As filed with the Securities and Exchange Commission on January 11, 1999
Registration No.
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
PALOMAR MEDICAL TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE
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(State or other jurisdiction of incorporation or organization)
04-3128178
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(IRS employer identification number)
45 HARTWELL AVENUE, LEXINGTON, MASSACHUSETTS 02421-3102 (781) 676-7300
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(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
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(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]
<PAGE>
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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<S> <C> <C> <C> <C> <C>
- -------------------------------- ----------------- -------------------- ----------------- ---------------------
Title of Shares Amount to be Proposed Proposed
to be Registered Registered Maximum Maximum Amount of
Offering Price Aggregate Registration
Per Share Offering Price Fee
- -------------------------------- ----------------- -------------------- ----------------- ---------------------
Common Stock, par value $.01 3,000,000 $.84375(2) $2,531,250(2) $767(2)
per share.
- -------------------------------- ----------------- -------------------- ----------------- ---------------------
Common Stock, par value $.01 3,000,000 $3.00(2) $9,000,000(2) $2,727(2)
per share.
- -------------------------------- ----------------- -------------------- ----------------- ---------------------
</TABLE>
(1) Consists of (i) 3,000,000 shares of common stock and (ii) 3,000,000 shares
of common stock issuable upon exercise of warrants, all of which were
issued pursuant to a Securities Purchase Agreement dated July 24, 1998 and
are exercisable at prices and terms described in the Description of Capital
Stock and Warrants section of the Prospectus.
(2) Estimated solely for purposes of calculation of the fee. The fee for the
warrants is estimated pursuant to Rule 457(g) under the Act on the basis of
the 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 January 8, 1999.
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.
The information in this prospectus is not complete and may be changed.
The selling stockholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell securities, and the selling stockholders are
not soliciting offers to buy these securities, in any state where the offer or
sale is not permitted.
SUBJECT TO COMPLETION DATED JANUARY 11, 1999
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PROSPECTUS
PALOMAR MEDICAL TECHNOLOGIES, INC.
6,000,000 shares of common stock
consisting of:
(i) 3,000,000 shares of common stock and
(ii) 3,000,000 shares of common stock issuable upon exercise of
common stock purchase warrants, all of which were issued
pursuant to a Securities Purchase Agreement dated July 24, 1998.
This prospectus relates to the offer and sale of 6,000,000 shares of
common stock, $.01 par value per share (the "SHARES") of Palomar Medical
Technologies, Inc., a Delaware corporation, consisting of: (i) 3,000,000 shares
of common stock and (ii) 3,000,000 shares of common stock issuable pursuant to
certain common stock purchase warrants, all of which were issued pursuant to a
Securities Purchase Agreement dated July 24, 1998. All of the shares being
registered may be offered and sold from time to time by certain of our
stockholders (the "SELLING STOCKHOLDERS"). (See "Selling Stockholders" and "Plan
of Distribution.") We will not receive any proceeds from the sale of such
shares, other than the $9,000,000 representing the exercise price of the
warrants. We have 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 of such liabilities.
Our common stock, $.01 par value per share, is listed on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") and
traded on the Nasdaq SmallCap Market under the symbol "PMTI." The last reported
bid price of our common stock on the Nasdaq SmallCap Market on January 8, 1999
was $.8125 per share.
AN INVESTMENT IN THESE SHARES INVOLVES A HIGH DEGREE OF RISK. SEE "DISCLOSURE
REGARDING FORWARD LOOKING STATEMENTS/RISK FACTORS" BEGINNING ON PAGE 8.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
JANUARY 11, 1998.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS.
NEITHER WE NOR THE SELLING STOCKHOLDERS HAVE AUTHORIZED ANYONE TO PROVIDE YOU
WITH INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. THE SELLING
STOCKHOLDERS ARE OFFERING TO SELL, AND SEEKING OFFERS TO BUY, SHARES OF COMMON
STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. IN THIS
PROSPECTUS, REFERENCES TO "WE," "US" AND "OUR" REFER TO PALOMAR MEDICAL
TECHNOLOGIES, INC. AND ITS SUBSIDIARIES.
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TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PAGE
Prospectus Summary............................................................5
Disclosure Regarding Forward-Looking Statements/Risk Factors .................8
Selling Stockholders ........................................................12
Use of Proceeds..............................................................13
Plan of Distribution ........................................................13
Experts......................................................................13
Legal Matters................................................................14
Material Changes.............................................................14
Where You Can Find More Information .........................................19
Disclosure of Commission Position on Indemnification.........................20
</TABLE>
It is anticipated that the Selling Stockholders will pay usual and
customary brokerage fees on the sale of the common stock registered in this
prospectus. We will pay the other expenses of this offering. The offer of shares
of common stock by the Selling Stockholders as described in this prospectus is
referred to as the "OFFERING."
<TABLE>
<S> <C> <C> <C>
Underwriting Discounts and Proceeds to Issuer or
Price To Public Commissions Other Persons
- ---------------------------- -------------------------- ---------------------------- ----------------------------
Per Unit.................... $.8125(1) 0(2) $.8125(1)(3)
Total....................... $4,875,000(1) 0(2) $4,875,000(1)(3)
- ---------------------------- -------------------------- ---------------------------- ----------------------------
</TABLE>
(1) Based on the closing bid price of the Company's common stock as
reported on the Nasdaq SmallCap Market on January 8, 1999.
(2) None, to the Company's knowledge.
(3) Less usual and customary brokerage fees.
The date of this Prospectus is ____________, 1999.
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PROSPECTUS SUMMARY
Because this is only a summary, it does not contain all of the
information that may be important to you. You should read the entire prospectus,
including "Disclosure Regarding Forward-Looking Statements/Risk Factors" and the
information incorporated by reference, before deciding to invest in shares
offered by this prospectus.
THE COMPANY
BACKGROUND...................... The Company was organized to design,
manufacture and market lasers, delivery
systems and related disposable products
for use in medical procedures. After a
period of rapid growth and expansion in
which we acquired and invested in a
number of businesses, many of which were
outside our core laser business, within
the last year and a half we have
refocused on our core competency and
divested those non-core subsidiaries and
investments. At this point in time, our
exclusive focus is laser hair removal
and research and development relating to
that and other cosmetic laser products.
In addition to manufacturing lasers for
hair removal, as a small part of our
operations we place our lasers in
clinical and cosmetic settings, and
receive in exchange a share of the
revenue generated from the laser hair
removal procedures.
OUR PRODUCTS.................... We have three lasers that have been
cleared by the FDA for hair removal in
addition to other dermatological
applications. The first, our
EpiLaser(R)hair removal system, is based
in part on ruby laser technology
originally developed in our corporate
headquarters in Massachusetts for tattoo
and pigmented lesion removal. (We still
manufacture and sell in small quantities
a laser cleared by the FDA for the
removal of tattoos and benign pigmented
lesions.) The EpiLaser(R)is specifically
configured to allow the appropriate
wavelength, energy and pulse duration to
be delivered to the hair follicle
without energy being absorbed by the
surrounding tissue. That delivery
method, combined with our patented
cooling handpiece, allows safe and
effective hair removal. The
EpiLaser(R)is the only hair removal
laser on the market that has been
cleared by the FDA for "permanent hair
reduction" labeling. The EpiLaser(R)is
manufactured at our headquarters in
Massachusetts.
Our second FDA cleared hair removal
laser, the LightSheer(TM) diode hair
removal laser, is based on diode
technology developed at our Star Medical
Technologies, Inc. subsidiary in
California. The LightSheer(TM) is
manufactured at Star, in California. The
LightSheer(TM) is the only diode-based
hair removal product on the market that
has FDA clearance.
PENDING SALE OF STAR............ The laser diode stacking technology used
in that laser has wide applications
across a variety of commercial,
industrial and medical lasers,
applications which Palomar, as a
narrowly focused cosmetic laser company,
does not utilize. This technology,
however, has enormous value to our
exclusive distributor, Coherent, Inc.
(also located in California) which does
manufacture a wide variety of lasers -
medical, commercial and industrial. As a
result, Coherent has entered into an
agreement with us to buy Star for $65
million in cash.
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The sale must still be approved by our
stockholders and by the Federal Trade
Commission, and thus we expect that it
may take an additional two to three
months to consummate the transaction. As
part of the deal, Coherent has agreed to
pay us an ongoing 7.5% royalty on future
sales of its hair removal lasers. Thus,
although the LightSheer(TM) diode laser
will no longer be in the Palomar family
of products after the sale of Star,
Palomar will continue to receive an
ongoing royalty on sales of that
product.
OUR FUTURE STRATEGY............. Assuming the sale of Star to Coherent is
completed, we will continue to
manufacture and develop cosmetic lasers
at our Massachusetts facility. We have
recently introduced our second
generation ruby laser, the E2000(TM), a
product which we anticipate will be
superior to hair removal lasers
currently on the market in a number of
respects, including speed and efficacy.
We will consider a number of
alternatives with respect to our future
products, including manufacturing them
ourselves and selling them directly
and/or through distributors or (as in
the case of Star) selling the product
line and/or technology to others. We
will continue to choose the alternative
in each case which we believe best
maximizes long-term shareholder value.
If Star is sold to Coherent, Coherent
will continue to act as a distributor of
our products, but on a non-exclusive
basis.
Our core research and development also
takes place in Massachusetts, under the
guidance of a team of scientists who
work closely with our partners at
Massachusetts General Hospital and the
Institute of Fine Mechanics and Optics
Laser Center in St. Petersburg, Russia.
Among our research and development goals
in the field of laser hair removal is to
design systems that 1) permit more rapid
treatment of large areas, 2) have high
gross margins, and 3) are lower cost,
thus addressing broader markets. We are
also seeking to develop products that
address dermatology and cosmetic
procedures markets other than hair
removal.
To enhance shareholder value and
increase revenues, we will also consider
licensing our intellectual property (in
particular, the patents licensed
exclusively to us by Massachusetts
General Hospital under which we practice
our proprietary method of skin cooling
and hair removal), selling intellectual
property rights that we do not intend to
exploit, and mergers, acquisitions or
other transactions.
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THE OFFERING
SECURITIES OFFERED.............. 6,000,000 shares of our common stock,
$.01 par value per share. The actual
number of shares offered by this
prospectus, 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................. We will receive no part of the proceeds
from the sale of the shares registered
pursuant to this registration statement,
other than the $9,000,000 representing
the exercise price of the warrants.
SELLING STOCKHOLDERS............ The Shares may be offered for sale from
time to time by the Selling Stockholders
specified under the caption "Selling
Stockholders."
NASDAQ TRADING SYMBOL........... PMTI
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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS/RISK FACTORS
An investment in shares of our common stock is risky. You should
consider carefully the following risk factors in addition to the remainder of
this prospectus, including information incorporated by reference, before
purchasing shares offered by this prospectus.
Some of the information in this prospectus contains forward-looking
statements that involve substantial risks and uncertainties. You can identify
these statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate," "continue" and similar words. You should
read statements that contain these words carefully because they (1) discuss our
future expectations, (2) contain projections of our future operating results or
financial conditions or (3) state other "forward-looking" information. We
believe it is important to communicate certain of our expectations to our
investors. There may be events in the future, however, that we are not
accurately able to predict or over which we have no control. The risk factors
listed in this section, as well as any other cautionary language in this
prospectus, provide examples of risks, uncertainties and events that may cause
our actual results to differ materially from the expectations we describe in our
forward-looking statements. Before you invest in our common stock, you should be
aware that the occurrence of any of the events described in these risk factors
and elsewhere in this prospectus could have a material adverse effect on our
business, financial condition and results of operations. In such case, the
trading price of our commons tock could decline and you could lose all or part
of your investment.
WE MAY NOT BE ABLE TO CLOSE THE SALE OF OUR STAR MEDICAL TECHNOLOGIES, INC.
SUBSIDIARY
We have recently signed an agreement with Coherent, Inc. pursuant to
which Coherent has agreed to buy our Star Medical Technologies, Inc. subsidiary
for 65 million dollars in cash. The sale must be approved by stockholders
holding a majority of the shares of our outstanding common stock, and is subject
to regulatory approval and other standard closing conditions. We may not receive
a sufficient number of stockholder votes to approve the transaction, or the
transaction may fail to close for other reasons. Our future operating plan is
now to a great extent dependant on completing the sale, in that it will provide
us with the money necessary to finance our future operations, including research
and product development.
WE MAY BE DELISTED FROM NASDAQ
We have been notified by the Nasdaq Stock Market that for continued
listing on the Nasdaq SmallCap Market we must meet Nasdaq's minimum bid price of
$1.00 per share. Because our stock price fell below $1.00 for a 30 day trading
period between August 28 and October 9, 1998, it is now subject to delisting.
Nasdaq informed us that we have until January 13, 1999 to regain compliance with
the $1.00 minimum bid price requirement We have not and will not be able to
regain compliance before that date. However, we have requested a hearing and
have been informed that the delisting of our common stock will be stayed during
the pendency of our appeal. To regain compliance with the minimum bid price
requirement, we plan to ask our stockholders to approve a ten-for-one reverse
split of our common stock. However, there can be no assurance that we would
secure stockholder approval for any reverse split, or that, even if stockholder
approval is obtained, a reverse split will enable us to regain compliance with
the minimum bid price requirement in time to prevent delisting. The delisting of
our common stock would likely reduce the liquidity of our common stock and our
ability to raise capital. If our common stock is delisted from the Nasdaq
SmallCap Market, it will likely be quoted on the "pink sheets" maintained by the
National Quotation Bureau, Inc. or Nasdaq's OTC Bulletin Board. These listings
can make trading more difficult for stockholders. In addition, a reverse split
itself could adversely impact the market price of our common stock.
WE WILL CONTINUE TO BE DEPENDENT ON COHERENT IF WE DO NOT SELL STAR
Under our sales agency agreement with Coherent, which will remain in
effect until November, 2001 if we do not sell Star to Coherent, Coherent
receives a marketing and sales commission, based on the end-user price, for each
of our lasers that it sells. If Coherent remains as our exclusive distributor
because we do not close the Star sale, Coherent may not be successful in
distributing our lasers or may not give sufficient priority to marketing our
products. In
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addition, Coherent may develop, market and manufacture its own lasers that
incorporate our proprietary technology and compete with our lasers, in which
case it must pay us a royalty on such sales. Under our agreement, if we are
unable (as defined in the agreement) or unwilling to manufacture the cosmetic
laser products to be distributed by Coherent, then we must license to Coherent
the technology necessary to make such products.
WE NEED TO DEVELOP NEW PRODUCTS
We face rapidly changing technology and continuing improvements in
cosmetic laser technology. In order to be successful, we must continue to make
significant investments in research and development in order to (a) develop in a
timely and cost-effective manner new products that meet changing market demands,
(b) enhance existing products and (c) achieve market acceptance for such
products. We have in the past experienced delays in developing new products and
enhancing existing products. If we sell our Star subsidiary, our future revenue
will be entirely dependent on sales of newly introduced products. Although we
have recently introduced a new hair removal laser, it may not achieve market
acceptance or generate sufficient margins. In addition, the market for this type
of hair removal laser may already be saturated. At present, broad market
acceptance of laser hair removal is critical to our success. We need to
diversify our product line by developing cosmetic laser products other than hair
removal lasers.
WE FACE INTENSE COMPETITION FROM COMPANIES WITH SUPERIOR FINANCIAL, MARKETING
AND OTHER RESOURCES
The laser hair removal industry is highly competitive and is
characterized by the frequent introduction of new products. We compete in the
development, manufacture, marketing and servicing of hair removal lasers with
numerous other companies, many of which have substantially greater financial,
marketing and other resources than we do. As a result, some of our competitors
are able to sell hair removal lasers at prices significantly below the prices at
which we sell our hair removal lasers. In addition, if and when we sell Star,
our current distributor, Coherent, one of the largest and best financed laser
companies, will become our competitor, and we will have to find new ways to
distribute our products. Our laser products also face competition from
alternative medical products and procedures, such as electrolysis and waxing,
among others. We may not be able to differentiate our products from the products
of our competitors, and customers may not consider our products to be superior
to competing products or medical procedures, especially if competitive products
and procedures are offered at lower prices. Our competitors may develop products
or new technologies that make our products obsolete or less competitive.
OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE
Our operating results are difficult to predict and may fluctuate
significantly from quarter to quarter, especially if we sell our Star
subsidiary. Almost all of our revenues in our most recent quarter were
attributable to sales of the LightSheer(TM) diode laser manufactured by Star. If
our operating results fall below the expectations of investors or public market
analysts, the price of our common stock could fall dramatically.
WE MAY NEED TO SECURE ADDITIONAL FINANCING, AND OUR AUDITORS HAVE EXPRESSED
DOUBT ABOUT OUR ABILITY TO CONTINUE AS GOING CONCERN
We have a history of losses. As a result, the report of our independent
public accountants in connection with our Consolidated Balance Sheets as of
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 our
recurring losses, working capital deficiency and stockholders' deficit raises
substantial doubts about our ability to continue as a going concern. If we do
not sell our Star subsidiary, we may have to secure additional financing to
complete our research and development activities, commercialize our current and
proposed cosmetic laser products, and fund ongoing operations. We may also
determine, depending upon the opportunities available, to seek additional debt
or equity financing to fund the costs of acquisitions or expansion. To the
extent that we finance an acquisition with a combination of cash and equity
securities, any such issuance of equity securities could result in dilution to
the interests of our stockholders. Additionally, to the extent that we incur
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, we will be subject to risks associated with incurring
substantial
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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.
WE ARE SUBJECT TO NUMEROUS GOVERNMENT REGULATIONS
We are 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. All laser medical devices are subject to FDA
regulations regulating clinical testing, manufacture, labeling, sale,
distribution and promotion of medical devices. Before a new device can be
introduced into the market, we must obtain clearance from the FDA. Compliance
with the FDA clearance process is expensive and time-consuming, and there is no
assurance that we will be able to obtain such clearances timely or at all. 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. In order to be sold outside the United
States, our 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.
WE ARE DEPENDENT ON THIRD PARTY RESEARCHERS
We are substantially dependent upon third party researchers, over whom
we do not have absolute control, to satisfactorily conduct and complete research
on our behalf and to grant us favorable licensing terms for products which they
may develop. At present, our principal research partner is the Wellman Labs at
Massachusetts General Hospital. We provide research funding, laser technology
and optics know-how in return for licensing agreements with respect to specific
medical applications and patents. Our success will be highly dependent upon the
results of the research, and there can be no assurance that such research
agreements will provide us with marketable products in the future or that any of
the products developed under these agreements will be profitable for us.
OUR COMMON STOCK COULD BE FURTHER DILUTED AS THE RESULT OF OUR ISSUING
CONVERTIBLE SECURITIES, WARRANTS AND OPTIONS
In the past, we have issued convertible securities (such as debentures
and preferred stock) and warrants in order to raise money. We have also issued
options and warrants as compensation for services and incentive compensation for
our employees and directors. We have a substantial number of shares of common
stock reserved for issuance upon the conversion and/or exercise of these
securities. The issuance of any such additional convertible securities, options
and warrants could affect the rights of the holders of common shares, and could
reduce the market price of the common shares.
WE ARE SUBJECT TO PRODUCT LIABILITY CLAIMS
We face an inherent business risk of financial exposure to product
liability claims in the event that use of our products results in personal
injury. Our 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 our products. Further, in the event that any of our products prove to be
defective, we may be required to recall and redesign such products. Although we
have not experienced any material losses due to product liability claims to
date, there can be no assurance that we will not experience such losses in the
future.
OUR PROPRIETARY TECHNOLOGY IS SUBJECT TO LIMITED PROTECTIONS
Our business could be materially and adversely affected if we are not
able to protect adequately our proprietary intellectual property rights. We rely
on a combination of patent, trademark and trade secret laws, license and
confidentiality agreements to protect our proprietary rights. We generally enter
into non-disclosure agreements with our employees and customers and restrict
access to, and distribution of, our proprietary information. Nevertheless, we
may be unable to deter misappropriation of our proprietary information, detect
unauthorized use and take appropriate steps to enforce our intellectual property
rights. Our competitors also may independently develop
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technologies that are substantially equivalent or superior to our technology.
Although we believe that our services and products do not infringe on the
intellectual property rights of others, we cannot prevent someone else from
asserting a claim against us in the future for violating their intellectual
property rights. In addition, costly and time consuming litigation may be
necessary to enforce patents issued or licensed exclusively to us, to protect
our trade secrets and/or know-how or to determine the enforceability, scope and
validity of others' intellectual property rights.
OUR PRODUCTS, SERVICES AND SYSTEMS MAY NOT BE YEAR 2000 COMPLIANT
Many existing computer systems and software applications use only two
digits to identify a year in the date field. These systems and applications were
designed and developed without considering the impact of the upcoming change in
the century. If not corrected, year 2000 problems may cause many computer
applications to fail or create erroneous results for calculations involving
years after 1999.
We are using internal resources to identify, correct or reprogram, and
test our systems for year 2000 compliance. We currently are evaluating the
readiness of those of our internal systems that are business-critical. We
consider hardware, software, systems, technologies and applications to be
"business-critical" if a failure would either have a material adverse impact on
our business or involve a safety risk to our employees or customers. We have
reviewed certain of our internal systems and future system plans to assess year
2000 compliance. We expect that our internal system development plans will
address the year 2000 issue and will correct any existing non-compliant systems
without the need to accelerate the overall information systems implementation
plans. Our business would be adversely affected if there are unidentified
dependencies on internal systems to operate the business, or if any required
modifications are not completed on a timely basis or are more costly to
implement than currently anticipated. We are in the process of assessing the
year 2000 compliance costs; based on information to date (excluding the possible
impact of vendor systems), we do not believe that it will have a material effect
on our earnings.
In addition, there can be no assurance that the systems of other
companies on which our 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 our systems.
OUR ANTI-TAKEOVER PROVISIONS MAY DISCOURAGE POTENTIAL TAKEOVER ATTEMPTS
Certain provisions of our Second Restated Certificate of Incorporation
and Delaware law could be used by our incumbent management to make it more
difficult for a third party to acquire control of us, even if the change in
control might be beneficial to our stockholders. This could discourage potential
takeover attempts and could adversely affect the market price of our common
stock.
In particular, we may issue preferred stock in the future without
stockholder approval, upon terms determined by our board of directors. The
rights of holders of our common stock would be subject to, and may be adversely
affected by, the rights of holders of any preferred stock 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, or of
discouraging a third party from acquiring, a majority of our outstanding stock.
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SELLING STOCKHOLDERS
All of the shares of common stock are being sold by the Selling
Stockholders identified in the following table (including the footnotes). The
table (including the footnotes) also sets forth information regarding the
beneficial ownership of our outstanding common stock as of the date of the
latest reports by the Selling Stockholders received by us. Except as indicated
by the notes to the following table, the Selling Stockholders listed below have
sole voting power and investment power over the shares beneficially held by
them. To the best of our 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 our predecessors or affiliates over the
past three years. The Selling Stockholders may reduce the number of shares
offered for sale or decline to sell any or all of the shares registered in the
prospectus
No predictions can be made as to the effect, if any, that future sales
of shares, or the availability of shares for future sales, will have on the
market price of the common stock prevailing from time to time. Sales of
substantial amounts of common stock (including shares issued upon the exercise
of stock options or warrants), or the perception that such sales could occur,
could adversely affect prevailing market prices for the common stock.
<TABLE>
<S> <C> <C> <C> <C> <C>
Number Number Shares to be
of Shares Beneficially of Beneficially Owned
Owned Prior Shares After Offering If
Selling to Offering(1) Offered All Shares Sold
STOCKHOLDERS NUMBER PERCENT NUMBER PERCENT
Rockside Foundation(2) 9,330,800 13.5% 3,600,000 5,730,800 8.3%
c/o Woodlawn Foundation, Inc.
524 North Avenue
New Rochelle, NY 10801
Mark T. Smith(3) 9,330,800 13.5% 2,400,000 6,930,800 10.0%
5090 Warwick Tr.
Pittsburgh, PA 15213
</TABLE>
1. Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. 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 by exercising
options or warrants are counted as outstanding for the purpose of computing
the ownership of such individual or group. Percentage of beneficial
ownership is based on 69,265,003 shares of common stock outstanding as of
January 8, 1999.
2. Based on information provided in Amendment No. 1 to a Schedule 13D, filed
on December 22, 1998. Includes 3,922,200 shares beneficially owned with
respect to which the Rockside Foundation shares voting and dispositive
power with four other individuals and entities. Also includes 3,000,000
shares of common stock beneficially owned which may be acquired with 60
days pursuant to the exercise of warrants.
3. Based on information provided in Amendment No. 1 to a Schedule 13D, filed
on December 22, 1998. Includes 6,288,900 shares beneficially owned with
respect to which Mark T. Smith shares voting and dispositive power with
four other individuals and entities. Also includes 3,000,000 shares of
common stock beneficially owned which may be acquired with 60 days pursuant
to the exercise of warrants.
12
<PAGE>
USE OF PROCEEDS
The common stock is being sold by the Selling Stockholders for their
own accounts, and we will not receive any of the proceeds from the sale of the
Selling Stockholders' common stock or warrants other than $9,000,000
representing the exercise price of the warrants.
PLAN OF DISTRIBUTION
The Selling Stockholders or their respective pledgees, donees,
transferees or other successors in interest may offer shares of our common stock
from time to time pursuant to this registration statement, depending on market
conditions and other factors, in one or more transactions on Nasdaq or other
securities exchanges on which our common stock is traded, in the over the
counter market or otherwise, at market prices prevailing at the time of sale, at
negotiated prices or at fixed prices. The Selling Stockholders also may sell
such shares through the sale and exercise of warrants. Common stock may be
offered in any manner permitted by law, including through underwriters, licensed
brokers, dealers or agents, and directly to one or more purchasers.
Sales of common stock may involve:
- sales to underwriters who will acquire shares of common stock
for their own account and resell them in one or more
transactions at fixed prices or at varying prices determined
at time of sale;
- block transactions in which the broker or dealer so engaged
may sell shares as agent or principal;
- purchases by a broker or dealer as principal who resells the
shares for its account;
- an exchange distribution in accordance with the rules of any
such exchange;
- ordinary brokerage transactions and transactions in which a
broker solicits purchasers; and
- privately negotiated sales, which may include sales directly
to institutions.
Brokers and dealers will receive customary compensation in the form of
underwriting discounts, concessions or commissions from the Selling Stockholders
and/or purchasers of our common stock in respect of transactions described above
(other than privately negotiated sales). The Selling Stockholders and any broker
or dealer that participates in the distribution of common stock may be deemed to
be underwriters and any commissions received by them and any profit on the
resale of our common stock positioned by a broker or dealer may be deemed to be
underwriting discounts and commissions under the Securities Act. In the event
the Selling Stockholders engage an underwriter in connection with the sale of
our common stock, to the extent required, a prospectus supplement will be
distributed, which will set forth the number of shares of common stock being
offered and the terms of the offering, including the names of the underwriters,
any discounts, commissions and other items constituting compensation to
underwriters, dealers or agents, the public offering price and any discounts,
commissions or concessions allowed or reallowed or paid by underwriters to
dealers.
In addition, the Selling Stockholders may, from time to time, sell
shares in transactions under Rule 144 promulgated under the Securities Act.
Certain of the underwriters, brokers, dealers or agents and their
associates may engage in transactions with and perform other services for
Palomar in the ordinary course of their business.
EXPERTS
The audited consolidated 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
13
<PAGE>
accounting and auditing. Reference is made to that report, which includes an
explanatory paragraph regarding the Company's ability to continue as a going
concern.
LEGAL MATTERS
Our General Counsel has advised us with respect to the validity of the
shares of common stock offered by this prospectus.
MATERIAL CHANGES
INTRODUCTION TO PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 1998 AND
PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS FOR
THE YEAR ENDED DECEMBER 31, 1997 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998
On December 7, 1998, we entered into an Agreement and Plan of
Reorganization to sell all of the issued and outstanding shares of common stock
of our majority owned Star subsidiary to Coherent for $65,000,000 in cash. Our
fully diluted ownership percentage of Star is 82.46%, assuming the exercise of
options issued to purchase 625,507 shares of Star's common stock at exercise
prices ranging from $2.50 per share to $19.00 per share. Under the terms of this
transaction, we will receive gross proceeds of approximately $54,000,000. We
anticipate that we will receive net proceeds of approximately $48,825,000. This
amount reflects transaction costs of approximately $600,000, income taxes of
approximately $2,500,000, costs associated with the repurchase of Coherent's
EpiLaser inventory of $1,125,000 and an earnout bonus of $950,000 for the
employees of Star based on the attainment of certain production milestones
through the date of closing.
The accompanying pro forma consolidated condensed balance sheet as of
September 30, 1998 assumes that Coherent purchased Star on the last reported
balance sheet date, September 30, 1998. The accompanying pro forma information
is presented for illustrative purposes only and is not necessarily indicative of
the financial position or results of operations which would have actually been
reported had the disposition occurred as assumed, or which may be presented in
the future.
The accompanying pro forma consolidated condensed Statements of
Operations for the year ended December 31, 1997 and nine months ended September
30, 1998 assume the sale of Star took place on December 31, 1996, immediately
before the fiscal year presented. The pro forma consolidated condensed
statements of operations do not include the effect of the gain from our sale of
Star to Coherent.
The accompanying pro forma information is presented for illustrative
purposes only and is not necessarily indicative of the financial position or
results of operations which would actually have been reported had the sale of
Star occurred as assumed, or which may be reported in the future.
The accompanying pro forma consolidated condensed financial statements
should be read in conjunction with the historical financial statements and
related notes thereto for Palomar.
14
<PAGE>
PALOMAR MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Historical Pro Forma
Consolidated Star Other Adjustments Pro Forma
--------------- ---------------- ------------------------------ --------------
ASSETS (a)
CURRENT ASSETS:
Cash and cash equivalents $2,665,686 $(565,395) (b) $ 48,070,092 $ $
- 50,170,383
Marketable securities 15,944 - - - 15,944
Accounts receivable, net 5,901,131 (5,209,070) - - 692,061
Inventories, net 4,117,425 (2,740,453) - - 1,376,972
Escrow amount due from Coherent, Inc. - - (c) 3,254,908 - 3,254,908
Other current assets 1,358,886 (26,395) - - 1,332,491
--------------- ---------------- -------------- ------------ --------------
Total current assets 14,059,072 (8,541,313) 51,325,000 - 56,842,759
--------------- ---------------- -------------- ------------ --------------
PROPERTY AND EQUIPMENT, AT COST, NET 3,517,716 (844,262) - - 2,673,454
--------------- ---------------- -------------- ------------ --------------
OTHER
ASSETS:
Cost in excess of net assets acquired, 1,850,574 (904,024) - - 946,550
net
Deferred financing costs 99,167 - - - 99,167
Other noncurrent assets 160,642 (18,190) - - 142,452
--------------- ---------------- -------------- ------------ --------------
Total other assets 2,110,383 (922,214) - - 1,188,169
--------------- ---------------- -------------- ------------ --------------
$ 19,687,171 $(10,307,789) $51,325,000 $ - 60,704,382
=============== ================ ============== ============ ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $5,765,486 $(4,000,000) $ $ $ 1,765,486
Accounts payable 3,009,978 (1,848,502) - - 1,161,476
Accrued expenses 10,652,657 (2,600,238) - (d) 2,500,000 10,552,419
Current portion of deferred revenue 1,181,213 - - - 1,181,213
--------------- ---------------- -------------- ------------ --------------
Total current liabilities 20,609,334 (8,448,740) - 2,500,000 14,660,594
--------------- ---------------- -------------- ------------ --------------
NET LIABILITIES OF DISCONTINUED
OPERATIONS 1,687,079 - - - 1,687,079
--------------- ---------------- -------------- ------------ --------------
LONG-TERM DEBT, NET OF CURRENT PORTION 3,173,542 - - - 3,173,542
--------------- ---------------- -------------- ------------ --------------
DEFERRED REVENUE, NET OF CURRENT PORTION 1,120,000 - - - 1,120,000
--------------- ---------------- -------------- ------------ --------------
INTERCOMPANY PAYABLE - (14,282,944) - (e) 14,282,944 -
--------------- ---------------- -------------- ------------ --------------
STOCKHOLDERS' EQUITY
(DEFICIT):
Preferred stock, $.01 par value- 75 - - - 75
Common stock, $.01 par value- 693,493 (2,220,000) - (e) 2,220,000 693,493
Additional paid-in capital 160,634,871 (1,874,823) - (e) 1,874,823 160,634,871
Accumulated deficit (166,592,364) 16,518,718 (e) 16,518,718 46,965,951 (119,626,413)
(f)
Less: Treasury stock- (345,000 shares
at cost) (1,638,859) - - - (1,638,859)
--------------- ---------------- -------------- ------------ --------------
Total stockholders' equity
(deficit) (6,902,784) 12,423,895 16,518,718 51,060,774 40,063,167
--------------- ---------------- -------------- ------------ --------------
$ 19,687,171 $(10,307,789) $16,518,718 $67,843,718 $ 60,704,382
=============== ================ ============== ============ ==============
</TABLE>
15
<PAGE>
PALOMAR MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C><C>
Historical Pro Forma
Consolidated Star Other Adjustments Pro Forma
---------------- --------------- ---------------------- ----------------
(g)
REVENUES $ 20,994,546 $ (394,000) $ - $ 20,600,546
COST OF REVENUES 20,055,963 (180,000) - 19,875,963
---------------- --------------- ---------------------- -----------------
Gross margin 938,583 (214,000) - 724,583
---------------- --------------- ---------------------- -----------------
OPERATING EXPENSES
Research and development 11,990,332 (8,402,000) 4,000,000 (h) 7,588,332
Sales and marketing 6,959,750 (863) - 6,958,887
General and administrative 17,393,093 (1,077,000) - 16,316,093
Restructuring and asset write-off 3,325,000 - - 3,325,000
Settlement and litigation costs 3,199,000 - - 3,199,000
---------------- --------------- ---------------------- -----------------
Total operating expenses 42,867,175 (9,479,863) 4,000,000 37,387,312
---------------- --------------- ---------------------- -----------------
Loss from operations (41,928,592) 9,265,863 (4,000,000) (36,662,729)
---------------- --------------- ---------------------- -----------------
INTEREST EXPENSE (6,993,898) 402,000 1,019,599 (5,572,299)
(i)
INTEREST INCOME 456,945 456,945
NET LOSS ON TRADING SECURITIES (52,272) - - (52,272)
ASSET WRITE-OFF (9,658,000) - - (9,658,000)
OTHER INCOME (EXPENSE) (193,262) - - (193,262)
---------------- --------------- ---------------------- -----------------
NET LOSS FROM CONTINUING
OPERATIONS $ (58,369,079) $ 9,667,863 $ (2,980,401) $ (51,681,617)
================ =============== ====================== =================
BASIC AND DILUTED NET LOSS
PER COMMON SHARE FROM:
Continuing Operations $(1.79) $(1.60)
================ =================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 35,105,272 35,105,272
================ =================
</TABLE>
16
<PAGE>
PALOMAR MEDICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Historical Pro Forma
Consolidated Star Other Adjustments Pro Forma
--------------- ---------------- -------------------- ---------------
(g)
REVENUES $ 29,968,108 $ (22,006,599) $ - $ 7,961,509
COST OF REVENUES 16,870,561 (8,856,776) - 8,013,785
--------------- ---------------- -------------------- ---------------
Gross margin 13,097,547 (13,149,823) - (52,276)
--------------- ---------------- -------------------- ---------------
OPERATING EXPENSES
Research and development 5,653,066 (2,657,435) - 2,995,631
Sales and marketing (9,118,366) - 1,350,481
General and administrative 6,980,037 (4,273,115) 2,706,922
--------------- ---------------- -------------------- ---------------
Total operating expenses 23,101,950 (16,048,916) - 7,053,034
--------------- ---------------- -------------------- ---------------
Loss from operations (10,004,403) 2,899,093 - (7,105,310)
--------------- ---------------- -------------------- ---------------
INTEREST EXPENSE (1,013,630) 730,000 (142,887) (i) (426,517)
OTHER INCOME 750,781 - - 750,781
--------------- ---------------- -------------------- ---------------
NET LOSS FROM
CONTINUING OPERATIONS $(10,267,252) $ 3,629,093 $ (142,887) $ (6,781,046)
=============== ================ ==================== ===============
BASIC AND DILUTED NET LOSS
PER COMMON SHARE FROM:
Continuing Operations $(0.19) $(0.13)
=============== ===============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 60,880,311 60,880,311
=============== ===============
</TABLE>
17
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 1998 AND
PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS FOR
THE YEAR ENDED DECEMBER 31, 1997 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998
(Unaudited)
NOTE (1) PRO FORMA BALANCE SHEET ADJUSTMENTS
The following pro forma adjustments are required to reflect the
anticipated sale of our majority owned subsidiary, Star, to Coherent as of
September 30, 1998 (the balance sheet date). Such allocations may be revised to
reflect the actual costs of this transaction as of the closing date.
(a) To eliminate Star's assets, liabilities and equity.
<TABLE>
<S> <C> <C> <C>
OTHER PRO FORMA ADJUSTMENTS NET AMOUNT
(b) To account for Palomar's net cash received from the sale
of Star to Coherent. $48,070,092
(c) To account for the amount due from Coherent for the escrow
related to the sale of Star. $3,254,908
(d) To record income taxes due related to the sale of Star. $2,500,000
(e) To eliminate Palomar's intercompany balance due from Star
and net investment basis of Star. $1,859,049
(f) To reflect the gain, net of related income taxes, on the
sale of Star. $46,965,951
</TABLE>
18
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 1998 AND
PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS FOR
THE YEAR ENDED DECEMBER 31, 1997 AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998
(Unaudited)
NOTE (2) PRO FORMA STATEMENT OF OPERATIONS ADJUSTMENTS
The following pro forma adjustments are required to reflect the pro
forma consolidated condensed statements of operations as a result of our
anticipated sale of our majority owned subsidiary, Star, to Coherent. For
purposes of the pro forma statements of operations, it is assumed that the sale
of Star and resulting gain of approximately $47 million, occurred on December
31, 1996 so that the statement of operations would only include results from
continuing operations.
(g) To eliminate the effects of Star's operations on the consolidated
statements of operations for the year ended December 31, 1997 and the nine
months ended September 30, 1998.
<TABLE>
<S> <C> <C> <C> <C>
OTHER PRO FORMA ADJUSTMENTS NET AMOUNT FOR THE PERIOD ENDED
--------------------------- -------------------------------
DECEMBER 31, 1996 SEPTEMBER 30, 1996
----------------- ------------------
(h) Represents the add back of research and development expense incurred by
Palomar and allocated to Star. $4,000,000 $--
(i) To record additional (excess) interest expense based on Star's percentage
of Palomar's total funding. $(142,887) $(1,019,599)
</TABLE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission (the
"COMMISSION"). You can inspect and copy these reports, proxy statements and
other information at the public reference facilities of the Commission, in Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549; 7 World Trade Center,
Suite 1300, New York, New York 10048; and Suite 1400, Citicorp Center, 500 W.
Madison Street, Chicago, Illinois 60661-2511. You can also obtain copies of
these materials from the public reference section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Please call the
Commission at 1-800-SEC-0330 for further information on the public reference
rooms. The Commission also maintains a web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission (http://www.sec.gov).
We have filed a registration statement and related exhibits with the
Commission under the Securities Act of 1933, as amended (the "SECURITIES ACT").
The registration statement contains additional information about us and our
common stock. You may inspect the registration statement and exhibits without
charge at the office of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and you may obtain copies from the Commission at prescribed rates.
The Commission allows us to "incorporate by reference" the information
we file with it, which means that we can disclose important information to you
by referring to those documents. The information incorporated by reference is an
important part of this prospectus, and information that we file later with the
Commission will automatically update and supersede this information. We
incorporate by reference the following documents we
19
<PAGE>
filed with the Commission pursuant to Section 13 of the Securities Exchange Act
of 1934, as amended (the "EXCHANGE ACT"):
- Annual Report on Form 10-K for the year ended December 31, 1997;
- Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998,
June 30, 1998 and September 30, 1998;
- Current Report on Form 8-K filed on June 3, 1998;
- Description of our common stock contained in our registration
statement on Form 8-A filed with the Commission on June 6, 1992,
including the amendment on Form 8 dated December 17, 1992; and
- All documents filed by us with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
prospectus and before the offering the common stock thereby is stopped
(other than those portions of such documents described in paragraphs
(i), (k), and (l) of Item 402 of Regulation S-K promulgated by the
Commission).
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
Investor Relations
Palomar Medical Technologies, Inc.
45 Hartwell Avenue
Lexington, Massachusetts 02421-3102
(781)676-7300
Attention: John J. Ingoldsby
(e-mail: [email protected])
You should rely only on the information incorporated by reference or
provided in this prospectus and any supplement. We have not authorized anyone
else to provide you with different information.
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 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.
20
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses to be paid by the
Registrant in connection with the issuance and distribution of the shares of
common stock being registered. All amounts shown are estimates except for the
Securities and Exchange Commission registration fee. The Registrant will pay all
expenses in connection with the distribution of the shares of common stock being
sold by the Selling Stockholders (including fees and expenses of counsel for the
Registrant), except for any commission or discounts due to any broker or dealer
in connection with sales of shares offered by this prospectus.
<TABLE>
<S> <C> <C> <C> <C>
Securities and Exchange Commission Filing Fee $ 767
Accounting Fees and Expenses 3,000
Legal Fees and Expenses 1,000
Blue Sky Filing Fees and Expenses 500
Printing and Mailing Costs 100
Transfer Agent Fees 500
Miscellaneous 500
-------------------
Total Expenses $6,367
===================
</TABLE>
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:
21
<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.
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.
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<PAGE>
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.
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.
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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.
In addition, the Company maintains a directors' and officers' insurance
policy that covers certain liabilities of directors and officers of the Company,
including liabilities under the Securities Act of 1933.
24
<PAGE>
ITEM 16. EXHIBITS
The following are filed as part of this registration statement:
<TABLE>
<S> <C> <C>
EXHIBIT NO. DESCRIPTION
3.1 Second Restated Certificate of Incorporation of the Company
4.2 By-laws of the Company as amended (incorporated by reference to Exhibit 3.5 to the Company's
Report on Form 10KSB/A-4 for the period ending December 31, 1996.
4.3 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).
4.4 Form of Securities Purchase Agreement.
4.5 Form of Warrant to Purchase Common Stock (incorporated by reference to Exhibit 4(b) of the
Company's Form S-3 Registration Statement No. 333-57261).
5 Opinion of General Counsel of Palomar regarding legality of shares registered hereunder.
23.1* Consent of Arthur Andersen LLP, independent public accountants.
23.2 * Consent of General Counsel of Palomar (included in Exhibit 5).
</TABLE>
25
<PAGE>
ITEM 17. UNDERTAKINGS
(a) We hereby undertake:
(1) 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 end 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 a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of 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 information required to be included in a post-effective
amendment by paragraphs (a)(1)(i) and (a)(1)(ii) above may be 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 in the
registration statement.
(2) 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 therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) We hereby undertake that, for purposes of determining any liability under
the Securities Act of 1933, each filing of our annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an 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 therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
Safeway pursuant to the provisions described in this registration statement
above, or otherwise, we have 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 us of
expenses incurred or paid by a director, officer or controlling person of us in
the successful defense of any action, suit or proceeding) is asserted against us
by such director, officer or controlling person in connection with the
securities being registered, we will, unless in the opinion of our counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by us is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
26
<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 January
11, 1999.
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>
<S> <C> <C> <C>
SIGNATURE TITLE DATE
/s/ Louis P. Valente Chairman of the Board January 11, 1999
- ------------------------------ President and Chief Executive
Louis P. Valente Officer (Chief Executive Officer)
/s/ Joseph P. Caruso Chief Financial Officer and Treasurer January 11, 1999
- ------------------------------ (Principal Financial and Accounting
Joseph P. Caruso Officer)
/s/ Nicholas P. Economou Director January 11, 1999
- ------------------------------
Nicholas P. Economou
/s/ A. Neil Pappalardo Director January 11, 1999
- ------------------------------
A. Neil Pappalardo
/s/ James G. Martin Director January 11, 1999
- ------------------------------
James G. Martin
</TABLE>
SECOND RESTATED
CERTIFICATE OF INCORPORATION
OF
PALOMAR MEDICAL TECHNOLOGIES, INC.
The following Second Restated Certificate of Incorporation of Palomar
Medical Technologies, Inc., originally known as Dynamed, Inc. (the
"CORPORATION"), (i) only restates and integrates and does not further amend the
provisions of the Restated Certificate of Incorporation of the Corporation filed
with the Secretary of State of the State of Delaware on August 14, 1996, as
heretofore amended, corrected or supplemented and; (ii) contains no discrepancy
with the provisions of such Restated Certificate of Incorporation, as heretofore
amended, corrected or supplemented; and (iii) has been duly adopted by the Board
of Directors of the Corporation in accordance with the provisions of Section 245
of the Delaware General Corporation Law.
FIRST: The name of the Corporation is Palomar Medical Technologies,
Inc.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, Wilmington, County of
New Castle, and the name of its registered agent at such
address is The Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or
promoted is as follows:
To engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of
Delaware.
FOURTH: The total number of shares which the Corporation shall have
the authority to issue is one hundred and twenty-five million
(125,000,000) shares, consisting of one hundred twenty million
(120,000,000) shares of common stock, having a par value of
one cent ($.01) per share (the "Common Stock") and five
million (5,000,000) of preferred stock, having a par value of
one cent ($.01) per share (the "Preferred Stock").
Additional designations and powers, the rights and preferences and the
qualifications, limitations or restrictions with respect to each series of such
class of stock of the Corporation shall be as determined by the Board of
Directors from time to time.
A. SERIES F CONVERTIBLE PREFERRED STOCK
SECTION 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "SERIES F CONVERTIBLE PREFERRED STOCK" (the "SERIES F CONVERTIBLE
PREFERRED STOCK"), and the number of shares constituting the Series F
Convertible Preferred Stock shall be 6,000.
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<PAGE>
SECTION 2. STATED CAPITAL. The amount to be represented in stated
capital at all times for each share of Series F Convertible Preferred Stock
shall be the sum of (i) $60.00, (ii) to the extent legally available, the
accrued but unpaid dividends on such share of Series F Convertible Preferred
Stock, and (iii) to be determined on at least a quarterly basis, an amount equal
to the accrued and unpaid interest on dividends in arrears through the date of
determination (as provided in Section.4).
SECTION 3. RANK. All Series F Convertible Preferred Stock shall rank
(i) senior to the Common Stock, par value $.01 per share (the "COMMON STOCK"),
of the Corporation, now or hereafter issued, as to payment of dividends and
distribution of assets upon liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary, and (ii) on a parity with the
Series A Convertible Preferred Stock, $.01 par value per share, the Series B
Convertible Preferred Stock, $.01 par value per share, the Series C Convertible
Preferred Stock, $.01 par value per share, the Series D Convertible Preferred
Stock, $.01 par value per share, the Series E Convertible Preferred Stock, $.01
par value per share, the Series I Class A Preference Shares, $.01 par value per
share, and the Series II Class A Preference Shares, $.01 par value per share, of
the Corporation, both as to payment of dividends and as to distributions of
assets upon liquidation, dissolution, or winding up of the Corporation, whether
voluntary or involuntary.
SECTION 4. DIVIDENDS AND DISTRIBUTIONS. The holders of shares of Series
F Convertible Preferred Stock shall be entitled to receive, when, as, and if
declared by the Board of Directors of the Corporation (the "BOARD OF DIRECTORS"
or the "BOARD") out of funds legally available for such purpose, dividends at
the rate of 8% of the Per Share Price (as defined in Section 5 per annum per
share during the first twelve (12) months after the date of original issuance, 6
% of the Per Share Price per annum during the second twelve months after the
date of original issuance and 4% of the Per Share Price per annum thereafter,
and no more,-.which shall be fully cumulative, shall accrue without interest
from the date of original issuance and shall be payable in cash quarterly on
March 31, June 30, September 30 and December 31 of each year commencing
September 30, 1996 (except that if any such date is a Saturday, Sunday, or legal
holiday, then such dividend shall be payable on the next succeeding day that is
not a Saturday, Sunday, or legal holiday) to holders of record as they appear on
the stock books of the Corporation on such record dates, not more than 20 nor
less than 10 days preceding the payment dates for such dividends, as shall be
fixed by the Board. The amount of the dividends payable per share of Series F
Convertible Preferred Stock for each quarterly dividend period shall be computed
by dividing the annual dividend amount by four. The amount of dividends payable
for the initial dividend period and any period shorter than a full quarterly
dividend period shall be computed on the basis of a 360-day year of twelve
30-day months. Dividends not paid on a payment date, whether or not such
dividends have been declared, will bear interest at the rate of 10% per annum
until paid. No dividends or other distributions, other than dividends payable
solely in shares of Common Stock or other capital stock of the Corporation
ranking junior as to dividends to the Series F Convertible Preferred Stock
(collectively, the "JUNIOR DIVIDEND Stock"), shall be paid or set apart for
payment on, and, except for the use of Common Stock to pay for the exercise
price of stock options issued pursuant to the stock option plans of the
2
<PAGE>
Corporation and its subsidiaries, no purchase, redemption, or other acquisition
shall be made by the Corporation of, any shares of Junior Dividend Stock unless
and until all accrued and unpaid dividends on the Series F Convertible Preferred
Stock and interest on dividends in arrears at the rate specified herein shall
have been paid or declared and set apart for payment.
If at any time any dividend on any capital stock of the Corporation
ranking senior as to dividends to the Series F Convertible Preferred Stock (the
"SENIOR DIVIDEND STOCK") shall be in default, in whole or in part, no dividend
shall be paid or declared and set apart for payment on the Series F Convertible
Preferred Stock unless and until all accrued and unpaid dividends with respect
to the Senior Dividend Stock, including the full dividends for the then current
dividend period, shall have been paid or declared and set apart for payment,
without interest. No dividends shall be paid or declared and set apart for
payment on any class or series or the Corporation's capital stock ranking, as to
dividends, on a parity with the Series F Convertible Preferred Stock (the
"PARITY DIVIDEND STOCK") for any period unless all accrued but unpaid dividends
(and interest on dividends in arrears at the rate specified herein) have been,
or contemporaneously are, paid or declared and set apart for such payment on the
Series F Convertible Preferred Stock. No dividends shall be paid or declared and
set apart for payment on the Series F Convertible Preferred Stock for any period
unless all accrued but unpaid dividends have been, or contemporaneously are,
paid or declared and set apart for payment on the Parity Dividend Stock for all
dividend periods terminating on or prior to the date of payment of such full
dividends. When dividends are not paid in full upon the Series F Convertible
Preferred Stock and the Parity Dividend Stock, all dividends paid or declared
and set apart for payment upon shares of Series F Convertible Preferred Stock
(and interest on. dividends in arrears at the rate specified herein) and the
Parity Dividend Stock shall be paid or declared and set apart for payment pro
rata, so that the amount of dividends paid or declared and set apart for payment
per share on the Series F Convertible Preferred Stock and the Parity Dividend
Stock shall in all cases bear to each other the same ratio that accrued and
unpaid dividends per share on the shares of Series F Convertible Preferred Stock
and the Parity Dividend Stock bear to each other.
Any references to "distribution" contained in this Section 4 shall not
be deemed to include any stock dividend or distributions made in connection with
any liquidation, dissolution, -or winding up of the Corporation, whether
voluntary or involuntary.
SECTION 5. LIQUIDATION PREFERENCE. In the event of a liquidation,
dissolution, or winding up of the Corporation, whether voluntary or involuntary,
the holders of Series F Convertible Preferred Stock shall be entitled to receive
out of the assets of the Corporation, whether such assets constitute stated
capital or surplus of any nature, an amount per share of Series F Convertible
Preferred Stock equal to the sum of (i) all dividends accrued and unpaid thereon
to the date of final distribution to such holders, (ii) accrued and unpaid
interest on dividends in arrears to the date of distribution, and (iii)
$1,000.00 (the "PER SHARE PRICE" and collectively with the amounts described in
CLAUSES (I) AND (II) above, the "LIQUIDATION PREFERENCE"), and no more, before
any payment shall be made or any assets distributed to the holders of Common
Stock or any other class or series of the Corporation's capital stock ranking
junior as to liquidation rights to the Series F Convertible Preferred Stock
(collectively, the "JUNIOR LIQUIDATION STOCK"); PROVIDED, HOWEVER, that such
rights shall accrue to the holders of
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<PAGE>
Series F Convertible Preferred Stock only in the event that the Corporation's
payments with respect to the liquidation preference of the holders of capital
stock of the Corporation ranking senior as to liquidation rights to the Series F
Convertible Preferred Stock (the "SENIOR LIQUIDATION STOCK") are fully met.
After the liquidation preferences of the Senior Liquidation Stock are fully met,
the entire assets of the Corporation available for distribution shall be
distributed ratably among the holders of the Series F Convertible Preferred
Stock and any other class or series of the Corporation's capital stock having
parity as to liquidation rights with the Series F Convertible Preferred Stock
(the "PARITY LIQUIDATION STOCK") in proportion to the respective preferential
amounts to which each is entitled (but only to the extent of such preferential
amounts). After payment in full of the liquidation price of the shares of the
Series F Convertible Preferred Stock and the Parity Liquidation Stock, the
holders of such shares shall not be entitled to any further participation in any
distribution of assets by the Corporation. Neither a consolidation or merger of
the Corporation with another corporation nor a sale or transfer of all or part
of the Corporation's assets for cash, securities, or other property in and of
itself will be considered a liquidation, dissolution, or winding up of the
Corporation.
SECTION 6. NO MANDATORY REDEMPTION. The shares of Series F Convertible
Preferred Stock shall not be subject to mandatory redemption by the Corporation.
SECTION 7. NO SINKING FUND. The shares of Series F Convertible
Preferred Stock shall not be subject to the operation of a purchase, retirement,
or sinking fund.
SECTION 8. OPTIONAL REDEMPTION. So long as the Corporation is in
compliance in all material respects with its obligations to the holders of
shares of Series F Convertible Preferred Stock, the Corporation shall have the
right, exercisable on not less than 10 days or more than 30 days written notice
to the holders of record of the shares of Series F Convertible Preferred Stock
to be redeemed, at any time after the sooner to occur of (i) three (3) years
after the date of original issuance or (ii) such time as the closing bid price
of the Common Stock shall exceed $16.80 per share (the "ALTERNATIVE MINIMUM
REDEMPTION PRICE") for 60 or more consecutive trading days (provided that for
purposes of this CLAUSE (II), the closing bid price of the Common Stock shall
exceed 16.80 on the day that the shares of, Series F Convertible Preferred Stock
are called for redemption) to redeem all of the shares or any part thereof not
less than 1,000 shares (or such lesser number of shares of Series F Convertible
Preferred Stock as shall remain outstanding at the time of exercise of such
redemption right) of Series F Convertible Preferred Stock in accordance with
this Section 8; provided that (i) the Corporation shall not exercise its right
to redeem shares of Series F Convertible Preferred Stock prior to the
Registration Effective Date (as hereinafter defined) and (ii) if within five (5)
days of receipt of a Notice of Redemption (as hereinafter defined) Travelers (as
hereinafter defined) shall notify the Corporation in writing that Travelers
cannot exercise its right of conversion by reason of the operation of the
proviso to the first sentence of Section 9(a) the Notice of Redemption shall not
be effective as to any shares of Series F Preferred Stock owned by Travelers and
the such shares shall no longer be entitled to the accrual and cumulation of
dividends under Section 4. The Alternative Minimum Redemption Price shall be
subject to equitable adjustments for stock splits, stock dividends,
combinations, recapitalizations, reclassifications and similar events. Any
notice of redemption (a "NOTICE OF REDEMPTION") under this Section shall be
delivered to the holders of
4
<PAGE>
the shares of Series F Convertible Preferred Stock at their addresses appearing
on the records of the Corporation; PROVIDED, HOWEVER, that any failure or defect
in the giving of notice to any such holder shall not affect the validity of
notice to or the redemption of shares of Series F Convertible Preferred Stock of
any other holder. Any Notice of Redemption shall state (1) that the Corporation
is exercising its right to redeem all or a portion of the outstanding shares of
Series F, Convertible Preferred Stock pursuant to this Section 8, (2) the number
of shares of Series F Convertible Preferred Stock held by such holder which are
to be redeemed, (3) the Redemption Price (as hereinafter defined) per share of
Series F Convertible Preferred Stock to be redeemed, determined in accordance
with this Section and (4) the date of redemption of such shares of Series F
Convertible Preferred Stock, determined in accordance with this Section (the
"REDEMPTION DATE"). On the Redemption Date, the Corporation shall make payment
in immediately available funds of the applicable Redemption Price (as
hereinafter defined) to each holder of shares of Series F Convertible Preferred-
Stock to be redeemed to or upon the order of such holder as specified by such
holder in writing to the Corporation at least one business day prior to the
Redemption Date. If the Corporation exercises its right to redeem all or a
portion of the outstanding shares of Series F Convertible Preferred Stock, the
Corporation shall make payment to the holders of the shares of Series F
Convertible Preferred Stock to be redeemed in respect of each share of Series F
Convertible Preferred Stock to be redeemed of an amount equal to the amount of
the Liquidation Preference determined as of the applicable Redemption Date (the
"REDEMPTION PRICE"). Upon redemption of less than all of the shares of Series F
Convertible Preferred Stock evidenced by a particular certificate, promptly, but
in no event later than three business days after surrender of such certificate
to the Corporation, the Corporation shall issue a replacement certificate for
the shares of Series F Convertible Preferred Stock which have not been redeemed.
Only whole shares of Series F Convertible Preferred Stock may be redeemed. If
the Corporation exercises its right to redeem less than all outstanding shares
of Series F Convertible Preferred Stock, then such redemption shall be made, as
nearly as practical, pro rata among the holders of record of the Series F
Convertible Preferred Stock. Notwithstanding any other provision of this
Certificate of Designations, no share of Series F Convertible Preferred Stock as
to which the holder has exercised the right of conversion pursuant to Section 9
hereof may be redeemed by the Corporation on or after the date of exercise of
such conversion right.
SECTION 9. CONVERSION.
(a) CONVERSION AT OPTION OF HOLDER. The holders of the Series
F Convertible Preferred Stock may, upon surrender of the certificates
therefor, convert any or all of their shares of Series F Convertible
Preferred Stock into fully paid and nonassessable shares of Common
Stock and such other securities and property as hereinafter provided.
Commencing on the date which is 20 days after the Registration
Effective Date (as hereinafter defined) and at any time thereafter,
each share of Series F Convertible Preferred Stock initially may be
converted at the office of any transfer agent for the Series F
Convertible Preferred Stock, if any, the office of any transfer agent
for the Common Stock or at such other office or offices, if any, as the
Board of Directors may designate, into whole shares of Common Stock at
the rate equal to the number of fully paid and nonassessable shares of
Common Stock (calculated as to each conversion to the nearest 1/100th
of a share) determined by dividing (y) the sum of (I) the Conversion
Amount, (ii) accrued but unpaid dividends to the Conversion Date, and
(iii) accrued but unpaid interest on the
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<PAGE>
dividends in arrears to the Conversion Date by (z) 80% of the daily
mean average of the Closing Price of the Common Stock on the ten
consecutive trading days immediately preceding the Conversion Date (but
in no event shall the amount determined pursuant to this CLAUSE (z)) be
less that $7.00 (subject to equitable adjustments for stock splits,
stock dividends, combinations, recapitalizations, reclassifications and
similar events) regardless of the actual amount otherwise determined
pursuant to this CLAUSE (Z) or more than $16.00 (subject to equitable
adjustments for stock splits, stock dividends, combinations,
recapitalizations, reclassifications and similar events) regardless of
the actual amount otherwise determined pursuant to this CLAUSE (Z), in
each case subject to adjustment as hereinafter provided (the
"CONVERSION RATE"); provided, however, that The Travelers Life
Insurance Company ("TRAVELERS") and any Travelers Person (as defined
herein) shall only be entitled to convert any shares of Series F
Convertible Preferred Stock from time to time to the extent that
Travelers or such Travelers Person will, through such conversion,
obtain that number of shares of Common Stock (the "CONVERSION SHARES")
that, together with shares of Common Stock directly or indirectly
beneficially owned by Travelers, its subsidiaries and affiliated
persons including persons serving as exclusive full time advisors of
Travelers (each a "TRAVELERS PERSON" and, collectively, "TRAVELERS
PERSONS"), would not result in direct and indirect beneficial ownership
by all Travelers 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 Conversion
Shares, Travelers 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 Conversion Shares, the Company
shall be entitled to rely, and shall be fully protected in relying, on
any statement or representation made by Travelers 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. The
"CONVERSION PRICE" shall be equal to the Conversion Amount divided by
the Conversion Rate.
Notwithstanding any other provision of this Section, the
Corporation shall not be required to permit a conversion of shares of
Series F Convertible Preferred Stock on any Conversion Date unless the
aggregate number of shares of Series F Convertible Preferred Stock to
be converted by all holders on such Conversion Date is 1,000 shares (or
such lesser number of shares of Series F Convertible Preferred Stock as
shall remain outstanding at the time of exercise of such conversion
right).
(b) CERTAIN DEFINITIONS.
As used herein, the "CLOSING PRICE" of any security on any
date shall mean the closing bid price of such security on such date on
the principal securities exchange on which such security is traded.
As used herein, the "CONVERSION AMOUNT" initially shall be
equal to $1,000 subject to adjustment as hereinafter provided.
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<PAGE>
As used herein, "CONVERSION DATE" shall mean the date on which
the notice of conversion is actually received by the Corporation, in
case of a conversion at the option of the holder pursuant to Section
9(a).
As used herein, "REGISTRATION EFFECTIVE DATE" shall mean, with
respect to any share of Series F Convertible Preferred Stock, the date
on which the Registration Statement required to be filed by the
Corporation pursuant to Section 8 of, the Securities Purchase
Agreement, dated as of July 12, 1996, by and between the Corporation
and The Travelers Insurance Company is first declared effective by the
Securities and Exchange Commission.
(c) OTHER PROVISIONS. Notwithstanding anything in this Section
9 to the contrary, no change in the Conversion Amount shall actually be
made until the cumulative effect of the adjustments called for by this
Section 9 since the date of the last change in the Conversion Amount
would change the Conversion Amount by more than I However, once the
cumulative effect would result in such a change, then the Conversion
Rate shall actually be changed to reflect all adjustments called for by
this Section.9 and not previously made. Notwithstanding anything in
this Seetion.9, no change in the Conversion Amount shall be made that
would result in a Conversion Price of less than the par value of the
Common Stock into which shares of Series F Convertible Preferred Stock
are at the time convertible.
The holders of shares of Series F Convertible Preferred Stock
at the close of business on the record date for any dividend payment to
holders of Series F Convertible Preferred Stock shall be entitled to
receive the dividend payable on such shares on the corresponding
dividend payment date notwithstanding the conversion thereof after such
dividend payment record date or the Corporation's default in payment of
the dividend due on such dividend payment date; PROVIDED, HOWEVER, that
shares of Series F Convertible Preferred Stock surrendered for
conversion during the period between the close of business on any
record date for a dividend payment and the opening of business on the
corresponding dividend payment date must be accompanied by payment of
an amount equal to the dividend payable on such shares on such dividend
payment date. A holder of shares of Series F Convertible Preferred
Stock on a record date for a dividend payment who (or whose transferee)
tenders 'any of such shares for conversion into shares of Common Stock
on or after such dividend payment date will receive the dividend
payable by the Corporation on such shares of Series F Convertible
Preferred Stock on such date, and the converting holder need not
include payment of the amount of such dividend upon surrender of shares
of Series F Convertible Preferred Stock for conversion. Except as
provided above, no adjustment shall be made in respect of cash
dividends on Common Stock or Series F Convertible Preferred Stock that
may be accrued and unpaid at the date of surrender for conversion.
The right of the holders of Series F Convertible Preferred
Stock to convert their shares shall be exercised by delivering to the
Corporation or its agent, as provided above, a written notice, duly
signed by or on behalf of the holder, stating the number of shares of
Series F Convertible Preferred Stock to be converted. Promptly, but in
no event later than 10 business days after delivery of a notice of
conversion, such holder shall surrender for such purpose to the
Corporation or its agent, as provided above, certificates representing
shares to be converted, duly
7
<PAGE>
endorsed in blank or accompanied by proper instruments of transfer. If
such holder shall fail to deliver certificates representing shares to
be converted in such form on or prior to such tenth business day, such
notice of conversion shall not be effective, unless otherwise agreed by
the Corporation, but such failure shall not affect such holder's right
to convert such shares at a date after the date such notice of
conversion was given. The Corporation shall not, however, be required
to pay any tax which may be payable in respect of any transfer involved
in the issue and delivery upon conversion of shares of Common Stock or
other securities or property in a name other than that of the holder of
the shares of the Series F Convertible Preferred Stock being converted,
and the Corporation shall not be required to issue or deliver any such
shares or other securities or property unless and until the person or
persons requesting the issuance thereof shall have paid to the
Corporation the amount of any such tax or shall have established to the
satisfaction of the Corporation that such tax has been paid.
The Corporation (and any successor corporation) shall take all
action necessary so that a number of shares of the authorized but
unissued Common Stock (or common stock in the case of any successor
corporation) sufficient to provide for the conversion of the Series F
Convertible Preferred Stock outstanding upon the basis hereinbefore
provided are at all times reserved by the Corporation (or any successor
corporation), free from preemptive rights, for such conversion, subject
to the provisions of the next succeeding paragraph. If the Corporation
shall issue any securities or make any change in its capital structure
which would change the number of shares of Common Stock into which each
share of the Series F Convertible Preferred Stock shall be convertible
as herein provided, the Corporation shall at the same time also make
proper provision so that thereafter there shall be a sufficient number
of shares of Common Stock authorized and reserved, free from preemptive
rights, for conversion of the outstanding Series F Convertible
Preferred Stock on the new basis. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all of the outstanding shares of Series F
Convertible Preferred Stock, the Corporation promptly shall seek such
corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose.
In case of any consolidation or merger of the Corporation with
any other corporation (other than a wholly-owned subsidiary of the
Corporation) in which the Corporation is not the surviving corporation,
or in case of any sale or transfer of all or substantially all of the
assets of the Corporation, 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 Corporation shall make
appropriate provision or cause appropriate provision to be made so that
each holder of shares of Series F Convertible Preferred Stock then
outstanding shall have the right thereafter to convert such shares of
Series F Convertible Preferred Stock into 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 into which such shares of Series F
Convertible Preferred Stock could have been converted immediately prior
to the effective date 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 either securities,
8
<PAGE>
cash, or other assets upon completion of such transaction, the
Corporation shall provide or cause to be provided to each holder of
Series F Convertible Preferred Stock the right to elect the securities,
cash, or other assets into which the Series F Convertible Preferred
Stock held by such holder shall be convertible after completion of any
such transaction on the same terms and 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 Corporation 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.
Upon surrender of certificates representing shares of Series F
Convertible Preferred Stock for conversion, the Corporation shall issue
and deliver to such person certificates for the Common Stock issuable
upon such conversion within three business days after such surrender
and the person converting shall be deemed to be the holder of record of
the Common Stock issuable upon such conversion, and all rights with
respect to the shares surrendered shall forthwith terminate except the
right to receive the Common Stock or other securities, cash, or other
assets as herein provided.
No fractional shares of Common Stock shall be issued upon
conversion of Series F Convertible Preferred Stock but, in lieu of any
fraction of a share of Common Stock which would otherwise be issuable
in respect of the aggregate number of such shares surrendered for
conversion at one time by the same holder, the Corporation at its
option (a) may pay in cash an amount equal to the product of (i) the
daily mean average of the Closing Price 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.
The "CLOSING PRICE" for each day shall be the closing price
regular way 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
Corporation 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.
9
<PAGE>
The Conversion Amount shall be adjusted from time to time
under certain circumstances, subject to the provisions of the first
three sentences of the first paragraph of this Section 9(c), as
follows:
(i) In case the Corporation 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 on the 30
consecutive business days commencing 45 business days before
the record date (the "CURRENT MARKET Price"), then in each
such case the Conversion Amount in effect on such record date
shall be adjusted in accordance with the formula
C1 C x O + N
-------
O + N X P
-----
M
where
C1 = the adjusted Conversion Amount
C = the current Conversion Amount
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 Conversion Amount then in effect shall be readjusted
appropriately.
(ii) In case the Corporation shall, by dividend or
otherwise, distribute to all holders of its Junior Stock (as
hereinafter defined) 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 Corporation), then in each such case the
Conversion Amount then in effect shall be adjusted in
accordance with the formula
C1 = C x M
---
M-F
where
C1 = the adjusted Conversion Amount
C = the current Conversion Amount
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<PAGE>
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.
For purposes of this subparagraph (ii), "JUNIOR STOCK" shall include any class
of capital stock ranking junior as to dividends or upon liquidation to the
Series F Convertible Preferred Stock.
(iii) All calculations hereunder shall be made to the
nearest cent or to the nearest 1/100 of a share, as the case
may be.
(iv) If at any time as a result of an adjustment made
pursuant to the fifth paragraph of this Section 9(c), the
holder of any Series F Convertible Preferred Stock thereafter
surrendered for conversion 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 conversion 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 (iii) above.
Except as otherwise provided above in this Section 9, no adjustment in
the Conversion Amount 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 Conversion Amount is adjusted, (i) the Corporation shall
send to each transfer agent, if any, for the Series F Convertible Preferred
Stock and the Common Stock, and to the principal securities exchange, if any, on
which the Series F Convertible Preferred Stock and the Common Stock is traded,
or the Nasdaq Stock Market if the Series F Convertible Preferred Stock or the
Common Stock is admitted for a quotation thereon, a statement signed by the
Chairman of the Board, the President or any Vice-President of the Corporation
and by its Treasurer or its Secretary or Assistant Secretary stating the
adjusted Conversion Amount determined as provided in this Section 9, and any
adjustment so evidenced, given in good faith, shall be binding upon all
stockholders and upon the Corporation and (ii) the Corporation will give notice
by mail to the holders of record of Series F Convertible Preferred Stock, which
notice shall be made within 45 days after the effective date of such adjustment
and shall state the adjustment and the Conversion Amount. Notwithstanding the
foregoing notice provisions, failure by the Corporation to give such notice or a
defect in such notice shall not affect the binding nature of such corporate
action of the Corporation.
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<PAGE>
Whenever the Corporation shall propose to take any of the actions
specified in the fifth paragraph of this Section 9(c) or in subparagraphs (i) or
(ii) of the ninth paragraph of this Section 9(c) which would result in any
adjustment in the Conversion Amount under this Section 9(c), the Corporation
shall cause a notice to be mailed at least 30 days prior to the date on which
the books of the Corporation will close or on which a record will be taken for
such action, to the holders of record of the outstanding Series F Convertible
Preferred Stock on the date of such notice. Such notice shall specify the action
proposed to be taken by the Corporation 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 9, no adjustment in
the Conversion Amount need be made (a) for a transaction referred to in
subparagraphs (i) or (ii) of the ninth paragraph of this Section 9(c) if holders
of Series F Convertible Preferred Stock are to participate in the transaction or
distribution on a basis 'and with notice that the Board of Directors determines
to be fair to the holders of the Series F Convertible Preferred Stock and
appropriate in light of the basis on which holders of the Common Stock or, in
the case of a transaction referred to in said SUBPARAGRAPH (II), holders of
Junior Stock participate in the transaction; (b) 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 (c) after the Series F Convertible Preferred Stock becomes convertible into
cash (no interest shall accrue on the cash).
SECTION 10. VOTING RIGHTS. Except as otherwise required by law, shares
of Series F Convertible Preferred Stock shall not be entitled to vote on any
matter.
The affirmative vote or consent of the holders of a majority of the
outstanding shares of the Series F Convertible Preferred Stock, voting
separately as a class, will be required for (1) any amendment, alteration, or
repeal, whether by merger or consolidation or otherwise, of the Corporation's
Certificate of Incorporation if the amendment, alteration, or repeal materially
and adversely affects the powers, preferences, or special rights of the Series F
Convertible Preferred Stock, or (2) the creation and issuance of any Senior
Dividend Stock or Senior Liquidation Stock; PROVIDED, HOWEVER, that any increase
in the authorized preferred stock of the Corporation or the creation and
issuance of any stock which is both Junior Dividend Stock and Junior Liquidation
Stock or any other capital stock of the Corporation ranking on a parity with the
Series F Convertible Preferred Stock shall be deemed not to affect materially,
and adversely such powers, preferences, or special rights.
SECTION 11. OUTSTANDING SHARES. For purposes of this Certificate of
Designations, all shares of Series F Convertible Preferred Stock shall be deemed
outstanding except (i) from the date of surrender of certificates representing
shares of Series F Convertible Preferred Stock for conversion into Common Stock,
all shares of Series F Convertible Preferred Stock converted into Common Stock;
and (ii) from the date of registration of transfer, all shares
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<PAGE>
of Series F Convertible Preferred Stock held of record by the Corporation or any
subsidiary or Affiliate (as defined herein) of the Corporation. For the purposes
of this Certificate of Designations, "Affiliate" means any person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Corporation. 'Control" is the power to direct the management
and policies of a person, directly or through one or more intermediaries,
whether through the ownership of voting securities, by contract, or otherwise.
B. SERIES G CONVERTIBLE PREFERRED STOCK
SECTION 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series G Convertible Preferred Stock" (the "SERIES G CONVERTIBLE
PREFERRED STOCK"), and the number of shares constituting such series shall be
10,000 and shall not be subject to increase. The Series G Convertible Preferred
Stock shall be divided into two ranches, referred to herein as "Tranche 1 Series
G Convertible Preferred Stock" (the "TRANCHE 1 SERIES G CONVERTIBLE PREFERRED
STOCK"), which shall consist of 4,000 shares, and "Tranche 2 Series G
Convertible Preferred Stock" (the "TRANCHE 2 SERIES G CONVERTIBLE PREFERRED
STOCK"), which shall consist of 6,000 shares.
SECTION 2. STATED CAPITAL. The amount to be represented in stated
capital at all times for each share of Series G Convertible Preferred Stock
shall be the sum of (i) $1,000, (ii) to the extent legally available, the
accrued but unpaid dividends on such share of Series G Convertible Preferred
Stock, and (iii) to be determined on at least a quarterly basis, an amount equal
to the accrued and unpaid interest on dividends in arrears through the date of
determination (as provided in Section 4).
SECTION 3. RANK. All Series G Convertible Preferred Stock shall rank
(i) senior to the Common Stock, par value $.01 per share (the "COMMON STOCK"),
of the Corporation, now or hereafter issued, as to payment of dividends and
distribution of assets upon liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary, and (ii) on a parity with the
Series E Convertible Preferred Stock of the Corporation, the Series F
Convertible Preferred Stock of the Corporation and any additional series of
preferred stock of any class which the Board of Directors or the stockholders
may from time to time authorize, both as to payment of dividends and as to
distributions of assets upon liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary.
SECTION 4. DIVIDENDS AND DISTRIBUTIONS. (a) The holders of shares of
Series G Convertible Preferred Stock shall be entitled to receive, when, as, and
if declared by the Board of Directors of the Corporation (the "BOARD OF
DIRECTORS" or the "BOARD") out of funds legally available for such purpose,
dividends at the rate of $70.00 per annum per share, and no more, which shall be
fully cumulative, shall accrue without interest (except as otherwise
specifically provided herein) from the date of original issuance and shall be
payable in cash quarterly on January 1, April 1, July 1, and October 1 of each
year commencing January 1, 1997 (except that if any such date is a Saturday,
Sunday, or legal holiday, then such dividend shall be payable on the next
succeeding day that is not a Saturday, Sunday, or legal holiday) to holders of
record as they appear on the stock books of the Corporation on such record
dates, not more than 20 nor less than 10 days preceding
13
<PAGE>
the payment dates for such dividends, as shall be fixed by the Board. Dividends
on the Series G Convertible Preferred Stock shall be paid in cash or, subject to
the limitations in Section 4(b) hereof, shares of Common Stock or any
combination of cash and shares of Common Stock, at the option of the Corporation
as hereinafter provided. The amount of the dividends payable per share of Series
G Convertible Preferred Stock for each quarterly dividend period shall be
computed by dividing the annual dividend amount by four. The amount of dividends
payable for the initial dividend period and any period shorter than a full
quarterly dividend period shall be computed on the basis of a 360-day year of
twelve 30-day months. Dividends not paid on a payment date, whether or not such
dividends have been declared, will bear interest at the rate of 12% per annum
until paid. No dividends or other distributions, other than dividends payable
solely in shares of Common Stock or other capital stock of the Corporation
ranking junior as to dividends to the Series G Convertible Preferred Stock
(collectively, the "JUNIOR DIVIDEND STOCK"), shall be paid or set apart for
payment on any shares of Junior Dividend Stock, and no purchase, redemption, or
other acquisition shall be made by the Corporation of any shares of Junior
Dividend Stock (other than purchases, redemptions or other acquisitions of a
number of shares of Common Stock in the aggregate not in excess of 2 percent of
the shares of Common Stock outstanding on the date this Certificate of
Designations is filed with the Secretary of State of the State of Delaware, at
prices not in excess of the fair market value thereof at the time of purchase,
redemption or acquisition) unless and until all accrued and unpaid dividends on
the Series G Convertible Preferred Stock and interest on dividends in arrears at
the rate specified herein shall have been paid or declared and set apart for
payment.
If at any time any dividend on any capital stock of the Corporation
ranking senior as to dividends to the Series G Convertible Preferred Stock (the
"SENIOR DIVIDEND STOCK") shall be in default, in whole or in part, no dividend
shall be paid or declared and set apart for payment on the Series G Convertible
Preferred Stock unless and until all accrued and unpaid dividends with respect
to the Senior Dividend Stock, including the full dividends for the then current
dividend period, shall have been paid or declared and set apart for payment,
without interest. No full dividends shall be paid or declared and set apart for
payment on any class or series or the Corporation's capital stock ranking, as to
dividends, on a parity with the Series G Convertible Preferred Stock (the
"PARITY DIVIDEND STOCK") for any period unless all accrued but unpaid dividends
(and interest on dividends in arrears at the rate specified herein) have been,
or contemporaneously are, paid or declared and set apart for such payment on the
Series G Convertible Preferred Stock. No full dividends shall be paid or
declared and set apart for payment on the Series G Convertible Preferred Stock
for any period unless all accrued but unpaid dividends have been, or
contemporaneously are, paid or declared and set apart for payment on the Parity
Dividend Stock for all dividend periods terminating on or prior to the date of
payment of such full dividends. When dividends are not paid in full upon the
Series G Convertible Preferred Stock and the Parity Dividend Stock, all
dividends paid or declared and set apart for payment upon shares of Series G
Convertible Preferred Stock (and interest on dividends in arrears at the rate
specified herein) and the Parity Dividend Stock shall be paid or declared and
set apart for payment pro rata, so that the amount of dividends paid or declared
and set apart for payment per share on the Series G Convertible Preferred Stock
and the Parity Dividend Stock shall in all cases bear to each other the same
ratio that accrued and unpaid dividends per share on the shares of Series G
Convertible Preferred Stock and the Parity Dividend Stock bear to each other.
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<PAGE>
Any references to "distribution" contained in this Section 4 shall not
be deemed to include any stock dividend or distributions made in connection with
any liquidation, dissolution, or winding up of the Corporation, whether
voluntary or involuntary.
(b) If the Corporation elects in the exercise of its sole discretion to
issue shares of Common Stock in payment of dividends on the Series G Convertible
Preferred Stock, the Corporation shall issue and dispatch, or cause to be issued
and dispatched, to each holder of such shares a certificate representing the
number of whole shares of Common Stock arrived at by dividing the per share
Computed Price of such shares of Common Stock into the total amount of cash
dividends such holder would be entitled to receive if the aggregate dividends on
the Series G Convertible Preferred Stock held by such holder which are being
paid in shares of Common Stock were being paid in cash; PROVIDED, HOWEVER, that
if certificates representing shares of Common Stock are issued and dispatched to
holders of Series G Convertible Preferred Stock subsequent to the third trading
day after a dividend payment date, the percentage used to calculate the Computed
Price will be reduced by one for each trading day after the third trading day
following such dividend payment date to the date of dispatch of shares of Common
Stock. No fractional shares of Common Stock shall be issued in payment of
dividends. In lieu thereof, the Corporation may issue a number of shares of
Common Stock to each holder which reflects a rounding to the nearest whole
number of shares of Common Stock or may pay cash. The Corporation shall not
exercise its right to issue shares of Common Stock in payment of dividends on
Series G Convertible Preferred Stock if:
(i) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes, or held in the
Corporation's treasury, is insufficient to pay the portion of such
dividends to be paid in shares of Common Stock;
(ii) the issuance or delivery of shares of Common Stock as a
dividend payment would require registration with or approval of any
governmental authority under any law or regulation, and such
registration or approval has not been effected or obtained;
(iii) the shares of Common Stock to be issued as a dividend
payment have not been authorized for listing, upon official notice of
issuance, on any securities exchange or market on which the Common
Stock is then listed; or have not been approved for quotation if the
Common Stock is traded in the over-the-counter market;
(iv) the Computed Price (determined without regard to the
proviso to the definition thereof) is less than the par value of the
shares of Common Stock;
(v) the shares of Common Stock (A) cannot be sold or
transferred without restriction by unaffiliated holders who receive
such shares of Common Stock as a dividend payment or (B) are no longer
listed on a national securities exchange, on the Nasdaq National Market
or the Nasdaq SmallCap Market; or
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<PAGE>
(vi) the issuance of shares of Common Stock in payment of
dividends on Series G Convertible Preferred Stock held by any GFL
Person (as defined in Section 9(a) hereof) would result in any GFL
Person beneficially owning more than 4.9% of the Common Stock,
determined as provided in the proviso to the second sentence of Section
9(a) hereof.
Shares of Common Stock issued in payment of dividends on Series G
Convertible Preferred Stock pursuant to this Section shall be, and for all
purposes shall be deemed to be, validly issued, fully paid and nonassessable
shares of Common Stock of the Corporation; the issuance and delivery thereof is
hereby authorized; and the dispatch thereof will be, and for all purposes shall
be deemed to be, payment in full of the cumulative dividends to which holders
are entitled on the applicable dividend payment date.
"Computed Price" of shares of Common Stock means the price equal to 85
percent of the arithmetic mean of the per share Closing Price (as defined in
Section 9(b)) of the Common Stock for the three consecutive trading days ending
on the third trading day prior to the applicable dividend payment date; PROVIDED
HOWEVER, THAT, notwithstanding the foregoing, in no event shall the Computed
Price be less than $.01 per share.
SECTION 5. LIQUIDATION PREFERENCE. In the event of a liquidation,
dissolution, or winding up of the Corporation, whether voluntary or involuntary,
the holders of Series G Convertible Preferred Stock shall be entitled to receive
out of the assets of the Corporation, whether such assets constitute stated
capital or surplus of any nature, an amount per share of Series G Convertible
Preferred Stock equal to the sum of (i) all dividends accrued and unpaid thereon
to the date of final distribution to such holders, (ii) accrued and unpaid
interest on dividends in arrears to the date of distribution, and (iii)
$1,000.00 (collectively, the "LIQUIDATION PREFERENCE"), and no more, before any
payment shall be made or any assets distributed to the holders of Common Stock
or any other class or series of the Corporation's capital stock ranking junior
as to liquidation rights to the Series G Convertible Preferred Stock
(collectively, the "JUNIOR LIQUIDATION STOCK"); PROVIDED, HOWEVER, that such
rights shall accrue to the holders of Series G Convertible Preferred Stock only
in the event that the Corporation's payments with respect to the liquidation
preference of the holders of capital stock of the Corporation ranking senior as
to liquidation rights to the Series G Convertible Preferred Stock (the "SENIOR
LIQUIDATION STOCK") are fully met. After the liquidation preferences of the
Senior Liquidation Stock are fully met, the entire assets of the Corporation
available for distribution shall be distributed ratably among the holders of the
Series G Convertible Preferred Stock and any other class or series of the
Corporation's capital stock having parity as to liquidation rights with the
Series G Convertible Preferred Stock (the "PARITY LIQUIDATION STOCK") in
proportion to the respective preferential amounts to which each is entitled (but
only to the extent of such preferential amounts). After payment in full of the
liquidation price of the shares of the Series G Convertible Preferred Stock and
the Parity Liquidation Stock, the holders of such shares shall not be entitled
to any further participation in any distribution of assets by the Corporation.
Neither a consolidation or merger of the Corporation with another corporation
nor a sale or transfer of all or part of the Corporation's assets for cash,
securities, or other property in and of itself will be considered a liquidation,
dissolution, or winding up of the Corporation.
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SECTION 6. NO MANDATORY REDEMPTION. The shares of Series G Convertible
Preferred Stock shall not be subject to mandatory redemption by the Corporation.
SECTION 7. NO SINKING FUND. The shares of Series G Convertible
Preferred Stock shall not be subject to the operation of a purchase, retirement,
or sinking fund.
SECTION 8. OPTIONAL REDEMPTION. So long as the Corporation is in
compliance in all material respects with its obligations to the holders of
shares of Series G Convertible Preferred Stock (including, without limitation,
its obligations under the Registration Rights Agreement between the Corporation
and the original holders of the Series G Convertible Preferred Stock (the
"REGISTRATION RIGHTS AGREEMENT") and the provisions of this Certificate of
Designations), the Corporation shall have the right, exercisable on not less
than 15 days or more than 20 days written notice to the holders of record of the
shares of Series G Convertible Preferred Stock to be redeemed, at any time which
is (x) 90 days or more after the Tranche 1 Registration Effective Date (as
defined in Section 9(b)) to redeem all of the shares or any part of not less
than 600 shares (or such lesser number of shares of Tranche 1 Series G
Convertible Preferred Stock as shall remain outstanding at the time of exercise
of such redemption right) of Tranche 1 Series G Convertible Preferred Stock or
(y) 90 days or more after the Tranche 2 Registration Effective Date (as defined
in Section 9(b)) to redeem all of the shares or any part of not less than 600
shares (or such lesser number of shares of Tranche 2 Series G Convertible
Preferred Stock as shall remain outstanding at the time of exercise of such
redemption right) of Tranche 2 Series G Convertible Preferred Stock, in either
case in accordance with this Section 8. Any notice of redemption (a "NOTICE OF
REDEMPTION") under this Section shall be delivered to the holders of the shares
of Series G Convertible Preferred Stock at their addresses appearing on the
records of the Corporation; PROVIDED, HOWEVER, that any failure or defect in the
giving of notice to any such holder shall not affect the validity of notice to
or the redemption of shares of Series G Convertible Preferred Stock of any other
holder. Any Notice of Redemption may, subject to the 15 and 20 day restrictions
stated above, be given prior to the date which is 90 days after the Tranche 1
Registration Effective Date or the Tranche 2 Registration Effective Date, as the
case may be, but in any such case may not specify a Redemption Date (as herein
defined) prior to the date which is 90 days after the Tranche 1 Registration
Effective Date or the Tranche 2 Registration Effective Date, as the case may be.
Any Notice of Redemption shall state (1) that the Corporation is exercising its
right to redeem all or a portion of the outstanding shares of Series G
Convertible Preferred Stock pursuant to this Section 8, (2) the number of shares
of Series G Convertible Preferred Stock held by such holder which are to be
redeemed and the tranche of the shares to be redeemed, (3) the Redemption Price
(as hereinafter defined) per share of Series G Convertible Preferred Stock to be
redeemed, determined in accordance with this Section, and (4) the date of
redemption of such shares of Series G Convertible Preferred Stock, determined in
accordance with this Section (the "REDEMPTION DATE"). On the Redemption Date,
the Corporation shall make payment in immediately available funds of the
applicable Redemption Price (as hereinafter defined) to each holder of shares of
Series G Convertible Preferred Stock to be redeemed to or upon the order of such
holder as specified by such holder in writing to the Corporation at least one
business day prior to the Redemption Date. If the Corporation exercises its
right to redeem all or a portion of the outstanding shares of Series G
Convertible Preferred Stock the Corporation shall make payment to the holders of
the shares of Series G Convertible Preferred Stock to be redeemed in respect of
each share of Series G
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<PAGE>
Convertible Preferred Stock to be redeemed of an amount equal to the sum of (A)
the amount of the Liquidation Preference determined as of the applicable
Redemption Date and (B) $176.50 (such sum being referred to herein as the
"REDEMPTION PRICE"). Upon redemption of less than all of the shares of Series G
Convertible Preferred Stock evidenced by a particular certificate, promptly, but
in no event later than three business days after surrender of such certificate
to the Corporation, the Corporation shall issue a replacement certificate for
the shares of Series G Convertible Preferred Stock which have not been redeemed.
Only whole shares of Series G Convertible Preferred Stock may be redeemed. If
the Corporation exercises its right to redeem less than all outstanding shares
of Series G Convertible Preferred Stock, then such redemption shall be made, as
nearly as practical, pro rata among the holders of record of the Series G
Convertible Preferred Stock. Notwithstanding any other provision of this
Certificate of Designations, no share of Series G Convertible Preferred Stock as
to which the holder exercises the right of conversion pursuant to Section 9
hereof may be redeemed by the Corporation on or after the date of exercise of
such conversion right.
SECTION 9. CONVERSION.
(a) CONVERSION AT OPTION OF HOLDER. (i) The holders of the Series G
Convertible Preferred Stock may, upon surrender of the certificates therefor,
convert any or all of their shares of Series G Convertible Preferred Stock into
fully paid and nonassessable shares of Common Stock and such other securities
and property as hereinafter provided. Commencing on the date which is the
earliest of (i) the Tranche 1 Registration Effective Date, (ii) or the Tranche 2
Registration Effective Date and (iii) the date which is 90 days after the date
of initial issuance of shares of Series G Convertible Preferred Stock (the
"ISSUANCE DATE") and at any time thereafter, each share of Series G Convertible
Preferred Stock initially may be converted at the principal executive offices of
the Corporation, the office of any transfer agent for the Series G Convertible
Preferred Stock, if any, the office of any transfer agent for the Common Stock
or at such other office or offices, if any, as the Board of Directors may
designate, into whole shares of Common Stock at the rate equal to the number of
fully paid and nonassessable shares of Common Stock (calculated as to each
conversion to the nearest 1/100th of a share) determined by dividing (y) the sum
of (i) the Conversion Amount, (ii) accrued but unpaid dividends to the
Conversion Date, and (iii) accrued but unpaid interest on the dividends on the
shares of Series G Convertible Preferred Stock being converted in arrears to the
Conversion Date by (z) the lesser of (I) $11.50 (subject to equitable
adjustments for stock splits, stock dividends, combinations, recapitalizations,
reclassifications and similar events) and (II) the product of (A) the Tranche 1
Conversion Percentage or the Tranche 2 Conversion Percentage, as the case may
be, TIMES (B) the arithmetic average of the Closing Price of the Common Stock on
the three consecutive trading days immediately preceding the Conversion Date
(but in no event shall the amount determined pursuant to subclause (II) of this
clause (z) be less than $7.00 (subject to equitable adjustments for stock
splits, stock dividends, combinations, recapitalizations, reclassifications and
similar events), regardless of the actual amount otherwise determined pursuant
to this clause (z)) (the "MINIMUM CONVERSION PRICE"), in each case subject to
adjustment as hereinafter provided (the "CONVERSION RATE"); PROVIDED, HOWEVER,
that in no event shall Genesee Fund Limited ("GENESEE") be entitled to convert
any shares of Series G Convertible Preferred Stock in excess of that number of
shares of Series G Convertible Preferred Stock upon conversion of which the sum
of (1) the number of shares of Common Stock beneficially owned by Genesee and
any person whose beneficial ownership of shares of Common Stock would be
aggregated with
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<PAGE>
Genesee's beneficial ownership of shares of Common Stock for purposes of Section
13(d) of the Securities Exchange Act of 1934, as amended (THE "EXCHANGE ACT"),
and Regulation 13D-G thereunder (each a "GFL PERSON" and collectively, the "GFL
PERSONS") (other than shares of Common Stock deemed beneficially owned through
the ownership of unconverted shares of Series G Convertible Preferred Stock and
unexercised Common Stock Purchase Warrants issued to Genesee in connection with
the issuance of the Series G Convertible Preferred Stock) and (2) the number of
shares of Common Stock issuable upon the conversion of the number of shares of
Series G Convertible Preferred Stock with respect to which the determination in
this proviso is being made, would result in beneficial ownership by any GFL
Person of more than 4.9% of the outstanding shares of Common Stock. For purposes
of the proviso to the immediately preceding sentence, beneficial ownership shall
be determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulation 13D-G thereunder, except as otherwise provided
in clause (1) of the proviso to the immediately preceding sentence. For purposes
of the proviso to the second preceding sentence, the Corporation shall be
entitled to rely, and shall be fully protected in relying, on any statement or
representation made by Genesee to the Corporation in connection with a
particular conversion, without any obligation on the part of the Corporation to
make any inquiry or investigation or to examine its records or the records of
any transfer agent for the Common Stock.
(ii) Each certificate for shares of Series G Convertible
Preferred Stock initially issued shall bear a legend identifying it as
either "TRANCHE 1" or "TRANCHE 2," as agreed in writing with the
Corporation by the initial holder of shares of Series G Convertible
Preferred Stock. Any new certificate issued upon transfer of any shares
of Series G Convertible Preferred Stock or, in connection with a
conversion of shares of Series G Convertible Preferred Stock, to
evidence the unconverted balance of shares of Series G Convertible
Preferred Stock shall bear the same legend as the certificate
surrendered to the Corporation in connection therewith, if applicable.
(b) CERTAIN DEFINITIONS.
As used herein, the "CLOSING PRICE" of any security on any date shall
mean the closing bid price of such security on such date on the principal
securities exchange on which such security is traded.
As used herein, the "CONVERSION AMOUNT" initially shall be equal to
$1,000.00, subject to adjustment as hereinafter provided.
As used herein, "CONVERSION DATE" shall mean the date on which the
notice of conversion is actually received by the Corporation, in case of a
conversion at the option of the holder pursuant to Section 9(a).
As used herein, "SEC" shall mean the United States Securities and
Exchange Commission.
As used herein, "TRANCHE 1 COMPUTATION DATE" means (1) January 1, 1997,
unless the Tranche 1 Registration Statement theretofore has been declared
effective by the SEC, and, (2) if
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<PAGE>
the Tranche 1 Registration Statement has not theretofore been declared effective
by the SEC, each date which is 30 days after a Tranche 1 Computation Date.
As used herein, "TRANCHE 2 COMPUTATION DATE" means (1) February 1,
1997, unless the Tranche 2 Registration Statement theretofore has been declared
effective by the SEC, and, (2) if the Tranche 2 Registration Statement has not
theretofore been declared effective by the SEC, each date which is 30 days after
a Tranche 2 Computation Date.
As used herein, "TRANCHE 1 CONVERSION PERCENTAGE" shall mean, with
respect to any conversion of shares of Tranche 1 Series G Convertible Preferred
Stock, 85 percent, except that, if the Tranche 1 Registration Statement is not
ordered effective by the SEC by the Tranche 1 Computation Date, then the
percentage stated above in this paragraph shall be reduced by two percentage
points on each Tranche 1 Computation Date, and except that the percentage stated
above in this paragraph, as so adjusted, is also subject to adjustment as
provided in Section 3(f)(iii) of the Registration Rights Agreement.
As used herein, "TRANCHE 2 CONVERSION PERCENTAGE" shall mean, with
respect to any conversion of Tranche 2 Series G Convertible Preferred Stock, 85
percent, except that, if the Tranche 2 Registration Statement is not ordered
effective by the SEC by the Tranche 2 Computation Date, then the percentage
stated above in this paragraph shall be reduced by two percentage points on each
Tranche 2 Computation Date, and except that the percentage stated above in this
paragraph, as so adjusted, is also subject to adjustment as provided in Section
3(f)(iii) of the Registration Rights Agreement.
As used herein, "TRANCHE 1 REGISTRATION EFFECTIVE DATE" shall mean the
date on which the Tranche 1 Registration Statement is first ordered effective by
the SEC.
As used herein, "TRANCHE 2 REGISTRATION EFFECTIVE DATE" shall mean the
date on which the Tranche 2 Registration Statement is first ordered effective by
the SEC.
As used herein, "TRANCHE 1 REGISTRATION STATEMENT" shall mean the
Registration Statement required to be filed by the Corporation with the SEC
pursuant to Section 2(a)(i) of the Registration Rights Agreement.
As used herein, "TRANCHE 2 REGISTRATION STATEMENT" shall mean the
Registration Statement required to be filed by the Corporation with the SEC
pursuant to Section 2(a)(ii) of the Registration Rights Agreement.
(c) OTHER PROVISIONS. Notwithstanding anything in this Section 9 to the
contrary, no change in the Conversion Amount shall actually be made until the
cumulative effect of the adjustments called for by this Section 9 since the date
of the last change in the Conversion Amount would change the Conversion Amount
by more than 1%. However, once the cumulative effect would result in such a
change, then the Conversion Rate shall actually be changed to reflect all
adjustments called for by this Section 9 and not previously made.
Notwithstanding anything in this Section 9, no change in the Conversion Amount
shall be made that would result in a
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<PAGE>
Conversion Price of less than the par value of the Common Stock into which
shares of Series G Convertible Preferred Stock are at the time convertible.
The holders of shares of Series G Convertible Preferred Stock at the
close of business on the record date for any dividend payment to holders of
Series G Convertible Preferred Stock shall be entitled to receive the dividend
payable on such shares on the corresponding dividend payment date
notwithstanding the conversion thereof after such dividend payment record date
or the Corporation's default in payment of the dividend due on such dividend
payment date; PROVIDED, HOWEVER, that shares of Series G Convertible Preferred
Stock surrendered for conversion during the period between the close of business
on any record date for a dividend payment and the opening of business on the
corresponding dividend payment date must be accompanied by payment of an amount
equal to the dividend payable on such shares on such dividend payment date. A
holder of shares of Series G Convertible Preferred Stock on a record date for a
dividend payment who (or whose transferee) tenders any of such shares for
conversion into shares of Common Stock on or after such dividend payment date
will receive the dividend payable by the Corporation on such shares of Series G
Convertible Preferred Stock on such date, and the converting holder need not
include payment of the amount of such dividend upon surrender of shares of
Series G Convertible Preferred Stock for conversion. Except as provided above,
no adjustment shall be made in respect of cash dividends on Common Stock or
Series G Convertible Preferred Stock that may be accrued and unpaid at the date
of surrender for conversion.
The right of the holders of Series G Convertible Preferred Stock to
convert their shares shall be exercised by delivering to the Corporation or its
agent, as provided above, a written notice, duly signed by or on behalf of the
holder, stating the number of shares of Series G Convertible Preferred Stock to
be converted and, in the case of Genesee, stating that such conversion will not
result in Genesee beneficially owning a number of shares of Common Stock in
excess of that number permitted by Section 9(a). Promptly, but in no event later
than 10 business days after delivery of a notice of conversion, such holder
shall surrender for such purpose to the Corporation or its agent, as provided
above, certificates representing shares to be converted, duly endorsed in blank
or accompanied by proper instruments of transfer. If such holder shall fail to
deliver certificates representing shares to be converted in such form on or
prior to such tenth business day, such notice of conversion shall not be
effective, unless otherwise agreed by the Corporation, but such failure shall
not affect such holder's right to convert such shares at a date after the date
such notice of conversion was given. The Corporation shall pay any tax arising
under United States federal, state or local law in connection with any
conversion of shares of Series G Convertible Preferred Stock except that the
Corporation shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery upon conversion of
shares of Common Stock or other securities or property in a name other than that
of the holder of the shares of the Series G Convertible Preferred Stock being
converted, and the Corporation shall not be required to issue or deliver any
such shares or other securities or property unless and until the person or
persons requesting the issuance thereof shall have paid to the Corporation the
amount of any such tax or shall have established to the satisfaction of the
Corporation that such tax has been paid.
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The Corporation (and any successor corporation) shall take all action
necessary so that a number of shares of the authorized but unissued Common Stock
(or common stock in the case of any successor corporation) sufficient to provide
for the conversion of the Series G Convertible Preferred Stock outstanding upon
the basis hereinbefore provided are at all times reserved by the Corporation (or
any successor corporation), free from preemptive rights, for such conversion,
subject to the provisions of the next succeeding paragraph. If the Corporation
shall issue any securities or make any change in its capital structure which
would change the number of shares of Common Stock into which each share of the
Series G Convertible Preferred Stock shall be convertible as herein provided,
the Corporation shall at the same time also make proper provision so that
thereafter there shall be a sufficient number of shares of Common Stock
authorized and reserved, free from preemptive rights, for conversion of the
outstanding Series G Convertible Preferred Stock on the new basis. If at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all of the outstanding shares of Series G
Convertible Preferred Stock, the Corporation promptly shall seek such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
In case of any consolidation or merger of the Corporation with any
other corporation (other than a wholly-owned subsidiary of the Corporation) in
which the Corporation is not the surviving corporation, or in case of any sale
or transfer of all or substantially all of the assets of the Corporation, 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 Corporation
shall make appropriate provision or cause appropriate provision to be made so
that each holder of shares of Series G Convertible Preferred Stock then
outstanding shall have the right thereafter to convert such shares of Series G
Convertible Preferred Stock into 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
into which such shares of Series G Convertible Preferred Stock could have been
converted immediately prior to the effective date 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 either securities, cash, or
other assets upon completion of such transaction, the Corporation shall provide
or cause to be provided to each holder of Series G Convertible Preferred Stock
the right to elect the securities, cash, or other assets into which the Series G
Convertible Preferred Stock held by such holder shall be convertible after
completion of any such transaction on the same terms and 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 Corporation 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.
If a holder shall have given a notice of conversion of shares of Series
G Convertible Preferred Stock, upon surrender of certificates representing
shares of Series G Convertible Preferred Stock for conversion, the Corporation
shall issue and deliver to such person certificates for the Common Stock
issuable upon such conversion within three business days after such
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<PAGE>
surrender of certificates and the person converting shall be deemed to be the
holder of record of the Common Stock issuable upon such conversion, and all
rights with respect to the shares surrendered shall forthwith terminate except
the right to receive the Common Stock or other securities, cash, or other assets
as herein provided.
No fractional shares of Common Stock shall be issued upon conversion of
Series G Convertible Preferred Stock but, in lieu of any fraction of a share of
Common Stock which would otherwise be issuable in respect of the aggregate
number of such shares surrendered for conversion at one time by the same holder,
the Corporation at its option (a) may pay in cash an amount equal to the product
of (i) the arithmetic average of the Closing Price of a share of Common Stock on
the three consecutive trading days before the Conversion Date and (ii) such
fraction of a share or (b) may issue an additional share of Common Stock.
The "Closing Price" for each day shall be the closing price regular way
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 National
Market (or, if not so reported, the closing price), or, if not admitted for
quotation on the Nasdaq National 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 Corporation 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.
The Conversion Amount shall be adjusted from time to time under certain
circumstances, subject to the provisions of the first three sentences of the
first paragraph of this Section 9(c), as follows:
(i) In case the Corporation shall issue rights or warrants on
a pro rata basis to allholders 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 on the 30 consecutive business days
commencing 45 business days before the record date (the "CURRENT MARKET
PRICE"), then in each such case the Conversion Amount in effect on such
record date shall be adjusted in accordance with the formula
C1 = C x O + N
-------
O + N x P
-------
M
where
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C1 = the adjusted Conversion Amount
C = the current Conversion Amount
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 Conversion Amount then in effect shall be readjusted
appropriately.
(ii) In case the Corporation shall, by dividend or otherwise,
distribute to all holders of its Junior Stock (as hereinafter defined)
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 Corporation), then in each such
case the Conversion Amount then in effect shall be adjusted in
accordance with the formula
C1 = C x M
---
M - F
where
C1 = the adjusted Conversion Amount
C = the current Conversion Amount
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.
For purposes of this subparagraph (ii), "JUNIOR STOCK" shall include any class
of capital stock ranking junior as to dividends or upon liquidation to the
Series G Convertible Preferred Stock.
(iii) All calculations hereunder shall be made to the nearest
cent or to the nearest 1/100 of a share, as the case may be.
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(iv) If at any time as a result of an adjustment made pursuant
to the fifth paragraph of this Section 9(c), the holder of any Series G
Convertible Preferred Stock thereafter surrendered for conversion 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 conversion shall be subject to adjustment from time to
time in a manner and on terms nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in subparagraphs
(i) to (iii) above.
Except as otherwise provided above in this Section 9, no adjustment in
the Conversion Amount 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 Conversion Amount is adjusted as herein provided, the
Corporation shall send to each transfer agent, if any, for the Series G
Convertible Preferred Stock and the Common Stock, a statement signed by the
Chairman of the Board, the President, or any Vice President of the Corporation
and by its Treasurer or its Secretary or Assistant Secretary stating the
adjusted Conversion Amount determined as provided in this Section 9, and any
adjustment so evidenced, given in good faith, shall be binding upon all
stockholders and upon the Corporation. Whenever the Conversion Amount is
adjusted, the Corporation will give notice by mail to the holders of record of
Series G Convertible Preferred Stock, which notice shall be made within 15 days
after the effective date of such adjustment and shall state the adjustment and
the Conversion Amount. Notwithstanding the foregoing notice provisions, failure
by the Corporation to give such notice or a defect in such notice shall not
affect the binding nature of such corporate action of the Corporation.
Whenever the Corporation shall propose to take any of the actions
specified in the fifth paragraph of this Section 9(c) or in subparagraphs (i) or
(ii) of the ninth paragraph of this Section 9(c) which would result in any
adjustment in the Conversion Amount under this Section 9(c), the Corporation
shall cause a notice to be mailed at least 20 days prior to the date on which
the books of the Corporation will close or on which a record will be taken for
such action, to the holders of record of the outstanding Series G Convertible
Preferred Stock on the date of such notice. Such notice shall specify the action
proposed to be taken by the Corporation 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 9, no adjustment in
the Conversion Amount need be made (a) for a transaction referred to in
subparagraphs (i) or (ii) of the ninth paragraph of this Section 9(c) if holders
of Series G Convertible Preferred Stock are to participate in the transaction or
distribution on a basis and with notice that the Board of Directors determines
such transaction to be fair to the holders of the Series G Convertible Preferred
Stock and appropriate in light of the basis on which holders of the Common Stock
or, in the case of a transaction referred to in said subparagraph (ii), holders
of Junior Stock participate in the
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transaction; (b) 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 (c) after such time as a holder of
shares of Series G Convertible Preferred Stock becomes entitled to receive only
cash upon conversion of such shares (in which case no interest shall accrue on
the amount of such cash for any period prior to the date which is three business
days after surrender of the certificates for such shares for conversion).
(d) CONVERSION AT OPTION OF CORPORATION. So long as the Corporation
shall be in compliance in all material respects with its obligations to the
holders of the Series G Convertible Preferred Stock (including, without
limitation, its obligations under the Registration Rights Agreement and the
provisions of this Certificate of Designations) and so long as the Tranche 1
Registration Statement and the Tranche 2 Registration Statement shall be
effective, the Corporation shall have the right, exercisable at any time or from
time to time on or after the date which is one year after the later of (x) the
Tranche 1 Registration Effective Date and (y) the Tranche 2 Registration
Effective Date, by at least 15 business days but not more than 20 business days
prior notice (a "CORPORATION CONVERSION NOTICE") to the holders of the Series G
Convertible Preferred Stock, to require such holders to convert, in accordance
with the provisions, and subject to the limitations, of this Section 9, all or
any part of the outstanding shares of Series G Convertible Preferred Stock into
shares of Common Stock to the extent the same are at such time convertible into
shares of Common Stock. The Corporation Conversion Notice shall state (1) the
number of shares of Series G Convertible Preferred Stock which the Corporation
seeks to require to be converted into shares of Common Stock and the tranche of
the shares to be converted and (2) the conversion date (which shall not be less
than 15 business days or more than 20 business days after the date the
Corporation Conversion Notice is given). If the Corporation shall give a
Corporation Conversion Notice, then, unless theretofore converted by the holder
or redeemed by the Corporation in accordance herewith, and, so long as the
Tranche 1 Registration Statement and the Tranche 2 Registration Statement shall
remain effective on such conversion date and the Corporation shall be in
compliance in all material respects with its obligations under the Registration
Rights Agreement on such conversion date, on the conversion date properly set
forth therein, the lesser of (A) the number of shares of Series G Convertible
Preferred Stock which the Corporation seeks to require to be converted, as set
forth in such Corporation Conversion Notice or (B) the maximum number of shares
of Series G Convertible Preferred Stock which on such conversion date is
convertible in accordance with Sections 9(a) hereof, shall be converted into
such number of shares of Common Stock as shall be determined pursuant to this
Section 9 (but without regard to the Minimum Conversion Price) as if the
conversion of such number of shares of Series G Convertible Preferred Stock were
made by the holders thereof in accordance herewith without any further action on
the part of the holders of such shares of Series G Convertible Preferred Stock.
Upon receipt by the Corporation of certificates for shares of Series G
Convertible Preferred Stock converted into shares of Common Stock in accordance
with this Section 9(d) after a Corporation Conversion Notice is given, the
Corporation shall issue and, within three trading days after such surrender,
deliver to or upon the order of such holder (1) that number of shares of Common
Stock for the number of shares of Series G Convertible Preferred Stock converted
as shall be determined in accordance herewith, (2) a new certificate for the
balance of shares of Series G Convertible
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<PAGE>
Preferred Stock, if any, and (3) payment of the accrued and unpaid dividends on
the shares of Series G Convertible Preferred Stock so converted (which payment
of dividends may be made in accordance with Section 4 if the Corporation
satisfies the requirements thereof).
SECTION 10. VOTING RIGHTS. Except as otherwise required by law or
expressly provided herein, shares of Series G Convertible Preferred Stock shall
not be entitled to vote on any matter.
The affirmative vote or consent of the holders of a majority of the
outstanding shares of the Series G Convertible Preferred Stock, voting
separately as a class, will be required for (1) any amendment, alteration, or
repeal, whether by merger or consolidation or otherwise, of the Corporation's
Certificate of Incorporation if the amendment, alteration, or repeal materially
and adversely affects the powers, preferences, or special rights of the Series G
Convertible Preferred Stock, or (2) the creation and issuance of any Senior
Dividend Stock or Senior Liquidation Stock; PROVIDED, HOWEVER, that any increase
in the authorized preferred stock of the Corporation or the creation and
issuance of any stock which is both Junior Dividend Stock and Junior Liquidation
Stock or any other capital stock of the Corporation ranking on a parity with the
Series G Convertible Preferred Stock shall not be deemed to affect materially
and adversely such powers, preferences, or special rights.
SECTION 11. OUTSTANDING SHARES. For purposes of this Certificate of
Designations, all shares of Series G Convertible Preferred Stock shall be deemed
outstanding except (i) from the date of surrender of certificates representing
shares of Series G Convertible Preferred Stock for conversion into Common Stock,
all shares of Series G Convertible Preferred Stock converted into Common Stock;
(ii) from the date of registration of transfer, all shares of Series G
Convertible Preferred Stock held of record by the Corporation or any subsidiary
or Affiliate (as defined herein) of the Corporation and (iii) from the
Redemption Date, all shares of Series G Convertible Preferred Stock which are
redeemed, so long as in each case the Redemption Price of such shares of Series
G Convertible Preferred Stock shall have been paid by the Corporation as and
when required hereby. For the purposes of this Certificate of Designations,
"AFFILIATE" means any person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Corporation. "CONTROL" is
the power to direct the management and policies of a person, directly or through
one or more intermediaries, whether through the ownership of voting securities,
by contract, or otherwise.
C. SERIES H CONVERTIBLE PREFERRED STOCK
SECTION 1. DESIGNATION AND AMOUNT. The designation of this series,
which consists of 20,000 shares of Preferred Stock, is the Series H Convertible
Preferred Stock (the "SERIES H PREFERRED STOCK") and the face amount shall be
One Thousand U.S. Dollars ($1,000.00) per share (the "FACE AMOUNT").
SECTION 2. NO DIVIDENDS. The Series H Preferred Stock will bear no
dividends, and the holders of the Series H Preferred Stock shall not be entitled
to receive dividends on the Series H Preferred Stock.
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<PAGE>
SECTON 3. CERTAIN DEFINITIONS. For purposes of this Certificate of
Designations, the following terms shall have the following meanings:
A. "CLOSING BID PRICE" means, for any security as of any date, the
closing bid price of such security on the principal securities
exchange or trading market where such security is listed or
traded as reported by Bloomberg Financial Markets or a comparable
reporting service of national reputation selected by the
Corporation and reasonably acceptable to holders of a majority of
the then outstanding shares of Series H Preferred Stock if
Bloomberg Financial Markets is not then reporting closing bid
prices of such security (collectively, "BLOOMBERG"), or if the
foregoing does not apply, the last reported sale price of such
security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if
no sale price is reported for such security by Bloomberg, the
average of the bid prices of any market makers for such security
as reported in the "pink sheets" by the National Quotation
Bureau, Inc. If the Closing Bid Price cannot be calculated for
such security on such date on any of the foregoing bases, the
Closing Bid Price of such security on such date shall be the fair
market value as reasonably determined by an investment banking
firm selected by the Corporation and reasonably acceptable to
holders of a majority of the then outstanding shares of Series H
Preferred Stock, with the costs of such appraisal to be borne by
the Corporation.
B. "CLOSING DATE" means the Closing Date under that certain
Securities Purchase Agreement dated March 27, 1997 by and among
the Corporation and the initial purchasers of the Series H
Preferred Stock (the "SECURITIES PURCHASE AGREEMENT").
C. "CONVERSION DATE" means, for any Optional Conversion, the date
specified in the notice of conversion in the form attached hereto
(the "NOTICE OF CONVERSION"), so long as the copy of the Notice
of Conversion is taxed (or delivered by other means resulting in
notice) to the Corporation before Midnight, New York City time,
on the Conversion Date indicated in the Notice of Conversion. If
the Notice of Conversion is not so delivered before such time,
then the Conversion Date shall be the date the holder delivers
the Notice of Conversion to the Corporation. The Conversion Date
for the Required Conversion at Maturity shall be the Maturity
Date (as such terms are defined in Paragraph D of Section 4).
D. "CONVERSION PERCENTAGE" shall have the following meaning and
shall be subject to adjustment as provided herein:
<TABLE>
<S> <C> <C>
IF THE CONVERSION DATE IS: THEN THE CONVERSION PERCENTAGE IS:
On or prior to the 179th day
after the Closing Date 100%
On or after the 180th and on or prior
to the 269th day after the Closing Date 90%
On or after the 270th day after
the Closing Date 85%
</TABLE>
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E. "CONVERSION PRICE" means, (i) with respect to any Conversion Date
occurring prior to the 210th day after the Closing Date, the
Variable Conversion Price and (ii) with respect to any Conversion
Date occurring on or after the 210th day after the Closing Date,
the lower of the Conversion Price Ceiling and the Variable
Conversion Price, each in effect as of such date and subject to
adjustment as provided herein.
F. "CONVERSION PRICE CEILING" means the average of the Closing Bid
Prices for the Common Stock for the twenty (20) consecutive
trading days ending on the trading day immediately preceding the
210th day after the Closing Date (subject to equitable adjustment
for any stock splits, stock dividends, reclassifications or
similar events during such twenty (20) trading day period), and
shall be subject to adjustment as provided herein.
G. "CONVERSION PRICE FLOOR" means (i) on or prior to that date which
is two hundred ten (210) days after the Closing Date, $6.00, and
(ii) after that date which is two hundred ten (210) days after
the Closing Date, the lower of (a) $6.00 and (b) the product of
(.65) and the Conversion Price Ceiling, and shall be subject to
adjustment as provided herein.
H. "N" means the sum of (a) the number of days from, but excluding,
the date of issuance of such share of Series H Preferred Stock,
through and including the earlier of (i) the Conversion Date for
such share of Series H Preferred Stock and (ii) such date (if
any) that the average of the Closing Bid Prices for the Common
Stock for ten (10) consecutive trading days is greater than one
hundred and seventy five percent (175%) of the initial Conversion
Price Ceiling determined under Paragraph F of this Section 3
(subject to equitable adjustment for any of the events described
in Section 11.A) plus (b) the number of days not included in
clause (a) of this Paragraph H (if any) during the period
beginning on, but excluding, the date such share of Series H
Preferred Stock was required to be (but was not) redeemed by the
Corporation pursuant to Section 8.B and the subsequent Conversion
Date for such share of Series H Preferred Stock.
I. "PREMIUM" means an amount equal to: (i) (.06)x(N/365)x(1,000) for
the period beginning on the Closing Date and ending on that date
which is 179 days after the Closing Date, (ii)
(.07)x(N/365)x(1,000) for the period beginning on the 180th day
after the Closing Date and ending on that date which is 269 days
after the Closing Date, and (iii) (.08)x(N/365)x(1,000) for the
period beginning on the 270th day after the Closing Date and
thereafter.
J. "VARIABLE CONVERSION PRICE" means, as of any date of
determination, the amount obtained by multiplying the Conversion
Percentage then in effect by the average of the Closing Bid
Prices for the Common Stock for ten (10) consecutive trading days
ending on the trading day immediately preceding such date of
determination (subject to equitable adjustments for any stock
splits, stock dividends, reclassifications or similar events
during such ten (10) trading day period), and shall be subject to
adjustment as provided herein.
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<PAGE>
SECTION 4. CONVERSION.
A. CONVERSION AT THE OPTION OF THE HOLDER. Subject to the limitations
on conversions contained in Paragraph C of this Section 4, each holder of shares
of Series H Preferred Stock may, at any time and from time to time, convert (an
"OPTIONAL CONVERSION") each of its shares of Series H Preferred Stock into a
number of fully paid and nonassessable shares of Common Stock determined in
accordance with the following formula:
1,000 + THE PREMIUM
---------------------
Conversion Price
B. MECHANICS OF CONVERSION. In order to convert Series H Preferred
Stock into shares of Common Stock, a holder shall: (x) deliver (by facsimile or
otherwise) a copy of the fully executed Notice of Conversion to the Corporation
and (y) surrender or cause to be surrendered the original certificates
representing the Series H Preferred Stock being converted (the "PREFERRED STOCK
CERTIFICATES"), duly endorsed, along with a copy of the Notice of Conversion as
soon as practicable thereafter to the Corporation. At the request of a holder
and upon receipt by the Corporation of a facsimile copy of a Notice of
Conversion from a holder, the Corporation shall immediately send, via facsimile,
a confirmation to such holder stating that the Notice of Conversion has been
received, the date upon which the Corporation expects to deliver the Common
Stock issuable upon such conversion and the name and telephone number of a
contact person at the Corporation regarding the conversion. The Corporation
shall not be obligated to issue shares of Common Stock issuable upon such
conversion unless either the Preferred Stock Certificates are delivered to the
Corporation as provided above, or the holder notifies the Corporation that such
certificates have been lost, stolen or destroyed (subject to the requirements of
Section 14.B).
(i) DELIVERY OF COMMON STOCK UPON CONVERSION. The Corporation
shall, within one business day after the later of (a) the second
business day following the Conversion Date in the case of DWAC
deliveries and the third business day following the Conversion date in
all other cases and (b) the date of such surrender (or, in the case of
lost, stolen or destroyed certificates, the date on which indemnity
pursuant to Section 14.B is provided) (the "DELIVERY PERIOD"), and
provided the holder has surrendered Preferred Stock Certificates, issue
and deliver to or upon the order of the holder (x) that number of
shares of Common Stock issuable upon conversion of such shares of
Series H Preferred Stock being converted and (y) a certificate
representing the number of shares of Series H Preferred Stock not being
converted, if any.
(ii) TAXES. The Corporation shall pay any and all taxes which
may be imposed upon it with respect to the issuance and delivery of the
shares of Common Stock upon the conversion of the Series H Preferred
Stock.
(iii) NO FRACTIONAL SHARES. If any conversion of Series H
Preferred Stock would result in the issuance of either a fractional
share of Common Stock, such fractional
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<PAGE>
share shall be disregarded and the number of shares of Common Stock
issuable upon conversion of the Series H Preferred Stock shall be the
closest whole number of shares.
(iv) STATUS AS STOCKHOLDER. Upon submission of a Notice of
Conversion by a holder of Series H Preferred Stock, the shares covered
thereby shall be deemed converted into shares of Common Stock as of the
Conversion Date and the holder's rights as a holder of such converted
shares of Series H Preferred Stock shall cease and terminate, excepting
only the right to receive certificates for such shares of Common Stock
and to any remedies provided herein or otherwise available at law or in
equity to such holder because of a failure by the Corporation to comply
with the terms of this Certificate of Designations (including its right
to regain its status as a Series H Preferred Stockholder pursuant to
Section 6.E).
(v) CONVERSION DISPUTES. In the case of any dispute with
respect to a conversion, the Corporation shall promptly issue such
number of shares of Common Stock as are not disputed in accordance with
subparagraph (i) above. If such dispute involves the calculation of the
Conversion Price, the Corporation shall submit the disputed
calculations to its outside accountant via facsimile within two (2)
business days of receipt of the Notice of Conversion. The accountant
shall audit the calculations and notify the Corporation and the holder
of the results no later than two (2) business days from the date it
receives the disputed calculations. The accountant's calculation shall
be deemed conclusive, absent manifest error. The Corporation shall then
issue the appropriate number of shares of Common Stock in accordance
with subparagraph (i) above.
C. LIMITATIONS ON CONVERSIONS. (i) Except in a Required Conversion at
Maturity, in no event shall a holder of shares of Series H Preferred Stock be
entitled to receive shares of Common Stock to the extent that the sum of (a) the
number of shares of Common Stock beneficially owned by the holder and its
affiliates (exclusive of shares issuable upon conversion of the unconverted
portion of the shares of Series H Preferred Stock or the unexercised or
unconverted portion of any other securities of the Corporation subject to a
limitation on conversion or exercise analogous to the limitations contained
herein) and (b) the number of shares of Common Stock issuable upon the
conversion of the shares of Series H Preferred Stock with respect to which the
determination of this subparagraph is being made, would result in beneficial
ownership by the holder and its affiliates of more than 4.9% of the outstanding
shares of Common Stock. For purposes of this subparagraph, beneficial ownership
shall be determined in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended, and Regulation 13 D-G thereunder, except as otherwise
provided in clause (i) above. The Corporation shall be entitled to rely, and
shall be fully protected in relying, on any statement or representation made by
a holder of Series H Preferred Stock to the Corporation in connection with a
particular conversion without any obligation on the part of the Corporation to
make any inquiry or investigation or to examine its records or the records of
any transfer agent for the Common Stock. The restriction contained in this
Paragraph C shall not be altered, amended, deleted or changed in any manner
whatsoever unless the holders of a majority of the Common Stock and each holder
of Series H Preferred Stock shall approve such alteration, amendment, deletion
or change.
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<PAGE>
(ii) Except as otherwise provided in Section 13, during any thirty (30)
day period beginning on the Closing Date and ending on the earlier of (a) that
date which is two hundred and nine (209) days after the Closing Date and (b)
that date (if any) that the Corporation delivers an Optional Redemption Notice
(as defined below) to the holders of Series H Preferred Stock pursuant to
Section 8.B, no holder of Series H Preferred Stock may convert in excess of
thirty-three percent (33%) of the shares of Series H Preferred Stock initially
purchased by such Holder; provided, however, if such holder has already
converted sixty-six percent (66%) of the shares of Series H Preferred Stock so
purchased, such holder may convert the remaining thirty-four percent (34%) of
the shares so purchased in the next succeeding thirty day period or thereafter.
D. REQUIRED CONVERSION AT MATURITY. Provided all shares of Common Stock
issuable upon conversion of all outstanding shares of Series H Preferred Stock
are then (i) authorized and reserved for issuance, (ii) registered under the
Securities Act of 1933, as amended (the "SECURITIES ACT") for resale by the
holders of such shares of Series H Preferred Stock and (iii) eligible to be
traded on either the NASDAQ, the New York Stock Exchange or the American Stock
Exchange, each share of Series H Preferred Stock issued and outstanding on March
27, 2002 (the "MATURITY DATE") (and any accrued and unpaid Conversion Default
Payments), automatically shall be converted into shares of Common Stock on such
date in accordance with the conversion formulas set forth in Paragraph A of this
Section 4 (the "REQUIRED CONVERSION AT MATURITY"). If a Required Conversion at
Maturity occurs, the Corporation and the holders of Series H Preferred Stock
shall follow the applicable conversion procedures set forth in Paragraph B of
this Section 4; PROVIDED, HOWEVER, that the holders of Series H Preferred Stock
are not required to deliver a Notice of Conversion to the Corporation.
SECTION 5 RESERVATION OF SHARES OF COMMON STOCK.
A. RESERVED AMOUNT. Upon adoption of this Certificate of Designations
by the Corporation's Board of Directors, the Corporation shall have reserved
4,500,000 authorized but unissued shares of Common Stock for issuance upon
conversion of the Series H Preferred Stock and thereafter the number of
authorized but unissued shares of Common Stock so reserved (the "RESERVED
AMOUNT") shall at all times be sufficient to provide for the conversion of the
Series H Preferred Stock outstanding at the then current Conversion Price. The
Reserved Amount shall be allocated to the holders of Series H Preferred Stock as
provided in Section 14.D.
B. INCREASES TO RESERVED AMOUNT. If the Reserved Amount for any three
(3) consecutive trading days (the last of such three (3) trading days being the
"AUTHORIZATION TRIGGER DATE") shall (i) during the period beginning on the
Closing Date and ending on that date which is one hundred fifty (150) days after
the Closing Date be less than 100% of the number of shares of Common Stock
issuable upon conversion of the Series H Preferred Stock on such trading days,
or (ii) on or after that date which is one hundred fifty one (151) days after
the Closing Date, be less than 135% of the number of shares of Common Stock
issuable upon conversion of the Series H Preferred Stock on such trading days,
the Corporation shall immediately notify the holders of Series H Preferred Stock
of such occurrence and shall take immediate action (including seeking
shareholder approval to authorize the issuance of additional shares of Common
Stock) to
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<PAGE>
increase the Reserved Amount to 150% of the number of shares of Common Stock
into which the Series H Preferred Stock are then convertible. In the event the
Corporation fails to so increase the Reserved Amount within ninety (90) days
after an Authorization Trigger Date, each holder of Series H Preferred Stock
shall thereafter have the option, exercisable in whole or in part at any time
and from time to time by delivery of a Redemption Notice (as defined in Section
8.D) to the Corporation, to require the Corporation to purchase for cash, at an
amount per share equal to the Redemption Amount (as defined in Section 8.C), a
portion of the holder's Series H Preferred Stock such that, after giving effect
to such purchase, the holder's allocated portion of the Reserved Amount exceeds
135% of the total number of shares of Common Stock issuable to such holder upon
conversion of its Series H Preferred Stock. If the Corporation fails to redeem
any of such shares within five (5) business days after its receipt of a
Redemption Notice, then such holder shall be entitled to the remedies provided
in Section 8.D.
SECTION 6. FAILURE TO SATISFY CONVERSIONS.
A. CONVERSION DEFAULT PAYMENTS. If, at any time, (x) a holder of shares
of Series H Preferred Stock submits a Notice of Conversion and the Corporation
fails for any reason (other than because such issuance would exceed such
holder's allocated portion of the Reserved Amount, for which failure the holders
shall have the remedies set forth in Section 5) to deliver, on or prior to the
fourth business day following the expiration of the Delivery Period for such
conversion, the shares of Common Stock to which such holder is entitled upon
such conversion, or (y) the Corporation provides notice to any holder of Series
H Preferred Stock at any time of its intention not to issue shares of Common
Stock upon exercise by any holder of its conversion rights in accordance with
the terms of this Certificate of Designations other than because such issuance
would exceed such holder's allocated portion of the Reserved Amount (each of (x)
and (y) being a "CONVERSION DEFAULT"), then the Corporation shall pay to the
affected holder, in the case of a Conversion Default described in clause (x)
above, and to all holders, in the case of a Conversion Default described in
clause (y) above, payments for the first ten (10) business days following the
expiration of the Delivery Period, in the case of a Conversion Default described
in clause (x), and for the first ten (10) business days of any other Conversion
Default ' an amount equal to $1,000 per day. In the event any Conversion Default
continues beyond such ten (10) business day period, the Corporation shall pay to
the holder an additional amount equal to:
(.24) x (D/365) x (the Default Amount)
where:
"D" means the number of days after the expiration of the ten (10)
business day period described above through and including the Default Cure Date;
"DEFAULT AMOUNT" means (i) the total Face Amount of all shares of
Series H Preferred Stock held by such holder plus (ii) the total Premium as of
the first day of the Conversion Default on all shares of Series H Preferred
Stock included in clause (i) of this definition; and
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<PAGE>
"DEFAULT CURE DATE" means (i) with respect to a Conversion Default
described in clause (x) of its definition, the date the Corporation effects the
conversion of the full number of shares of Series H Preferred Stock and (ii)
with respect to a Conversion Default described in clause (y) of its definition,
the date the Corporation begins to honor all conversions of Series H Preferred
Stock in accordance with Section 4.A.
The payments to which a holder shall be entitled pursuant to this
Paragraph A are referred to herein as "CONVERSION DEFAULT PAYMENTS." A holder
may elect to receive accrued Conversion Default Payments in cash or to convert
all or any portion of such accrued Conversion Default Payments, at any time,
into Common Stock at the Conversion Price in effect at the time of such
conversion. In the event a holder elects to receive any Conversion Default
Payments in cash, it shall so notify the Corporation in writing. Such payment
shall be made in accordance with and be subject to the provisions of Section
14.F. In the event a holder elects to convert all or any portion of the
Conversion Default Payments, the holder shall indicate on a Notice of Conversion
such portion of the Conversion Default Payments which such holder elects to so
convert and such conversion shall otherwise be effected in accordance with the
provisions of Section 4.
B. ADJUSTMENT TO CONVERSION PRICE. If a holder has not received
certificates for all shares of Common Stock prior to the tenth (10th) business
day after the expiration of the Delivery Period with respect to a conversion of
Series H Preferred Stock for any reason (other than because such issuance would
exceed such holder's allocated portion of the Reserved Amount, for which failure
the holders shall have the remedies set forth in Section 5), then the Conversion
Price in respect of any shares of Series H Preferred Stock held by such holder
shall thereafter be the lesser of (i) the Conversion Price on the Conversion
Date specified in the Notice of Conversion which resulted in the Conversion
Default and (ii) the lowest Conversion Price in effect during the period
beginning on, and including, such Conversion Date through and including the day
such shares of Common Stock are delivered to the holder and (iii) the Conversion
Price (calculated in accordance with Section 3.E) on the Conversion Date
specified in the Notice of Conversion for such share of Series H Preferred
Stock. If there shall occur a Conversion Default of the type described in clause
(y) of Section 6.A, then the Conversion Price with respect to any conversion
thereafter shall be the lower of (x) the lowest Conversion Price in effect at
any time during the period beginning on, and following, the date of the
occurrence of such Conversion Default through and including the Default Cure
Date and (y) the Conversion Price (calculated in accordance with Section 3.E) on
the Conversion Date specified in the Notice of Conversion for such share of
Series H Preferred Stock., The Conversion Price shall thereafter be subject to
further adjustment for any events described in Section 11.
C. BUY-IN CURE. If (i) the Corporation fails for any reason to deliver
during the Delivery Period shares of Common Stock to a holder upon a conversion
of shares of Series H Preferred Stock having a Conversion Date on or prior to a
date upon which the Corporation has notified the applicable holder in writing
that the Corporation is unable to honor conversions and (ii) after the
applicable Delivery Period with respect to such conversion, such holder
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by such holder of the shares of Common Stock
which such holder anticipated receiving
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<PAGE>
upon such conversion (a "BUY-IN"), the Corporation shall pay such holder (in
addition to any other remedies available to the holder) the amount by which (x)
such holder's total purchase price (including brokerage commissions, if any) for
the shares of Common Stock so purchased exceeds (y) the total Face Amount (plus
the accrued Premium thereon) of the portion of the Series H Preferred Stock
resulting in the Buy-In. For example, if a holder purchases shares of Common
Stock having a total purchase price of $1 1,000 to cover a Buy-In with respect
to an attempted conversion of Series H Preferred Stock having a total Face
Amount and accrued Premium of $10,000, the Corporation will be required to pay
the holder $1,000. A holder shall provide the Corporation written notification
indicating any amounts payable to such holder pursuant to this Paragraph C. The
Corporation shall make any payments required pursuant to this Paragraph C in
accordance with and subject to the provisions of Section 14.F.
D. REDEMPTION RIGHT. If the Corporation fails, and such failure
continues uncured for five (5) business days after the Corporation has been
notified thereof in writing by the holder, for any reason (other than because
such issuance would exceed such holder's allocated portion of the Reserved
Amount, for which failure the holders shall have the remedies set forth in
Section 5) to issue shares of Common Stock within ten (10) business days after
the expiration of the Delivery Period with respect to any conversion of Series H
Preferred Stock, then the holder may elect at any time and from time to time
prior to the Default Cure Date for such Conversion Default, by delivery of a
Redemption Notice (as defined in Section 8.D) to the Corporation, to have all or
any portion of such holder's outstanding shares of Series H Preferred Stock
purchased by the Corporation for cash, at an amount per share equal to the
Redemption Amount (as defined in Section 8.C). If the Corporation fails to
redeem any of such shares within five (5) business days after its receipt of a
Redemption Notice, then such holder shall be entitled to the remedies provided
in Section 8.D.
E. RETENTION OF RIGHTS AS SERIES H PREFERRED STOCKHOLDER. If a holder
has not received certificates for all shares of Common Stock prior to the tenth
(10th) business day after the expiration of the Delivery Period with respect to
a conversion of Series H Preferred Stock for any reason, then the Corporation
shall, as soon as practicable, return such unconverted shares of Series H
Preferred Stock to the holder and (unless the holder otherwise elects to retain
its status as a holder of Common Stock) the holder shall regain the rights of a
holder of Series H Preferred Stock with respect to such shares. In all cases,
the holder shall retain all of its rights and remedies (including, without
limitation, (i) the right to receive Conversion Default Payments pursuant to
Paragraph A above to the extent required thereby for such Conversion Default and
any subsequent Conversion Default and (ii) the right to have the Conversion
Price with respect to subsequent conversions determined in accordance with
Paragraph B above) for the Corporation's failure to convert Series H Preferred
Stock.
SECTION 7. INTENTIONALLY OMITTED.
SECTION 8. REDEMPTION DUE TO CERTAIN EVENTS.
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A. REDEMPTION BY HOLDER. In the event (each of the events described in
clauses (i)-(v) below after expiration of the applicable cure period (if any)
being a "REDEMPTION EVENT"):
(i) the Common Stock (including all of the shares of Common
Stock issuable upon conversion of the Series H Preferred Stock) is
suspended from trading on any of, or is not listed or designated for
quotation (and authorized) for trading on at least one of, the New York
Stock Exchange, the American Stock Exchange, the NASDAQ National Market
or the NASDAQ Small Cap Market ("NASDAQ") for an aggregate of ten (10)
trading days in any nine (9) month period,
(ii) the Registration Statement required to be filed by the
Corporation pursuant to Section 2(a) of the Registration Rights
Agreement, dated as of March 27, 1997, by and among the Corporation and
the other signatories thereto (the "REGISTRATION RIGHTS AGREEMENT"),
has not been declared effective by the 180th day following the Closing
Date or such Registration Statement, after being declared effective,
cannot be utilized by the holders of Series H Preferred Stock for the
resale of all of their Registrable Securities (as defined in the
Registration Rights Agreement) for an aggregate of more than thirty
(30) days in any consecutive twelve month period,
(iii) the Corporation fails, and any such failure continues
uncured for five (5) business days after the Corporation has been
notified thereof in writing by the holder, to remove any restrictive
legend on any certificate or any shares of Common Stock issued to the
holders of Series H Preferred Stock upon conversion of the Series H
Preferred Stock as and when required by this Certificate of
Designations, the Securities Purchase Agreement or the Registration
Rights Agreement,
(iv) the Corporation provides notice to any holder of Series H
Preferred Stock, including by way of public announcement, at any time,
of its intention not to issue shares of Common Stock to any holder of
Series H Preferred Stock upon conversion in accordance with the terms
of this Certificate of Designations (other than due to the
circumstances contemplated by Section 5, for which the holders shall
have the remedies set forth in such Section), or
(v) the Corporation shall:
(a) sell, convey or dispose of all or substantially
all of its assets;
(b) merge, consolidate or engage in any other
business combination with any other entity (other than a
merger, consolidation or business combination in which the
holders of the Corporation's voting securities immediately
preceding such merger, consolidation or business combination
own, on a pro rata basis, at least 50% of the surviving
entity's voting securities); or
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(c) have fifty percent (50%) or more of the voting
power of its capital stock owned beneficially by one person,
entity or "group" (as such term is used under Section 13(d) of
the Securities Exchange Act of 1934, as amended), then, upon
the occurrence of any such Redemption Event, each holder of
shares of Series H Preferred Stock shall thereafter have the
option, exercisable in whole or in part at any time and from
time to time by delivery of a Redemption Notice (as defined in
Paragraph D below) to the Corporation while such Redemption
Event continues, to require the Corporation to purchase for
cash any or all of the then outstanding shares of Series H
Preferred Stock held by such holder for an amount per share
equal to the Redemption Amount (as defined in Paragraph C
below) in effect at the time of the redemption hereunder. For
the avoidance of doubt, the occurrence of any event described
in clauses (i), (ii), (iv) or (v) above shall immediately
constitute a Redemption Event and there shall be no cure
period.
B. REDEMPTION BV CORPORATION.
(i) If at any time after that date which is two (2) years after the
Closing Date, the average of the Closing Bid Prices for the Common Stock for ten
(10) consecutive trading days is greater than the Conversion Price Ceiling
multiplied by 1.5 (subject to equitable adjustments for stock splits, stock
dividends, reclassifications or similar events during such ten (10) trading day
period), then the Corporation shall have the right to redeem up to fifty percent
(50%) of the Series H Preferred Stock for a price per share equal to the
Optional Redemption Amount (as defined below). If at any time after the Closing
Date the average of the Closing Bid Prices for the Common Stock for ten (10)
consecutive trading days is greater than the Conversion Price Ceiling multiplied
by 2.0 (subject to equitable adjustments for stock splits, stock dividends,
reclassifications or similar events during such ten (10) trading day period)
then the Corporation shall have the right to redeem (such right, collectively
with the Corporation's redemption rights pursuant to the immediately preceding
sentence, shall be referred to as "REDEMPTION AT CORPORATION'S ELECTION") any or
all of the Series H Preferred Stock for an amount equal to the Optional
redemption Amount. A Redemption at Corporation's Election shall be exercisable
by the Corporation in its sole discretion by delivery of an Optional Redemption
Notice (as defined below). Holders of Series H Preferred Stock may convert all
or any part of their shares of Series H Preferred Stock into Common Stock by
delivering a Notice of Conversion to the Corporation at any time prior to that
date which is ten (IO) days after receipt of an Optional Redemption Notice. The
"OPTIONAL REDEMPTION Amount" with respect to each share of Preferred Stock means
(a) for redemptions pursuant to the first sentence of this subparagraph (i), an
amount equal to:
(1,000 + P) X 1.5
------------------
CCP
and (b) for redemptions pursuant to the second sentence of this subparagraph
(1), an amount equal to:
(1,000 + P) X 2.0
------------------
CCP
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where:
"P" means the accrued Premium on such share of Series H Preferred Stock
through the date of redemption; and
"CCP" means the Conversion Price Ceiling on the date of the redemption.
(ii) The Corporation shall effect each redemption under this
Section 8.B by giving at least ten (10) trading days but not more than
twenty (20) trading days (subject to extension as set forth below)
prior written notice (the "OPTIONAL REDEMPTION NOTICE") of the date
which such redemption is to become effective (the "EFFECTIVE DATE OF
REDEMPTION") and the Optional Redemption Amount to (a) the holders of
Series H Preferred Stock selected for redemption at the address and
facsimile number of such holder appearing in the Corporation's register
for the Series H Preferred Stock and (b) the transfer agent for the
Common Stock, which Optional Redemption Notice shall be deemed to have
been delivered on the business day after the Corporation's fax (with a
copy sent by overnight courier) of such notice to the holders of Series
H Preferred Stock.
(iii) The Optional Redemption Amount shall be paid to the
holder of the Series H Preferred Stock being redeemed within three (3)
business days of the Effective Date of Redemption; PROVIDED, HOWEVER,
that the Corporation shall not be obligated to deliver any portion of
the Optional Redemption Amount until either the certificates evidencing
the Series H Preferred Stock being redeemed are delivered to the office
of the Corporation, or the holder notifies the Corporation that such
certificates have been lost, stolen or destroyed and delivers the
documentation in accordance with Section 14.B hereof. Notwithstanding
anything herein to the contrary, in the event that the certificates
evidencing the Series H Preferred Stock redeemed are not delivered to
the Corporation prior to the 3rd business day following the Effective
Date of Redemption, the redemption of the Series H Preferred Stock
pursuant to this Section 8.B shall still be deemed effective as of the
Effective Date of Redemption and the Optional Redemption Price shall be
paid to the holder of Series H Preferred Stock redeemed within five (5)
business days of the date the certificates evidencing the Series H
Preferred Stock redeemed are actually delivered to the Corporation.
(iv) Notwithstanding the provisions of Section 4 hereof, if
the Conversion Price on the date a holder delivers a Conversion Notice
is less than or equal to the Conversion Price Floor then in effect, the
Corporation may, at its option, elect to redeem the shares of Series H
Preferred Stock which are the subject of such Conversion Notice at a
price per share equal to the Floor Redemption Amount (as defined below)
in lieu of converting such shares to Common Stock. Each holder of
Series H Preferred Stock shall have the right, by sending a written
request to the Corporation, to require the Corporation to provide
advance written notice to such holder stating whether the Corporation
will elect to exercise its redemption rights pursuant to this paragraph
(iv). The Corporation shall have five (5) business days from receipt of
such request to reply in writing to such holder. In the event
Corporation either fails to so reply or replies that it will not elect
to exercise such redemption rights, the Corporation shall forfeit its
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rights to redeem shares of Series H Preferred Stock pursuant to this
paragraph (iv) during the thirty (30) day period immediately following
the expiration of the Corporation's reply period or receipt of such
election not to redeem, as the case may be. In the event the
Corporation notifies a holder of its intention to redeem shares of
Series H Preferred Stock pursuant to this paragraph (v) and such holder
delivers a Conversion Notice at any time during which the Corporation
has redemption rights pursuant to this paragraph (iv) and the
Corporation, prior to the date of such Conversion Notice, has not
provided such holder with written notice that it no longer intends to
exercise its redemption rights pursuant to this paragraph (iv), the
Corporation shall, no later than thirty (30) days from the date of such
Conversion Notice, pay to such holder the Floor Redemption Amount for
each share of series H Preferred which is covered by such Conversion
Notice. The Floor Redemption Amount per share means an amount equal to:
(1000+P) x (RAP)
where:
"P" means the accrued Premium on such share of Series H
Preferred Stock through the date of redemption.
"RAP" means:
If the Redemption occurs: RAP
On or prior to the 209th
day after the Closing Date 110%
On or after the 210th and on or prior
to the 299th day after the Closing Date 112%
On or after the 300th and on or prior
to the 394th day after the Closing Date 115%
On or after the 395th day
after the Closing Date 120%
(v) If the Corporation fails to pay, when due and owing, any
Optional Redemption Amount or Floor Redemption Amount, then the holder
of Series H Preferred Stock entitled to receive such Optional
Redemption Amount or Floor Redemption Amount, as the case may be, shall
have the right, at any time and from time to time, to require the
Corporation, upon written notice, to immediately convert (in accordance
with the terms of paragraph A of Section 4) any or all of the shares of
Series H Preferred Stock which are the subject of such redemption, into
shares of Common Stock at the lowest Conversion Price in effect during
the period beginning on the date the Corporation elected to redeem such
shares of Series H Preferred Stock and ending on the earlier of the
date the Corporation effects such redemption and the twentieth trading
day following either the Conversion Date which gave rise to the right
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of redemption (in the case of a redemption pursuant to subparagraph
(iv) of this Paragraph B) or the Effective Date of Redemption (in the
case of a Redemption at Corporation's Election), as the case may be. In
addition, if the Corporation fails to pay a Floor Redemption Amount,
when due and owing, the Corporation shall thereafter forfeit its rights
this Paragraph B to effect any redemption with respect to any or all
issued and outstanding shares of Series H Preferred Stock, and in the
case of a failure to pay all or any portion of an Optional Redemption
Amount, shall pay the holder entitled to such Optional Redemption
Amount an amount equal to:
ORA
----- x (ORF-LCBP)
OCP
where:
"ORA" means the amount of the Optional Redemption Amount which
the Corporation failed to so pay;
"OCP" means the Conversion Price in effect on the Effective
Date of Redemption;
"ORF" means (i) with respect to any redemption pursuant to the
first sentence of Section 8.B (I), the product obtained by multiplying
1.5 by the Conversion Price Ceiling and (ii) with respect to any
redemption pursuant to the second sentence of Section 8.B(ii), the
product obtained by multiplying 2.0 by the Conversion Price Ceiling;
and
"LCBP" means the lowest Closing Big Price of the Corporation's
Common Stock during the Twenty (20) trading day period beginning on the
Effective Date of redemption.
C. DEFINITION OF REDEMPTION AMOUNT. The "REDEMPTION AMOUNT" with
respect to a share of Series H Preferred Stock means an amount equal to:
1,000 + P
----------- x M
CP
where:
"P" means the accrued Premium on such share of Series H Preferred Stock
through the date of redemption;
"CP" means the Conversion Price in effect on the date of the Redemption
Notice; and
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"M" means the highest Closing Bid Price of the Corporation's Common
Stock during the period beginning on the date of the Redemption Notice and
ending on the date of the redemption.
D. REDEMPTION DEFAULTS. If the Corporation fails to pay any holder the
Redemption Amount with respect to any share of Series H Preferred Stock within
five (5) business days of its receipt of a notice requiring such redemption (a
"REDEMPTION NOTICE"), then the holder of Series H Preferred Stock delivering
such Redemption Notice (i) shall be entitled to interest on the Redemption
Amount at a per annum rate equal to the lower of twenty-four percent (24%) and
the highest rate permitted by applicable law from the date of the Redemption
Notice until the date of redemption hereunder, and (ii) shall have the right, at
any time and from time to time, to require the Corporation, upon written notice,
to immediately convert (in accordance with the terms of Paragraph A of Section
4) all or any portion of the Redemption Amount, plus interest as aforesaid, into
shares of Common Stock at the lowest Conversion Price in effect during the
period beginning on the date of the Redemption Notice and ending on the
Conversion Date with respect to the conversion of such Redemption Amount. In the
event the Corporation is not able to redeem all of the shares of Series H
Preferred Stock subject to Redemption Notices, the Corporation shall redeem
shares of Series H Preferred Stock from each holder pro rata, based on the total
number of shares of Series H Preferred Stock included by such holder in the
Redemption Notice relative to the total number of shares of Series H Preferred
Stock in all of the Redemption Notices.
SECTION 9. RANK. All shares of the Series H Preferred Stock shall rank
(i) prior to the Corporation's common stock, par value $.01 per share (the
"COMMON STOCK"); (ii) PARI PASSU with any class or series of capital stock of
the Corporation now outstanding or hereafter created other than the Common Stock
or classes or series of capital stock of the Corporation specifically ranking,
by their terms, junior to the Series H Preferred Stock (the "PARI PASSU
SECURITIES"); and (iii) junior to any class or series of capital stock of the
Corporation hereafter created (with the consent of the holders of Series H
Preferred Stock obtained in accordance with Section 13 hereof) specifically
ranking, by its terms, senior to the Series H Preferred Stock (the "SENIOR
SECURITIES"), in each case as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary.
SECTION 10. LIQUIDATION PREFERENCE.
A. If the Corporation shall commence a voluntary case under the U.S.
Federal bankruptcy laws or any other applicable bankruptcy, insolvency or
similar law, or consent to the entry of an order for relief in an involuntary
case under any law or to the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the Corporation
or of any substantial part of its property, or make an assignment for the
benefit of its creditors, or admit in writing its inability to pay its debts
generally as they become due, or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the U.S. Federal bankruptcy laws or any other
applicable bankruptcy, insolvency or similar law resulting in the appointment of
a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation
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<PAGE>
or of any substantial part of its property, or ordering the winding up or
liquidation of its affairs, and any such decree or order shall be unstayed and
in effect for a period of sixty (60) consecutive days and, on account of any
such event, the Corporation shall liquidate, dissolve or wind up, or if the
Corporation shall otherwise liquidate, dissolve or wind up (a "LIQUIDATION
EVENT"), no distribution shall be made to the holders of any shares of capital
stock of the Corporation (other than Senior Securities) upon liquidation,
dissolution or winding up unless prior thereto the holders of shares of Series H
Preferred Stock shall have received the Liquidation Preference with respect to
each share. If, upon the occurrence of a Liquidation Event, the assets and funds
available for distribution among the holders of the Series H Preferred Stock and
holders of PARI PASSU Securities shall be insufficient to permit the payment to
such holders of the preferential amounts payable thereon, then the entire assets
and funds of the Corporation legally available for distribution to the Series H
Preferred Stock and the PARI PASSU Securities shall be distributed ratably among
such shares in proportion to the ratio that the Liquidation Preference payable
on each such share bears to the aggregate Liquidation Preference payable on all
such shares. After payment in full of the Liquidation Preference of the shares
of the Series H Preferred Stock and the PARI PASSU Securities, the holders of
such shares shall not be entitled to any further participation in any
distribution of assets by the Corporation.
B. The purchase or redemption by the Corporation of stock of any class,
in any manner permitted by law, shall not, for the purposes hereof, be regarded
as a liquidation, dissolution or winding up of the Corporation. Neither the
consolidation or merger of the Corporation with or into any other entity nor the
sale or transfer by the Corporation of less than substantially all of its assets
shall, for the purposes hereof, be deemed to be a liquidation, dissolution or
winding up of the Corporation.
C. The "LIQUIDATION PREFERENCE" with respect to a share of Series H
Preferred Stock means an amount equal to the Face Amount thereof plus the
Premium thereon through the date of final distribution. The Liquidation
Preference with respect to any PARI PASSU Securities shall be as set forth in
the Certificate of Designations filed in respect thereof.
SECTION 11. ADJUSTMENTS TO THE CONVERSION PRICE. The Conversion Price
shall be subject to adjustment from time to time as follows:
A. STOCK SPLITS, STOCK DIVIDENDS, Etc. If at any time on or after a
determination of the Conversion Price Ceiling or Conversion Price Floor, the
number of outstanding shares of Common Stock is increased by a stock split,
stock dividend, combination, reclassification or other similar event, the
Conversion Price Ceiling and Conversion Price Floor shall be proportionately
reduced, or if the number of outstanding shares of Common Stock is decreased by
a reverse stock split, combination or reclassification of shares, or other
similar event at anytime on or after the determination of the Conversion Price
Ceiling or Conversion Price Floor, the Conversion Price Ceiling and Conversion
Price Floor shall be proportionately increased. In such event, the Corporation
shall notify the transfer agent for the Common Stock of such change on or before
the effective date thereof.
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B. ADJUSTMENT DUE TO MAJOR ANNOUNCEMENT. In the event the Corporation
(i) makes a public announcement that it intends to consolidate or merge with any
other entity (other than a merger in which the Corporation is the surviving or
continuing entity and its capital stock is unchanged) or to sell or transfer all
or substantially all of the assets of the Corporation or (ii) any person, group
or entity (including the Corporation) publicly announces a tender offer to
purchase 50% or more of the Corporation's Common Stock (the date of the
announcement referred to in clause (i) or (ii) of this Paragraph B is
hereinafter referred to as the "ANNOUNCEMENT DATE"), then the Conversion Price
shall, effective upon the Announcement Date and continuing through the
Abandonment Date (as defined below), be equal to the Conversion Price which
would have been applicable for an Optional Conversion occurring on the
Announcement Date. From and after the Abandonment Date, the Conversion Price
shall be determined as set forth in Section 3.F "ABANDONMENT DATE" means with
respect to any proposed transaction or tender offer for which a public
announcement as contemplated by this Paragraph B has been made, the date upon
which the Corporation (in the case of clause (i) above) or the person, group or
entity (in the case of clause (ii) above) publicly announces the termination or
abandonment of the proposed transaction or tender offer which caused this
Paragraph B to become operative.
C. ADJUSTMENT DUE TO MERGER, CONSOLIDATION, ETC. If, at any time when
any Series H Preferred Stock is issued and outstanding, there shall be (i) any
reclassification or change of the outstanding shares of Common Stock (other than
a change in par value, or from par value to no par value, or from no par value
to par value, or as a result of a subdivision or combination), (ii) any
consolidation or merger of the Corporation with any other entity (other than a
merger in which the Corporation is the surviving or continuing entity and its
capital stock is unchanged), (iii) any sale or transfer of all or substantially
all of the assets of the Corporation or (iv) any share exchange pursuant to
which all of the outstanding shares of Common Stock are converted into other
securities or property, then the holders of Series H Preferred Stock shall
thereafter have the right to receive upon conversion, in lieu of the shares of
Common Stock immediately theretofore issuable (without giving effect to any
limitations upon conversion imposed by Section 4.C), such shares of stock,
securities and/or other property as may be issued or payable with respect to or
in exchange for the number of shares of Common Stock immediately theretofore
issuable upon conversion (without giving effect to any limitations upon
conversion imposed by Section 4.C) had such merger, consolidation, exchange of
shares, recapitalization, reorganization or other similar event not taken place,
and in any such case, appropriate provisions shall be made with respect to the
rights and interests of the holders of the Series H Preferred Stock to the end
that the provisions hereof (including, without limitation, provisions for
adjustment of the Conversion Price and of the number of shares of Common Stock
issuable upon conversion of the Series H Preferred Stock) shall thereafter be
applicable, as nearly as may be practicable in relation to any shares of stock
or securities thereafter deliverable upon the conversion thereof. The
Corporation shall not effect any transaction described in this Paragraph C
unless (i) each holder of Series H Preferred Stock has received written notice
of such transaction at least thirty (30) days prior thereto, but in no event
later than ten (10) days prior to the record date for the determination of
shareholders entitled to vote with respect thereto, and (ii) the resulting
successor or acquiring entity (if not the Corporation) assumes by written
instrument the obligations of this Paragraph C. The above provisions shall apply
regardless of whether or not there would have been a sufficient number of shares
of Common Stock authorized
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and available for issuance upon conversion of the shares of Series H Preferred
Stock outstanding as of the date of such transaction, and shall similarly apply
to successive reclassifications, consolidations, mergers, sales, transfers or
share exchanges.
D. ADJUSTMENT DUE TO DISTRIBUTION. If the Corporation shall declare or
make any distribution of its assets (or rights to acquire its assets) to holders
of Common Stock as a partial liquidating dividend, by way of return of capital
or otherwise (including any dividend or distribution to the Corporation's
shareholders in cash or shares (or rights to acquire shares) of capital stock of
a subsidiary (i.e. a spin-off)) (a "DISTRIBUTION"), then the holders of Series H
Preferred Stock shall be entitled, upon any conversion of shares of Series H
Preferred Stock after the date of record for determining shareholders entitled
to such Distribution, to receive the amount of such assets which would have been
payable to the holder with respect to the shares of Common Stock issuable upon
such conversion (without giving effect to any limitations upon conversion
imposed by Section 4.C) had such holder been the holder of such shares of Common
Stock on the record date for the determination of shareholders entitled to such
Distribution.
E. INTENTIONALLY OMITTED.
F. PURCHASE RIGHTS. If at any time when any Series H Preferred Stock is
issued and outstanding, the Corporation issues any Convertible Securities or
rights to purchase stock, warrants, securities or other property (the "PURCHASE
RIGHTS") pro rata to the record holders of any class of Common Stock, then the
holders of Series H Preferred Stock will be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which such
holder could have acquired if such holder had held the number of shares of
Common Stock acquirable upon complete conversion of the Series H Preferred Stock
(without giving effect to any limitations upon conversion imposed by Section
4.C) immediately before the date on which a record is taken for the grant,
issuance or sale of such Purchase Rights, or, if no such record is taken, the
date as of which the record holders of Common Stock are to be determined for the
grant, issue or sale of such Purchase Rights.
G. NOTICE OF ADJUSTMENTS. Upon the occurrence of each adjustment or
readjustment of the Conversion Price pursuant to this Section 11, the
Corporation, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to each holder of Series H Preferred Stock
a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder of Series
H Preferred Stock, furnish to such holder a like certificate setting forth (i)
such adjustment or readjustment, (ii) the Conversion Price at the time in effect
and (iii) the number of shares of Common Stock and the amount, if any, of other
securities or property which at the time would be received upon conversion of a
share of Series H Preferred Stock.
SECTION 12. VOTING RIGHTS. The holders of the Series H Preferred Stock
have no voting power whatsoever, except as otherwise provided by the Delaware
General Corporation Law (the "GENERAL CORPORATE Law"), in this Section 12 and in
Section 13 below.
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Notwithstanding the above, the Corporation shall provide each holder of
Series H Preferred Stock, at its request, with copies of proxy materials and
other information sent to shareholders. If the Corporation takes a record of its
shareholders for the purpose of determining shareholders entitled to (a) receive
payment of any dividend or other distribution, any right to subscribe for,
purchase or otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or (b) to vote in connection with any proposed sale,
lease or conveyance of all or substantially all of the assets of the
Corporation, or any proposed merger, consolidation, liquidation, dissolution or
winding up of the Corporation, the Corporation shall mail a notice to each
holder, at least twenty (20) days prior to the record date specified therein (or
thirty (30) days prior to the consummation of the transaction or event,
whichever is earlier, but in no event earlier than public announcement of such
proposed transaction), of the date on which any such record is to be taken for
the purpose of such vote, dividend, distribution, right or other event, and a
brief statement regarding the amount and character of such vote, dividend,
distribution, right or other event to the extent known at such time.
To the extent that under the General Corporate Law the vote of the
holders of the Series H Preferred Stock, voting separately as a class or series,
as applicable, is required to authorize a given action of the Corporation, the
affirmative vote or consent of the holders of at least a majority of the shares
of the Series H Preferred Stock represented at a duly held meeting at which a
quorum is present or by written consent of a majority of the shares of Series H
Preferred Stock (except as otherwise may be required under the General Corporate
Law) shall constitute the approval of such action by the class. To the extent
that under the General Corporate Law holders of the Series H Preferred Stock are
entitled to vote on a matter with holders of Common Stock, voting together as
one class, each share of Series H Preferred Stock shall be entitled to a number
of votes equal to the number of shares of Common Stock into which it is then
convertible (without giving effect to any limitations upon conversion imposed by
Section 4.C) using the record date for the taking of such vote of shareholders
as the date as of which the Conversion Price is calculated. Holders of the
Series H Preferred Stock shall be entitled to notice of (and copies of proxy
materials and other information sent to shareholders) all shareholder meetings
or written consents with respect to which they would be entitled to vote, which
notice would be provided pursuant to the Corporation's by-laws and the General
Corporate Law.
SECTION 13. PROTECTION PROVISIONS. So long as any shares of Series H
Preferred Stock are outstanding, the Corporation shall not, without first
obtaining the approval (by vote or written consent, as provided by the General
Corporate Law) of the holders of at least a majority of the then outstanding
shares of Series H Preferred Stock:
(a) alter or change the rights, preferences or privileges of
the Series H Preferred Stock;
(b) alter or change the rights, preferences or privileges of
any capital stock of the Corporation so as to affect adversely the
Series H Preferred Stock;
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(c) create any new class or series of capital stock having a
preference over the Series H Preferred Stock as to distribution of
assets upon liquidation, dissolution or winding up of the Corporation
(as previously defined in Section 9 hereof, "SENIOR SECURITIES");
(d) increase the authorized number of shares of Series H
Preferred Stock;
(e) issue any shares of Series H Preferred Stock other than
pursuant to the Securities Purchase Agreement; or
(f) redeem, or declare or pay any cash dividend or
distribution on, any capital stock of the Corporation ranking junior to
the Series H Preferred Stock as to distribution of assets upon
liquidation, dissolution or winding up of the Corporation (including
the Common Stock).
If holders of at least a majority of the then outstanding shares of Series H
Preferred Stock agree to allow the Corporation to alter or change the rights,
preferences or privileges of the shares of Series H Preferred Stock pursuant to
subsection (a) above, then the Corporation shall deliver notice of such approved
change to the holders of the Series H Preferred Stock that did not agree to such
alteration or change (the "DISSENTING Holders") and the Dissenting Holders shall
have the right, for a period of thirty (30) days, to convert all of their shares
of Series H Preferred Stock pursuant to the terms of this Certificate of
Designations as they existed prior to such alteration or change or to continue
to hold their shares of Series H Preferred Stock.
SECTION 14. MISCELLANEOUS.
A. CANCELLATION OF SERIES H PREFERRED STOCK. If any shares of Series H
Preferred Stock are converted pursuant to Section 4, the shares so converted
shall be canceled, shall return to the status of authorized, but unissued
preferred stock of no designated series, and shall not be issuable by the
Corporation as Series H Preferred Stock.
B. LOST OR STOLEN CERTIFICATES. Upon receipt by the Corporation of (i)
evidence of the loss, theft, destruction or mutilation of any Preferred Stock
Certificate(s) and (ii) (y) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to the Corporation, or (z) in the case of
mutilation, upon surrender and cancellation of the Preferred Stock
Certificate(s), the Corporation shall execute and deliver new Preferred Stock
Certificate(s) of like tenor and date. However, the Corporation shall not be
obligated to reissue such lost or stolen Preferred Stock Certificate(s) if the
holder contemporaneously requests the Corporation to convert such Series H
Preferred Stock.
C. INTENTIONALLY OMITTED.
D. ALLOCATIONS OF RESERVED AMOUNT. The Reserved Amount and each
increase to the Reserved Amount shall be allocated pro rata among the holders of
Series H Preferred Stock based on the number of shares of Series H Preferred
Stock held by each holder at
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the time of the establishment of or increase in the Reserved Amount, as the case
may be. In the event a holder shall sell or otherwise transfer any of such
holder's shares of Series H Preferred Stock, each transferee shall be allocated
a pro rata portion of such transferor's Reserved Amount. Any portion of the
Reserved Amount which remains allocated to any person or entity which does not
hold any Series H Preferred Stock shall be allocated to the remaining holders of
shares of Series H Preferred Stock, pro rata based on the number of shares of
Series H Preferred Stock then held by such holders.
E. STATEMENTS OF AVAILABLE SHARES. So long as any shares of Series H
Preferred Stock are outstanding, the Corporation shall deliver to each holder a
written report notifying the holders of any occurrence which prohibits the
Corporation from issuing Common Stock upon any conversion. In addition, the
Corporation shall provide, within ten (10) days after delivery to the
Corporation of a written request by any holder, any of the following information
as of the date of such request: (i) the total number of shares of Series H
Preferred Stock outstanding, (ii) the total number of shares of Common Stock
issued upon all prior conversions of Series H Preferred Stock, (iii) the total
number of shares of Common Stock which are reserved for issuance upon conversion
of the Series H Preferred Stock, (iv) the total number of shares of Common Stock
which may thereafter be issued by the Corporation upon conversion of the Series
H Prefer-red Stock before the Corporation would exceed the Reserved Amount.
F. PAYMENT OF CASH DEFAULTS. Whenever the Corporation is required to
make any cash payment to a holder under this Certificate of Designations (as a
Conversion Default Payment, upon redemption or otherwise), such cash payment
shall be made to the holder within five (5) business days after delivery by such
holder of a notice specifying that the holder elects to receive such payment in
cash and the method (e.g., by check, wire transfer) in which such payment should
be made. If such payment is not delivered within such five (5) business day
period, such holder shall thereafter be entitled to interest on the unpaid
amount at a per annum rate equal to the lower of twenty-four percent (24%) and
the highest rate permitted by applicable law until such amount is paid in full
to the holder.
G. REMEDIES CUMULATIVE. The remedies provided in this Certificate of
Designations shall be cumulative and in addition to all other remedies available
under this Certificate of Designations, at law or in equity (including a decree
of specific performance and/or other injunctive relief), and nothing herein
shall limit a holder's right to pursue actual damages for any failure by the
Corporation to comply with the terms of this Certificate of Designations. The
Corporation acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the holders of Series H Preferred Stock and that the
remedy at law for any such breach may be inadequate. The Corporation therefore
agrees, in the event of any such breach or threatened breach, the holders of
Series H Preferred Stock shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being required.
FIFTH: [Intentionally omitted.]
SIXTH: The Corporation is to have perpetual existence.
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SEVENTH: In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized:
To make, alter or repeal the bylaws of the Corporation. To
authorize and cause to be executed mortgages and liens upon
the real and personal property of the corporation.
To authorize and cause to be executed mortgages and liens upon
the real and personal property of the Corporation.
To set apart out of any of the funds of the corporation
available for dividends a reserve or reserves for any proper
purpose and to abolish any such reserve in the manner in which
it was created.
By a majority of the whole Board, to designate one or more
committees, each committee to consist of one or more of the
Directors of the Corporation. The Board may designate one or
more Directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of
the committee. The bylaws may provide that in the absence or
disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified
from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such agent
or disqualified member. ' Any such committee, to the extent
provided in the resolution of the Board of Directors, or in
the bylaws of the Corporation, shall have and may exercise all
the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, and
may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have
the power or authority in reference to amending the
certificate of incorporation, adopting an agreement of merger
or consolidation, recommending to the stockholders the sale,
lease, or exchange of all or substantially all of the
Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation
of a dissolution, or amending the bylaws of the Corporation;
and, unless the resolution or bylaws expressly so provide, no
such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock.
When and as authorized by the stockholders in accordance with
statute, to sell, lease or exchange all or substantially all
of the property and assets of the corporation, including its
goodwill and its corporate franchises, upon such terms and
conditions and for such consideration, which may consist in
whole or in part of money or property, including shares of
stock in, and/or other securities of, any other Corporation or
Corporations, as its Board of Directors shall deem expedient
and for the best interests of the Corporation.
EIGHTH: To the maximum extent permitted by Section 102(b)(7) of the
General Corporation Law of the State 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 Directors' duty of loyalty to the
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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.
NINTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or
between this Corporation and its stockholders or any class of
them, any court of equitable jurisdiction within the State of
Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof, or on
the application of any receiver or receivers appointed for
this Corporation under the provisions of Section 291 of Title
8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this
Corporation under the provisions of Section 279 of Title 8 of
the Delaware Code order a meeting of the creditors or class of
creditors, and/or of the stockholders or class of stockholders
of this Corporation, as the case may be, to be summoned in
such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class
of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to
any compromise or arrangement and to any reorganization of
this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the
said application has been made, be binding on all the
creditors or class of creditors, and/or on all the
stockholders or class of stockholders of this Corporation, as
the case may be, and also on this Corporation.
TENTH: Meetings of the stockholders may be held within or without the
State of Delaware, as the bylaws may provide. The books of the
corporation may be kept (subject to any provision contained in
the statutes) outside the State of Delaware at such place or
places as may be designated from time to time by the Board of
Directors or in the bylaws of the corporation. Elections of
directors need not be written ballot unless the bylaws of the
corporation shall so provide.
ELEVENTH:The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Amended and Restated
Certificate of Incorporation, in the manner now or hereafter
prescribed by statute and this Amended and Restated
Certificate of Incorporation, and all rights conferred upon
stockholders herein are granted subject to this reservation.
IN WITNESS WHEREOF, the undersigned, being the duly elected Assistant
Secretary of Palomar Medical Technologies, Inc., does hereby declare that this
Second Restated Certificate of Incorporation has been duly adopted by the Board
of Directors of this Corporation in accordance with the provisions of Section
245 of the General Corporation Law of the State of Delaware. The undersigned
does hereby affirm, under the penalties of perjury, that this instrument is the
act and deed of the Corporation and the facts herein set forth are true and
correct. I have accordingly hereunto set my hand this 7th day of January, 1999.
PALOMAR MEDICAL TECHNOLOGIES, INC.
/s/ Sarah Burgess Reed
----------------------------------
Sarah Burgess Reed
Assistant Secretary
General Counsel
FORM OF SECURITIES PURCHASE AGREEMENT
THIS AGREEMENT is by and between Palomar Medical Technologies, Inc.
(the "Company"), a Delaware corporation with an office at 45 Hartwell Avenue,
Lexington, Massachusetts 02173 U.S.A., and the purchasers (each a "Purchaser"
and, collectively, the "Purchasers") named on the purchaser signature pages
hereto (the "Purchaser Signature Pages").
IN CONSIDERATION of the mutual covenants contained in this Agreement
and good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
SECTION 1. AUTHORIZATION OF SHARES. The Company has authorized (a) the
sale of up to 3,000,000 shares (the "Shares") of the Company's Common Stock, par
value $.01 per share (the "Common Stock"), and (b) the sale of warrants (the
"Warrants" and, together with the Shares, the "Securities") to purchase up to an
aggregate of _____ shares (the "Warrant Shares") of Common Stock.
SECTION 2. AGREEMENT TO SELL AND PURCHASE THE SECURITIES. At each
Closing (as defined below), the Company will sell to each Purchaser
participating in such Closing, and each such Purchaser will buy from the
Company, upon the terms and conditions hereinafter set forth, the Securities
being purchased by such Purchaser. The number of shares of Common Stock to be
purchased by each Purchaser, and the number of Warrant Shares to be purchasable
under each Purchaser's Warrant, shall be determined on the basis of the total
amount payable by such Purchaser (the "Purchase Price") as set forth on such
Purchaser's Purchaser Signature Page, based on an aggregate purchase price of
$1.00 for each share of Common Stock and Warrant to purchase one share of Common
Stock.
SECTION 3. PAYMENT OF PURCHASE PRICE. On or prior to each Closing Date,
as defined below, each Purchaser that is purchasing Securities on such Closing
Date will deliver to the Company the full amount of the Purchase Price payable
by such Purchaser by check or wire transfer. Wire transfers should be directed
as follows:
Fleet Bank
One Federal Street
Boston, MA
ABA No.:
For further credit to:
account no.:
account name: Palomar Medical Technologies, Inc.
SECTION 4. THE CLOSING. The consummation of the transactions
contemplated by this Agreement (the "Closings") shall occur as to each Purchaser
on the date that all conditions to Closing with respect to the Company and such
Purchaser have been satisfied or at such other time as shall be agreed by the
Company and the Purchasers (the "Closing Date"). Within thirty (30) days after
each Closing Date, the Company shall deliver to each Purchaser that purchased
Securities on such Closing Date one or more certificates for the Securities
registered in the name of such Purchaser or its nominee.
SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
The Company hereby represents and warrants to, and covenants with, the
Purchasers as follows:
SECTION 5.1. ORGANIZATION. The Company is duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Company has full power and authority to own and operate its properties and to
conduct its business as currently conducted and is registered or qualified to do
business and is in good standing in each jurisdiction in which it owns or leases
property or transacts
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business and where the failure to be so qualified would have a material adverse
effect upon the business, financial condition, properties or operations of the
Company.
SECTION 5.2. DUE AUTHORIZATION. The Company has all requisite
power and authority to execute, deliver and perform its obligations under this
Agreement and the Warrants, and this Agreement and the Warrants have been duly
authorized and validly executed and delivered by the Company and constitute
valid and binding agreements of the Company enforceable against the Company in
accordance with their terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' and contracting parties' rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
SECTION 5.3. NON-CONTRAVENTION. The execution and delivery of this
Agreement and the Warrants, the issuance and sale of the Securities to be sold
by the Company hereunder, and the consummation of the transactions contemplated
hereby will not conflict with or constitute a violation of, or default (with the
passage of time or otherwise) under, any material agreement or instrument to
which the Company is a party or by which it is bound or the Certificate of
Incorporation (the "Charter") or the By-Laws of the Company nor result in the
creation or imposition of any lien, encumbrance, claim, security interest or
restriction whatsoever upon any of the material properties or assets of the
Company or an acceleration of indebtedness pursuant to any obligation, agreement
or condition contained in any material bond, debenture, note or any other
evidence of indebtedness or any material indenture, mortgage, deed of trust or
any other agreement or instrument to which the Company is a party or by which
the Company is bound or to which any of the property or assets of the Company is
subject, nor conflict with, or result in a violation of, any law, administrative
regulation, ordinance or order of any court or governmental agency, arbitration
panel or authority applicable to the Company. No consent, approval,
authorization or other order of, or registration, qualification or filing with,
any regulatory body, administrative agency, or other governmental body in the
United States, other than with respect to "blue sky" laws and is required by the
rules and regulations of the NASDAQ SmallCap Market, is required for the valid
issuance and sale of the Securities to be sold pursuant to this Agreement (other
than such as have been made or obtained).
SECTION 5.4. THE SHARES; THE WARRANT SHARES. The Shares have been
duly authorized, and when issued and paid for in accordance with the terms of
this Agreement, will be validly issued, fully paid and nonassessable. The
Warrant Shares have been duly authorized, and when issued and paid for in
accordance with the terms of the Warrants will be validly issued, fully paid and
nonassessable. On and after the later to occur of (i) six months after each
Purchaser's Closing Date and (ii) the first date following such Closing Date on
which the Closing Price (as defined in the Warrants) 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 such Purchaser's Warrants, the number of shares of Common Stock
as from time to time shall be receivable upon the exercise of such Warrants.
SECTION 5.5. LEGAL PROCEEDINGS. Except as disclosed in the SEC
Filings (as defined below), there is no material legal or governmental
proceeding pending or, to the knowledge of the Company, threatened or
contemplated to which the Company is or may be a party or of which the business
or property of the Company is or may be subject.
SECTION 5.6. NO VIOLATIONS. Except as disclosed in the SEC
Filings, the Company is not in violation of its Charter or By-Laws, in violation
of any law, administrative regulation, ordinance or order of any court or
governmental agency, arbitration panel or authority applicable to the Company,
which violation, individually or in the aggregate, would have a material adverse
effect on the business or financial condition of the Company, or in default in
any material respect in the performance of any obligation, agreement or
condition contained in any bond, debenture, note or any other evidence of
indebtedness in any indenture, mortgage, deed of trust or any other agreement or
instrument to which the Company is a party or by which the Company is bound or
by which the properties of the Company are
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bound or affected, and there exists no condition which, with the passage of time
or the giving of notice or both, would constitute a material default under any
such document or instrument or result in the imposition of any material penalty
or the acceleration of any indebtedness.
SECTION 5.7. GOVERNMENTAL PERMITS, ETC. Except as disclosed in the
SEC Filings, the Company has all necessary franchises, licenses, certificates
and other authorizations from any foreign, federal, state or local government or
governmental agency, department, or body that are currently necessary for the
operation of the business of the Company as currently conducted, the absence of
which would have a material adverse effect on the business or operations of the
Company.
SECTION 5.8. FINANCIAL STATEMENTS. Except as disclosed in the SEC
Filings, the financial statements of the Company and the related notes contained
in the Company's Annual Report on Form 10-KSB for the fiscal year ended December
31, 1997 and its Quarterly Report on Form 10-QSB for the quarter ended March 31,
1998, present fairly the financial position of the Company as of the dates
indicated therein and its results of operations and cash flows for the periods
therein specified. Such financial statements (including the related notes) have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods therein specified and are
true, correct and complete in all respects.
SECTION 5.9. NO MATERIAL ADVERSE CHANGE. Except as disclosed in
the SEC Filings, since March 31, 1998, the Company has not incurred any material
liabilities or obligations, direct or contingent, other than in the ordinary
course of business, and there has not been any material adverse change in its
business, financial condition or results of operations.
SECTION 5.10. ADDITIONAL INFORMATION. The Company has filed in a
timely manner all documents that the Company was required to file under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") during the 12
months preceding the date of this Agreement. The following documents
(collectively, the "SEC Filings") complied in all material respects with the
requirements of the Exchange Act or the Securities Act of 1933, as amended (the
"Securities Act"), as the case may be, as of their respective filing or
effective dates, and the information contained therein was true and correct in
all material respects as of the date or effective date of such documents, and
each of the following documents as of the date thereof did not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading:
(a) The Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1997 and its Quarterly Report on Form 10-QSB for the
quarter ended March 31, 1998;
(b) All other documents, if any, filed by the Company with
the Securities and Exchange Commission (the "SEC") since March 31, 1998 pursuant
to the reporting requirements of the Exchange Act; and
(c) The Company's Registration statement on Form S-3 (No.
333-57261), filed with the SEC on June 19, 1998.
SECTION 5.11. INTELLECTUAL PROPERTY. The Company has the right to
use all intellectual property (the "Intellectual Property") now used by it in
its business. The Company owns all right, title and interest in and to, all of
the intellectual property it owns, free and clear of any liens or encumbrances.
In any case in which the Company does not own the Intellectual Property, it has
good and valid licenses for the same, which are in full force and effect. No
claims have been asserted with respect to the use of any such Intellectual
Property or challenging or questioning the validity or effectiveness of any such
license or agreement.
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SECTION 5.12. LISTING. The Company shall use its best efforts to
comply with all requirements of the National Association of Securities Dealers,
Inc. (the "NASD") with respect to the issuance of the Shares and the listing of
the Shares and the Warrant Shares on the NASDAQ SmallCap Market.
SECTION 5.13. USE OF PROCEEDS. The Company will use the proceeds
of the sale of the Securities for the purpose of redeeming, repurchasing and/or
repaying certain convertible preferred stock and/or convertible debentures
previously issued by it or for general working capital purposes.
SECTION 6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS.
(a) Each Purchaser, severally and not jointly, represents and warrants
to, and covenants with, the Company, as of the date hereof and as of the Closing
Date on which such Purchaser acquires the Securities, that: (i) such Purchaser
is an "accredited investor" as defined in Rule 501 of Regulation D promulgated
under the Securities Act; (ii) such Purchaser is acquiring the Securities for
its own account for investment and with no present intention of distributing any
of such Shares other than to any affiliate of such Purchaser; (iii) such
Purchaser will not, directly or indirectly, voluntarily offer, sell, pledge,
transfer or otherwise dispose of (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of) any of the Securities, except in
compliance with the Securities Act and the rules and regulations promulgated
thereunder; (iv) such Purchaser has received and reviewed copies of the SEC
Filings, (v) such Purchaser has had an opportunity to ask questions and receive
answers from the management of the Company regarding the Company, its business
and the offering of the Securities; and (vi) such Purchaser has, in connection
with its decision to purchase Shares, relied solely upon the documents described
in Section 5.10 and the representations and warranties of the Company contained
herein.
(b) Each Purchaser agrees not to make any sale of the Securities except
pursuant to an effective registration statement under the Securities Act or an
exemption from the registration requirements thereof.
(c) Each Purchaser, severally and not jointly, further represents and
warrants to, and covenants with, the Company that (i) such Purchaser has full
right, power, authority and capacity to enter into this Agreement and to
consummate the transactions contemplated hereby and has taken all necessary
action to authorize the execution, delivery and performance of this Agreement,
and (ii) upon the execution and delivery of this Agreement, this Agreement shall
constitute a valid and binding obligation of such Purchaser enforceable in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' and contracting parties' rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
(d) Each Purchaser, severally and not jointly, represents that it
understands and agrees that, until registered under the Securities Act or
transferred pursuant to the provisions of Rule 144 promulgated thereunder, all
certificates evidencing the Securities and the Warrant Shares, whether upon
initial issuance or upon any transfer thereof, shall bear a legend, prominently
stamped or printed therein, reading substantially as follows:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 or the securities laws of
any state. These securities have been acquired for investment and not
with a view toward distribution or resale. Such securities may not be
offered for sale, sold, delivered after sale, transferred, pledged or
hypothecated in the absence of an effective registration statement
covering such securities under the Act and any applicable state
securities laws, unless the holder shall have obtained an opinion of
counsel satisfactory to the corporation that such registration is not
required."
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SECTION 7. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Notwithstanding any investigation made by any party to this Agreement all
covenants, agreements, representations and warranties made by the Company and
the Purchasers herein shall survive the execution of this Agreement, the
delivery to the Purchasers of the Securities being purchased and payment
therefor.
SECTION 8. REGISTRATION STATEMENT. Within 120 days after the date
hereof and, in any event, subject to the receipt of necessary information from
the Purchasers, the Company shall file with the SEC a registration statement on
Form S-3 (the "Registration Statement"), which may include other selling
stockholders, providing for the resale of the Warrant Shares and the Shares
(collectively, the "REGISTRABLE SHARES") by the Purchasers from time to time in
accordance with Rule 415 promulgated under the Securities Act. The Company shall
use its best efforts to cause the Registration Statement to become effective
within 180 days after the date hereof and the Company shall use its best efforts
to keep the Registration Statement effective until the earlier of (a) the time
all the Registrable Shares have been sold pursuant to the Registration Statement
or (b) the expiration of the Warrants. The Company shall furnish to each
Purchaser such number of copies of the prospectus contained in the Registration
Statement as such Purchaser shall reasonably require to facilitate the public
sale of the Registrable Shares.
SECTION 9. LOCKUP AGREEMENTS WITH UNDERWRITERS. In the event of an
underwritten public offering of the Company's securities, each Purchaser agrees
to enter into an agreement with the Underwriter or Underwriters' Representative
for such offering restricting the sale, transfer or other disposition of the
Securities and the Warrant Shares to the extent that such agreement is required
to be executed by members of senior management of the Company.
SECTION 10. PAYMENTS IN RESPECT OF UNSOLD SHARES. Within thirty (30)
days following November 30, 1998 and the end of each three month period
following such date, the Company shall pay to each Purchaser an amount equal to
$0.0125 multiplied by the number of Shares that continue to be held by such
Purchaser or its nominee named on the signature page to this Agreement as of
such date. Such number of Shares shall be determined by the Company solely by
reference to the monthly list of stockholders furnished to the Company by its
transfer agent, American Stock Transfer & Trust Company. Each Purchaser
understands and agrees that, in order to be eligible for the payments
contemplated by this Section, it must either continue to hold the certificate or
certificates issued to it by the Company in connection with such Purchaser's
Closing or provide evidence satisfactory to the Company that any other
certificate held by it represents the Shares or a portion thereof. The Company
shall send all payments by the Company pursuant to this Section 10 to each
Purchaser at such Purchaser's address determined in accordance with Section
13(b) of this Agreement.
SECTION 11. CONDITIONS TO CLOSING.
(a) The obligations of each Purchaser to consummate the transactions
contemplated hereby shall be subject to the satisfaction by the Company of each
of the following conditions on or before the Closing Date on which such
Purchaser is to acquire Securities, any one or more of which may be waived by
such Purchaser:
(i) The representations and warranties of the Company set forth in
this Agreement delivered to the Purchasers by or on behalf of the Company shall
be true and correct as if made on such Closing Date.
(ii) Each of the covenants, agreements and conditions to be
performed and satisfied by the Company pursuant to this Agreement at or prior to
such Purchaser's Closing shall have been duly performed and satisfied.
(iii) The Company shall have delivered an executed counterpart of
this Agreement to such Purchaser.
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(b) The obligations of the Company to consummate the transactions
contemplated hereby on each Closing Date shall be subject to the satisfaction by
each Purchaser acquiring Securities on such Closing Date of each of the
following conditions on or before such Closing Date, any one or more of which
may be waived by the Company:
(i) The representations and warranties of such Purchaser set forth
in this Agreement shall be true and correct as if made on such Closing Date.
(ii) Each of the covenants, agreements and conditions to be
performed and satisfied by such Purchaser pursuant to this Agreement at or prior
to such Purchaser's Closing shall have been duly performed and satisfied.
(iii) Such Purchaser shall have paid the Purchase Price to be paid
by it in accordance with Section 3.
(iv) Such Purchaser shall have delivered a completed and executed
Purchaser Signature Page to the Company.
(c) The Company and each Purchaser shall use their best efforts to
cause their respective conditions to closing set forth in this Section 11 to be
satisfied.
SECTION 12. NO BROKERS. The parties hereto hereby represent that there
are no brokers or finders entitled to compensation in connection with the
transactions contemplated hereby.
SECTION 13. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first-class
registered or certified mail, postage prepaid, or sent by facsimile and shall be
deemed given when actually received:
(a) if to the Company to:
Palomar Medical Technologies, Inc.
45 Hartwell Avenue
Lexington, MA 02173
Facsimile: (781) 676-7330
Attention: Paul S. Weiner, Director of Finance
(b) if to any Purchaser, to its address as set forth on such
Purchaser's Purchaser Signature Page, or to such other address or addresses as
may have been furnished to the Company in writing.
SECTION 14. CHANGES. Any term of the Agreements may be amended or
compliance therewith waived with the written consent of the Company and the
holders of a majority of the Shares purchased pursuant to this Agreement.
SECTION 15. HEADINGS. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
SECTION 16. SEVERABILITY. If any provision contained in this Agreement
shall be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
SECTION 17. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of The Commonwealth of
Massachusetts and United States federal law.
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SECTION 18. COUNTERPARTS. This Agreement may be executed in two
counterparts, each of which shall constitute an original, but both of which,
when taken together, shall constitute but one instrument, and shall become
effective when one or more counterparts have been signed by each party hereto
and delivered to the other parties.
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be executed by their duly authorized representatives as of
the following date.
Dated: _____________, 1998 PALOMAR MEDICAL TECHNOLOGIES, INC.
By:
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Title:
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[Purchaser Signature Page Continues on the Following Page]
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PURCHASER SIGNATURE PAGE
The undersigned Purchaser hereby executes the Securities Purchase
Agreement with Palomar Medical Technologies, Inc. (the "COMPANY") and hereby
authorizes this signature page to be attached to a counterpart of such document
executed by a duly authorized officer of the Company.
Purchaser Name:
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By:
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Title:
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Amount of Investment: $
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Name in which Securities are to be registered:
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Address, telephone number and facsimile number of registered holder:
- ----------------------------------------------
- ----------------------------------------------
- ----------------------------------------------
- ----------------------------------------------
Attn:
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Telephone number:
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Facsimile number:
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Social Security or Tax ID Number:
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Contact name, address, telephone number and facsimile number regarding
settlement and registration if different from above:
- ----------------------------------------------
- ----------------------------------------------
- ----------------------------------------------
- ----------------------------------------------
Attn:
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Telephone number:
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Facsimile number:
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January 11, 1999
Palomar Medical Technologies, Inc.
45 Hartwell Avenue
Lexington, MA 02421-3102
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 6,000,000 shares (the
"Shares") of the Company's common stock, $.01 par value per share ("Common
Stock"), issued and issuable in connection with a Securities Purchase Agreement
dated July 24, 1998.
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
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Sarah Burgess Reed
General Counsel
Palomar Medical Technologies, Inc.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference 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
January 8, 1999
