000,000 shares of Common Stock issuable upon conversion of Tranche 1
Debentures and to pay interest in respect of the Tranche 1 Debentures in shares
of Common Stock and (ii) 65,000 shares of Common Stock issuable upon exercise of
Tranche 1 Warrants and (B) in respect of the Tranche 2 Closing, in excess of the
sum of (i) 145% of the number of shares of Common Stock issuable upon conversion
in full of the Tranche 2 Debentures and to pay interest in respect of the
Tranche 2 Debentures in shares of Common Stock and (ii) a number of shares of
Common Stock sufficient to permit exercise in full of the Tranche 2 Warrants
(whether such Warrants are issued on the Tranche 2 Closing Date or the Tranche 2
Closing Expiration Date).
"Registration Statement" means the registration statements
contemplated by Section 2(a) (and any additional Registration Statements
contemplated in the definition of Registrable Securities), including (in each
case) the Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference or deemed to be incorporated
by reference in such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
3
"Rule 158" means Rule 158 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 415" means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Counsel" means any special counsel to the Holders,
for which the Holders will be reimbursed by the Company pursuant to Section 4.
"Underwritten Registration or Underwritten Offering" means a
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective registration
statement.
2. Shelf Registration
(a) On or prior to each applicable Filing Date the Company
shall prepare and file with the Commission a "Shelf" Registration Statement
covering all Registrable Securities for an offering to be made on a continuous
basis pursuant to Rule 415. The Registration Statement shall be on Form S-3
(except if otherwise directed by the Holders of a majority in interest of the
applicable Registrable Securities in accordance herewith or if the Company is
not then eligible to register for resale the Registrable Securities on Form S-3,
in which case such registration shall be on another appropriate form in
accordance herewith). The Company shall (i) not permit any securities other than
the Registrable Securities to be included in the Registration Statement and (ii)
use its best efforts to cause the Registration Statement to be declared
effective under the Securities Act as promptly as possible after the filing
thereof, but in any event prior to the Effectiveness Date, and to keep such
Registration Statement continuously effective under the Securities Act until the
date which is two years after the date that such Registration Statement is
declared effective by the Commission or such earlier date when all Registrable
Securities covered by such Registration Statement have been sold or may be sold
without volume restrictions pursuant to Rule 144(k) as determined by the counsel
to the Company pursuant to a written opinion letter, addressed to the Company's
transfer agent to such effect (the "Effectiveness Period"); provided, however,
that the Company shall not be deemed to have used its best efforts to keep the
Registration Statement effective during the Effectiveness Period if it
voluntarily takes any action that would result in the Holders not being able to
sell the Registrable Securities covered by such Registration Statement during
the Effectiveness Period, unless such action is required under applicable law or
the Company has filed a post-effective amendment to the Registration Statement
and the Commission has not declared it effective.
4
(b) If the Holders of a majority of the Registrable Securities
so elect, an offering of Registrable Securities pursuant to the Registration
Statement may be effected on one occasions in the form of an Underwritten
Offering. In such event, and if the managing underwriters advise the Company and
such Holders in writing that in their opinion the amount of Registrable
Securities proposed to be sold in such Underwritten Offering exceeds the amount
of Registrable Securities which can be sold in such Underwritten Offering, there
shall be included in such Underwritten Offering the amount of such Registrable
Securities which in the opinion of such managing underwriters can be sold, and
such amount shall be allocated pro rata among the Holders proposing to sell
Registrable Securities in such Underwritten Offering.
(c) If any of the Registrable Securities are to be sold in an
Underwritten Offering, the investment banker in interest that will administer
the offering will be selected by the Holders of a majority of the Registrable
Securities included in such offering upon consultation with the Company. No
Holder may participate in any Underwritten Offering hereunder unless such Person
(i) agrees to sell its Registrable Securities on the basis provided in any
underwriting agreements approved by the Persons entitled hereunder to approve
such arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such arrangements.
3. Registration Procedures
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Prepare and file with the Commission on or prior to each
applicable Filing Date, a Registration Statement on Form S-3 (or such other form
if directed by the Holders in connection with an Underwritten Offering hereunder
or if the Company is not then eligible to register for resale the Registrable
Securities on Form S-3, in which case such registration shall be on another
appropriate form in accordance herewith) in accordance with the method or
methods of distribution thereof as specified by the Holders (except if otherwise
directed by the Holders), and cause the Registration Statement to become
effective and remain effective as provided herein; provided, however, that not
less than five (5) Business Days prior to the filing of the Registration
Statement or any related Prospectus or any amendment or supplement thereto
(including any document that would be incorporated or deemed to be incorporated
therein by reference), the Company shall (i) furnish to the Holders, their
Special Counsel and any managing underwriters, copies of all such documents
proposed to be filed, which documents (other than those incorporated or deemed
to be incorporated by reference) will be subject to the review of such Holders,
their Special Counsel and such managing underwriters, and (ii) cause its
officers and directors, counsel and independent certified public accountants to
respond to such inquiries as shall be necessary, in the reasonable opinion of
respective counsel to such Holders and such underwriters, to conduct a
reasonable investigation within the meaning of the Securities Act. The Company
shall not file the Registration Statement or any such Prospectus or any
amendments or supplements thereto to which the Holders of a majority of the
Registrable Securities, their Special Counsel, or any
5
managing underwriters, shall reasonably object in writing within three (3)
Business Days of their receipt thereof.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period and prepare and
file with the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable Securities;
(ii) cause the related Prospectus to be amended or supplemented by any required
Prospectus supplement, and as so supplemented or amended to be filed pursuant to
Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; (iii) respond as promptly as practicable to any comments
received from the Commission with respect to the Registration Statement or any
amendment thereto and promptly provide the Holders true and complete copies of
all correspondence from and to the Commission relating to the Registration
Statement; and (iv) comply with the provisions of the Securities Act and the
Exchange Act with respect to the disposition of all Registrable Securities
covered by the Registration Statement during the applicable period in accordance
with the intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold,
their Special Counsel and any managing underwriters immediately (and, in the
case of (i)(A) below, not less than five (5) days prior to such filing) and (if
requested by any such Person) confirm such notice in writing no later than one
(1) Business Day following the day (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment to the Registration Statement is proposed
to be filed; (B) when the Commission notifies the Company whether there will be
a "review" of such Registration Statement and whenever the Commission comments
in writing on such Registration Statement and (C) with respect to the
Registration Statement or any post-effective amendment, when the same has become
effective; (ii) of any request by the Commission or any other Federal or state
governmental authority for amendments or supplements to the Registration
Statement or Prospectus or for additional information; (iii) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) if at any time any of the
representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated hereby ceases to be true and
correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material fact
or omit to state
6
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(d) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
the Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(e) If requested by any managing underwriter or the Holders of
a majority in interest of the Registrable Securities to be sold in connection
with an Underwritten Offering, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment to the Registration Statement such
information as such managing underwriters and such Holders reasonably agree
should be included therein and (ii) make all required filings of such Prospectus
supplement or such post-effective amendment as soon as practicable after the
Company has received notification of the matters to be incorporated in such
Prospectus supplement or post-effective amendment; provided, however, that the
Company shall not be required to take any action pursuant to this Section 3(e)
that would, in the opinion of counsel for the Company, violate applicable law or
be materially detrimental to the business prospects of the Company.
(f) Furnish to each Holder, their Special Counsel and any
managing underwriters, without charge, at least one conformed copy of each
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent requested by
such Person (including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the Commission.
(g) Promptly deliver to each Holder, their Special Counsel,
and any underwriters, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request; and the Company
hereby consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders and any underwriters in connection with
the offering and sale of the Registrable Securities covered by such Prospectus
and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities,
use its best efforts to register or qualify or cooperate with the selling
Holders, any underwriters and their Special Counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any Holder or underwriter requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective during the Effectiveness Period
and to do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by a
Registration Statement; provided, however, that the Company shall not be
required to qualify generally to do business in any jurisdiction where it is not
then so
7
qualified or to take any action that would subject it to general service of
process in any such jurisdiction where it is not then so subject or subject the
Company to any material tax in any such jurisdiction where it is not then so
subject.
(i) Cooperate with the Holders and any managing underwriters
to facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold pursuant to a Registration Statement, which
certificates shall be free of all restrictive legends, and to enable such
Registrable Securities to be in such denominations and registered in such names
as any such managing underwriters or Holders may request at least two Business
Days prior to any sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section
3(c)(vi), as promptly as practicable, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(k) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on the American Stock
Exchange and any other securities exchange, quotation system, market or
over-the-counter bulletin board, if any, on which similar securities issued by
the Company are then listed as and when required pursuant to the Purchase
Agreement.
(l) Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in Underwritten
Offerings) and take all such other actions in connection therewith (including
those reasonably requested by any managing underwriters and the Holders of a
majority of the Registrable Securities being sold) in order to expedite or
facilitate the disposition of such Registrable Securities, and whether or not an
underwriting agreement is entered into, (i) make such representations and
warranties to such Holders and such underwriters as are customarily made by
issuers to underwriters in underwritten public offerings, and confirm the same
if and when requested; (ii) in the case of an Underwritten Offering obtain and
deliver copies thereof to the managing underwriters, if any, of opinions of
counsel to the Company and updates thereof addressed to each such underwriter,
in form, scope and substance reasonably satisfactory to any such managing
underwriters covering the matters customarily covered in opinions requested in
Underwritten Offerings and such other matters as may be reasonably requested by
such underwriters; (iii) immediately prior to the effectiveness of the
Registration Statement, and, in the case of an Underwritten Offering, at the
time of delivery of any Registrable Securities sold pursuant thereto, obtain and
deliver copies to the Holders and the managing underwriters, if any, of "cold
comfort" letters and updates thereof from the independent certified public
accountants of the Company (and, if necessary, any other independent certified
public accountants of any subsidiary of the Company or of any business acquired
by the Company for which financial
8
statements and financial data is, or is required to be, included in the
Registration Statement), addressed to each selling Holder and each of the
underwriters, if any, in form and substance as are customary in connection with
Underwritten Offerings; (iv) if an underwriting agreement is entered into, the
same shall contain indemnification provisions and procedures no less favorable
to the selling Holders and the underwriters, if any, than those set forth in
Section 6 (or such other provisions and procedures acceptable to the managing
underwriters, if any, and holders of a majority of Registrable Securities
participating in such Underwritten Offering; and (v) deliver such documents and
certificates as may be reasonably requested by the Holders of a majority of the
Registrable Securities being sold, their Special Counsel and any managing
underwriters to evidence the continued validity of the representations and
warranties made pursuant to clause 3(l)(i) above and to evidence compliance with
any customary conditions contained in the underwriting agreement or other
agreement entered into by the Company.
(m) Make available for inspection by the selling Holders, a
representative of such Holders, an underwriter participating in any disposition
of Registrable Securities, and an attorney or accountant retained by such
selling Holders or underwriters, at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries, and cause the
officers, directors, agents and employees of the Company and its subsidiaries to
supply all information in each case reasonably requested by any such Holder,
representative, underwriter, attorney or accountant in connection with the
Registration Statement; provided, however, that any information that is
determined in good faith by the Company in writing to be of a confidential
nature at the time of delivery of such information shall be kept confidential by
such Persons, unless (i) disclosure of such information is required by court or
administrative order or is necessary to respond to inquiries of regulatory
authorities; (ii) disclosure of such information, in the opinion of counsel to
such Person, is required by law; (iii) such information becomes generally
available to the public other than as a result of a disclosure or failure to
safeguard by such Person; or (iv) such information becomes available to such
Person from a source other than the Company and such source is not known by such
Person to be bound by a confidentiality agreement with the Company.
(n) Comply with all applicable rules and regulations of the
Commission and make generally available to its security holders earning
statements satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 not later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Securities are
sold to underwriters in a firm commitment or best efforts Underwritten Offering
and (ii) if not sold to underwriters in such an offering, commencing on the
first day of the first fiscal quarter of the Company after the effective date of
the Registration Statement, which statement shall cover said 12-month period, or
end shorter periods as is consistent with the requirements of Rule 158.
(o) The Company may require each selling Holder to furnish to
the Company such information regarding the distribution of such Registrable
Securities as is required by law to be disclosed in the Registration Statement
and the Company may exclude
9
from such registration the Registrable Securities of any such Holder who
unreasonably fails to furnish such information within a reasonable time after
receiving such request.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder shall
have the right to require (if such reference to such Holder by name or otherwise
is not required by the Securities Act or any similar Federal statute then in
force) the deletion of the reference to such Holder in any amendment or
supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
The Purchaser covenants and agrees that (i) it will not sell
any Registrable Securities under the Registration Statement until it has
received copies of the Prospectus as then amended or supplemented as
contemplated in Section 3(g) and notice from the Company that such Registration
Statement and any post-effective amendments thereto have become effective as
contemplated by Section 3(c) and (ii) the Purchaser and its officers, directors
or Affiliates, if any, will comply with the prospectus delivery requirements of
the Securities Act as applicable to them in connection with sales of Registrable
Securities pursuant to the Registration Statement.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence of
any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv),
3(c)(v) or 3(c)(vi), such Holder will forthwith discontinue disposition of such
Registrable Securities until such Holder's receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement contemplated by
Section 3(j), or until it is advised in writing (the "Advice") by the Company
that the use of the applicable Prospectus may be resumed, and, in either case,
has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.
If (a) there is material non-public information regarding the
Company which the Board reasonably determines not to be in the Company's best
interest to disclose and which the Company is not otherwise required to
disclose, or (b) there is a significant business opportunity (including but not
limited to the acquisition or disposition of assets (other than in the ordinary
course of business) or any merger, consolidation, tender offer or other similar
transaction) available to the Company which the Board reasonably determines not
to be in the Company's best interest to disclose, then the Company may postpone
or suspend filing or effectiveness of a registration statement for a period not
to exceed 20 consecutive days, provided that the Company may not postpone or
suspend its obligation under this Section for more than 60 days in the aggregate
during any 12 month period; provided, however, that no such postponement of
suspension shall be permitted for consecutive 20 day periods, arising out of the
same set as of facts, circumstances or transactions.
10
4. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall, except as and to the extent
specified in Section 4(b), be borne by the Company whether or not pursuant to an
Underwritten Offering and whether or not the Registration Statement is filed or
becomes effective and whether or not any Registrable Securities are sold
pursuant to the Registration Statement. The fees and expenses referred to in the
foregoing sentence shall include, without limitation, (i) all registration and
filing fees (including, without limitation, fees and expenses (A) with respect
to filings required to be made with The American Stock Exchange and each other
securities exchange or market on which Registrable Securities are required
hereunder to be listed and (B) in compliance with state securities or Blue Sky
laws (including, without limitation, fees and disbursements of counsel for the
Holders in connection with Blue Sky qualifications of the Registrable Securities
and determination of the eligibility of the Registrable Securities for
investment under the laws of such jurisdictions as the managing underwriters, if
any, or the Holders of a majority of Registrable Securities may designate)),
(ii) printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities and of printing prospectuses if the
printing of prospectuses is requested by the managing underwriters, if any, or
by the holders of a majority of the Registrable Securities included in the
Registration Statement), (iii) messenger, telephone and delivery expenses, (iv)
fees and disbursements of counsel for the Company and Special Counsel for the
Holders, in the case of the Special Counsel, to a maximum amount of $5,000, (v)
Securities Act liability insurance, if the Company so desires such insurance,
and (vi) fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement. In addition, the Company shall be responsible for all of its internal
expenses incurred in connection with the consummation of the transactions
contemplated by this Agreement (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expense of any annual audit, the fees and expenses incurred in connection
with the listing of the Registrable Securities on any securities exchange as
required hereunder.
(b) If the Holders require an Underwritten Offering pursuant
to the terms hereof, the Company shall be responsible for all costs, fees and
expenses in connection therewith, except for the fees and disbursements of the
Underwriters (including any underwriting commissions and discounts) and their
legal counsel and accountants (which shall be borne by the Holders). Therefore,
in such circumstances the Holder shall bear the expenses of the fees and
disbursements of any legal counsel or accounting firm retained by the
underwriters in connection with such Underwritten Offering and the costs of any
determination (but not filing) by the underwriters of the eligibility of the
Registrable Securities for investment under the applicable state securities
laws. By way of illustration which is not intended to diminish from the
provisions of Section 4(a), the Holders shall not be responsible for, and the
Company shall be required to pay the fees or disbursements incurred by the
Company (including by its legal counsel and accountants) in connection with, the
preparation and filing of a Registration Statement and related Prospectus for
such offering, the maintenance of such Registration Statement in accordance with
the terms hereof, the listing of
11
the Registrable Securities in accordance with the requirements hereof, and
printing expenses incurred to comply with the requirements hereof.
5. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents (including any underwriters
retained by such Holder in connection with the offer and sale of Registrable
Securities), brokers (including brokers who offer and sell Registrable
Securities as principal as a result of a pledge or any failure to perform under
a margin call of Common Stock), investment advisors and employees of each of
them, each Person who controls any such Holder (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, costs of preparation
and attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising
out of or relating to any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent, but only to the extent, that such untrue
statements or omissions are based solely upon information regarding such Holder
furnished in writing to the Company by or on behalf of such Holder expressly for
use therein, or to the extent that such information relates to such Holder or
such Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto. The Company shall notify the Holders promptly
of the institution, threat or assertion of any Proceeding of which the Company
is aware in connection with the transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally
and not jointly, indemnify and hold harmless the Company, the directors,
officers, agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of or based solely upon any untrue
statement of a material fact contained in the Registration Statement, any
Prospectus, or any form of prospectus, or arising solely out of or based solely
upon any omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading to the extent, but only to the
extent, that such untrue statement or omission is contained in any information
so furnished in writing by such Holder to the Company specifically for inclusion
in the Registration Statement or such Prospectus or to the extent that such
information relates
12
to such Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form of
Prospectus. In no event shall the liability of any selling Holder hereunder be
greater in amount than the dollar amount of the net proceeds received by such
Holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party promptly shall notify the
Person from whom indemnity is sought (the "Indemnifying Party") in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (2) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within 10 Business Days of written notice thereof to the Indemnifying
Party (regardless of whether it is ultimately determined that an Indemnified
Party is not entitled to indemnification hereunder; provided, that the
Indemnifying Party may require such
13
Indemnified Party to undertake to reimburse all such fees and expenses to the
extent it is finally judicially determined that such Indemnified Party is not
entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party because of a failure or
refusal of a governmental authority to enforce such indemnification in
accordance with its terms (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such Indemnifying
Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material fact,
has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set forth
in Section 5(c), any reasonable attorneys' or other reasonable fees or expenses
incurred by such party in connection with any Proceeding to the extent such
party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 5(d), the Purchaser
shall not be required to contribute, in the aggregate, any amount in excess of
the amount by which the proceeds actually received by the Purchaser from the
sale of the Registrable Securities subject to the Proceeding exceeds the amount
of any damages that the Purchaser has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
6. Rule 144
The Company shall file the reports required to be filed by it
under the Securities Act and the Exchange Act in a timely manner and, if at any
time the Company is not required to file such reports, they will, upon the
request of any Holder, make publicly available other information so long as
necessary to permit sales of its securities pursuant to Rule 144. The
14
Company further covenants that it will take such further action as any Holder
may reasonably request, all to the extent required from time to time to enable
such Holder to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144;
provided, however, that the Company shall not be obligated to provide an opinion
to any Holder regarding the sale of Registrable Securities pursuant to
exemptions provided by Rule 144. Upon the request of any Holder, the Company
shall deliver to such Holder a written certification of a duly authorized
officer as to whether it has complied with such requirements.
7. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of
its subsidiaries has, as of the date hereof, nor shall the Company or any of its
subsidiaries, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor any of its subsidiaries has previously entered into any
agreement granting any registration rights with respect to any of its securities
to any Person. Without limiting the generality of the foregoing, without the
written consent of the Holders of a majority of the then outstanding Registrable
Securities, the Company shall not grant to any Person the right to request the
Company to register any securities of the Company under the Securities Act
unless the rights so granted are subject in all respects to the prior rights in
full of the Holders set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement.
(c) No Piggyback on Registrations. Neither the Company nor any
of its security holders (other than the Holders in such capacity pursuant
hereto) may include securities of the Company in the Registration Statement
other than the Registrable Securities, and the Company shall not enter into any
agreement providing any such right to any of its securityholders.
(d) Piggy-Back Registrations. If at any time when there is not
an effective Registration Statement the Company shall determine to prepare and
file with the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act of any of its
equity securities, other than on Form S-4 or Form S-8 (each as promulgated under
the Securities Act) or their then equivalents relating to equity securities to
15
be issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, the Company shall send to each holder of Registrable Securities
written notice of such determination and, if within twenty (20) days after
receipt of such notice, any such holder shall so request in writing, the Company
shall include in such registration statement all or any part of the Registrable
Securities such holder requests to be registered. No right to registration of
Registrable Securities under this Section shall be construed to limit any
registration otherwise required hereunder.
(e) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of at least a majority of the then outstanding Registrable
Securities; provided, however, that, for the purposes of this sentence,
Registrable Securities that are owned, directly or indirectly, by the Company,
or an Affiliate of the Company are not deemed outstanding. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of at least a majority of the Registrable Securities to which such
waiver or consent relates; provided, however, that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance with
the provisions of the immediately preceding sentence.
(f) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 4:30 p.m. (New
York City time) on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in the Purchase Agreement later than 4:30
p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (iii) the Business Day following the date of mailing, if
sent by nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given.
If to the Company: PLC Systems Inc.
10 Forge Park
Franklin, MA 02038
Attn: Chief Executive Officer
Facsimile No.: (508) 541-7990
16
With copies to: Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C.
One Financial Center
Boston, MA 02111
Attn: Neil H. Aronson
Facsimile No.: (617) 542-2241
If to the Southbrook: Southbrook International
Investments, Ltd.
c/o Trippoak Advisors, Inc.
630 Fifth Avenue, Suite 2000
New York, NY 10111
Facsimile No.: (212) 332-3256
Attn: Robert L. Miller
If to HBK Cayman: HBK Cayman L.P.
c/o HBK Investments L.P.
777 Main Street, Suite 2750
Forth Worth, TX 76102
Facsimile No.: (817) 870-6234
Attn: David C. Haley and Michael Reese
If to HBK Offshore: HBK Offshore Fund Ltd.
c/o HBK Investments L.P.
777 Main Street, Suite 2750
Forth Worth, TX 76102
Facsimile No.: (817) 870-6234
Attn: David C. Haley and Michael Reese
With copies in the case of
Southbrook, HBK Cayman, and
HBK Offshore to: Robinson Silverman Pearce
Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Attn: Eric L. Cohen
Fax: (212) 541-4630
If to any other Person who is then the registered Holder:
To the address of such Holder as it appears
in the stock transfer books of the Company
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
17
(g) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder. The Purchaser may assign its rights hereunder in the manner and to
the Persons as permitted under the Purchase Agreement.
(h) Assignment of Registration Rights. The rights of the
Purchaser hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall be
automatically assignable by the Purchasers to any assignee or transferee of all
or a portion of the Debentures, the Warrants or the Registrable Securities if:
(i) the Purchaser agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to such registration rights are being transferred or assigned, (iii)
following such transfer or assignment the further disposition of such securities
by the transferee or assignees restricted under the Securities Act and
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this Section, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions of this Agreement, and (v) such transfer shall have been made in
accordance with the applicable requirements of the Purchase Agreement. The
rights to assignment shall apply to the Purchaser's (and to subsequent)
successors and assigns.
(i) Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(j) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflicts of law.
(k) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(l) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by
18
such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(m) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(n) Shares Held by The Company and its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than the Purchaser or transferees or successors or assigns
thereof if such Persons are deemed to be Affiliates solely by reason of their
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE TO FOLLOW]
19
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
PLC SYSTEMS INC.
By:________________________
Name:
Title:
SOUTHBROOK INTERNATIONAL INVESTMENTS, LTD.
By:________________________
Name:
Title:
HBK CAYMAN L.P.
By:________________________
Name:
Title:
HBK OFFSHORE FUND LTD.
By:________________________
Name:
Title:
20
EXHIBIT 11
PLC SYSTEMS INC.
CALCULATION OF NET INCOME (LOSS) PER SHARE
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Weighted average number of
common shares outstanding 16,632 16,441 16,021 16,246
Common stock equivalents (1) -- -- -- 968
-------- -------- -------- --------
Shares used to compute net
income (loss) per share 16,632 16,441 16,021 17,214
Net income (loss) $ (2,697) $ (903) $ (5,719) $ 374
Net income (loss) per share $ (0.16) $ (0.05) $ (0.36) $ 0.02
</TABLE>
(1) The net loss per share is calculated using the weighted average number of
shares outstanding during the period and does not include common stock
equivalents as their inclusion would be antidilutive.
<TABLE> <S> <C>
<ARTICLE>5
<S><C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<CASH> 1,680,000
<SECURITIES> 0
<RECEIVABLES> 3,862,000
<ALLOWANCES> (76,000)
<INVENTORY> 3,052,000
<CURRENT-ASSETS> 9,107,000
<PP&E> 8,333,000
<DEPRECIATION> (3,180,000)
<TOTAL-ASSETS> 14,931,000
<CURRENT-LIABILITIES> 3,717,000
<BONDS> 0
0
0
<COMMON> 54,639,000
<OTHER-SE> (43,446,000)
<TOTAL-LIABILITY-AND-EQUITY> 14,931,000
<SALES> 2,525,000
<TOTAL-REVENUES> 3,422,000
<CGS> 1,470,000
<TOTAL-COSTS> 4,664,000
<OTHER-EXPENSES> (27,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (42,000)
<INCOME-PRETAX> (2,697,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,697,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,697,000)
<EPS-PRIMARY> (.16)
<EPS-DILUTED> (.16)
</TABLE>
