As filed with the Securities and Exchange Commission on June 19, 1998
Registration No._______________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
PALOMAR MEDICAL TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
04-3128178
(I.R.S. employer identification number)
45 Hartwell Avenue, Lexington, Massachusetts 02421-3102 (781) 676-7300
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Sarah Burgess Reed
General Counsel
Palomar Medical Technologies, Inc.
45 Hartwell Avenue
Lexington, Massachusetts 02421-3102
(781) 676-7300
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Approximate date of commencement of proposed sale to the public: from time
to time after the effective date of this Registration Statement as determined by
market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
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If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
______________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ______________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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- -------------------------------- ------------------- --------------------- ------------------- -------------------------------
Title of Shares Amount to be Proposed Proposed
to be Registered Registered Maximum Maximum Amount of Registration
Offering Price Aggregate Fee
Per Share Offering Price
- -------------------------------- ------------------- --------------------- ------------------- -------------------------------
- -------------------------------- ------------------- --------------------- ------------------- -------------------------------
Common Stock, par value $.01 7,735,000(1) $2.94(2) $22,740,900(2) $6,891(2)
per share.
- -------------------------------- ------------------- --------------------- ------------------- -------------------------------
Common Stock, par value $.01 7,317,000(1) $1.11(2) $8,121,870(2) $2,461(2)
per share.
- -------------------------------- ------------------- --------------------- ------------------- -------------------------------
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(1) Consists of (i) 7,200,000 shares of common stock issued pursuant to a
Securities Purchase Agreement dated February 20, 1998, (ii) 7,735,000
shares of common stock issuable pursuant to certain common stock purchase
warrants, (iii) 100,000 shares of common stock issued in connection with
advisory services (iv) 15,000 shares of common stock issued in connection
with investor relations services and (v) 2,000 shares of common stock
issued to an individual pursuant to a Settlement Agreement dated March 4,
1998.
(2) Estimated solely for purposes of calculation of the fee. The actual number
of shares of common stock issuable upon conversion of the foregoing may be
more or less than such estimate based on a variety of factors, including
the date of conversion and the price of the common stock on such date. The
fee for the warrants is estimated pursuant to Rule 457(g) under the Act on
the basis of the weighted average exercise price. The fee for the common
stock is estimated pursuant to Rule 457(c) under the Act on the basis of
the average of the high and low sale prices reported on the Nasdaq SmallCap
Market on June 16, 1998.
Pursuant to Rule 416, there are also registered hereby such additional
indeterminate number of shares of such common stock as may become issuable or to
prevent dilution resulting from stock splits, stock dividends or similar
transactions as set forth in the terms of the warrants referred to above.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
SUBJECT TO COMPLETION DATED June 19, 1998
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PROSPECTUS
PALOMAR MEDICAL TECHNOLOGIES, INC.
15,052,000 shares of common stock
consisting of:
(i) 7,200,000 shares of common stock issued pursuant to a Securities
Purchase Agreement dated February 20, 1998,
(ii) 7,735,000 shares of common stock issuable
pursuant to certain common stock purchase warrants,
(iii)100,000 shares of common stock issued in connection with advisory services,
(iv) 15,000 shares of common stock issued in connection with investor
relations services and
(v) 2,000 shares of common stock issued to an individual pursuant to a
Settlement Agreement dated March 4, 1998.
This Prospectus relates to 15,052,000 shares of common stock, $.01 par
value, (the "Shares") of Palomar Medical Technologies, Inc. (the "Company", the
"Registrant" or "Palomar") consisting of: (i) 7,200,000 shares of common stock
issued pursuant to a Securities Purchase Agreement dated February 20, 1998, (ii)
7,735,000 shares of common stock issuable pursuant to certain common stock
purchase warrants, (iii) 100,000 shares of common stock issued in connection
with advisory services (iv) 15,000 shares of common stock issued in connection
with investor relations services and (v) 2,000 shares of common stock issued to
an individual pursuant to a Settlement Agreement dated March 4, 1998, all of
which are exercisable as described in the Selling Stockholders and Plan of
Distribution sections of the Prospectus. All shares to be registered hereby are
to be offered by the selling stockholders listed herein (the "Selling
Stockholders") and the Company will receive no proceeds from the sale of such
shares. The Company has agreed to indemnify the Selling Stockholders against
certain liabilities, including certain liabilities under the Securities Act of
1933, as amended (the "Securities Act"), or to contribute to payments which such
Selling Stockholders may be required to make in respect thereof. See "Plan of
Distribution".
The Company's common stock, par value $.01 per share, is listed on the
National Association of Securities Dealers Automated Quotation System ("Nasdaq")
and traded on the Nasdaq SmallCap Market. The last reported bid price of the
common stock on the Nasdaq SmallCap Market on June 18 was $1.09375 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" AT PAGES 6 THROUGH 14.
It is anticipated that usual and customary brokerage fees will be paid by
the Selling Stockholders on the sale of the Common Stock registered hereby. The
Company will pay the other expenses of this offering. See "Plan of
Distribution". The offer of shares of Common Stock by the Selling Stockholders
as described in this Prospectus is referred to as the "Offering".
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- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Price to Public Underwriting Discounts and Proceeds to Issuer or
Commissions Other Persons
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
Per Unit..................... $1.09375(1) 0(2) $1.09375(1)(3)
Total......................... $16,463,125(1) 0(2) $16,463,125(1)(3)
- ----------------------------- ----------------------------- ---------------------------- ----------------------------
</TABLE>
(1) Based on the closing bid price of the Company's common stock as reported on
the Nasdaq SmallCap Market on June 18, 1998.
(2) None, to the Company's knowledge.
(3) Less usual and customary brokerage fees.
The date of this Prospectus is ______________.
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No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus in connection with the offer
contained in this Prospectus, and, if given or made, such other information or
representations must not be relied upon as having been authorized by the Company
or the Selling Stockholders. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that there has been no change in the affairs of the Company since the date
hereof.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, Room 1024 and at the public
reference facilities maintained by the Commission on the 14th Floor, 75 Park
Place, New York, New York 10007; Suite 1400, Northwestern Atrium Center, 500
West Madison Street, Chicago, Illinois 60661; and Suite 500 East, Securities and
Exchange Commission Building, 5757 Wilshire Boulevard, Los Angeles, California
90036. Copies can be obtained from the Commission at prescribed rates by writing
to the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Such
reports, proxy statements and similar information can also be inspected and
copied at the National Association of Securities Dealers, 1735 K Street, N.W.,
Washington, DC 20006-1500. In addition, the Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically, including the Company. The
Commission's Web site address is http://www.sec.gov. This prospectus, which
constitutes part of a Registration Statement filed by the Company with the
Commission under the Securities Act omits certain of the information contained
in the Registration Statement in accordance with the rules and regulations of
the Commission. Reference is hereby made to the Registration Statement and to
the Exhibits relating thereto for further information with respect to the
Company and the Securities offered hereby. Any statements contained herein
concerning the provisions of any document are not necessarily complete, and, in
each instance, reference is made to the copy of such documents filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for its fiscal year ended December
31, 1997, the Company's Quarterly Report on Form 10-Q for its quarter ending
March 31, 1998 filed May 15, 1998; the Company's Form 8-K filed with the
Commission on June 3, 1998, the Company's Form 8-K filed with the Commission on
December 23, 1997, and the description of the Company's common stock contained
in its Registration statement on Form 8-A filed with the Commission on June 6,
1992, as amended by Form 8 on December 17, 1992, all of which have been
previously filed with the Commission, are incorporated in this Prospectus by
reference. All documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date hereof and prior to the
termination of the offering made hereby are also incorporated by reference
herein and made a part hereof from the date of filing of such documents. Any
statement contained in a document incorporated by reference herein is modified
or superseded for all purposes to the extent that a statement contained in this
Prospectus or in any other subsequently filed document which is incorporated by
reference modifies or replaces such statement. The Company will provide without
charge to each person, including any beneficial owner, to whom a copy of this
Prospectus is delivered, upon the written or oral request of such person, a copy
of all documents incorporated herein by reference (not including the exhibits to
such documents, unless such exhibits are specifically incorporated by reference
herein). Requests for such copies should be directed to: John J. Ingoldsby,
Palomar Medical Technologies, Inc., 45 Hartwell Avenue, Lexington, Massachusetts
02421-3102; telephone number (781) 676-7300; e-mail address: [email protected].
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PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the more
detailed information appearing elsewhere in this Prospectus or incorporated
herein by reference and the financial statements which are incorporated herein
by reference.
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THE COMPANY ........................................The Company currently has two business segments: cosmetic
dermatological laser products and laser services. The
Company anticipates that it will concentrate its efforts in
the cosmetic dermatological laser segment on hair removal.
In the laser services segment, which is in the
proof-of-concept stage, the Company intends to focus on its
partnership with Columbia/HCA.
RISK FACTORS........................................ The Offering involves substantial risk. See "Risk Factors".
SECURITIES OFFERED.................................. 15,052,000 shares of Company Common Stock, par value $.01
per share. The actual number of shares offered hereby, and
included in the Registration statement of which this
Prospectus is a part, includes such additional shares of
common stock as may be issuable by reason of any stock
split, stock dividend or similar transaction involving the
common stock, in order to prevent dilution, in accordance
with Rule 416 under the Securities Act of 1933.
OFFERING PRICE...................................... All or part of the Shares offered hereby may be sold from
time to time in amounts and on terms to be determined by the
Selling Stockholders at the time of sale.
USE OF PROCEEDS..................................... The Company will receive no part of the proceeds from the
sale of the shares registered pursuant to this Registration
Statement.
SELLING STOCKHOLDERS................................ The Shares being offered hereby are being offered for the
account of the Selling Stockholders specified under the
caption "Selling Stockholders".
NASDAQ TRADING SYMBOL............................... PMTI
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RISK FACTORS
An investment in the Shares offered hereby involves a high degree of risk and
should not be made by persons who cannot afford the loss of their entire
investment. In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company is hereby identifying
important factors that could cause the Company's actual results to differ
materially from those projected in forward-looking statements of the Company
made by or on behalf of the Company. The Company advises readers not to place
undue reliance on such forward-looking statements, which speak only as of the
date hereof, in light of the risks and uncertainties to which they are subject.
The Company undertakes no obligation to release publicly the result of any
revisions to these forward-looking statements that may be made to reflect events
or circumstances after the date hereof or to reflect events or to reflect the
occurrence of unanticipated events. The following factors should be considered
carefully in evaluating the Company and its business. The cautionary statements
below are being made pursuant to the provisions of the Reform Act and with the
intention of obtaining the benefits of safe harbor provisions of the Reform Act.
Substantial Continuing Losses; Doubt About Ability to Continue as a Going
Concern. The Company incurred a net loss from continuing operations of
$58,369,079 for the year ended December 31, 1997 and a net loss from operations
of $6,838,682 for the quarter ended March 31, 1998. The Company expects to incur
losses for the near term and through the third quarter of 1998. However, there
can be no assurance that the Company will achieve profitable operations or that
profitable operations will be sustained if achieved. At December 31, 1997, the
Company's stockholders' deficit and working capital deficit was $6,183,687 and
$9,138,975, respectively; at March 31, 1998, the Company's stockholders' deficit
and working capital deficit was $5,023,695 and $7,993,042, respectively. The
Company's Star Medical Technologies, Inc ("Star"), Palomar Medical Products,
Inc. ("PMP") and Cosmetic Technologies International, Inc. ("CTI") subsidiaries
each have had a history of losses. As a result, the report of the Company's
independent public accountants in connection with the Company's Consolidated
Balance Sheets at December 31, 1997 and 1996, and the related Consolidated
Statements of Operations, Stockholders' Equity (Deficit) and Cash Flows for the
three years ended December 31, 1997 includes an explanatory paragraph stating
that the Company's recurring losses, working capital deficiency and
stockholders' deficit raises substantial doubts about the Company's ability to
continue as a going concern. The Company must continue to secure additional
financing to complete its research and development activities, commercialize its
current and proposed cosmetic laser products, and fund ongoing operations. The
Company anticipates that it will require substantial additional financing during
the next twelve-month period. The Company believes that the cash generated to
date from its financing activities, continued sale of assets and the Company's
ability to raise cash in future financing activities will be sufficient to
satisfy its working capital requirements through the next twelve-month period.
The Company bases its belief that it has the ability to raise cash in future
financings on its demonstrated historical ability to raise money and its ongoing
preliminary discussions with financing sources. However, there can be no
assurance that this assumption will prove to be accurate or that events in the
future will not require the Company to obtain additional financing sooner than
presently anticipated. The Company may also determine, depending upon the
opportunities available to it, to seek additional debt or equity financing to
fund the costs of acquisitions or expansion. To the extent that the Company
finances an acquisition with a combination of cash and equity securities, any
such issuance of equity securities could result in dilution to the interests of
the Company's shareholders. Additionally, to the extent that the Company incurs
indebtedness to fund increased levels of accounts receivable or to finance the
acquisition of capital equipment or issues debt securities in connection with
any acquisition, the Company will be subject to risks associated with incurring
substantial additional indebtedness, including the risks that interest rates may
fluctuate and cash flow may be insufficient to pay principal and interest on any
such indebtedness. The Company continues to investigate several financing
alternatives, including strategic partnerships, additional bank financing,
private, debt and equity financing and other sources, including the liquidation
of its marketable securities. While the Company regularly reviews potential
funding sources in relation to its ongoing and proposed projects, there can be
no assurance that the current levels of funding or additional funding will be
available, or if available will be on terms satisfactory to the Company. Failure
to obtain additional financing could have a material adverse effect on the
Company, including requiring it to significantly curtail its operations. (See
March 31, 1998 Form 10-Q "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and Notes 7 and 8 to Financial Statements;
December 31, 1997 Form 10-K Item 1. "Description of Business - Financing of
Operations and Increase in Outstanding Shares," and Notes 1, 6 and 7 to
Financial Statements.)
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Dependence on New Relationship With Coherent. The Company has entered into
a Sales Agency, Development and License Agreement with Coherent (the
"Agreement") pursuant to which Coherent serves as exclusive distributor for the
Company's laser based hair removal systems. As a result, the Company no longer
has its own sales force. Coherent receives a marketing and sales commission,
based on the end-user price, for each Palomar laser it sells. There can be no
assurance that Coherent will be successful in distributing the Company's hair
removal lasers or that it will give sufficient priority to marketing the
Company's products. In addition, Coherent may develop, market and manufacture
its own lasers that incorporate the Company's proprietary technology and compete
with the Company's lasers, in which case it must pay the Company a royalty on
such sales. If Coherent proves unable to sell Palomar's hair removal lasers in
the volume anticipated, it could have a material adverse effect on the Company's
business, financial condition and results of operations. Pursuant to the
Agreement, if Palomar is unable (as defined) or unwilling to manufacture the
cosmetic laser products to be distributed by Coherent, then Palomar will license
to Coherent the technology necessary to make such products. The initial term of
the Agreement is for three years, commencing on November 17, 1997. At the end of
each year, the Agreement automatically renews for another year, unless either
party provides written notice of its nonrenewal 30 days prior to the renewal
date. In the Agreement, the Company has agreed to upgrade all its EpiLaser(R)
laser systems sold prior to the date of the Agreement. The unanticipated loss of
Coherent as a distributor, any significant reduction in orders from Coherent,
the introduction by Coherent of competitive products, and unanticipated costly
product upgrades would have a material adverse effect on the Company's business,
financial condition and results of operations. (See December 31, 1997 Form 10-K
Notes 3(i) and 12(e) to Financial Statements.)
Dependence on New Products. The Company expects that a significant portion
of future revenue will continue to be derived from sales of newly introduced
products. The Company must continue to make significant investments in research
and development in order to continue to develop new products, enhance existing
products and achieve market acceptance for such products. However, there can be
no assurance that development stage products will be successfully completed or,
if developed, will achieve significant customer acceptance. If the Company were
unable to successfully define, develop and introduce competitive new products,
and enhance its existing products, its future results of operations would be
adversely affected. Development and manufacturing schedules for technology
products are difficult to predict, and there can be no assurance that the
Company will achieve timely initial customer shipments of new products. The
timely availability of these products in volume and their acceptance by
customers are important to the future success of the Company. Delays, whether
due to manufacturing delays, lack of market acceptance, delays in regulatory
approval, or otherwise, could have a material adverse effect on the Company's
results of operations. From time to time, the Company or its competitors may
announce new products, capabilities or technologies that have the potential to
replace or shorten life cycles of the Company's existing products. No assurance
can be given that announcements of currently planned or other new products will
not cause customers to defer purchasing existing Company products. To the extent
that new products are not developed in a timely manner, do not achieve customer
acceptance or do not generate higher sales prices and margins than existing
products, the Company's business, financial condition and results of operations
could be materially adversely affected.
Dependence on Developing Market; Product Concentration. The market for
laser hair removal is new and rapidly evolving. The Company currently derives
substantially all of its revenues from its laser hair removal products and
expects that revenues from these products will continue to account for
substantially all of its revenues in the foreseeable future. Broad market
acceptance of laser hair removal and, in particular, the Company's EpiLaser(R)
and LightSheer(TM) laser hair removal systems is critical to the Company's
future success.
Holding Company Structure. The Company has no significant operations other
than that incidental to its ownership of the capital stock of its subsidiaries.
As a holding company, the Company is dependent on dividends or other
intercompany transfers of funds from its subsidiaries to meet the Company's debt
service and other obligations. Claims of creditors of the Company's
subsidiaries, including trade creditors, will generally have priority as to the
assets of such subsidiaries over the claims of the Company and the holders of
the Company's indebtedness.
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Limited Operating History. The Company's subsidiaries have limited
operating histories and are in the development stage, and the Company is subject
to all of the risks inherent in the establishment of a new business enterprise.
The likelihood of success of the Company must be considered in light of the
problems, expenses, difficulties, complications and delays frequently
encountered in connection with the establishment of a new business and
development of new technologies in the cosmetic laser products industry. These
include, but are not limited to, government regulation, competition, the need to
expand manufacturing capabilities and market expertise, and setbacks in
production, product development, market acceptance and sales and marketing. (See
December 31, 1997 Form 10-K Item 1. "Description of Business.")
New Ventures. The Company's CTI subsidiary has entered into agreements with
healthcare providers to provide cosmetic laser services at laser treatment
centers and plans to enter into more such agreements in the future. While the
Company believes these new partnerships are strategically important, there are
substantial uncertainties associated with the development of new products,
technologies and services for evolving markets. The success of these ventures
will be determined not only by the Company's efforts, but also by those of its
partners. Initial timetables for the development and introduction of new
technologies, products or services may not be achieved, and price/performance
targets may not prove feasible. External factors, such as the development of
competitive alternatives or government regulation, may cause new markets to
evolve in unanticipated directions. (See "- Highly Competitive Industries," and
December 31, 1997 Form 10-K Item 1. "Description of Business - Cosmetic Laser
Services.")
Investments in Unrelated Businesses. The Company has investments in
marketable securities (consisting principally of Nexar Technology Inc. ("Nexar")
and The American Materials and Technologies, Inc. ("AMTK") common stock). The
Company's carrying value of these investments as of March 31, 1998 totals
approximately $4.3 million. During April 1998, the Company sold a portion of its
AMTK common stock for $1.4 million. In addition, in June of 1998, the Company
sold 300,000 shares of Nexar common stock in a series of transactions for an
aggregate amount of approximately $300,000. The Company's current market value
of these investments totals approximately $3.3 million. The amount that the
Company may ultimately realize from these investments could differ materially
from the value of these investments recorded in the Company's financial
statements, and the ultimate disposition of these investments could result in a
loss to the Company. (See March 31, 1998 Form 10-Q Note 2 to Financial
Statements and December 31, 1997 Form 10-K "Management's Discussion and Analysis
of Financial Condition and Results of Operations," and Notes 2 and 3(b) and (c)
to Financial Statements.)
Highly Competitive Industries. The cosmetic laser industry is highly
competitive and is characterized by the frequent introduction of new products.
The Company competes in the development, manufacture, marketing and servicing of
cosmetic laser products with numerous other companies, certain of which have
substantially greater financial, marketing and other resources than the Company.
In addition, the Company's cosmetic laser products face competition from
alternative medical products and procedures, such as electrolysis and waxing,
among others. There can be no assurance that the Company will be able to
differentiate its products from the products of its competitors or that the
marketplace will consider the Company's products to be superior to competing
products or medical procedures. There can be no assurance that competitors will
not develop products or that new technologies will not be developed that render
the Company's products obsolete or less competitive. (See "- Technological
Obsolescence.") In addition, in entering areas of business in which it has
little or no experience, such as the opening of laser treatment centers, the
Company may not be able to compete successfully with competitors that are more
established in such areas. (See "- New Ventures," and December 31, 1997 Form
10-K Item 1. "Description of Business - Cosmetic Laser Services.")
Fluctuations in Quarterly Performance. The Company's results of operations
have fluctuated substantially and can be expected to continue to vary
significantly. The Company's quarterly operating results depend on a number of
factors, including the timing of the introduction or acceptance of new products
offered by the Company or its competitors, changes in the mix of products sold
by the Company, changes in regulations affecting the cosmetic laser products
industry, changes in the Company's operating expenses, personnel changes and
general economic conditions.
Volatility of Share Price. Factors such as announcements of developments
related to the Company's business, announcements by competitors, quarterly
fluctuations in the Company's financial results and other factors have caused
the price of the Company's stock to fluctuate, in some cases substantially, and
could continue to do so in the future. If revenues or earnings in any quarter
fail to meet the investment community's expectations, there could be an
immediate impact on the price of the Company's common stock. In addition, the
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stock market has experienced extreme price and volume fluctuations that have
particularly affected the market price for many technology companies and that
have often been unrelated to the operating performance of these companies. These
broad market fluctuations may adversely affect the market price of the Company's
common stock.
Government Regulation. The Company's laser product business segment is
subject to regulation in the United States and abroad. Failure to comply with
applicable regulatory requirements can result in fines, denial or suspension of
approvals, seizures or recall of products, operating restrictions and criminal
prosecutions, any or all of which could have a material adverse effect on the
Company. Furthermore, changes in existing regulations or adoption of new
regulations could prevent the Company from obtaining, or could affect the timing
of, future regulatory approvals. (See December 31, 1997 Form 10-K Item 1.
"Description of Business - Impact of Medical Device Regulations.")
All laser medical devices, including those sold by the Company, are subject
to regulation by the FDA under the Medical Device Amendments of the United
States Food, Drug and Cosmetics Act of 1976, as amended (the "FDA Act"),
pursuant to which the FDA regulates the clinical testing, manufacture, labeling,
sale, distribution and promotion of medical devices. Before a new device can be
introduced into the market, the manufacturer must obtain market clearance
through either the 510(k) premarket notification process or the lengthier
premarket approval ("PMA") application process. Compliance with this process is
expensive and time-consuming. Three of the Company's lasers have received
clearance from the FDA through the 510(k) process for certain dermatological
applications: the Q-switched RD-1200(TM) ruby laser for tattoo removal, the
StarLight(TM) diode laser for hair and leg vein removal and the EpiLaser(R) hair
removal laser. The Company is also investigating other applications in
dermatology for its laser systems. It will be required to obtain FDA clearance
before commercially marketing any other application. The Company believes that
it will be able to seek such clearance under the 510(k) application process;
however, no assurance can be given that the FDA will not require the Company to
follow the more extensive and time-consuming PMA process. FDA review of a 510(k)
application currently averages about seven to twelve months and requires limited
clinical data based on substantial equivalence to a product marketed prior to
1976, while a PMA review can last for several years and require substantially
more clinical data. There can be no assurance that the appropriate clearances
from the FDA will be granted, that the process to obtain such clearances will
not be excessively expensive or lengthy or that the Company will have sufficient
funds to pursue such clearances. The Company's business, financial condition and
operations are, and will continue to be, critically dependent upon timely
receipt of FDA clearance for its current and proposed cosmetic laser products.
Delays or failure to obtain such approval would have a material adverse effect
on the Company.
The FDA also imposes various requirements on manufacturers and sellers of
products under its jurisdiction, such as labeling, good manufacturing practices,
record keeping and reporting requirements. The FDA may require postmarket
testing and surveillance programs to monitor a product's effects. The Company is
subject to the laser radiation safety regulations of the FDA Act administered by
the National Center for Devices and Radiological Health ("CDRH") of the FDA.
These regulations require a laser manufacturer to file new product and annual
reports, to maintain quality control, product testing and sales records, to
distribute appropriate operation manuals, to incorporate certain design and
operating features in lasers sold to end-users and to certify and label each
laser sold to end-users as one of four classes of lasers (based on the level of
radiation from the laser). In addition, various warning labels must be affixed
on the product and certain protective devices must be installed depending upon
the class of product. Under the Act, the Company is also required to register
with the FDA as a medical device manufacturer and is subject to inspection on a
routine basis by the FDA for compliance with Quality Systems Regulations
("QSR"). QSR impose certain procedural and documentation requirements upon the
Company relevant to its manufacturing, testing and quality control activities.
Noncompliance with applicable FDA regulations, including QSR, can result in,
among other things, fines, injunctions, civil penalties, recall or seizure of
products, total or partial suspension of production, failure of the government
to grant premarket clearance or premarket approval for devices, withdrawal of
marketing approvals and criminal prosecution. The FDA also has the authority to
request repair, replacement or refund of the cost of any medical device
manufactured or distributed by the Company. The Company believes that it is
currently in compliance with these regulations.
9
<PAGE>
In order to be sold outside the United States, the Company's products are
subject to FDA permit requirements that are conditioned upon clearance by the
importing country's appropriate regulatory authorities. Many countries also
require that imported products comply with their own or international electrical
and safety standards. Additional approvals may be required in other countries.
The Company's EpiLaser(R) laser system has received the CE Mark pursuant to the
European Medical Device Directive which allows that laser to be sold in all
countries that recognize the CE Mark, including the countries that comprise the
European Community. The Company has not yet received international approval for
its diode laser for use in cosmetic surgery and dermatology.
Uncertainty of Market Acceptance. The Company continually develops new
products intended for use in the cosmetic laser market. As with any new
products, there is substantial risk that the marketplace may not accept or be
receptive to the potential benefits of such products. Market acceptance of the
Company's current and proposed products will depend, in large part, upon the
ability of the Company or any marketing partners to demonstrate to the
marketplace the advantages of the Company's products over other types of
products. There can be no assurance that the marketplace will accept
applications or uses for the Company's current and proposed products or that any
of the Company's current or proposed products will be able to compete
effectively. (See December 31, 1997 Form 10-K Item 1. "Description of Business -
Competition.")
Uncertainty of Healthcare Reimbursement and Reform. The healthcare industry
is subject to changing political, economic and regulatory influences that may
affect the procurement practices and operations of healthcare industry
participants. During the past several years, state and federal government
regulation of reimbursement rates and capital expenditures in the United States
healthcare industry has increased. Lawmakers continue to propose programs to
reform the United States healthcare system, which may contain programs to
increase governmental involvement in healthcare, lower Medicare and Medicaid
reimbursement rates or otherwise change the operating environment for the
Company's customers. Healthcare industry participants may react to these
proposals by curtailing or deferring investments, including investments in the
Company's products.
Dependence on Third Party Researchers. The Company is substantially
dependent upon third party researchers and others, over which the Company will
not have absolute control, to satisfactorily conduct and complete research on
behalf of the Company and to grant to the Company favorable licensing terms for
products which may be developed. The Company has entered into research
agreements with recognized research hospitals and clinical laboratories. At
present, the Company's principal research partner is the Wellman Labs at MGH.
The Company provides research funding, laser technology and optics know-how in
return for licensing agreements with respect to specific medical applications
and patents. Management believes that this method of conducting research and
development provides a higher level of technical and clinical expertise than it
could provide on its own and in a more cost efficient manner. The Company's
success will be highly dependent upon the results of the research, and there can
be no assurance that such research agreements will provide the Company with
marketable products in the future or that any of the products developed under
these agreements will be profitable for the Company. (See December 31, 1997 Form
10-K Item 1. "Description of Business - Research and Development" and Note 8 to
Financial Statements.)
Technological Obsolescence. The markets for the Company's products are
characterized by rapid and significant technological change, evolving industry
standards and frequent new product introductions and enhancements. Many of the
Company's products and products under development are technologically
innovative, and require significant planning, design, development and testing at
the technological, product and manufacturing process levels. These activities
require significant capital commitments and investment by the Company. The
Company's failure to develop products in a timely manner in response to changes
in the industry, whether for financial, technological or other reasons, will
have a material adverse effect on the Company's business, financial condition
and results of operations. (See December 31, 1997 Form 10-K Item 1. "Description
of Business.")
Patents/Possible Patent Infringements. The Company currently holds several
patents and intends to pursue various additional avenues that it deems
appropriate to protect its technology. There can be no assurance, however, that
the Company will file any additional patent applications or that any patent
applications that have been, or may be, filed will result in issued patents, or
that any patent, patent application, know-how, license or cross-license will
afford any protection or benefit to the Company. (See Item 1. "Description of
Business - Patents and Licenses.")
10
<PAGE>
The laser industry is characterized by frequent litigation regarding patent
and other intellectual property rights. Because patent applications are
maintained in secrecy in the United States until such patents are issued and are
maintained in secrecy for a period of time outside the United States, the
Company can conduct only limited searches to determine whether its technology
infringes any patents or patent applications. Any claims for patent infringement
could be time-consuming, result in costly litigation, diversion of technical and
management personnel, cause shipment delays, require the Company to develop
noninfringing technology or to enter into royalty or licensing agreements.
Although patent and intellectual property disputes in the laser industry have
often been settled through licensing or similar arrangements, costs associated
with such arrangements may be substantial and often require the payment of
ongoing royalties, which could have a negative impact on gross margins. There
can be no assurance that necessary licenses would be available to the Company on
satisfactory terms, or that the Company could redesign its products or processes
to avoid infringement, if necessary. Accordingly, an adverse determination in a
judicial or administrative proceeding or failure to obtain necessary licenses
could prevent the Company from manufacturing and selling some of its products.
This could have a material adverse effect on the Company's business, results of
operations and financial condition. Conversely, costly and time consuming
litigation may be necessary to enforce patents issued to the Company, to protect
trade secrets or know-how owned by the Company or to determine the
enforceability, scope and validity of the proprietary rights of others.
The Company is aware of patents relating to laser technologies used in
certain applications. The Company intends to pursue such laser technologies in
the future; hence, if the patents relating to those technologies are valid and
enforceable, they may be infringed by the Company. After consulting with outside
counsel to the Company, the Company believes that it is not infringing currently
on patents held by others; however, were the issue ever to be litigated, a court
could reach a different opinion. If the Company's current or proposed products
are, in the opinion of patent counsel, infringing on any of these patents, the
Company intends to seek nonexclusive, royalty-bearing licenses to such patents
but there can be no assurance that any such license would be available on
favorable terms, if at all. The Company recently prevailed in a suit filed by
one of its competitors alleging patent infringement. However, no assurance can
be given that other infringement claims will not be made or that the Company
would prevail in any legal action with respect thereto. Defense of a claim of
infringement would be costly and could have a material adverse effect on the
Company's business, even if the Company was to prevail. (See March 31, 1998 Form
10-Q Item 1. "Legal Proceedings.")
Dependence on Proprietary Rights. The Company relies on trade secrets and
proprietary know-how which it seeks to protect, in part, by confidentiality
agreements with its collaborators, employees and consultants. There can be no
assurance that these agreements will not be breached, that the Company would
have adequate remedies for any breach, or that the Company's trade secrets will
not otherwise become known or be independently developed by competitors.
Risks Associated with Pending Litigation. The Company and its subsidiaries
are involved in disputes with third parties. Such disputes have resulted in
litigation with such parties and, although the Company is a plaintiff in several
matters, the Company is subject to claims and counterclaims for damages and has
incurred, and likely will continue to incur, legal expenses in connection with
such matters. There can be no assurance that such litigation will result in
favorable outcomes for the Company. An adverse result or action brought by some
of the holders of the Company's Swiss Franc Debentures could have a material
adverse effect on the Company's business, financial condition and results of
operations. The Company is unable to determine the total expense or possible
loss, if any, that may ultimately be incurred in the resolution of these
proceedings. These matters may result in diversion of management time and effort
from the operations of the business. (See March 31, 1998 Form 10-Q Item 1.
"Legal Proceedings.")
Need for Additional Qualified Personnel. The Company's ability to develop,
manufacture and market all of its products, and to attain a competitive position
within the laser products industry, will depend, in large part, on its ability
to attract and retain qualified personnel. Competition for qualified personnel
in these industries is intense and the Company will be required to compete for
such personnel with companies which may have greater financial and other
resources. There can be no assurance that the Company will be successful in
attracting, assimilating and retaining the personnel it requires to grow and
operate profitably. The Company's inability to attract and retain such personnel
could have a material adverse effect upon its business.
11
<PAGE>
Issuance of Preferred Stock and Debentures Could Affect Rights of Common
Shareholders. The Company is authorized to issue up to five million shares of
Preferred Stock, $.01 par value. The Preferred Stock may be issued in one or
more series, the terms of which may be determined at the time of issuance by the
Board of Directors, without further action by shareholders, and may include
voting rights (including the right to vote as a series on particular matters),
preferences as to dividends and liquidation, conversion and redemption rights
and sinking fund provisions. In July 1996, the Company issued 6,000 shares of
Series F Convertible Preferred Stock at a price of $1,000 per share. In
September 1996, the Company issued 10,000 shares of Series G Convertible
Preferred Stock at a price of $1,000 per share. As of June 17, 1998, 8,120
shares of the Series G Convertible Preferred Stock were converted into 1,507,110
shares of common stock, 956,388 shares of common stock of Nexar and $47,731 in
cash dividends. In March 1997, the Company issued 6,000 shares of Series H
Convertible Preferred Stock at a price of $1,000 per share. In May 1997, the
Company issued 10,000 shares of Series H Convertible Preferred Stock at a price
of $1,000 per share. As of June 17, 1998, 15,300 shares of the Series H
Convertible Preferred Stock were converted/redeemed into 9,392,808 shares of
common stock and $3,791,890.
In July 1996, the Company issued 9,675 units in a convertible debenture
financing. Each unit consisted of a convertible debenture denominated in 1,000
Swiss francs and a warrant to purchase 24 shares of the Company's common stock
at $16.50 per share. In February 1997, the Company redeemed 300 units for an
aggregate price of $195,044. In November 1997, the remaining 9,375 units were
converted into 914,028 shares of common stock. (See March 31, 1998 Form 10-Q
Item 1. "Legal Proceedings.") In March 1997, the Company issued $500,000 in 6%
Convertible Debentures. In September 1997, the Company issued $7,000,000 in 6%,
7% and 8% Convertible Debentures. The holders were issued 413,109 shares upon
issuance in lieu of a discount. In addition, as of June 17, 1998, $3,000,000
principal amount was converted into 2,805,540 shares of common stock. The
Company also redeemed $2,000,000 principal amount for $2,196,667.
The issuance of any such additional Preferred Stock or Debentures could
affect the rights of the holders of common shares, and could reduce the market
price of the common shares. In particular, specific rights granted to future
holders of Preferred Stock or Debentures could be used to restrict the Company's
ability to merge with or sell its assets to a third party, thereby preserving
control of the Company by the existing control group. (See March 31, 1997 Form
10-Q Notes 6, 7 and 8 to Financial Statements and December 31, 1997 Form 10-K
Item 1. "Description of Business," Item 5. "Market for Common Equity and Related
Stockholder Matters," and Notes 6, 7 and 13 to Financial Statements.)
Issuance of Reserved Shares; Registration Rights. As of June 17, 1998, the
Company had 68,418,030 shares of common stock outstanding. The Company has
reserved an additional 34,239,091 shares for issuance as follows: (1) 6,707,655
shares for issuance to key employees, officers, directors, consultants and
advisors pursuant to the Company's Stock Option Plans; (2) 700,000 shares for
issuance to employees, officers and directors pursuant to the Company's 401(k)
Plan; (3) 455,851 shares for issuance pursuant to the Company's Employee Stock
Purchase Plan; (4) 17,508,030 shares for issuance upon exercise of three-,
four-, five- and seven year warrants issued to certain lenders, investors,
consultants, directors and officers (a portion of which are subject to certain
antidilutive adjustments); (5) 45,455 shares for issuance upon conversion of
$500,000 principal amount of 6% Convertible Debentures; (6) 3,694,460 shares for
issuance upon conversion of $2,000,000 principal amount of a 6%, 7% and 8%
Convertible Debenture; (7) 600,000 shares for issuance upon conversion of 6,000
shares of Series F Convertible Preferred Stock; (8) 2,707,373 shares for
issuance upon conversion of 1,880 shares of Series G Convertible Preferred
Stock; and (9) 1,820,267 shares for issuance upon conversion of 700 shares of
Series H Convertible Preferred Stock. All of the foregoing reserved shares are,
or the Company intends for them shortly to be, registered with the Securities
and Exchange Commission and therefore freely salable on Nasdaq or elsewhere.
Product Liability Exposure. Cosmetic laser product companies face an
inherent business risk of financial exposure to product liability claims in the
event that the use of their products results in personal injury. The Company's
products are and will continue to be designed with numerous safety features, but
it is possible that patients could be adversely affected by use of one of the
Company's products. Further, in the event that any of the Company's products
prove to be defective, the Company may be required to recall and redesign such
products. Although the Company has not experienced any material losses due to
product liability claims to date, there can be no assurance that it will not
12
<PAGE>
experience such losses in the future. The Company maintains general liability
insurance in the amount of $1,000,000 per occurrence and $2,000,000 in the
aggregate and maintains umbrella coverage in the aggregate amount of
$25,000,000; however, there can be no assurance that such coverage will continue
to be available on terms acceptable to the Company or that such coverage will be
adequate for liabilities actually incurred. In the event the Company is found
liable for damages in excess of the limits of its insurance coverage, or if any
claim or product recall results in significant adverse publicity against the
Company, the Company's business, financial condition and results of operations
could be materially and adversely affected. In addition, although the Company's
products have been and will continue to be designed to operate in a safe manner,
and although the Company attempts to educate medical personnel with respect to
the proper use of its products, misuse of the Company's products by medical
personnel over whom the Company cannot exert control may result in the filing of
product liability claims or significant adverse publicity against the Company.
International Operations. Because the Company has minimal experience in
marketing and distributing its products internationally, it engaged Coherent, a
company with particular experience in international markets, to serve as its
distributor in international markets. (See "- Dependence on New Relationship
with Coherent" and December 31, 1997 Form 10-K Item 1. "Description of Business
- - Marketing, Distribution and Service.") Accordingly, the Company's success in
international markets will be substantially dependent upon the skill and
expertise of Coherent in marketing the Company's products. There can be no
assurance that Coherent will be able to successfully market, sell and deliver
the Company's products in these markets. In addition, there are certain risks
inherent in doing business in international markets, such as unexpected changes
in regulatory requirements, export restrictions, tariffs and other trade
barriers, difficulties in staffing and managing foreign operations, management's
lack of international expertise, political instability and fluctuations in
currency exchange rates and potentially adverse tax consequences, which could
adversely impact the success of the Company's international operations. There
can be no assurance that one or more of such factors will not have a material
adverse effect on the Company's future international operations and,
consequently, on the Company's business, financial condition or operating
results. (See December 31, 1997 Form 10-K Item 1. "Financial Information About
Exports by Domestic Operations.")
Need for Continued Product Development. Although the Company received FDA
clearance in March and December 1997, respectively, to commercially market its
EpiLaser(R) and LightSheer(TM) laser systems for hair removal, the Company is
continuing its development of both products. The Company is continuing to study
both laser systems to optimize performance and treatment parameters. (See
December 31, 1997 Form 10-K Item 1. "Description of Business.")
Dependence on Suppliers. The Company relies on outside suppliers for
substantially all of its manufacturing supplies, parts and components. Several
component parts of the Company's cosmetic laser products are manufactured
exclusively by one supplier. There can be no assurance that the Company will be
able to obtain a sufficient supply of such components at commercially reasonable
prices or at all. A shortage of necessary parts and components or the inability
of the Company to obtain such parts and components would have a material adverse
effect on the Company's business, financial condition and results of operations.
(See December 31, 1997 Form 10-K Item 1. "Description of Business - Production
and Sources and Availability of Materials.")
Significant Outstanding Indebtedness; Subordination of Debentures. The
Company has incurred substantial indebtedness in relation to its equity capital
and will be subject to all of the risks associated with substantial leverage,
including the risk that available cash may not be adequate to make required
payments to the holders of the Company's debentures. The Company's ability to
satisfy its obligations under the debentures from cash flow will be dependent
upon the Company's future performance and will be subject to financial, business
and other factors affecting the operation of the Company, many of which may be
beyond the Company's control. In the event the Company does not have sufficient
cash resources to satisfy quarterly interest or other repayment obligations to
the holders of the debentures, the Company will be in default under the
debentures, which would have a material adverse effect on the Company. To the
extent that the Company is required to use cash resources to satisfy interest
payments to the holders of the debentures, it will have fewer resources
available for other purposes. Inability of the Company to repay the debentures
upon maturity would have a material adverse effect on the Company, which could
result in a reduction of the price of the Company's shares. The debentures will
be unsecured and subordinate in right of payment to all senior indebtedness of
13
<PAGE>
the Company. The debentures do not restrict the Company's ability to incur
additional senior indebtedness and most other indebtedness. The terms of senior
indebtedness now existing or incurred in the future could affect the Company's
ability to make payments of principal and/or interest to the holders of
debentures. (See March 31, 1998 Form 10-Q Note 8 to Financial Statements and
December 31, 1997 Form 10-K Item 5. "Market for Registrant's Common Equity and
Related Shareholder Matters" and Note 6 to Financial Statements.)
Potential Effect of Anti-takeover Provisions. The Company is subject to
the anti-takeover provisions of Section 203 of the Delaware General Corporation
Law, which prohibit the Company from engaging in a business combination with an
interested stockholder for a period of three years after the date of the
transaction in which the person becomes an interested stockholder, unless the
business combination is approved in a prescribed manner. The application of
Section 203 could have the effect of delaying or preventing a change of control
of the Company. The Company's stock option grants generally provide for an
exercise of some or all of the optioned stock, including nonvested shares, upon
a change of control or similar event. The Board of Directors has authority to
issue up to 5,000,000 shares of Preferred Stock and to fix the rights,
preference, privileges and restrictions, including voting rights, of these
shares without any further vote or action by the stockholders. The rights of the
holders of the common stock will be subject to, and may be adversely affected
by, the rights of the holders of any Preferred Stock that may be issued in the
future. The issuance of Preferred Stock, while providing desirable flexibility
in connection with possible acquisitions and other corporate purposes, could
have the effect of making it more difficult for a third party to acquire a
majority of the outstanding voting stock of the Company, thereby delaying,
deferring or preventing a change in control of the Company. Furthermore, such
Preferred Stock may have other rights, including economic rights senior to the
common stock, and, as a result, the issuance of such Preferred Stock could have
a material adverse effect on the market value of the common stock. (See "-
Issuance of Preferred Stock and Debentures Could Affect Rights of Common
Shareholders.")
Year 2000. The Company is aware of the issues associated with the
programming code in existing computer systems as the millennium (year 2000)
approaches. The "year 2000" problem is pervasive and complex, as virtually every
computer operation will be affected in the same way by the rollover of the two
digit year value to 00. The issue is whether computer systems will properly
recognize date sensitive information when the year changes to 2000. Systems that
do not properly recognize such information could generate erroneous data or
cause a system to fail. The Company is at this time utilizing internal resources
to identify, correct or reprogram, and test the systems for year 2000
compliance. However, there can be no assurance that the systems of other
companies on which the Company's systems rely will also be converted in a timely
manner or that any such failure to convert by another company would not have an
adverse effect on the Company's systems. Management is in the process of
assessing the year 2000 compliance costs; however, based on information to date
(excluding the possible impact of vendor systems), management does not believe
that it will have a material effect on the Company's earnings. (See December 31,
1997 Form 10-K Note 12(c) to Financial Statements.)
14
<PAGE>
THE COMPANY
The Company was organized to design, manufacture and market lasers,
delivery systems and related disposable products for use in medical procedures.
The Company currently operates in two business segments: cosmetic laser products
and cosmetic laser services. The Company recently divested itself of its
non-core electronics subsidiaries. In the cosmetic laser products segment, the
Company is focusing its efforts on the FDA-cleared EpiLaser(R) hair removal
laser and the FDA-cleared LightSheer(TM) diode laser and other lasers that are
currently under development. The Company recently entered into an agreement with
the world's largest laser company, Coherent, pursuant to which Coherent acts as
exclusive distributor of the Company's hair removal systems. Under this
agreement, Coherent will obtain a right of first refusal to distribute the
Company's future laser products and Coherent and the Company have agreed to
cross-license certain hair removal technology. The Company anticipates that
Coherent, with its direct sales force number over 200, will be able to sell the
Company's products in greater volume than the Company could in the past through
its independent sales representatives. In addition, on May 22, 1998, Coherent
loaned the Company $3,000,000 for working capital requirements and agreed to
loan the Company an additional $1,000,000 through June 21, 1998 at the Company's
request. The Company anticipates that it will borrow this additional $1,000,000
by June 21, 1998. These loans bear interest at 8.5% per annum and are due
September 15, 1998.
The Company is developing ruby and diode cosmetic lasers for use in
clinical trails and is engaged in the research and development of additional
cosmetic laser and surgical products. (See December 31, 1997 Form 10K "Item 1.
Description of Business--Research and Development.") The Company has entered
into a number of research agreements with recognized research hospitals and
clinical laboratories. The Company provides research funding, laser technology
and optics know-how in return for licensing agreements to specific cosmetic
laser applications and patents. Management feels that this method of conducting
research and development provides a higher level of technical and clinical
expertise than it could provide on its own and in a more cost efficient manner.
In late 1996, Cosmetic Technology International, Inc. ("CTI") was formed as
a wholly-owned subsidiary of the Company. CTI is a services company which is
engaged in establishing cosmetic dermatological laser and medical device beta
sites with medical services partners in key geographic locations. Each site will
be provided a turnkey package of laser and medical device technology, equipment,
training and service, strategic advertising and marketing programs, and
management assistance. In early 1997, a binding letter of intent was completed
with Columbia/HCA, a $20 billion company and one of the world's largest owners
and operators of medical facilities, to establish revenue sharing sites in
different areas of the country in existing Columbia/HCA facilities. To date, CTI
has established thirteen sites, one of those in conjunction with Columbia/HCA.
CTI's revenues from its operations for the year ended December 31, 1997 were
approximately $900,000.
The Company will continue to develop, acquire or license technologies that
can be integrated into its current and proposed products in the cosmetic laser
business segment. The Company intends to address very large markets
incorporating its core technology with proprietary products and services and
structure its operations to strive to be the low-cost producer and provider of
these products and services. The Company intends to seek agreements or
arrangements with other medical products and high technology companies in order
to acquire technical and financial assistance in the research and development of
such products and in the extensive experimentation and testing required to
obtain regulatory approvals in the United States and elsewhere.
USE OF PROCEEDS
The Company will receive no part of the proceeds from the sale of any of
the Shares by the Selling Stockholders.
15
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth information concerning the beneficial
ownership of shares of common stock by the Selling Stockholders as of the date
of this Prospectus and the number of such shares included for sale in this
Prospectus assuming the sale of all Shares being offered by this Prospectus. The
number of shares included in the Registration Statement of which this Prospectus
is a part and available for resale is subject to adjustment and could be
materially more or less than such estimated amount depending on factors which
cannot be predicted by the Company at this time. To the best of the Company's
knowledge, except as stated in this Prospectus, the Selling Stockholders have
not held any office or maintained any material relationship with the Company or
any of its predecessors or affiliates over the past three years. The Selling
Stockholders reserve the right to reduce the number of shares offered for sale
or to otherwise decline to sell any or all of the Shares registered hereunder.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Shares Shares Shares
owned to be owned
Selling prior to sold in after
Stockholders Offering (1) Offering Offering (2)
- ------------------------------------------------------------------------------------------------------
The Travelers Insurance Company (3) 6,873,289 4,000,000 2,879,289 4.2%
One Tower Square, 9PB
Hartford, CT 06183-30
A.I.M. Overseas Ltd. (3) 3,000,000 3,000,000 - -
C/o LIS S.A.
1, rue Goethe
L-1637 Luxembourg
TJJ Corporation (3) 2,200,000 2,200,000 - -
C/o Cres Development Corp.
50 Salem Street
Lynnfield, MA 01940
PAR Investment Partners, L.P. (3) 2,000,000 2,000,000 - -
One Financial Center, Suite 1600
Boston, MA 02111
Pequot Scout Fund, L.P. (3) 500,000 500,000 - -
354 Pequot Avenue
Southport, CT 06490
Leonard Donadio (3) 200,000 200,000 - -
170 Partridge Lane
Concord, MA 01742-2651
Ronald E. Scott (3) 200,000 200,000 - -
3825 Potomac Avenue
Dallas, TX 75205
Richard E. Carter (3) 200,000 200,000 - -
P.O. Box 81
Nahant, MA 01908
Jeffrey R. Power (3) 200,000 200,000 - -
74 Beach Street
Cohasset, MA 02025
16
<PAGE>
Joseph Fedele Trustee of the
Hoseph Fedele Living Trust
dated July 23, 1996 (3) 200,000 200,000 - -
455 Front Street
Lahaina, HI 94761
Robert Donadio (3) 200,000 200,000 - -
45 Mitchell Grant Way
Bedford, MA 01730
Edward J. Stewart III (3) 200,000 200,000 - -
53 Temple Road
Wellesley, MA 02181
Frederick F. Margosian (3) 200,000 200,000 - -
21 Butterfield Road
Lexington, MA 02173
IRA John T. Walsh, Jr. (3) 100,000 100,000 - -
c/o Fechtor, Detwiler & Co., Inc.
225 Frankling Street
Boston, MA 02110
Jeremy R. Whittle (3) 100,000 100,000 - -
P.O. Box FLR 80
Flatts
Bermuda FLBX
Robert R. Detwiler (3) 100,000 100,000 - -
c/o Fechtor, Detwiler & Co., Inc.
225 Frankling Street
Boston, MA 02110
IRA Robert R. Detwiler Rollover (3) 100,000 100,000 - -
c/o Fechtor, Detwiler & Co., Inc.
225 Frankling Street
Boston, MA 02110
Alan G. Zaring, IV (3) 100,000 100,000 - -
11300 Cornell Park Drive
Cincinnati, OH 45242
H. Bruce Boal (3) 100,000 100,000 - -
9 Redstone Lane
Marblehead, MA 01945
Kenneth M. Dorros (3) 100,000 100,000 - -
241 Shoddy Mill Road
Glastonbury, CT 06033
Kalman Kobrin (3) 100,000 100,000 - -
1691 Revere Beach Parkway
Everett, MA 02149
17
<PAGE>
Nicholas Menonna Jr. (3) 100,000 100,000 - -
28 Mountain View Road
Cresskill, NJ 07626
Charles Schultz (3) 100,000 100,000 - -
1691 Revere Beach Parkway
Everett, MA 02149
Angela DeFelippi (3) 100,000 100,000 - -
838 Farmington Avenue
Farmington, CT 06032
Peter Fenton (4) 107,500 107,500 - -
7 Worthen Road
Winchester, MA 01890
Robert Detwiler (4) 107,500 107,500 - -
c/o Fechtor, Detwiler & Co., Inc.
225 Frankling Street
Boston, MA 02110
Sheldon Fechtor (4) 56,250 56,250 - -
151 Tremont Street, Apt. 196
Boston, MA 02111
Richard Fechtor (4) 56,250 56,250 - -
c/o Fechtor, Detwiler & Co., Inc.
225 Frankling Street
Boston, MA 02110
Hector Wiltshire (4) 22,500 22,500 - -
4200 Coral Hills Drive
Coral Srpings, FL 33065
Jeffrey R. Power (4) 7,500 7,500 - -
74 Beach Street
Cohasset, MA 02025
Karl Niehoff (4) 2,500 2,500 - -
c/o Fechtor, Detwiler & Co., Inc.
225 Frankling Street
Boston, MA 02110
Hector Wiltshire (5) 125,000 125,000 - -
4200 Coral Hills Drive
Coral Srpings, FL 33065
Peter Fenton (6) 25,000 25,000 - -
7 Worthen Road
Winchester, MA 01890
Robert Detwiler (6) 15,000 15,000 - -
c/o Fechtor, Detwiler & Co., Inc.
225 Frankling Street
Boston, MA 02110
18
<PAGE>
Richard Fechtor (6) 5,000 5,000 - -
c/o Fechtor, Detwiler & Co., Inc.
225 Frankling Street
Boston, MA 02110
Sheldon Fechtor (6) 5,000 5,000 - -
151 Tremont Street, Apt. 196
Boston, MA 02111
Cavendish Distribution Corporation Ltd.(7) 100,000 100,000 - -
Kissack Court
29 Parliament Street
Ramsey/Isle of Man
BlueStone Capital Partners, L.P. (8) 15,000 15,000 - -
575 Fifth Avenue
New York, NY 10017
Robert Emmons (9) 2,000 2,000 - -
c/o Ira Zuckerman
3355 Lenox Road, Suite 1150
Atlanta, GA 30326
</TABLE>
1. Pursuant to the rules of the Securities and Exchange Commission, shares of
Common Stock which an individual or group has a right to acquire within 60
days pursuant to the exercise of options or warrants are deemed to be
outstanding for the purpose of computing the ownership of such individual
or group.
2. The amount and (if one percent or more) the percentage of outstanding
Common Stock.
3. Represents common stock and warrants issued pursuant to a Securities
Purchase Agreement dated February 20, 1998.
4. Represents warrants issued as brokers' fees relating to a Securities
Purchase Agreement dated February 20, 1998.
5. Represents warrants issued as interest on $2 million Bridge Loan issued
March 27, 1998, due May 20, 1998.
6. Represents warrant issued as brokers' fees relating to a $2 million Bridge
Loan issued March 27, 1998, due May 26, 1998.
7. Represents shares issued in connection with advisory services.
8. Represents shares issued as compensation for investor relations
services.
9. Represents shares issued in connection with a Settlement Agreement dated
March 4, 1998.
19
<PAGE>
PLAN OF DISTRIBUTION
The 15,052,000 shares being registered herein for sale by the Selling
Stockholders consists of (i) 7,200,000 shares of common stock issued pursuant to
a Securities Purchase Agreement dated February 20, 1998, (ii) 7,735,000 shares
of common stock issuable pursuant to certain common stock purchase warrants,
(iii) 100,000 shares of common stock issued in connection with advisory services
(iv) 15,000 shares of common stock issued in connection with investor relations
services and (v) 2,000 shares of common stock issued to an individual pursuant
to a Settlement Agreement dated March 4, 1998
The Selling Stockholders and their respective pledgees, donees, transferees
and other successors in interest may sell the common stock registered in
connection with this Offering on the Nasdaq market system or otherwise. There
will be no charges or commissions paid to the Company by the Selling
Stockholders in connection with the resale of shares offered hereby. It is
anticipated that usual and customary brokerage fees will be paid by the Selling
Stockholders upon sale of the Common Stock offered hereby. The Company will pay
the other expenses of this Offering. Such sales may be made on one or more
exchanges or in the over-the-counter market, or otherwise at fixed prices, at
prices and at terms then prevailing or at prices related to the then current
market price, or in negotiated transactions. The Shares may be sold by one or
more of the following methods: (a) a block trade in which the broker so engaged
will attempt to sell the Shares as agent but may position and resell a portion
of the block as principal to facilitate the transaction; (b) purchases by a
broker or dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; (c) an exchange distribution in accordance
with the rules of Nasdaq; (d) ordinary brokerage transactions and (e) used to
cover short sales. In effecting sales, brokers or dealers engaged by the Selling
Stockholders may arrange for other brokers or dealers to participate. Brokers or
dealers will receive commissions or discounts from Selling Stockholders in
amounts to be negotiated prior to the sale. The Selling Stockholders and brokers
or dealers and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with such
sales. In addition, any securities covered by this Prospectus which qualify for
sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to
this Prospectus.
The Company has agreed to indemnify the Selling Stockholders against
certain liabilities, including certain liabilities under the Securities Act, or
to contribute to payments which the Selling Stockholders will be required to
make in respect thereof.
EXPERTS
The audited financial statements incorporated by reference in this
registration statement and elsewhere in the registration statement have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report with respect thereto, and are included herein upon the authority of
said Firm as experts in accounting and auditing. Reference is made to said
report which includes an explanatory paragraph regarding the Company's ability
to continue as a going concern.
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Sarah Burgess Reed, General Counsel to the Company.
LEGAL OPINIONS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by its General Counsel.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
20
<PAGE>
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
21
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the issuance and distribution of the Common
Stock to be registered are estimated (except for the Securities and Exchange
Commission filing fee) below. All such expenses will be paid by the Registrant.
Securities and Exchange Commission Filing Fee $9,352
Accounting Fees and Expenses 2,500
Legal Fees and Expenses 2,000
Blue Sky Filing Fees and Expenses 500
Printing and Mailing Costs 100
Transfer Agent Fees 500
Miscellaneous 500
------------------
Total Expenses $15,452
==================
Item 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Delaware General Corporation Law, Section 102(b)(7), enables a corporation
in its original certificate of incorporation or an amendment thereto validly
approved by stockholders to eliminate or limit personal liability of members of
its Board of Directors for violations of a director's fiduciary duty of care.
However, the elimination or limitation shall not apply where there has been a
breach of the duty of loyalty, failure to act in good faith, engaging in
intentional misconduct or knowingly violating a law, paying a dividend or
approving a stock repurchase which was deemed illegal or obtaining an improper
personal benefit. The Company's Certificate of Incorporation includes the
following language:
"To the maximum extent permitted by Section 102(b)(7) of the General Corporation
Laws of Delaware, a director of this corporation shall not be personally liable
to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit."
Section 145 of the General Corporation Law of the State of Delaware
generally provides that a corporation may indemnify any director, officer,
employee or agent against expenses, judgments, fines and amounts paid in
settlement in connection with any action against him by reason of his being or
having been such a director, officer, employee or agent, if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action, had no
reasonable cause to believe his conduct was unlawful. No indemnification shall
be made, however, if he is adjudged liable for negligence or misconduct in the
performance of his duty to the corporation, unless a court determines that he is
nevertheless entitled to indemnification. If he is successful on the merits or
otherwise in defending the action, the corporation must indemnify him against
expenses actually and reasonably incurred by him. Article IX of the Company's
Bylaws provides indemnification as follows:
22
<PAGE>
Indemnification
SECTION 1. Actions, Etc. Other Than by or in the Right of the Corporation. The
Corporation shall, to the full extent legally permissible, indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, including a grand jury proceeding, and all
appeals (but excluding any such action, suit or proceeding by or in the right of
the Corporation), by reason of the fact that such person is or was a director,
executive officer (as hereinafter defined) or advisory council member of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe the conduct in question was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that such person did not act in good faith and in a
manner which such person reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, that such person had reasonable cause to believe that the conduct in
question was unlawful. As used in this Article IX, an "executive officer" of the
Corporation is the president, treasurer, a vice president given the title of
executive vice president, or any officer designated as such pursuant to vote of
the Board of Directors.
SECTION 2. Actions. Etc. by or in the Right of the Corporation. The Corporation
shall, to the full extent legally permissible, indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit, including appeals, by or in the right of the
Corporation to procure a judgment in its favor, by reason of the fact that such
person is or was a director or executive officer of the Corporation as defined
in Section 1 of this Article, or is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit
if such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the corporation,
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
SECTION 3. Determination of Right of Indemnification. Any indemnification of a
director or officer (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that such
indemnification is proper in the circumstances because the director or executive
officer has met the applicable standard of conduct as set forth in Sections 1
and 2 hereof. Such a determination shall be reasonably and promptly made (i) by
the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such action, suit or proceeding, or (ii) (if such a
quorum is not obtainable, or, even if obtainable if a quorum of disinterested
directors so directs) by independent legal counsel in a written opinion, or
(iii) by the stockholders.
23
<PAGE>
SECTION 4. Indemnification Against Expenses of Successful Party. Notwithstanding
any other provision of this Article, to the extent that a director or officer of
the Corporation has been successful in whole or in part on the merits or
otherwise, including the dismissal of an action without prejudice, in defense of
any action, suit or proceeding or in defense of any claim, issue or matter
therein, such person shall be indemnified against all expenses incurred in
connection therewith.
SECTION 5. Advances of Expenses. Expenses incurred by a director or officer in
any action, suit or proceeding shall be paid by the Corporation in advance of
the final disposition of thereof, if such person shall undertake to repay such
amount in the event that it is ultimately determined, as provided herein, that
such person is not entitled to indemnification. Notwithstanding the foregoing,
no advance shall be made by the Corporation if a determination is reasonably and
promptly made (i) by the Board of Directors by a majority vote of a quorum of
disinterested directors, or (ii) (if such a quorum is not obtainable or, even if
obtainable, if a quorum of disinterested directors so directs) by independent
legal counsel in a written opinion, that, based upon the facts known to the
Board of Directors or such counsel at the time such determination is made, such
person has not met the relevant standards set forth for indemnification in
Section 1 or 2, as the case may be.
SECTION 6. Right to Indemnification Upon Application: Procedure Upon
Application. Any indemnification or advance under Sections 1, 2, 4 or 5 of this
Article shall be made promptly, and in any event within ninety days, upon the
written request of the person seeking to be indemnified, unless a determination
is reasonably and promptly made by the Board of Directors that such person acted
in a manner set forth in such Sections so as to justify the Corporation's not
indemnifying such person or making such an advance. In the event no quorum of
disinterested directors is obtainable, the Board of Directors shall promptly
appoint independent legal counsel to decide whether the person acted in the
manner set forth in such Sections so as to justify the Corporation's not
indemnifying such person or making such an advance. The right to indemnification
or advances as granted by this Article shall be enforceable by such person in
any court of competent jurisdiction, if the Board of Directors or independent
legal counsel denies the claim therefor, in whole or in part, or if no
disposition of such claim is made within ninety days.
SECTION 7. Other Right and Remedies: Continuation of Rights. The indemnification
and advancement of expenses provided by this Article shall not be deemed
exclusive of any other rights to which any person seeking indemnification or
advancement of expenses may be entitled under any Bylaw, agreement, Vote of
stockholders or disinterested directors, the General Corporation Law of the
State of Delaware or otherwise, both as to action in such person's official
capacity and as to action in another capacity while holding such office. All
rights to indemnification or advancement under this Article shall be deemed to
be in the nature of contractual rights bargained for and enforceable by each
director and executive officer as defined in Section 1 of this Article who
serves in such capacity at any time while this Article and other relevant
provisions of the General Corporation Law of the State of Delaware and other
applicable laws, if any, are in effect. All right to indemnification under this
Article or advancement of expenses shall continue as to a person who has ceased
to be a director or executive officer, and shall inure to the benefit of the
heirs, executors and administrators of such a person. No repeal or modification
of this Article shall adversely affect any such rights or obligations then
existing with respect to any state of facts then or theretofore existing or any
action, suit or proceeding theretofore or thereafter brought based in whole or
in part upon any such state of facts. The Corporation shall also indemnify any
person for attorneys' fees, costs, and expenses in connection with the
successful enforcement of such person's rights under this Article.
24
<PAGE>
SECTION 8. Other Indemnities. The Board of Directors may, by general vote or by
vote pertaining to a specific officer, employee or agent, advisory council
member or class thereof, authorize indemnification of the Corporation's
employees and agents, in addition to those executive officers and to whatever
extent it may determine, which may be in the same manner and to the same extent
provided above.
SECTION 9. Insurance. Upon resolution passed by the Board of Directors, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee, advisory council member or agent of the
Corporation, or is or was serving at the request of the Corporation, as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Corporation would have the power to
indemnify such person against such liability under the provisions of this
Article.
SECTION 10. Constituent Corporations. For the purposes of this Article,
reference to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporations (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors and officers so that any person who is or was a director or officer of
such a constituent corporation or is or was serving at the request of such
constituent corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise shall stand in the same
position under the provisions of this Article with respect to the resulting or
surviving corporation as such person would have with respect to such constituent
corporation if its separate existence had continued.
SECTION 11. Savings Clause. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director, executive officer,
advisory council member, and those employees and agents of the Corporation
granted indemnification pursuant to Section 3 hereof as to expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement with respect
to any action, suit or proceeding, whether civil, criminal, administrative or
investigative, including a grand jury proceeding, and all appeals, and any
action by the Corporation, to the full extent permitted by any applicable
portion of this Article that shall not have been invalidated or by any other
applicable law.
SECTION 12. Other Enterprises. Fines. and Serving at Corporation's Request. For
purposes of this Article, references to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to any employee benefit plan; and references
to "serving at the request of the Corporation" shall include any service as a
director, officer, employee or agent of the Corporation which imposes duties on,
or involves services by, such director, officer, employee, or agent with respect
to any employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner such person reasonably believed to be in
the interest of the participants and beneficiaries of any employee benefit plan
shall be deemed to have acted in a manner not opposed to the best interests of
the Corporation" as referred to in this Article.
25
<PAGE>
Item 16. EXHIBITS
The following documents have been previously filed as Exhibits and are
incorporated herein by reference except those exhibits indicated with an
asterisk which are filed herewith:
Exhibit No. Description
4(a) Specimen certificate for the Common Stock, incorporated by
reference to Exhibit No. 4.1 of the Company's Annual Report on
Form 10-KSB/A-4 for the fiscal year ending December 31, 1996
filed on July 11, 1997.
4(b)* Form of Warrant to Purchase Common Stock.
5* Opinion of General Counsel of Palomar regarding legality of
shares registered hereunder.
23(a)* Consent of Arthur Andersen LLP, independent public accountants.
23(b)* Consent of General Counsel of Palomar (included in Exhibit 5).
26
<PAGE>
Item 17. UNDERTAKINGS
(1) The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would
not exceed that which was registered) and any deviation
from the low or high and of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the
"Calculation of the Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs 2(a)(i) and 2(a)(ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference herein.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide
offering thereof.
27
<PAGE>
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain at
the termination of the offering.
(2) The undersigned registrant hereby undertakes that, for the purposes of
determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of any employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time be deemed to be
the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provision, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
28
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Lexington, Commonwealth of Massachusetts, on June 18,
1998.
PALOMAR MEDICAL TECHNOLOGIES, INC.
By: /s/ Louis P. Valente
-----------------------------
Louis P. Valente, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons, in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date
/s/ Louis P. Valente Chairman of the Board June 18, 1998
-------------------------------------- President and Chief Executive
Louis P. Valente Officer (Principal Executive Officer)
/s/ Joseph P. Caruso Chief Financial Officer and Treasurer June 18, 1998
-------------------------------------- (Principal Financial and Accounting
Joseph P. Caruso Officer)
/s/ Nicholas P. Economou Director June 18, 1998
--------------------------------------
Nicholas P. Economou
/s/ A. Neil Pappalardo Director June 18, 1998
--------------------------------------
A. Neil Pappalardo
/s/ James G. Martin Director June 18, 1998
--------------------------------------
James G. Martin
</TABLE>
29
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
and to all references to our Firm included in or made part of the registration
statement.
/s/ Arthur Andersen LLP
Boston, Massachusetts
June 18, 1998
30
June 19, 1998
Palomar Medical Technologies, Inc.
66 Cherry Hill Drive
Beverly, MA 01915
Gentlemen:
I am familiar with the Registration Statement on Form S-3 (the
"Registration Statement") to which this opinion is an exhibit, to be filed by
Palomar Medical Technologies, Inc., a Delaware corporation (the "Company"), with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended. The Registration Statement relates to a total of 15,052,000 shares (the
"Shares") of the Company's common stock, $.01 par value per share ("Common
Stock"), issuable in connection with (i) a Securities Purchase Agreement dated
February 20, 1998, (ii) certain common stock purchase warrants, (iii) advisory
services (iv) investor relations services and (v) a Settlement Agreement dated
March 4.
In arriving at the opinion expressed below, I have examined and relied on
the following documents:
(1) the Certificate of Incorporation and By-Laws of the Company, each as
amended as of the date hereof; and
(2) the records of meetings and consents of the Board of Directors and
stockholders of the Company provided to me by the Company.
In addition, I have examined and relied on the originals or copies
certified or otherwise identified to my satisfaction of all such corporate
records of the Company and such other instruments and other certificates of
public officials, officers and representatives of the Company and such other
persons, and have made such investigations of law, as I have deemed appropriate
as a basis for the opinion expressed below.
Based upon the foregoing, it is my opinion that the Company has corporate
power adequate for the issuance of the Shares. The Company has taken all
necessary corporate action required to authorize the issuance and sale of the
Shares, and when certificates for the Shares have been duly executed and
countersigned and delivered, such shares will be legally issued, fully paid and
non-assessable.
I hereby consent to the filing of this opinion as an exhibit to the S-3
Registration Statement.
Sincerely,
/s/ Sarah Burgess Reed
General Counsel
Palomar Medical Technologies, Inc.
32
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NEITHER
THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION SHALL BE
APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
Void after 5:00 p.m. Eastern Time, on ________________.
WARRANT TO PURCHASE COMMON STOCK
OF
PALOMAR MEDICAL TECHNOLOGIES, INC.
FOR VALUE RECEIVED, PALOMAR MEDICAL TECHNOLOGIES, INC., a Delaware corporation
(the "Company"), hereby certifies that (the "Purchaser") or its permitted
assigns, is entitled to purchase from the Company, at any time or from time to
time on or after _________________ and prior to 5:00 P.M., Eastern Time, on
_________________, a total of _________ fully paid and nonassessable shares of
the common stock, par value $.01 per share, of the Company for an aggregate
purchase price of $____ per share. (Hereinafter, (i) said common stock, together
with any other equity securities which may be issued by the Company with respect
thereto or in substitution therefor, is referred to as the "Common Stock", (ii)
the shares of the Common Stock purchasable hereunder are referred to as the
"Warrant Shares", (iii) the aggregate purchase price payable hereunder for the
Warrant Shares is referred to as the "Aggregate Warrant Price", (iv) the price
payable hereunder for each of the Warrant Shares is referred to as the "Exercise
Price", (v) this Warrant, and all warrants hereafter issued in exchange or
substitution for this Warrant are referred to as the "Warrant" and (vi) the
holder of this Warrant is referred to as the "Holder".) The Exercise Price is
subject to adjustment as hereinafter provided.
1. Exercise of Warrant. This Warrant may be exercised, in whole at any time
or in part from time to time, on or after August 20, 1998 and prior to 5:00
P.M., Eastern Time, on February 19, 2003, by the Holder of this Warrant by the
surrender of this Warrant (with the subscription form at the end hereof duly
executed) at the address set forth in Subsection 9(a) hereof, together with
proper payment of the Aggregate Warrant Price, or the proportionate part thereof
if this Warrant is exercised in part; provided, however, that the Holder shall
only be entitled to exercise this Warrant from time to time to extent that the
Holder will, through such exercise, obtain that number of shares of Common Stock
(the "Exercisable Shares") that, together with shares of Common Stock directly
or indirectly beneficially owned by the Holder, its subsidiaries and affiliated
persons including persons serving as exclusive full time advisors of the Holder
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(each a "Holder Person" and, collectively, "Holder Persons"), would not result
in direct and indirect beneficial ownership by all Holder Persons that would
exceed 10% of the outstanding shares of Common Stock, as calculated in
accordance with Rule 16a-1(a)(1). For purposes of calculating the number of
Exercisable Shares, the Holder shall be entitled to use the outstanding number
contained in the Company's most recent Quarterly Report on Form 10-QSB or Annual
Report on Form 10-KSB in accordance with Rule 13D-1(e). For purposes of
determining the number of Exercisable Shares, the Company shall be entitled to
rely and shall be fully protected in relying, on any statement or representation
made by the Holder to the Company without any obligation on the part of the
Company to make any inquiry or investigation or to examine its records or the
records of any transfer agent for the Common Stock to confirm such calculation.
Payment for Warrant Shares shall be made by certified or official bank check
payable to the order of the Company. If this Warrant is exercised in part, this
Warrant must be exercised for a minimum of 50,000 shares of the Common Stock (or
such lesser number of shares of Common Stock as shall remain available for
purchase under the terms of the Warrant), and the Holder is entitled to receive
a new Warrant covering the number of Warrant Shares in respect of which this
Warrant has not been exercised and setting forth the proportionate part of the
Aggregate Warrant Price applicable to such Warrant Shares. Upon such surrender
of this Warrant, the Company will (a) issue a certificate or certificates in the
name of the Holder for the largest number of whole shares of the Common Stock to
which the Holder shall be entitled if this Warrant is exercised in whole and (b)
deliver the proportionate part thereof if this Warrant is exercised in part,
pursuant to the provisions of the Warrant. In lieu of any fractional share of
the Common Stock which would otherwise be issuable in respect to the exercise of
the Warrant, the Company at its option (a) may pay in cash an amount equal to
the product of (i) the daily mean average of the Closing Price (as hereinafter
defined) of a share of Common Stock on the ten consecutive trading days before
the Conversion Date and (ii) such fraction of a share or (b) may issue an
additional share of Common Stock.
Upon exercise of the Warrant, the Company shall issue and deliver to the
Holder certificates for the Common Stock issuable upon such exercise within ten
business days after such exercise and the person exercising shall be deemed to
be the holder of record of the Common Stock issuable upon such exercise.
No warrant granted herein shall be exercisable after 5:00 p.m. Eastern Time
on the fifth anniversary of the date of issuance.
2. Consolidations and Mergers. In case of any consolidation or merger of
the Company with any other corporation (other than a wholly-owned subsidiary of
the Company), or in case of any sale or transfer of all or substantially all of
the assets of the Company, or in the case of any share exchange pursuant to
which all of the outstanding shares of Common Stock are converted into other
securities or property, the Company shall make appropriate provision or cause
appropriate provision to be made so that each Holder shall have the right
thereafter to obtain upon exercise of the Warrant the kind and amount of shares
of stock and other securities and property receivable upon such consolidation,
merger, sale, transfer, or share exchange by a holder of the number of shares of
Common Stock for which the Warrant may be exercised prior to the effective date
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of such consolidation, merger, sale, transfer, or share exchange. If, in
connection with any such consolidation, merger, sale, transfer, or share
exchange, each holder of shares of Common Stock is entitled to elect to receive
securities, cash, or other assets upon completion of such transaction, the
Company shall provide or cause to be provided to each Holder the right to elect
the securities, cash, or other assets for which the Warrant may be exercised by
such Holder subject to the same conditions applicable to holders of the Common
Stock (including, without limitation, notice of the right to elect, limitations
on the period in which such election shall be made, and the effect of failing to
exercise the election). The Company shall not effect any such transaction unless
the provisions of this paragraph have been complied with. The above provisions
shall similarly apply to successive consolidations, mergers, sales, transfers,
or share exchanges.
3. Adjustments to the Exercise Price. Notwithstanding anything in this
Section 3 to the contrary, no change in the exercise price shall actually be
made until the cumulative effect of the adjustments called for by this Section 3
since the date of the last change in the Exercise Price would change the
Exercise Price by more than 1%. However, once the cumulative effect would result
in such a change, then the Exercise Price shall actually be changed to reflect
all adjustments called for by this Section 3 and not previously made.
Notwithstanding anything in this Section 3, no change in the Exercise Price
shall be made that would result in an Exercise Price of less than the par value
of the Common Stock to be issued upon exercise of this Warrant.
The "Closing Price" for each day shall be the closing price on such day as
reported on the New York Stock Exchange Composite Tape, or, if the Common Stock
is not listed or admitted to trading on such Exchange, on the principal national
securities exchange on which Common Stock is listed or admitted to trading, or,
if not listed or admitted to trading on any national securities exchange, the
closing bid price as reported on the Nasdaq Stock Market (or, if not so
reported, the closing price), or, if not admitted for quotation on the Nasdaq
Stock Market, the average of the high bid and low asked prices on such day as
recorded by the National Association of Securities Dealers, Inc. through the
National Association of Securities Dealers Automated Quotations System
("NASDAQ"), or if the National Association of Securities Dealers, Inc. through
NASDAQ shall not have reported any bid and asked prices for the Common Stock on
such day, the average of the bid and asked prices for such day as furnished by
any New York Stock Exchange member firm selected from time to time by the
Company for such purposes, or, if no such bid and asked prices can be obtained
from any such firm, the fair market value of one share of Common Stock on such
day as determined in good faith by the Board of Directors. Such determination by
the Board of Directors shall be conclusive.
Subject to the provisions of the first paragraph of this Section 3, the
Exercise Price shall be appropriately adjusted from time to time to account for
stock splits, stock dividends, combinations, recapitalizations,
reclassifications and similar events and under certain circumstances as follows:
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(i) In case the Company shall issue rights or warrants to all holders
of the Common Stock entitling such holders to subscribe for or purchase
Common Stock on the record date referred to below at a price per share less
than the average daily Closing Prices of the Common Stock for the 30
consecutive business days commencing 45 business days before the record
date (the "Current Market Price"), then in each such case the Exercise
Price in effect on such record date shall be adjusted in accordance with
the formula
EP1 = EP x O + N x P
-----
M
-----
O + N
where
EP1 = the adjusted Exercise Price.
EP = the current Exercise Price.
O = the number of shares of Common Stock outstanding on
the record date.
N = the number of additional shares of Common Stock
issuable pursuant to the exercise of such rights or
warrants.
P = the offering price per share of the additional
shares (which amount shall include amounts received
by the Corporation in respect of the issuance and the
exercise of such rights or warrants).
M = the Current Market Price per share of Common Stock on
the record date.
Such adjustment shall become effective immediately after the record date
for the determination of stockholders entitled to receive such rights or
warrants. If any or all such rights or warrants are not so issued or expire
or terminate before being exercised, the Exercise Price then in effect
shall be readjusted appropriately.
(ii) In case the Company shall, by dividend or otherwise, distribute
to all holders of its Common Stock evidences of its indebtedness or assets
(including securities, but excluding any warrants or subscription rights
referred to in subparagraph (i) above and any dividend or distribution paid
in cash out of the retained earnings of the Company), then in each such
case the Exercise Price then in effect shall be adjusted in accordance with
the formula
EP1 = EP x M-F
-----
M
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<PAGE>
where
EP1 = the adjusted Exercise Price.
EP = the current Exercise Price.
M = the Current Market Price per share of Common Stock on the
record date mentioned below.
F = the aggregate amount of such cash dividend and/or the fair
market value on the record date of the assets or securities
to be distributed divided by the number of shares of common
Stock outstanding on the record date. The Board of Directors
shall determine such fair market value, which determination
shall be conclusive.
Such adjustment shall become effective immediately after the record date
for the determination of stockholders entitled to receive such dividend or
distribution.
(iii) If at any time an adjustment to the Exercise Price shall be made
in accordance with subparagraph (i) or (ii) above, the Holder of any
Warrant shall thereafter, on the exercise hereof, be entitled to receive
that number of shares of Common Stock determined by multiplying the number
of shares of Common Stock which would be issuable on such exercise
immediately prior to such issuance by a fraction of which (i) the numerator
is the Exercise Price in effect immediately prior to such issuance and (ii)
the denominator is the Exercise Price in effect on the date of such
exercise.
(iv) All calculations hereunder shall be made to the nearest cent or
to the nearest 1/100 of a share, as the case may be.
(v) If at any time as a result of an adjustment made pursuant to
Section 2, the Holder of any Warrant thereafter exercised shall become
entitled to receive securities, cash, or assets other than Common Stock,
the number or amount of such securities or property so receivable upon
exercise shall be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as practicable to the provisions with respect
to the Common Stock contained in subparagraphs (i) to (iv) above.
Except as otherwise provided above in this Section 3, no adjustment in
the Exercise Price shall be made in respect of any conversion for share
distributions or dividends theretofore declared and paid or payable on the
Common Stock.
Whenever the Exercise Price is adjusted, the Company will give notice
by mail to the Holders, which notice shall be made within 45 days after the
effective date of such adjustment and shall state the adjustment and the
Exercise Price. Notwithstanding the foregoing notice provisions, failure by
the Company to give such notice or a defect in such notice shall not affect
the binding nature of such corporate action of the Company.
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<PAGE>
Whenever the Company shall propose to take any of the actions
specified in Section 2 or in subparagraphs (i) or (ii) of the third
paragraph of this Section 3 which would result in any adjustment in the
Exercise Price under this Section 3, the Company shall cause a notice to be
mailed at least 30 days prior to the date on which the books of the Company
will close or on which a record will be taken for such action, to the
Holders. Such notice shall specify the action proposed to be taken by the
Company and the date as of which holders of record of the Common Stock
shall participate in any such actions or be entitled to exchange their
Common Stock for securities or other property, as the case may be. Failure
by the Corporation to mail the notice or any defect in such notice shall
not affect the validity of the transaction.
Notwithstanding any other provision of this Section 3, no adjustment
in the Exercise Price need be made (a) for sales of Common Stock pursuant
to a plan for reinvestment of dividends and interest, provided that the
purchase price in any such sale is at least equal to the fair market value
of the Common Stock at the time of such purchase, or pursuant to any plan
adopted by the Corporation for the benefit of its employees, directors, or
consultants; or (b) after the Common Stock becomes convertible into cash
(no interest shall accrue on the cash).
4. Company Call Option. If at any time after August 19, 1998 the Closing
Price of a share of Common Stock equals or exceeds $5.00 for ten (10)
consecutive trading days, the Company shall thereafter have the option (the
"Company Call Option"), exercisable at any time before this Warrant expires or
is exercised in full, to repurchase this Warrant at a price equal to the Call
Option Price (as hereinafter defined). The Company Call Option may be exercised
by providing written notice of exercise (the "Call Option Notice") to the
Holder, which notice shall specify a date not less than thirty (30) and not more
than sixty (60) days thereafter (the "Call Option Closing Date") upon which the
Company shall repurchase the Warrant. On the Call Option Closing Date, the
Holder shall assign and transfer this Warrant to the Company against payment by
the Company, by check or wire transfer, of the Call Option Price. As used
herein, the Call Option Price shall be calculated in accordance with the formula
COP = N x (ACP - EP)
where
COP = the Call Option Price.
N = the number of shares of Common Stock issuable upon
exercise of this Warrant on the date the Call Option Notice
is sent by the Company.
ACP = the average Closing Price of a share of Common Stock on
the ten (10) trading days preceding the date the Call Option
Notice is sent by the Company.
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<PAGE>
EP = the Exercise Price in effect on the date the Call Option
Notice is sent by the Company.
Upon delivery by the Company of a Call Option Notice, the Holder's right to
exercise this Warrant shall terminate, and the Holder's only right hereunder
shall be to receive the Call Option Price on the Call Option Closing Date as
provided in this Section 4.
5. Reservation of Warrant Shares. On and after the later to occur of (i)
six months after the Closing Date and (ii) the first date following the Closing
Date on which the Closing Price of a share of Common Stock has equaled or
exceeded $2.50 for a period of ten (10) consecutive trading days, the Company
shall reserve and keep available, solely for issuance or delivery upon exercise
of this Warrant, the number of shares of Common Stock as from time to time shall
be receivable upon the exercise of this Warrant.
6. Fully Paid Stock; Taxes. The Company agrees that the shares of the
Common Stock represented by each and every certificate for Warrant Shares
delivered on the exercise of this Warrant shall, at the time of such delivery,
be validly issued and outstanding, fully paid and nonassessable, and not subject
to preemptive rights, and the Company will take all such actions as may be
necessary to assure that the par value or stated value, if any, per share of the
Common Stock is at all times equal to or less than the then Exercise Price. The
Company further covenants and agrees that it will pay, when due and payable, any
and all federal and state stamp, original issue or similar taxes that may be
payable in respect of the issue of any Warrant Share or certificate therefor.
7. Transfer.
(a) Securities Laws. Neither this Warrant nor the Warrant Shares
issuable upon the exercise hereof have been registered under the Securities
Act of 1933, as amended (the "Securities Act"), or under any state
securities laws and unless so registered may not be transferred, sold,
pledged, hypothecated or otherwise disposed of unless an exemption from
such registration is available. In the event the Holder desires to transfer
this Warrant or any of the Warrant Shares issued, the Holder must give the
Company prior written notice of such proposed transfer including the name
and address of the proposed transferee. Such transfer may be made only
either (i) upon publication by the Securities and Exchange Commission (the
"Commission") of a ruling, interpretation, opinion or "no action letter"
based upon facts presented to said Commission, or (ii) upon receipt by the
Company of an opinion of counsel to the Company in either case to the
effect that the proposed transfer will not violate the provisions of the
Securities Act, the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or the rules and regulations promulgated under either such
act, or in the case of clause (ii) above, to the effect that the Warrant or
Warrant Shares to be sold or transferred has been registered under the
Securities Act and that there is in effect a registration statement in
which is included a prospectus meeting the requirements of Subsection 10
(a) of the Securities Act, which is being or will be delivered to the
purchaser or transferee at or prior to the time of delivery of the
certificates evidencing the Warrant or Warrant Stock to be sold or
transferred.
39
<PAGE>
(b) Conditions to Transfer. Prior to any such proposed transfer, and
as a condition thereto, if such transfer is not made pursuant to an
effective registration statement under the Securities Act, the Holder will,
if requested by the Company, deliver to the Company (i) an investment
covenant signed by the proposed transferee, (ii) an agreement by such
transferee to the impression of the restrictive investment legend set forth
herein on the certificate or certificates representing the securities
acquired by such transferee, (iii) an agreement by such transferee that the
Company may place a "stop transfer order" with its transfer agent or
registrar, and (iv) an agreement by the transferee to indemnify the Company
to the same extent as set forth in the next succeeding paragraph.
(c) Indemnity. The Holder acknowledges that the Holder understands the
meaning and legal consequences of this Section 7, and the Holder hereby
agrees to indemnify and hold harmless the Company, its representatives and
each officer and director thereof from and against any and all loss, damage
or liability (including all attorneys' fees and costs incurred in enforcing
this indemnity provision) due to or arising out of (a) the inaccuracy of
any representation or the breach of any warranty of the Holder contained
in, or any other breach of, this warrant, (b) any transfer of the Warrant
or any of the Warrant Shares in violation of the Securities Act, the
Exchange Act or the rules and regulations promulgated under either of such
acts, (c) any transfer of the Warrant or any of the Warrant Shares not in
accordance with this Warrant or (d) any untrue statement or omission to
state any material fact in connection with the investment representations
or with respect to the facts and representations supplied by the Holder to
counsel to the Company upon which its opinion as to a proposed transfer
shall have been based.
(d) Transfer. Except as restricted hereby, this Warrant and the
Warrant Shares issued may be transferred by the Holder in whole or in part
at any time or from time to time. Upon surrender of this Warrant to the
Company or at the office of its stock transfer agent, if any, with
assignment documentation duly executed and funds sufficient to pay any
transfer tax, and upon compliance with the foregoing provisions, the
Company shall, without charge, execute and deliver a new Warrant in the
name of the assignee named in such instrument of assignment, and this
Warrant shall promptly be canceled. Any assignment, transfer, pledge,
hypothecation or other disposition of this Warrant attempted contrary to
the provisions of this Warrant, or any levy of execution, attachment or
other process attempted upon the Warrant, shall be null and void and
without effect.
(e) Legend and Stop Transfer Orders. Unless the Warrant Shares have
been registered under the Securities Act, upon exercise of any part of the
Warrant and the issuance of any of the Warrant Shares, the Company shall
instruct its transfer agent to enter stop transfer orders with respect to
such shares, and all certificates representing Warrant Shares shall bear on
the face thereof substantially the following legend, insofar as is
consistent with Delaware law:
40
<PAGE>
"The shares of common stock represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may not be
sold, offered for sale, assigned, transferred or otherwise disposed of
unless registered pursuant to the provisions of that Act or an opinion of
counsel to the Company is obtained stating that such disposition is in
compliance with an available exemption from such registration."
8. Loss, etc. of Warrant. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and of an
unsecured indemnity from the Holder reasonably satisfactory to the Company, if
lost, stolen or destroyed, and upon surrender and cancellation of the Warrant,
if mutilated, the Company shall execute and deliver to the Holder a new Warrant
of like date, tenor and denomination.
9. Warrant Holder Not Shareholder. Except as otherwise provided herein,
this Warrant does not confer upon the Holder any right to vote or to consent to
or receive notice as a shareholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a shareholder, prior
to the exercise hereof.
10. Communication. No notice or other communication under this Warrant
shall be effective unless the same is in writing and is (i) mailed by
first-class mail, postage prepaid, or (ii) sent by facsimile, addressed to:
(a) the Company at 45 Hartwell Avenue, Lexington, Massachusetts 02173,
facsimile no. (781) 676-7330, attention: Paul S. Weiner, Director of
Finance, or such other address as the Company has designated in writing to
the Holder, with a copy to David A. Broadwin, Esq., Foley, Hoag & Eliot
LLP, One Post Office Square, Boston, Massachusetts 02109, facsimile no.
(617) 832-7000 or
(b) the Holder at or such other address as the Holder has designated
in writing to the Company.
11. Headings. The headings of this Warrant have been inserted as a matter
of convenience and shall not affect the construction hereof
12. Applicable Law. This Warrant shall be governed by and construed in
accordance with the law of the State of Delaware without giving effect to the
principles of conflicts of law thereof.
41
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IN WITNESS WHEREOF, PALOMAR MEDICAL TECHNOLOGIES, INC. has caused this
Warrant to be signed by its Chief Executive Officer and its corporate seal to be
hereunto affixed and attested by its Secretary this ____ day of ________, 1998.
ATTEST: PALOMAR MEDICAL TECHNOLOGIES, INC.
____________________________ By:
Title: Chief Executive Officer
[Corporate Seal]
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<PAGE>
SUBSCRIPTION
The undersigned, ______________________________________________,
pursuant to the provisions of the foregoing Warrant, hereby agrees to subscribe
for the purchase of _________ shares of the Common Stock of PALOMAR MEDICAL
TECHNOLOGIES, INC. covered by said Warrant, and makes payment therefor in full
at the price per share provided by said Warrant.
Dated: ___________________ Signature: _________________________
Address: _________________________
----------------------------------
----------------------------------
Soc. Sec. or Fed ID Number: _____________
43
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED ____________________________________ hereby sells,
assigns and transfers unto ___________________________________ the foregoing
Warrant and all rights evidenced thereby, and does irrevocably constitute and
appoint __________________________________, attorney, to transfer said Warrant
on the books of PALOMAR MEDICAL TECHNOLOGIES, INC.
Dated: ___________________ Signature: _________________________
Address: _________________________
----------------------------------
----------------------------------
Soc. Sec. or Fed ID Number: _____________
44
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PARTIAL ASSIGNMENT
FOR VALUE RECEIVED ____________________________________ hereby sells,
assigns and transfers unto ____________________________________ the right to
purchase ___________ shares of the Common Stock of PALOMAR MEDICAL TECHNOLOGIES,
INC. by the foregoing Warrant, and a proportionate part of said Warrant and the
rights evidenced hereby, and does irrevocably constitute and appoint
___________________________________, attorney, to transfer that part of said
Warrant on the books of PALOMAR MEDICAL TECHNOLOGIES, INC.
Dated: ___________________ Signature: _________________________
Address: _________________________
----------------------------------
----------------------------------
Soc. Sec. or Fed ID Number: _____________
