UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
___________________
FORM 8-K
CURRENT REPORT
___________________
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) April 30, 1996
LASERMEDICS, INC.
(Exact name of registrant as specified in its charter)
Commission File Number 33-49972
TEXAS 76-0335587
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
120 Industrial Boulevard, Sugar Land, Texas 77478
(Address of principal executive offices, including zip code)
713-276-7000
(Registrant's telephone number, including area code)
2427 Murphy Road, Missouri City, Texas 77459
(Former address of registrant)
<PAGE>
LASERMEDICS, INC.
FORM 8-K
CURRENT REPORT
Item 2. Acquisition or Disposition of Assets
On April 30, 1996 Lasermedics, Inc., a Texas corporation (the
"Company"), entered into an agreement with Maxxim Medical, Inc., a Delaware
corporation ("Maxxim"), whereby the Company purchased certain assets of (and
assumed certain liabilities associated with) the Henley Healthcare Division
("Henley") of Maxxim for an estimated purchase price of approximately $13
million. This purchase price (i) was determined by adding $1.0 million to the
estimated net book value of the Henley assets as of April 30, 1996 and (ii) is
subject to adjustment based on a final determination of the net book value of
the Henley assets following the closing. The assets acquired consist of real
property; tangible personal property including machinery, equipment, furniture
and fixtures; general intangibles; contracts; business licenses; accounts
receivable; inventory; and prepaid expenses.
The purchase price was paid by the issuance of the Company's convertible
subordinated promissory note in the principal amount of $7,000,000 (the "Note")
with the balance of the purchase price being paid in cash. The Company obtained
the cash portion of the purchase price pursuant to a loan agreement entered into
with Comerica Bank - Texas, a Texas banking corporation ("Comerica"), which loan
is secured by substantially all of the assets of the Company including the
Henley assets acquired from Maxxim.
Henley specializes in the manufacturing and marketing of a complete line
of physical therapy products and is the second largest provider of turn-key
physical therapy products in the U.S. The Company intends to continue the
manufacturing and marketing of this line of products and believes that the
acquisition of Henley will complement as well as diversify its total product
offering and will help provide an international distribution system for its non-
invasive low-energy laser for the treatment of repetitive stress disorders
including carpal tunnel syndrome.
The Note is due and payable on March 1, 2003 with interest payable
semi-annually on November 1 and May 1 of each calendar year and calculated at a
rate equal to 2% per annum and increasing annually 2% per annum. The Company
may redeem all or any portion of the outstanding principal amount of the Note at
redemption prices ranging from 104% to 110% of the principal amount being
redeemed, depending on when the redemption occurs as set forth in the Note. In
addition, the Note is subject to mandatory redemption in annual installments of
$1.4 million commencing on March 1, 1999 at premiums starting at 7% and
decreasing 1% each year. The Company is also required to redeem 40% of the Note
upon the completion of a public offering. The Note is convertible into common
stock at an initial conversion price of $3 per share, provided that upon the
occurrence of any default under the Note, the conversion price will be
automatically adjusted to an amount equal to the lesser of the conversion price
then in effect or 80% of the average market price for the Company's common stock
for the 30
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trading days immediately preceding the event of default. The conversion price
is also subject to adjustment upon the occurrence of certain events (including
certain issuances of common stock for less than the conversion price) to provide
anti-dilution protection. The common stock issuable on conversion of the Note
is subject to the terms of a registration rights agreement entered into by the
Company and Maxxim whereby Maxxim (and certain subsequent holders) shall retain
certain demand and piggyback registration rights with respect to those shares of
common stock.
The loan agreement with Comerica provides for a revolving loan, which
permits borrowings up to $4,000,000 pursuant to a borrowing base calculation
derived from the Company's accounts receivable and inventory. The $4,000,000
revolving loan also includes a $250,000 letter of credit facility. In addition,
the Company received two term loans in the amount of $893,000 and $1,616,000,
respectively. The revolving loan's maturity date is two years from the date of
the loan agreement while the maturity dates of the $893,000 and $1,616,000 term
loans are five years and fifteen years, respectively, from the date of the loan
agreement, except that Comerica may call the $1,616,000 term loan beginning on
the fifth anniversary of the loan agreement. All of the borrowings from
Comerica are secured by substantially all of the assets of the Company including
the Henley assets acquired from Maxxim. The loan agreement also contains a
number of affirmative covenants, negative covenants and financial covenants with
which the Company must comply including a minimum tangible net worth, leverage
ratio, working capital ratio, fixed charge ratio and interest coverage ratio.
The Company is also limited in the amount of its capital expenditures and
research and development expenditures, and all future acquisitions and major
corporate transactions require approval of Comerica, as do offerings of
securities by the Company.
Item 5. Other Events
The Company's Board of Directors increased the number of directors
constituting the entire Board of Directors from two to four, effective January
15, 1996, and elected Dan D. Sudduth and Dr. Pedro A. Rubio to fill the
vacancies created by such increase.
Mr. Sudduth is President and Director of AMC Home Healthcare, Inc., a
respiratory therapy company in Houston, Chairman of Mezzanine Financial
Relations, Inc., a merchant banking firm in Houston and Chief Financial Officer
and Director of Creative Communications International, Inc., a Houston
telecommunications company. From 1992-1994 Mr. Sudduth served as Chairman and
CEO of Heart Labs of America, Inc. (NASDAQ: HLOA), a provider of Continuous
Passive Motion services. From 1988-1992 he was President, Chief Financial
Officer and Director of American BioMed, Inc. (NASDAQ: ABMI), a manufacturer and
distributor of minimally invasive surgical devices, and from 1982-1989 served as
President and CEO of First Stamford Group, Inc., a financial consulting firm
that specialized in mergers & acquisitions. Prior to 1988, Mr. Sudduth served in
various business executive positions in industry including the commercial
banking industry. Mr. Sudduth holds a Bachelor of Business Administration
degree from Lamar University.
Dr. Rubio is Clinical Associate Professor of Surgery at the University
of Texas Health Science Center (Houston) and Director of Education of the Laser
Training Institute (Houston). He served as World President of the International
College of Surgeons (Chicago) in 1995, and is
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Chairman Emeritus of the Department of Surgery at the Columbia/HCA Medical
Center Hospital (Houston). He also practiced in cardiovascular, thoracic and
general surgery, has published numerous papers (including surgical atlases,
monographs and dissertations) in national and international journals, and holds
the following degrees: Bachelor of Science, Master of Science in Surgical
Technology, Doctor of Philosophy in Biomedical Technology and Doctor of Medicine
and Surgery. Dr. Rubio is a Diplomate of the American Boards of Surgery, Laser
Surgery, Abdominal Surgery, Forensic Medicine, Quality Assurance and Pain
Management.
In connection with the acquisition of Henley, the Company entered into
an agreement with Maxxim, Mr. Michael Barbour (the Company's President and a
director) and Dr. Chadwick Smith (the Company's Chairman of the Board of
Directors) pursuant to which, among other things, (i) the Company created two
vacancies in its Board of Directors and elected a nominee of Maxxim, Mr. Kenneth
W. Davidson, to fill one vacancy, (ii) Mr. Barbour and Dr. Smith agreed to vote
their shares of the Company common stock in favor of such nominee during the
term of the agreement and (iii) the Company elected Dr. Ernest J. Henley, a
director of Maxxim, to fill the other vacancy.
Mr. Davidson has served as Chairman of the Board of Directors, Chief
Executive Officer and President of Maxxim since November 1986, prior to which
time he was the Corporate Director of Business Development at Intermedics, a
manufacturer of implantable medical devices.
Dr. Henley has served as a director and consultant to Maxxim since 1976
and for more than the past five years has been a professor of Chemical
Engineering at the University of Houston.
Also, in connection with the acquisition of Henley the Company
terminated the employment agreements under which Mr. Barbour and Dr. Smith
currently serve. The Company anticipates entering into new employment
agreements with Mr. Barbour and Dr. Smith. Such agreements could include an
increase in base salary, granting of stock options and other changes in
compensation.
The Board of Directors of the Company adopted a 1996 Incentive Stock
Option Plan (the "Employee Plan"), effective January 15, 1996, covering 1.2
million shares of the Company's common stock and a 1996 Non-Employee Directors
Stock Option Plan (the "Outside Director Plan") covering 250,000 shares of
common stock. Both of these Plans will be subject to further approval by the
Company's shareholders at the upcoming annual meeting and shareholders will be
receiving proxy materials relating to those Plans for approval at that time.
In connection with their election to the Board of Directors, Mr. Sudduth
and Dr. Rubio were each granted stock options effective January 15, 1996, under
the Non-Employee Director Stock Option Plan to purchase a total of 25,000 shares
of the Company's common stock at a price of $5.50 per share. These options are
subject to shareholder approval of the Non- Employee Director Stock Option Plan.
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Item 7. Financial Statements, Pro Forma Financial Information, and
Exhibits
(a) and (b) Financial Statements of Business Acquired and Pro Forma
Financial Information.
At this time it is impractical to provide the required financial
statements of Henley and the pro forma financial information that are required
to be furnished with this Form 8-K. The Company anticipates filing this
information under cover of Form 8-K/A as soon as practicable within the next 60
days.
(c) The following exhibits, from which schedules and attachments have been
omitted and will be furnished to the Commission upon its request, are filed with
this report on Form 8-K:
EXHIBITS
Exhibit
Number Description
- ------- -----------
1.1 Agreement of Purchase and Sale of Assets dated April 30, 1996 by and
between the Company and Maxxim.
1.2 Lasermedics, Inc. Convertible Subordinated Promissory Note dated April
30, 1996 in the original principal amount of $7,000,000 payable to
Maxxim.
1.3 Registration Rights Agreement dated April 30, 1996 by and between the
Company and Maxxim.
1.4 Voting and Shareholders Agreement dated April 30, 1996 by and between
Michael M. Barbour, Chadwick F. Smith, MD, and Maxxim.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
LASERMEDICS, INC.
(Registrant)
Date: May 14,1996 By: MICHAEL M. BARBOUR
President & Chief
Executive Officer
THE SECURITIES REPRESENTED BY THIS NOTE AND THE COMMON STOCK ISSUABLE HEREUNDER
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW. THE SECURITIES
REPRESENTED BY THIS NOTE MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER, OR IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH ANY OTHER APPLICABLE SECURITIES
LAWS.
THE SHARES OF COMMON STOCK ISSUABLE ON CONVERSION OF THIS NOTE ARE SUBJECT TO
THE TERMS OF A CERTAIN VOTING AGREEMENT BETWEEN CERTAIN SHAREHOLDERS DATED APRIL
30, 1996, AS IT MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH AGREEMENT IS
ON FILE WITH THE SECRETARY OF THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS,
AND WILL BE DELIVERED AT NO COST BY THE COMPANY UPON REQUEST.
LASERMEDICS, INC.
Convertible Subordinated Promissory Note
$7,000,000 Houston, Texas April 30, 1996
Lasermedics, Inc., a Texas corporation (hereinafter called the "Company,"
which term includes any directly or indirectly controlled subsidiaries or
successor entities), for value received, hereby promises to pay to Maxxim
Medical, Inc., a Delaware corporation (hereinafter called the "Holder"), or its
registered assigns, the principal sum of Seven Million Dollars ($7,000,000)
together with accrued interest on the amount of such principal sum, payable in
accordance with the terms set forth below.
THE OBLIGATIONS OF THE COMPANY CONTAINED IN THIS NOTE ARE SUBJECT TO (I)
THE TERMS OF A SUBORDINATION AGREEMENT BETWEEN THE COMPANY, COMERICA BANK -
TEXAS, A TEXAS BANKING CORPORATION, AND THE HOLDER OF EVEN DATE HEREWITH (THE
"SUBORDINATION AGREEMENT") AND (II) THE TERMS OF A COMMERCIAL SECURITY AGREEMENT
BETWEEN THE COMPANY AND THE HOLDER OF EVEN DATE HEREWITH (THE "SECURITY
AGREEMENT").
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ARTICLE I
Definitions
For all purposes of this Note, except as otherwise expressly provided or
unless the context otherwise requires: (i) the terms defined in this Article
have the meanings assigned to them in this Article and include the plural as
well as the singular; (ii) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with generally accepted
accounting principles as promulgated from time to time by the Association of
Independent Certified Public Accountants; and (iii) the words "herein" and
"hereof" and other words of similar import refer to this Note as a whole and not
to any particular Article, Section or other subdivision.
1.1 "BOARD OF DIRECTORS" means the board of directors of the Company as
elected from time to time or any duly authorized committee of that board.
1.2 "BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in Houston, Texas are
authorized or obligated by law or executive order to be closed.
1.3 "CHANGE IN CONTROL" shall mean a change in control of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act"); provided that, without limitation, such a change in control
shall be deemed to have occurred if (X) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act), other than the Company or the
Holder, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
40% or more of the combined voting power of the Company's then outstanding
securities, or (Y) during any period of two consecutive years during the term of
this Note, individuals who at the beginning of such period constitute the Board
of Directors cease for any reason to constitute at least a majority thereof,
unless the election of each director who was not a director at the beginning of
such period has been approved in advance by directors representing at least
two-thirds of the directors then in office who were directors at the beginning
of the period.
1.4 "COMMON STOCK" means shares of common stock, par value $.01 per share,
of the Company.
1.5 "CONVERSION PRICE" means the price per share determined in accordance
with Articles IV and V hereof (as adjusted in accordance with the terms of this
Note) at which shares of Common Stock shall be delivered to Holder upon
conversion of this Note into Common Stock.
1.6 "DEFAULT" means any event which is, or after notice or passage of time
would be, an Event of Default.
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1.7 "EVENT OF DEFAULT" has the meaning specified in Section 3.1.
1.8 "FUNDED DEBT" means, as determined in accordance with GAAP, (i) all
obligations for borrowed money (whether as a direct obligor on a promissory
note, a reimbursement obligor on a letter of credit, a guarantor, or otherwise)
and (ii) all capital lease obligations that have been (or under GAAP should be)
capitalized on the Company's balance sheet.
1.9 "GAAP" means generally accepted accounting principles of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board that are applicable
from time to time.
1.10 "INDEBTEDNESS" of any Person means all indebtedness of such Person,
whether outstanding on the date of this Note or hereafter created, incurred,
assumed or guaranteed, (i) for the principal of, premium on and interest on all
debts of the Person whether outstanding on the date of this Note or thereafter
created for money borrowed by such Person (including capitalized lease
obligations), money borrowed by others (including capitalized lease obligations)
and guaranteed, directly or indirectly, by such Person, or purchase money
indebtedness, or indebtedness secured by property ("Purchase Money
Indebtedness") at the time of the acquisition of such property by such Person,
for the payment of which the Person is directly or contingently liable; (ii) for
all accrued obligations of the Person in respect of any contract, agreement or
instrument imposing an obligation upon the Person to pay over funds; (iii) for
all trade debt of the Person; and (iv) for all deferrals, renewals, extensions
and refundings of, and amendments, modifications and supplements to, any of the
indebtedness referred to in (i), (ii) or (iii) above.
1.11 "LIEN" means any mortgage, deed of trust, lien, security interest,
pledge, claim, charge, liability, obligation or other encumbrance.
1.12 "MARKET PRICE" for any day, when used with reference to Common Stock,
shall mean the price of said Common Stock determined by reference to the last
reported sale price for the Common Stock on such day on the principal securities
exchange on which the Common Stock is listed or admitted to trading or if no
such sale takes place on such date, the average of the closing bid and asked
prices thereof as officially reported, or, if not so listed or admitted to
trading on any securities exchange, the last sale price for the Common Stock on
the National Association of Securities Dealers national market system on such
date, or, if there shall have been no trading on such date or if the Common
Stock shall not be listed on such system, the average of the closing bid and
asked prices in the over-the-counter market as furnished by any NASD member firm
selected from time to time by the Company for such purpose.
1.13 "MATURITY DATE", when used with respect to this Note means May 1,
2003 (or such earlier date upon which this Note become due and payable).
1.14 "NOTE" means this Convertible Subordinated Promissory Note.
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1.15 "PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
1.16 "PUBLIC OFFERING" means the sale by the Company of securities for
cash in an underwritten public offering registered on the appropriate form with
the SEC.
1.17 "SEC" means the United States Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act of 1933 or
any successor act thereto.
1.18 "SECURITY INSTRUMENTS" means (i) that certain Commercial Security
Agreement of even date herewith by and between the Company and the Holder
evidencing a security interest held by the Holder in all of the Company's
tangible and intangible personal property, (ii) that certain Second Lien Deed of
Trust of even date herewith executed by the Company to J. Randolph Ewing,
Trustee, for the benefit of Holder, covering certain real property in Fort Bend
County, Texas, (iii) that certain Second Lien Deed of Trust of even date
herewith executed by the Company to J. Randolph Ewing, Trustee, for the benefit
of Holder, covering certain real property in Bell County, Texas, (iv) those
certain UCC-1 Financing Statements executed by the Company for the benefit of
the Holder to be recorded in the records of the Office of the Secretary of State
of Texas, the Office of the Secretary of State of Ohio, the County Clerk for
Bell County, Texas, and the County Clerk for Fort Bend County, Texas, and (v)
all other collateral agreements, security agreements, collateral assignments,
vendor's liens and lien instruments executed by the Company or any other party
in favor of the Holder or any other holder of this Note.
1.19 "SENIOR INDEBTEDNESS" means each and every loan, advance or other
renewals and extensions of credit by Comerica Bank - Texas (and their successors
or assigns) heretofore or hereafter to the Company.
1.20 "SUBSIDIARY" means a corporation or other entity in which more than
50% of the outstanding voting stock or equity interests is owned or controlled,
directly or indirectly, by the Company or any combination of the Company and one
or more other Subsidiaries. For the purposes of this definition, "VOTING STOCK"
means stock or other interests which ordinarily has voting power for the
election of directors, and equity interests means the right to receive the
profits of the entity, when disbursed, or the assets of the entity upon
liquidation or dissolution.
ARTICLE II
Payments
2.1 INTEREST. From the date of this Note through the Maturity Date,
interest shall accrue hereunder on the unpaid outstanding principal sum of this
Note beginning at a rate equal to 2% per annum and increasing 2% per annum on
each May 1 of each calendar year (beginning with calendar year 1997) prior to
the Maturity Date, calculated on the basis of a 360-day year. Accrued interest
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shall be paid on November 1 and May 1 of each calendar year (beginning on
November 1, 1996) through the Maturity Date. All past due amounts of principal
and interest shall bear interest at the maximum rate permitted by law.
2.2 PAYMENT OF PRINCIPAL AND INTEREST. Subject to the provisions of
Section 2.3 hereof, the principal and unpaid interest of this Note shall be due
and payable in full on the Maturity Date.
2.3 REDEMPTION.
2.3.1. At any time before the Maturity Date, the Company may, upon 20
days' written notice to the Holder, redeem all or any portion of the outstanding
principal balance of this Note at the redemption prices (expressed as
percentages of the amount of the principal of this Note being redeemed) set
forth below, plus all accrued and unpaid interest as of the date of such
redemption, if redeemed during the twelve month period beginning on May 1 of the
year indicated below:
Year Percentage
---- ----------
1996 110%
1997 109%
1998 108%
1999 107%
2000 106%
2001 105%
2002 104%
The portion of the principal of this Note redeemed under this Section 2.3.1
shall be applied to satisfy the Company's redemption obligations under Section
2.3.2 hereof in accordance with Section 2.3.4 hereof.
2.3.2. Subject to the provisions of Section 2.3.4 hereof, the
Company will be required to redeem 20% of the original principal amount of this
Note on each of the dates and at the redemption prices (expressed as percentages
of the amount of the principal of this Note being redeemed) set forth below,
plus all accrued and unpaid interest as of the date of such redemption:
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Date Percentage
---- ----------
May 1, 1999 107%
May 1, 2000 106%
May 1, 2001 105%
May 1, 2002 104%
May 1, 2003 103%
2.3.3. Immediately upon the closing of the first Public Offering to
be consummated after the original issuance of this Note, the Company will be
required to redeem forty percent (40%) of the then outstanding principal amount
of this Note, plus all accrued and unpaid interest as of the date of such
redemption. The portion of the principal of this Note redeemed under this
Section 2.3.3 shall be applied to satisfy the Company's redemption obligations
under Section 2.3.2 hereof in accordance with Section 2.3.4 hereof.
2.3.4. In the event all or any portion of the principal balance of
this Note is (i) redeemed pursuant to Sections 2.3.1 or 2.3.3 hereof or (ii)
reduced by conversion of such portion of the principal balance of this Note into
shares of Common Stock pursuant to Section 4.1 hereof, then the amount of such
redemption or reduction shall be applied to satisfy the Company's redemption
obligations under Section 2.3.2 hereof in reverse order of redemption dates.
2.4 MANNER OF PAYMENT. Any payment of principal and interest on this Note,
including a redemption prior to the Maturity Date, will be made by delivery of
certified or bank cashier checks payable to the order of Holder at its address
as set forth in this Note or by wire transfers pursuant to instructions from
Holder as determined at the Holder's option. If the date upon which the payment
of principal and interest is required to be made pursuant to this Note occurs
other than on a Business Day, then such payment of principal and interest shall
be made on the next occurring Business Day following said payment date and shall
include interest through said next occurring Business Day.
ARTICLE III
Remedies
3.1 EVENTS OF DEFAULT. An "Event of Default" occurs if:
3.1.1. the Company defaults in the performance of any covenant made
by the Company in this Note, and such default remains uncured for a period of 15
days after notice from the Holder; or
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3.1.2. the Company defaults in the performance of or breaches any of
the terms, covenants, or conditions contained in any of the Security
Instruments, or in any instrument or instruments given contemporaneously
herewith, heretofore or hereafter as security for or guaranteeing the payment of
this Note and the applicable grace periods expire; or
3.1.3. the Company defaults in the performance of or breaches any of
the terms, covenants, or conditions contained in any of the documents
evidencing, securing or guaranteeing the Senior Indebtedness, including, but not
limited to, any loan agreements, promissory notes or security agreements and the
applicable grace periods expire; or
3.1.4. the Company defaults in the payment when due (whether by
lapse of time, by declaration, by call for redemption or otherwise) of the
principal of or interest on any Indebtedness of the Company (other than the
Indebtedness evidenced by this Note or good-faith disputes with trade creditors)
having an aggregate principal amount in excess of $500,000 and such default
remains uncured for a period of 15 days; or
3.1.5. a court of competent jurisdiction enters a final and
non-appealable judgment or judgments against the Company or any property or
assets of the Company for the payment of money aggregating $500,000 or more in
excess of applicable insurance coverage; or
3.1.6. (i) a receiver, liquidator, custodian, or trustee of the
Company, or of any material property thereof is appointed by court order of a
court of competent jurisdiction and such order remains in effect on the 90th day
after its entry; or (ii) a petition is filed, a case is commenced, or relief is
ordered against the Company under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution, or liquidation law of any
jurisdiction, whether now or hereafter in effect, and is not dismissed with 90
days of such filing, commencement, or order; or
3.1.7. the Company: (i) commences a voluntary case or proceeding
under any applicable federal or state bankruptcy, insolvency, reorganization or
other similar law or any other case or proceeding to be adjudicated a bankrupt
or insolvent; (ii) files a petition, answer or consent seeking reorganization or
similar relief under any applicable federal or state law; (iii) makes an
assignment for the benefit of creditors; or (iv) admits in writing its inability
to pay its debts generally as they become due; or
3.1.8. the Company: (i) merges or consolidates with or into any
other Person, unless the Company is the surviving or acquiring party and there
is no Change in Control in connection therewith or resulting therefrom; (ii) the
Company dissolves or liquidates or agrees or consents thereto; (iii) the Company
sells, leases or assigns all or any substantial portion of its assets; (iv) ,
except as otherwise agreed to by the Holder, amends or modifies its Articles of
Incorporation or Bylaws in a manner that would materially adversely affect the
Holder's rights under the Note or as a shareholder of the Company, (whether or
not the Holder has exercised its right of conversion under Article IV hereof);
or (v) pays any dividends or distributions on its capital stock.
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3.2 ACCELERATION OF MATURITY. This Note and all accrued interest shall
become immediately due and payable at the option of the Holder in its sole
discretion if an Event of Default occurs.
ARTICLE IV
Conversion of Note
4.1 CONVERSION PRIVILEGE AND CONVERSION PRICE. Subject to and upon
compliance with the provisions of this Article IV, at the option of the Holder,
all or any portion of the amounts owed and outstanding under this Note may be
converted at any time and from time to time into fully paid and nonassessable
shares of Common Stock (the "Shares"), calculated as to each conversion to the
nearest 1/100 of a share at the Conversion Price, determined as hereinafter
provided, in effect at the time of conversion. Unless and until the occurrence
of an Event of Default, the Conversion Price shall be $3.00 per share of Common
Stock, subject to adjustment in accordance with Article 5 hereof. Upon the
occurrence of an Event of Default, the Conversion Price shall be automatically
adjusted to an amount equal to the lesser of (i) the Conversion Price in effect
as of the date of the Event of Default and (ii) 80% of the average Market Price
for the 30 trading days immediately preceding the date of the Event of Default,
which amount shall be subject to further adjustment in accordance with Article 5
hereof. All amounts so converted shall be applied first to pay any accrued and
unpaid interest and second to reduce the principal amount of this Note as of the
date of such conversion as if payment or prepayment in such amount has occurred,
with any reduction in principal to be applied to satisfy the Company's
redemption obligations under Section 2.3.2 hereof in accordance with Section
2.3.4 hereof. This right of conversion must be exercised by delivery of a
written notice to the Company setting forth the amount to be converted to be
effective upon the Company's receipt of such notice (the "Conversion Notice").
Notwithstanding the foregoing, in the event the Company provides notice to the
Holder of its intention to redeem all or any portion of the outstanding
principal balance of this Note pursuant to Section 2.3.1 hereof, the Company
must receive the Conversion Notice on or before the last Business Day prior to
the effective date of such redemption to the extent that the Holder desires to
convert all or any portion of the amount to be redeemed by the Company.
ARTICLE V
Adjustment of Conversion Price
5.1 ANTI-DILUTION PROVISIONS. The Conversion Price shall be subject to
adjustment from time to time as provided herein. Upon each adjustment of the
Conversion Price, the holder of this Note shall thereafter be entitled to
purchase, at the Conversion Price resulting from such adjustment, the number of
shares of Common Stock obtained by multiplying the Conversion Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Conversion Price resulting from such adjustment.
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5.2 ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF COMMON STOCK.
5.2.1. If and whenever after the date hereof the Company shall issue
or sell any Common Stock for no consideration or for a consideration per share
less than the Conversion Price, the Conversion Price shall be reduced (but not
increased, except as otherwise specifically provided herein), to the price
(calculated to the nearest one-tenth of a cent) determined by dividing (x) an
amount equal to the sum of (1) the aggregate number of shares of Common Stock
outstanding immediately prior to such issue or sale multiplied by the then
existing Conversion Price plus (2) the consideration received by the Company
upon such issue or sale by (y) the aggregate number of shares of Common Stock
outstanding immediately after such issue or sale.
5.2.2. No adjustment shall be made in the Conversion Price in the
event that the Company issues, in one or more transactions, (i) Common Stock
upon exercise of any options issued to officers, directors or employees of the
Company pursuant to those stock option plans which have been previously approved
by the Company's board of directors and are subject only to shareholder approval
(the "Current Plans") or any other stock option agreement or an employment,
severance or consulting agreement in effect as of the date hereof; (ii) Common
Stock upon conversion of this Note; (iii) Common Stock upon exercise of any
stock purchase warrant or option (other than the options referred to in clause
(i) above) or other convertible security outstanding on the date hereof; or (iv)
Common Stock issued as consideration in acquisitions. In addition, for purposes
of calculating any adjustment of the Conversion Price, all of the shares of
Common Stock issuable pursuant to any of the foregoing shall be assumed to be
outstanding prior to the event causing such adjustment to be made.
5.2.3. In case at any time after the date hereof the Company shall
in any manner grant (whether directly or by assumption in a merger or otherwise)
any rights to subscribe for or to purchase Common Stock or any options, (except
for options issued to (or reserved for issuance to) officers, directors or
employees of the Company pursuant to the Current Plans or any other stock option
agreement or an employment, severance, or consulting agreement in effect as of
the date hereof), for the purchase of Common Stock or any stock or securities
convertible into or exchangeable for Common Stock (such convertible or
exchangeable stock or securities being herein called "Convertible Securities"),
whether or not such rights or options or the right to convert or exchange any
such Convertible Securities are immediately exercisable, and the price per share
for which shares of Common Stock are issuable upon the exercise of such rights
or options or upon conversion or exchange of such Convertible Securities
(determined by dividing (i) the total amount, if any, received or receivable by
the Company as consideration for the granting of such rights or options, plus
the minimum aggregate amount of additional consideration, if any, payable to the
Company upon the exercise of such rights or options, or plus, in the case of
such rights or options that relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable upon the issue or
sale of such Convertible Securities and upon the conversion or exchange thereof,
by (ii) the total maximum number of shares of Common Stock issuable upon the
exercise of such rights or options or upon the conversion or exchange of all
such Convertible Securities issuable upon the exercise of such rights or
options) shall be less than the Conversion
9
Price in effect as of the date of granting such rights or options, then the
total maximum number of shares of Common Stock issuable upon the exercise of
such rights or options or upon conversion or exchange of all such Convertible
Securities issuable upon the exercise of such rights or options shall be deemed
to be outstanding as of the date of the granting of such rights or options and
to have been issued for such price per share, with the effect on the Conversion
Price specified herein. Except as provided herein, no further adjustment of the
Conversion Price shall be made upon the actual issuance of such Common Stock or
of such Convertible Securities upon exercise of such rights or options or upon
the actual issuance of such Common Stock upon conversion or exchange of such
Convertible Securities.
5.2.4. If: (i) the purchase price provided for in any right or
option, (ii) the additional consideration, if any, payable upon the conversion
or exchange of any Convertible Securities, or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock
shall be decreased (other than by reason of provisions designed to protect
against dilution), the Conversion Price then in effect shall be decreased to the
Conversion Price that would have been in effect had such rights, options or
Convertible Securities provided for such changed purchase price, additional
consideration or conversion rate at the time initially issued.
5.2.5. In case at any time Common Stock or Convertible Securities or
any rights or options to purchase Common Stock or Convertible Securities shall
be issued or sold for cash, the total amount of cash consideration shall be
deemed to be the amount received by the Company. If at any time any Common
Stock, Convertible Securities or any rights or options to purchase any such
Common Stock or Convertible Securities shall be issued or sold for consideration
other than cash, the amount of the consideration other than cash received by the
Company shall be deemed to be the fair value of such consideration, as
determined reasonably and in good faith by the Board of Directors of the
Company. If at any time any Common Stock, Convertible Securities or any rights
or options to purchase any Common Stock or Convertible Securities shall be
issued in connection with any merger or consolidation in which the Company is
the surviving corporation, the amount of consideration received therefor shall
be deemed to be the fair value, as determined reasonably and in good faith by
the Board of Directors of the Company, of such portion of the assets and
business of the nonsurviving corporation as such Board of Directors may
determine to be attributable to such Common Stock, Convertible Securities,
rights or options as the case may be. In case at any time any rights or options
to purchase any shares of Common Stock or Convertible Securities shall be issued
in connection with the issuance and sale of other securities of the Company,
together consisting of one integral transaction in which no consideration is
allocated to such rights or options by the parties, such rights or options shall
be deemed to have been issued without consideration.
5.2.6. In the case the Company shall take a record of the holders of
its Common Stock for the purpose of entitling them (i) to receive a dividend or
other distribution payable in Common Stock or Convertible Securities, or (ii) to
subscribe for or purchase Common Stock or Convertible Securities, then such
record date shall be deemed to be the date of the issuance or sale of the Common
Stock or Convertible Securities deemed to have been issued or sold as a result
of
10
the declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
5.2.7. The number of shares of Common Stock outstanding at any given
time shall not include shares owned directly by the Company in treasury, and the
disposition of any such shares shall be considered an issuance or sale of Common
Stock.
5.3 STOCK DIVIDENDS. In case the Company shall declare a dividend or make
any other distribution upon any shares of the Company, payable in Common Stock
or Convertible Securities, any Common Stock or Convertible Securities, as the
case may be, issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
5.4 STOCK SPLITS AND REVERSE SPLITS. In the event that the Company shall
at any time subdivide its outstanding shares of Common Stock into a greater
number of shares, the Conversion Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of Shares into which
this Note may be converted immediately prior to such subdivision shall be
proportionately increased, and conversely, in the event that the outstanding
shares of Common Stock shall at any time be combined into a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
shall be proportionately increased and the number of Shares into which this Note
may be converted immediately prior to such combination shall be proportionately
reduced.
5.5 REORGANIZATIONS AND ASSET SALES. If any capital reorganization or
reclassification of the capital stock of the Company, or any consolidation,
merger or share exchange of the Company with another Person, or the sale,
transfer or other disposition of all or substantially all of its assets to
another Person shall be effected in such a way that holders of Common Stock
shall be entitled to receive capital stock, securities or assets with respect to
or in exchange for their shares, then the following provisions shall apply:
5.5.1. As a condition of such reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer or other disposition,
lawful and adequate provisions shall be made whereby the Holder shall thereafter
have the right to purchase and receive upon the terms and conditions specified
in this Note, such shares of capital stock, securities or assets as may be
issued or payable with respect to or in exchange for a number of outstanding
shares of such Common Stock equal to the number of Shares immediately
theretofore so receivable had such reorganization, reclassification,
consolidation, merger, share exchange or sale not taken place, and in any such
case appropriate provision reasonably satisfactory to such holder shall be made
with respect to the rights and interests of such holder to the end that the
provisions hereof (including, without limitation, provisions for adjustments of
the Conversion Price and of the number of Shares receivable upon the exercise)
shall thereafter be applicable, as nearly as possible, in relation to any shares
of capital stock, securities or assets thereafter deliverable upon the exercise
of Note.
11
5.5.2. In the event of a merger, share exchange or consolidation of
the Company with or into another Person as a result of which a number of shares
of common stock or its equivalent of the successor Person greater or lesser than
the number of shares of Common Stock outstanding immediately prior to such
merger, share exchange or consolidation are issuable to holders of Common Stock,
then the Conversion Price in effect immediately prior to such merger, share
exchange or consolidation shall be adjusted in the same manner as though there
were a subdivision or combination of the outstanding shares of Common Stock.
5.5.3. The Company shall not effect any such consolidation, merger,
share exchange, sale, transfer or other disposition unless prior to or
simultaneously with the consummation thereof the successor Person (if other than
the Company) resulting from such consolidation, share exchange or merger or the
Person purchasing or otherwise acquiring such assets shall have assumed by
written instrument executed and mailed or delivered to the Holder hereof at the
last address of such Holder appearing on the books of the Company the obligation
to deliver to such Holder such shares of capital stock, securities or assets as,
in accordance with the foregoing provisions, such Holder may be entitled to
receive, and all other liabilities and obligations of the Company hereunder.
Upon written request by the Holder hereof, such Successor Person will issue a
new Note revised to reflect the modifications in this Note effected pursuant to
this Section 5.5.
5.5.4.If a purchase, tender or exchange offer is made to and
accepted by the holders of 50% or more of the outstanding shares of Common
Stock, the Company shall not effect any consolidation, merger, share exchange or
sale, transfer or other disposition of all or substantially all of the Company's
assets with the Person having made such offer or with any affiliate of such
Person, unless prior to the consummation of such consolidation, merger, share
exchange, sale, transfer or other disposition the Holder hereof shall have been
given a reasonable opportunity to then elect to receive upon the conversion of
this Note either the capital stock, securities or assets then issuable with
respect to the Common Stock or the capital stock, securities or assets, or the
equivalent, issued to previous holders of the Common Stock in accordance with
such offer.
5.6 ADJUSTMENT FOR ASSET DISTRIBUTION. If the Company declares a dividend
or other distribution payable to all holders of shares of Common Stock in
evidences of indebtedness of the Company or other assets of the Company, the
Conversion Price in effect immediately prior to such declaration of such
dividend or other distribution shall be reduced by an amount equal to the fair
value of such dividend or distribution per share of Common Stock (as reasonably
determined in good faith by the Board of Directors of the Company). Such
reduction shall be made whenever any such dividend or distribution is made and
shall be effective as of the date as of which a record is taken for purpose of
such dividend or distribution or, if a record is not taken, the date as of which
holders of record of Common Stock entitled to such dividend or distribution are
determined.
5.7 DE MINIMIS ADJUSTMENTS. No adjustment in the number of shares of
Common Stock purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one share of Common Stock
purchasable upon conversion of this Note and no adjustment in the Conversion
Price shall be required unless such adjustment would require an
12
increase or decrease of at least $.01 in the Conversion Price; provided,
however, that any adjustments which are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
shall be made to the nearest full share or nearest one hundredth of a dollar, as
applicable.
5.8 NOTICE OF ADJUSTMENT. Whenever the Conversion Price or the number of
Shares issuable upon the conversion of this Note shall be adjusted as herein
provided, or the rights of the holder hereof shall change by reason of other
events specified herein, the Company shall compute the adjusted Conversion Price
and the adjusted number of Shares in accordance with the provisions hereof and
shall prepare an Officer's Certificate setting forth the adjusted Conversion
Price and the adjusted number of Shares issuable upon the conversion of this
Note or specifying the other shares of stock, securities or assets receivable as
a result of such change in rights, and showing in reasonable detail the facts
and calculations upon which such adjustments or other changes are based. The
Company shall cause to be mailed to the Holder hereof copies of such Officer's
Certificate together with a notice stating that the Conversion Price and the
number of Shares purchasable upon conversion of this Note have been adjusted and
setting forth the adjusted Conversion Price and the adjusted number of Shares
purchasable upon conversion of this Note.
5.9 NOTIFICATIONS TO HOLDERS. In case at any time the Company proposes:
(i) to declare any dividend upon its Common Stock payable in
capital stock or make any special dividend or other distribution
(other than cash dividends) to the holders of its Common Stock;
(ii) to offer for subscription pro rata to all of the holders
of its Common Stock any additional shares of capital stock of any
class or other rights;
(iii) to effect any capital reorganization, or
reclassification of the capital stock of the Company, or
consolidation, merger or share exchange of the Company with another
Person, or sale, transfer or other disposition of all or
substantially all of its assets;
(iv) to effect a voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(v) to effect any other matter described in Section 3.1.8
hereof.
then, in any one or more of such cases, the Company shall give the Holder hereof
(a) at least 10 days (but not more than 90 days) prior written notice of the
date on which the books of the Company shall close or a record shall be taken
for such dividend, distribution or subscription rights or for determining rights
to vote in respect of any such issuance, reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer, disposition, dissolution,
liquidation or winding up, and (b) in the case of any such issuance,
reorganization, reclassification, consolidation, merger,
13
share exchange, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 10 days (but not more than 90 days) prior written notice of the
date when the same shall take place. Such notice in accordance with the
foregoing clause (a) shall also specify, in the case of any such dividend,
distribution or subscription rights, the date on which the holders of Common
Stock shall be entitled thereto, and such notice in accordance with the
foregoing clause (b) shall also specify the date on which the holders of Common
Stock shall be entitled to exchange their Common Stock, as the case may be, for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, share exchange, sale, transfer,
disposition, dissolution, liquidation or winding up, as the case may be.
5.10 COMPANY TO PREVENT DILUTION. If any event or condition occurs as to
which other provisions of this Article are not strictly applicable or if
strictly applicable would not fairly protect the exercise or purchase rights of
this Note evidenced hereby in accordance with the essential intent and
principles of such provisions, or that might materially and adversely affect the
exercise or purchase rights of the holder hereof under any provisions of this
Note, then the Company shall make such adjustments in the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such exercise and purchase rights as aforesaid, and any adjustments
necessary with respect to the Conversion Price and the number of Shares
purchasable hereunder so as to preserve the rights of the holder hereunder. In
no event shall any such adjustment have the effect of increasing the Conversion
Price as otherwise determined pursuant to this Article except in the event of a
combination of shares.
ARTICLE VI
Covenants
The Company covenants and agrees that, so long as this Note is
outstanding:
6.1 PAYMENT OF PRINCIPAL AND ACCRUED INTEREST. The Company will duly and
punctually pay or cause to be paid the principal sum of this Note, together with
interest accrued thereon from the date hereof to the date of payment, in
accordance with the terms hereof.
6.2 CORPORATE EXISTENCE. The Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, rights (charter and statutory) and franchises; provided, however,
that the Company shall not be required to preserve any such right or franchise
if it shall reasonably determine that the preservation thereof is no longer
desirable in the conduct of its business.
6.3 TAXES; CLAIMS; ETC. The Company will promptly pay and discharge all
lawful taxes, assessments, and governmental charges or levies imposed upon it or
upon its income or profits, or upon any of its properties, real, personal, or
mixed, before the same shall become in default, as well as all lawful claims for
labor, materials, and supplies or otherwise which, if unpaid, might become a
lien or charge upon such properties or any part thereof, and which lien or
charges will have a
14
material adverse effect on the business of the Company; PROVIDED, however, that
the Company shall not be required to pay or cause to be paid any such tax,
assessment, charge, levy, or claim prior to institution of foreclosure
proceedings if the validity thereof shall concurrently be contested in good
faith by appropriate proceedings and if the Company shall have established
reserves deemed by the Company adequate with respect to such tax, assessment,
charge, levy, or claim.
6.4 MAINTENANCE OF EXISTENCE AND PROPERTIES. The Company will, and will
cause each Subsidiary to, keep its material properties in good repair, working
order, and condition, ordinary wear and tear excepted, so that the business
carried on may be properly conducted at all times in accordance with prudent
business management.
6.5 SEC REPORTS. The Company will deliver to the Holder within 10 days
after it files them with the SEC, copies of its annual and quarterly reports and
of the information, documents, and other reports (or copies of such portions of
any of the foregoing as the SEC may by rules and regulations prescribe) which
the Company is required to file with the SEC pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934. The Company will timely comply with its
reporting and filing obligations under the applicable federal securities laws.
6.6 NOTICE OF DEFAULTS. The Company will promptly notify the Holder in
writing of the occurrence of (i) any Event of Default under this Note, and (ii)
any event of default (or if any event of default would result upon any payment
with respect to this Note) with respect to any Indebtedness as such event of
default is defined therein or in the instrument under which it is outstanding,
permitting holders to accelerate the maturity of such Indebtedness.
6.7 LIMITATION ON FUNDED DEBT. The Company will not create, incur, assume
or suffer to exist Restricted Debt (defined below) in excess of $500,000 owed
and outstanding at any given time. The term "Restricted Debt" shall mean all
Funded Debt of the Company other than:
(a) Funded Debt of the Company under this Note, the Security
Instruments and any and all other documents and instruments executed in
connection therewith;
(b) Funded Debt of the Company under the Senior Indebtedness not
exceeding $10,000,000 in aggregate principal amount at any one time outstanding;
(c) Funded Debt of the Company deemed to be Funded Debt as a result
of a change in the requirements of GAAP since the date such obligation was
originally incurred; and
(d) Funded Debt of the Company incurred with respect to the purchase
or lease or raw materials, equipment and inventory in the ordinary course of
business.
6.8 LIMITATION ON LIENS. The Company will not create, incur, assume or
suffer to exist any Lien upon any of its property, assets or revenues, whether
now owned or hereafter acquired, except for:
15
(a) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings, PROVIDED that adequate reserves with respect
thereto are maintained on the books of the Company in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business in
respect of obligations which are not overdue for a period of more than 90 days
beyond the Company's customary payment terms or which are being contested in
good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements;
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business not to exceed $1,000,000 in the aggregate at
any given time;
(e) encumbrances and restrictions on the use of real property
which do not materially impair the use thereof;
(f) any interest or title of (i) a lessor in assets being leased to
the Company or (ii) a seller in assets being purchased by the Company pursuant
to a transaction not prohibited by Section 6.7 hereof;
(g) Liens created pursuant to the Security Instruments; and
(h) Liens granted in connection with the Senior Indebtedness.
6.9 LIMITATION ON OPTIONS, WARRANTS, ETC. The Company shall not at any
time issue or reserve for issuance options or warrants to officers, directors or
employees of the Company except pursuant to the Current Plans or any other stock
option or agreement or an employment, severance or consulting agreement in
effect as of the date hereof.
ARTICLE VII
Miscellaneous
7.1 COLLECTION FEES. If this Note is placed in the hands of an attorney
for collection, and if it is collected through any legal proceedings at law or
in equity or in bankruptcy, receivership or other court proceedings, the Company
hereby undertakes to pay all costs and expenses of collection including, but not
limited to, court costs and the reasonable attorney's fees of Holder.
16
7.2 CONSENT TO AMENDMENTS. This Note may be amended, and the Company may
take any action herein prohibited, or omit to perform any act herein required to
be performed by it, if and only if the Company shall obtain the written consent
to such amendment, action or omission to act from the holders of a majority of
the aggregate principal amount of this Note.
7.3 BENEFITS OF NOTE; NO IMPAIRMENT OF RIGHTS OF HOLDER OF SENIOR
INDEBTEDNESS. Nothing in this Note, express or implied, shall give to any
Person, other than the Company, Holder, and their successors any benefit or any
legal or equitable right, remedy or claim under or in respect of this Note.
7.4 SUCCESSORS AND ASSIGNS. All covenants and agreements in this Note
contained by or on behalf of the Company and the Holder shall bind and inure to
the benefit of the respective successors and assigns of the Company and the
Holder.
7.5 RESTRICTIONS ON TRANSFER. Subject to the provisions of this Section,
this Note is transferable in the same manner and with the same effect as in the
case of a negotiable instrument payable to a specified person.
7.6 WAIVER. No failure to exercise and no delay on the part of Holder in
exercising any power or right in connection herewith shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No course of dealing between the Company and Holder shall
operate as a waiver of any right of Holder under this Note. No modification or
waiver of any provision of this Note or any other instrument evidencing,
securing, or guaranteeing this Note nor any consent to any departure therefrom
shall in any event be effective unless the same shall be in writing and signed
by the person against whom enforcement thereof is to be sought, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given.
7.7 NOTICE; ADDRESS OF PARTIES. Except as otherwise provided, all
communications to the Company or Holder provided for herein or with reference to
this Note shall be deemed to have been sufficiently given or served for all
purposes on the third business day after being sent as certified or registered
mail, postage and charges prepaid, to the following addresses: if to the
Company: 2427 FM 1092, Missouri City, Texas 77459 or at any other address
designated by the Company in writing to Holder; if to Holder: Maxxim Medical,
Inc., 104 Industrial Blvd., Sugar Land, Texas 77478, Attn: President, or at any
other address designated by Holder to the Company in writing.
7.8 SEPARABILITY CLAUSE. In case any provision in this Note shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions in such jurisdiction shall not in
any way be affected or impaired thereby; provided, however, such construction
does not destroy the essence of the bargain provided for hereunder.
17
7.9 GOVERNING LAW. This Note shall be governed by, and construed in
accordance with, the internal laws of the State of Texas (without regard to
principles of choice of law).
7.10 USURY. It is the intention of the parties hereto to conform strictly
to the applicable laws of the State of Texas and the United States of America,
and judicial or administrative interpretations or determinations thereof
regarding the contracting for, charging and receiving of interest for the use,
forbearance, and detention of money (referred to as "Applicable Law"). The
Holder shall have no right to claim, to charge or to receive any interest in
excess of the maximum rate of interest, if any, permitted to be charged on that
portion of the amount representing principal which is outstanding and unpaid
from time to time by Applicable Law. Determination of the rate of interest for
the purpose of determining whether this Note is usurious under Applicable Law
shall be made by amortizing, prorating, allocating and spreading in equal parts
during the period of the actual time of this Note, all interest or other sums
deemed to be interest (referred to in this Section as "Interest") at any time
contracted for, charged or received from the Company in connection with this
Note. Any Interest contracted for, charged or received in excess of the maximum
rate allowed by Applicable Law shall be deemed a result of a mathematical error
and a mistake. If this Note is paid in part prior to the end of the full stated
term of this Note and the Interest received for the actual period of existence
of this Note exceeds the maximum rate allowed by Applicable Law, Holder shall
credit the amount of the excess against any amount owing under this Note or, if
this Note has been paid in full, or in the event that it has been accelerated
prior to maturity, Holder shall refund to the Company the amount of such excess,
and shall not be subject to any of the penalties provided by Applicable Law for
contracting for, charging or receiving Interest in excess of the maximum rate
allowed by Applicable Law. Any such excess which is unpaid shall be canceled.
THIS NOTE, THE SECURITY INSTRUMENTS, AND ALL DOCUMENTS AND INSTRUMENTS
EXECUTED IN CONNECTION HEREWITH OR THEREWITH, REPRESENT THE FINAL AGREEMENT
BETWEEN THE COMPANY AND HOLDER AND MAY NOT BE CONTRADICTED BY EVIDENCING OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE COMPANY AND
HOLDER.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed on the date first above written.
LASERMEDICS, INC.
MICHAEL M. BARBOUR
Michael M. Barbour, President
18
THE SECURITIES REPRESENTED BY THIS NOTE AND THE COMMON STOCK ISSUABLE HEREUNDER
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW. THE SECURITIES
REPRESENTED BY THIS NOTE MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER, OR IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH ANY OTHER APPLICABLE SECURITIES
LAWS.
THE SHARES OF COMMON STOCK ISSUABLE ON CONVERSION OF THIS NOTE ARE SUBJECT TO
THE TERMS OF A CERTAIN VOTING AGREEMENT BETWEEN CERTAIN SHAREHOLDERS DATED APRIL
30, 1996, AS IT MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH AGREEMENT IS
ON FILE WITH THE SECRETARY OF THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS,
AND WILL BE DELIVERED AT NO COST BY THE COMPANY UPON REQUEST.
LASERMEDICS, INC.
Convertible Subordinated Promissory Note
$7,000,000 Houston, Texas April 30, 1996
Lasermedics, Inc., a Texas corporation (hereinafter called the "Company,"
which term includes any directly or indirectly controlled subsidiaries or
successor entities), for value received, hereby promises to pay to Maxxim
Medical, Inc., a Delaware corporation (hereinafter called the "Holder"), or its
registered assigns, the principal sum of Seven Million Dollars ($7,000,000)
together with accrued interest on the amount of such principal sum, payable in
accordance with the terms set forth below.
THE OBLIGATIONS OF THE COMPANY CONTAINED IN THIS NOTE ARE SUBJECT TO (I)
THE TERMS OF A SUBORDINATION AGREEMENT BETWEEN THE COMPANY, COMERICA BANK -
TEXAS, A TEXAS BANKING CORPORATION, AND THE HOLDER OF EVEN DATE HEREWITH (THE
"SUBORDINATION AGREEMENT") AND (II) THE TERMS OF A COMMERCIAL SECURITY AGREEMENT
BETWEEN THE COMPANY AND THE HOLDER OF EVEN DATE HEREWITH (THE "SECURITY
AGREEMENT").
1
ARTICLE I
Definitions
For all purposes of this Note, except as otherwise expressly provided or
unless the context otherwise requires: (i) the terms defined in this Article
have the meanings assigned to them in this Article and include the plural as
well as the singular; (ii) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with generally accepted
accounting principles as promulgated from time to time by the Association of
Independent Certified Public Accountants; and (iii) the words "herein" and
"hereof" and other words of similar import refer to this Note as a whole and not
to any particular Article, Section or other subdivision.
1.1 "BOARD OF DIRECTORS" means the board of directors of the Company as
elected from time to time or any duly authorized committee of that board.
1.2 "BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in Houston, Texas are
authorized or obligated by law or executive order to be closed.
1.3 "CHANGE IN CONTROL" shall mean a change in control of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act"); provided that, without limitation, such a change in control
shall be deemed to have occurred if (X) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act), other than the Company or the
Holder, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
40% or more of the combined voting power of the Company's then outstanding
securities, or (Y) during any period of two consecutive years during the term of
this Note, individuals who at the beginning of such period constitute the Board
of Directors cease for any reason to constitute at least a majority thereof,
unless the election of each director who was not a director at the beginning of
such period has been approved in advance by directors representing at least
two-thirds of the directors then in office who were directors at the beginning
of the period.
1.4 "COMMON STOCK" means shares of common stock, par value $.01 per share,
of the Company.
1.5 "CONVERSION PRICE" means the price per share determined in accordance
with Articles IV and V hereof (as adjusted in accordance with the terms of this
Note) at which shares of Common Stock shall be delivered to Holder upon
conversion of this Note into Common Stock.
1.6 "DEFAULT" means any event which is, or after notice or passage of time
would be, an Event of Default.
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1.7 "EVENT OF DEFAULT" has the meaning specified in Section 3.1.
1.8 "FUNDED DEBT" means, as determined in accordance with GAAP, (i) all
obligations for borrowed money (whether as a direct obligor on a promissory
note, a reimbursement obligor on a letter of credit, a guarantor, or otherwise)
and (ii) all capital lease obligations that have been (or under GAAP should be)
capitalized on the Company's balance sheet.
1.9 "GAAP" means generally accepted accounting principles of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board that are applicable
from time to time.
1.10 "INDEBTEDNESS" of any Person means all indebtedness of such Person,
whether outstanding on the date of this Note or hereafter created, incurred,
assumed or guaranteed, (i) for the principal of, premium on and interest on all
debts of the Person whether outstanding on the date of this Note or thereafter
created for money borrowed by such Person (including capitalized lease
obligations), money borrowed by others (including capitalized lease obligations)
and guaranteed, directly or indirectly, by such Person, or purchase money
indebtedness, or indebtedness secured by property ("Purchase Money
Indebtedness") at the time of the acquisition of such property by such Person,
for the payment of which the Person is directly or contingently liable; (ii) for
all accrued obligations of the Person in respect of any contract, agreement or
instrument imposing an obligation upon the Person to pay over funds; (iii) for
all trade debt of the Person; and (iv) for all deferrals, renewals, extensions
and refundings of, and amendments, modifications and supplements to, any of the
indebtedness referred to in (i), (ii) or (iii) above.
1.11 "LIEN" means any mortgage, deed of trust, lien, security interest,
pledge, claim, charge, liability, obligation or other encumbrance.
1.12 "MARKET PRICE" for any day, when used with reference to Common Stock,
shall mean the price of said Common Stock determined by reference to the last
reported sale price for the Common Stock on such day on the principal securities
exchange on which the Common Stock is listed or admitted to trading or if no
such sale takes place on such date, the average of the closing bid and asked
prices thereof as officially reported, or, if not so listed or admitted to
trading on any securities exchange, the last sale price for the Common Stock on
the National Association of Securities Dealers national market system on such
date, or, if there shall have been no trading on such date or if the Common
Stock shall not be listed on such system, the average of the closing bid and
asked prices in the over-the-counter market as furnished by any NASD member firm
selected from time to time by the Company for such purpose.
1.13 "MATURITY DATE", when used with respect to this Note means May 1,
2003 (or such earlier date upon which this Note become due and payable).
1.14 "NOTE" means this Convertible Subordinated Promissory Note.
3
1.15 "PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
1.16 "PUBLIC OFFERING" means the sale by the Company of securities for
cash in an underwritten public offering registered on the appropriate form with
the SEC.
1.17 "SEC" means the United States Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act of 1933 or
any successor act thereto.
1.18 "SECURITY INSTRUMENTS" means (i) that certain Commercial Security
Agreement of even date herewith by and between the Company and the Holder
evidencing a security interest held by the Holder in all of the Company's
tangible and intangible personal property, (ii) that certain Second Lien Deed of
Trust of even date herewith executed by the Company to J. Randolph Ewing,
Trustee, for the benefit of Holder, covering certain real property in Fort Bend
County, Texas, (iii) that certain Second Lien Deed of Trust of even date
herewith executed by the Company to J. Randolph Ewing, Trustee, for the benefit
of Holder, covering certain real property in Bell County, Texas, (iv) those
certain UCC-1 Financing Statements executed by the Company for the benefit of
the Holder to be recorded in the records of the Office of the Secretary of State
of Texas, the Office of the Secretary of State of Ohio, the County Clerk for
Bell County, Texas, and the County Clerk for Fort Bend County, Texas, and (v)
all other collateral agreements, security agreements, collateral assignments,
vendor's liens and lien instruments executed by the Company or any other party
in favor of the Holder or any other holder of this Note.
1.19 "SENIOR INDEBTEDNESS" means each and every loan, advance or other
renewals and extensions of credit by Comerica Bank - Texas (and their successors
or assigns) heretofore or hereafter to the Company.
1.20 "SUBSIDIARY" means a corporation or other entity in which more than
50% of the outstanding voting stock or equity interests is owned or controlled,
directly or indirectly, by the Company or any combination of the Company and one
or more other Subsidiaries. For the purposes of this definition, "VOTING STOCK"
means stock or other interests which ordinarily has voting power for the
election of directors, and equity interests means the right to receive the
profits of the entity, when disbursed, or the assets of the entity upon
liquidation or dissolution.
ARTICLE II
Payments
2.1 INTEREST. From the date of this Note through the Maturity Date,
interest shall accrue hereunder on the unpaid outstanding principal sum of this
Note beginning at a rate equal to 2% per annum and increasing 2% per annum on
each May 1 of each calendar year (beginning with calendar year 1997) prior to
the Maturity Date, calculated on the basis of a 360-day year. Accrued interest
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shall be paid on November 1 and May 1 of each calendar year (beginning on
November 1, 1996) through the Maturity Date. All past due amounts of principal
and interest shall bear interest at the maximum rate permitted by law.
2.2 PAYMENT OF PRINCIPAL AND INTEREST. Subject to the provisions of
Section 2.3 hereof, the principal and unpaid interest of this Note shall be due
and payable in full on the Maturity Date.
2.3 REDEMPTION.
2.3.1. At any time before the Maturity Date, the Company may, upon 20
days' written notice to the Holder, redeem all or any portion of the outstanding
principal balance of this Note at the redemption prices (expressed as
percentages of the amount of the principal of this Note being redeemed) set
forth below, plus all accrued and unpaid interest as of the date of such
redemption, if redeemed during the twelve month period beginning on May 1 of the
year indicated below:
Year Percentage
---- ----------
1996 110%
1997 109%
1998 108%
1999 107%
2000 106%
2001 105%
2002 104%
The portion of the principal of this Note redeemed under this Section 2.3.1
shall be applied to satisfy the Company's redemption obligations under Section
2.3.2 hereof in accordance with Section 2.3.4 hereof.
2.3.2. Subject to the provisions of Section 2.3.4 hereof, the
Company will be required to redeem 20% of the original principal amount of this
Note on each of the dates and at the redemption prices (expressed as percentages
of the amount of the principal of this Note being redeemed) set forth below,
plus all accrued and unpaid interest as of the date of such redemption:
5
Date Percentage
---- ----------
May 1, 1999 107%
May 1, 2000 106%
May 1, 2001 105%
May 1, 2002 104%
May 1, 2003 103%
2.3.3. Immediately upon the closing of the first Public Offering to
be consummated after the original issuance of this Note, the Company will be
required to redeem forty percent (40%) of the then outstanding principal amount
of this Note, plus all accrued and unpaid interest as of the date of such
redemption. The portion of the principal of this Note redeemed under this
Section 2.3.3 shall be applied to satisfy the Company's redemption obligations
under Section 2.3.2 hereof in accordance with Section 2.3.4 hereof.
2.3.4. In the event all or any portion of the principal balance of
this Note is (i) redeemed pursuant to Sections 2.3.1 or 2.3.3 hereof or (ii)
reduced by conversion of such portion of the principal balance of this Note into
shares of Common Stock pursuant to Section 4.1 hereof, then the amount of such
redemption or reduction shall be applied to satisfy the Company's redemption
obligations under Section 2.3.2 hereof in reverse order of redemption dates.
2.4 MANNER OF PAYMENT. Any payment of principal and interest on this Note,
including a redemption prior to the Maturity Date, will be made by delivery of
certified or bank cashier checks payable to the order of Holder at its address
as set forth in this Note or by wire transfers pursuant to instructions from
Holder as determined at the Holder's option. If the date upon which the payment
of principal and interest is required to be made pursuant to this Note occurs
other than on a Business Day, then such payment of principal and interest shall
be made on the next occurring Business Day following said payment date and shall
include interest through said next occurring Business Day.
ARTICLE III
Remedies
3.1 EVENTS OF DEFAULT. An "Event of Default" occurs if:
3.1.1. the Company defaults in the performance of any covenant made
by the Company in this Note, and such default remains uncured for a period of 15
days after notice from the Holder; or
6
3.1.2. the Company defaults in the performance of or breaches any of
the terms, covenants, or conditions contained in any of the Security
Instruments, or in any instrument or instruments given contemporaneously
herewith, heretofore or hereafter as security for or guaranteeing the payment of
this Note and the applicable grace periods expire; or
3.1.3. the Company defaults in the performance of or breaches any of
the terms, covenants, or conditions contained in any of the documents
evidencing, securing or guaranteeing the Senior Indebtedness, including, but not
limited to, any loan agreements, promissory notes or security agreements and the
applicable grace periods expire; or
3.1.4. the Company defaults in the payment when due (whether by
lapse of time, by declaration, by call for redemption or otherwise) of the
principal of or interest on any Indebtedness of the Company (other than the
Indebtedness evidenced by this Note or good-faith disputes with trade creditors)
having an aggregate principal amount in excess of $500,000 and such default
remains uncured for a period of 15 days; or
3.1.5. a court of competent jurisdiction enters a final and
non-appealable judgment or judgments against the Company or any property or
assets of the Company for the payment of money aggregating $500,000 or more in
excess of applicable insurance coverage; or
3.1.6. (i) a receiver, liquidator, custodian, or trustee of the
Company, or of any material property thereof is appointed by court order of a
court of competent jurisdiction and such order remains in effect on the 90th day
after its entry; or (ii) a petition is filed, a case is commenced, or relief is
ordered against the Company under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution, or liquidation law of any
jurisdiction, whether now or hereafter in effect, and is not dismissed with 90
days of such filing, commencement, or order; or
3.1.7. the Company: (i) commences a voluntary case or proceeding
under any applicable federal or state bankruptcy, insolvency, reorganization or
other similar law or any other case or proceeding to be adjudicated a bankrupt
or insolvent; (ii) files a petition, answer or consent seeking reorganization or
similar relief under any applicable federal or state law; (iii) makes an
assignment for the benefit of creditors; or (iv) admits in writing its inability
to pay its debts generally as they become due; or
3.1.8. the Company: (i) merges or consolidates with or into any
other Person, unless the Company is the surviving or acquiring party and there
is no Change in Control in connection therewith or resulting therefrom; (ii) the
Company dissolves or liquidates or agrees or consents thereto; (iii) the Company
sells, leases or assigns all or any substantial portion of its assets; (iv) ,
except as otherwise agreed to by the Holder, amends or modifies its Articles of
Incorporation or Bylaws in a manner that would materially adversely affect the
Holder's rights under the Note or as a shareholder of the Company, (whether or
not the Holder has exercised its right of conversion under Article IV hereof);
or (v) pays any dividends or distributions on its capital stock.
7
3.2 ACCELERATION OF MATURITY. This Note and all accrued interest shall
become immediately due and payable at the option of the Holder in its sole
discretion if an Event of Default occurs.
ARTICLE IV
Conversion of Note
4.1 CONVERSION PRIVILEGE AND CONVERSION PRICE. Subject to and upon
compliance with the provisions of this Article IV, at the option of the Holder,
all or any portion of the amounts owed and outstanding under this Note may be
converted at any time and from time to time into fully paid and nonassessable
shares of Common Stock (the "Shares"), calculated as to each conversion to the
nearest 1/100 of a share at the Conversion Price, determined as hereinafter
provided, in effect at the time of conversion. Unless and until the occurrence
of an Event of Default, the Conversion Price shall be $3.00 per share of Common
Stock, subject to adjustment in accordance with Article 5 hereof. Upon the
occurrence of an Event of Default, the Conversion Price shall be automatically
adjusted to an amount equal to the lesser of (i) the Conversion Price in effect
as of the date of the Event of Default and (ii) 80% of the average Market Price
for the 30 trading days immediately preceding the date of the Event of Default,
which amount shall be subject to further adjustment in accordance with Article 5
hereof. All amounts so converted shall be applied first to pay any accrued and
unpaid interest and second to reduce the principal amount of this Note as of the
date of such conversion as if payment or prepayment in such amount has occurred,
with any reduction in principal to be applied to satisfy the Company's
redemption obligations under Section 2.3.2 hereof in accordance with Section
2.3.4 hereof. This right of conversion must be exercised by delivery of a
written notice to the Company setting forth the amount to be converted to be
effective upon the Company's receipt of such notice (the "Conversion Notice").
Notwithstanding the foregoing, in the event the Company provides notice to the
Holder of its intention to redeem all or any portion of the outstanding
principal balance of this Note pursuant to Section 2.3.1 hereof, the Company
must receive the Conversion Notice on or before the last Business Day prior to
the effective date of such redemption to the extent that the Holder desires to
convert all or any portion of the amount to be redeemed by the Company.
ARTICLE V
Adjustment of Conversion Price
5.1 ANTI-DILUTION PROVISIONS. The Conversion Price shall be subject to
adjustment from time to time as provided herein. Upon each adjustment of the
Conversion Price, the holder of this Note shall thereafter be entitled to
purchase, at the Conversion Price resulting from such adjustment, the number of
shares of Common Stock obtained by multiplying the Conversion Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Conversion Price resulting from such adjustment.
8
5.2 ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF COMMON STOCK.
5.2.1. If and whenever after the date hereof the Company shall issue
or sell any Common Stock for no consideration or for a consideration per share
less than the Conversion Price, the Conversion Price shall be reduced (but not
increased, except as otherwise specifically provided herein), to the price
(calculated to the nearest one-tenth of a cent) determined by dividing (x) an
amount equal to the sum of (1) the aggregate number of shares of Common Stock
outstanding immediately prior to such issue or sale multiplied by the then
existing Conversion Price plus (2) the consideration received by the Company
upon such issue or sale by (y) the aggregate number of shares of Common Stock
outstanding immediately after such issue or sale.
5.2.2. No adjustment shall be made in the Conversion Price in the
event that the Company issues, in one or more transactions, (i) Common Stock
upon exercise of any options issued to officers, directors or employees of the
Company pursuant to those stock option plans which have been previously approved
by the Company's board of directors and are subject only to shareholder approval
(the "Current Plans") or any other stock option agreement or an employment,
severance or consulting agreement in effect as of the date hereof; (ii) Common
Stock upon conversion of this Note; (iii) Common Stock upon exercise of any
stock purchase warrant or option (other than the options referred to in clause
(i) above) or other convertible security outstanding on the date hereof; or (iv)
Common Stock issued as consideration in acquisitions. In addition, for purposes
of calculating any adjustment of the Conversion Price, all of the shares of
Common Stock issuable pursuant to any of the foregoing shall be assumed to be
outstanding prior to the event causing such adjustment to be made.
5.2.3. In case at any time after the date hereof the Company shall
in any manner grant (whether directly or by assumption in a merger or otherwise)
any rights to subscribe for or to purchase Common Stock or any options, (except
for options issued to (or reserved for issuance to) officers, directors or
employees of the Company pursuant to the Current Plans or any other stock option
agreement or an employment, severance, or consulting agreement in effect as of
the date hereof), for the purchase of Common Stock or any stock or securities
convertible into or exchangeable for Common Stock (such convertible or
exchangeable stock or securities being herein called "Convertible Securities"),
whether or not such rights or options or the right to convert or exchange any
such Convertible Securities are immediately exercisable, and the price per share
for which shares of Common Stock are issuable upon the exercise of such rights
or options or upon conversion or exchange of such Convertible Securities
(determined by dividing (i) the total amount, if any, received or receivable by
the Company as consideration for the granting of such rights or options, plus
the minimum aggregate amount of additional consideration, if any, payable to the
Company upon the exercise of such rights or options, or plus, in the case of
such rights or options that relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable upon the issue or
sale of such Convertible Securities and upon the conversion or exchange thereof,
by (ii) the total maximum number of shares of Common Stock issuable upon the
exercise of such rights or options or upon the conversion or exchange of all
such Convertible Securities issuable upon the exercise of such rights or
options) shall be less than the Conversion
9
Price in effect as of the date of granting such rights or options, then the
total maximum number of shares of Common Stock issuable upon the exercise of
such rights or options or upon conversion or exchange of all such Convertible
Securities issuable upon the exercise of such rights or options shall be deemed
to be outstanding as of the date of the granting of such rights or options and
to have been issued for such price per share, with the effect on the Conversion
Price specified herein. Except as provided herein, no further adjustment of the
Conversion Price shall be made upon the actual issuance of such Common Stock or
of such Convertible Securities upon exercise of such rights or options or upon
the actual issuance of such Common Stock upon conversion or exchange of such
Convertible Securities.
5.2.4. If: (i) the purchase price provided for in any right or
option, (ii) the additional consideration, if any, payable upon the conversion
or exchange of any Convertible Securities, or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock
shall be decreased (other than by reason of provisions designed to protect
against dilution), the Conversion Price then in effect shall be decreased to the
Conversion Price that would have been in effect had such rights, options or
Convertible Securities provided for such changed purchase price, additional
consideration or conversion rate at the time initially issued.
5.2.5. In case at any time Common Stock or Convertible Securities or
any rights or options to purchase Common Stock or Convertible Securities shall
be issued or sold for cash, the total amount of cash consideration shall be
deemed to be the amount received by the Company. If at any time any Common
Stock, Convertible Securities or any rights or options to purchase any such
Common Stock or Convertible Securities shall be issued or sold for consideration
other than cash, the amount of the consideration other than cash received by the
Company shall be deemed to be the fair value of such consideration, as
determined reasonably and in good faith by the Board of Directors of the
Company. If at any time any Common Stock, Convertible Securities or any rights
or options to purchase any Common Stock or Convertible Securities shall be
issued in connection with any merger or consolidation in which the Company is
the surviving corporation, the amount of consideration received therefor shall
be deemed to be the fair value, as determined reasonably and in good faith by
the Board of Directors of the Company, of such portion of the assets and
business of the nonsurviving corporation as such Board of Directors may
determine to be attributable to such Common Stock, Convertible Securities,
rights or options as the case may be. In case at any time any rights or options
to purchase any shares of Common Stock or Convertible Securities shall be issued
in connection with the issuance and sale of other securities of the Company,
together consisting of one integral transaction in which no consideration is
allocated to such rights or options by the parties, such rights or options shall
be deemed to have been issued without consideration.
5.2.6. In the case the Company shall take a record of the holders of
its Common Stock for the purpose of entitling them (i) to receive a dividend or
other distribution payable in Common Stock or Convertible Securities, or (ii) to
subscribe for or purchase Common Stock or Convertible Securities, then such
record date shall be deemed to be the date of the issuance or sale of the Common
Stock or Convertible Securities deemed to have been issued or sold as a result
of
10
the declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
5.2.7. The number of shares of Common Stock outstanding at any given
time shall not include shares owned directly by the Company in treasury, and the
disposition of any such shares shall be considered an issuance or sale of Common
Stock.
5.3 STOCK DIVIDENDS. In case the Company shall declare a dividend or make
any other distribution upon any shares of the Company, payable in Common Stock
or Convertible Securities, any Common Stock or Convertible Securities, as the
case may be, issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
5.4 STOCK SPLITS AND REVERSE SPLITS. In the event that the Company shall
at any time subdivide its outstanding shares of Common Stock into a greater
number of shares, the Conversion Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of Shares into which
this Note may be converted immediately prior to such subdivision shall be
proportionately increased, and conversely, in the event that the outstanding
shares of Common Stock shall at any time be combined into a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
shall be proportionately increased and the number of Shares into which this Note
may be converted immediately prior to such combination shall be proportionately
reduced.
5.5 REORGANIZATIONS AND ASSET SALES. If any capital reorganization or
reclassification of the capital stock of the Company, or any consolidation,
merger or share exchange of the Company with another Person, or the sale,
transfer or other disposition of all or substantially all of its assets to
another Person shall be effected in such a way that holders of Common Stock
shall be entitled to receive capital stock, securities or assets with respect to
or in exchange for their shares, then the following provisions shall apply:
5.5.1. As a condition of such reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer or other disposition,
lawful and adequate provisions shall be made whereby the Holder shall thereafter
have the right to purchase and receive upon the terms and conditions specified
in this Note, such shares of capital stock, securities or assets as may be
issued or payable with respect to or in exchange for a number of outstanding
shares of such Common Stock equal to the number of Shares immediately
theretofore so receivable had such reorganization, reclassification,
consolidation, merger, share exchange or sale not taken place, and in any such
case appropriate provision reasonably satisfactory to such holder shall be made
with respect to the rights and interests of such holder to the end that the
provisions hereof (including, without limitation, provisions for adjustments of
the Conversion Price and of the number of Shares receivable upon the exercise)
shall thereafter be applicable, as nearly as possible, in relation to any shares
of capital stock, securities or assets thereafter deliverable upon the exercise
of Note.
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5.5.2. In the event of a merger, share exchange or consolidation of
the Company with or into another Person as a result of which a number of shares
of common stock or its equivalent of the successor Person greater or lesser than
the number of shares of Common Stock outstanding immediately prior to such
merger, share exchange or consolidation are issuable to holders of Common Stock,
then the Conversion Price in effect immediately prior to such merger, share
exchange or consolidation shall be adjusted in the same manner as though there
were a subdivision or combination of the outstanding shares of Common Stock.
5.5.3. The Company shall not effect any such consolidation, merger,
share exchange, sale, transfer or other disposition unless prior to or
simultaneously with the consummation thereof the successor Person (if other than
the Company) resulting from such consolidation, share exchange or merger or the
Person purchasing or otherwise acquiring such assets shall have assumed by
written instrument executed and mailed or delivered to the Holder hereof at the
last address of such Holder appearing on the books of the Company the obligation
to deliver to such Holder such shares of capital stock, securities or assets as,
in accordance with the foregoing provisions, such Holder may be entitled to
receive, and all other liabilities and obligations of the Company hereunder.
Upon written request by the Holder hereof, such Successor Person will issue a
new Note revised to reflect the modifications in this Note effected pursuant to
this Section 5.5.
5.5.4.If a purchase, tender or exchange offer is made to and
accepted by the holders of 50% or more of the outstanding shares of Common
Stock, the Company shall not effect any consolidation, merger, share exchange or
sale, transfer or other disposition of all or substantially all of the Company's
assets with the Person having made such offer or with any affiliate of such
Person, unless prior to the consummation of such consolidation, merger, share
exchange, sale, transfer or other disposition the Holder hereof shall have been
given a reasonable opportunity to then elect to receive upon the conversion of
this Note either the capital stock, securities or assets then issuable with
respect to the Common Stock or the capital stock, securities or assets, or the
equivalent, issued to previous holders of the Common Stock in accordance with
such offer.
5.6 ADJUSTMENT FOR ASSET DISTRIBUTION. If the Company declares a dividend
or other distribution payable to all holders of shares of Common Stock in
evidences of indebtedness of the Company or other assets of the Company, the
Conversion Price in effect immediately prior to such declaration of such
dividend or other distribution shall be reduced by an amount equal to the fair
value of such dividend or distribution per share of Common Stock (as reasonably
determined in good faith by the Board of Directors of the Company). Such
reduction shall be made whenever any such dividend or distribution is made and
shall be effective as of the date as of which a record is taken for purpose of
such dividend or distribution or, if a record is not taken, the date as of which
holders of record of Common Stock entitled to such dividend or distribution are
determined.
5.7 DE MINIMIS ADJUSTMENTS. No adjustment in the number of shares of
Common Stock purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one share of Common Stock
purchasable upon conversion of this Note and no adjustment in the Conversion
Price shall be required unless such adjustment would require an
12
increase or decrease of at least $.01 in the Conversion Price; provided,
however, that any adjustments which are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
shall be made to the nearest full share or nearest one hundredth of a dollar, as
applicable.
5.8 NOTICE OF ADJUSTMENT. Whenever the Conversion Price or the number of
Shares issuable upon the conversion of this Note shall be adjusted as herein
provided, or the rights of the holder hereof shall change by reason of other
events specified herein, the Company shall compute the adjusted Conversion Price
and the adjusted number of Shares in accordance with the provisions hereof and
shall prepare an Officer's Certificate setting forth the adjusted Conversion
Price and the adjusted number of Shares issuable upon the conversion of this
Note or specifying the other shares of stock, securities or assets receivable as
a result of such change in rights, and showing in reasonable detail the facts
and calculations upon which such adjustments or other changes are based. The
Company shall cause to be mailed to the Holder hereof copies of such Officer's
Certificate together with a notice stating that the Conversion Price and the
number of Shares purchasable upon conversion of this Note have been adjusted and
setting forth the adjusted Conversion Price and the adjusted number of Shares
purchasable upon conversion of this Note.
5.9 NOTIFICATIONS TO HOLDERS. In case at any time the Company proposes:
(i) to declare any dividend upon its Common Stock payable in
capital stock or make any special dividend or other distribution
(other than cash dividends) to the holders of its Common Stock;
(ii) to offer for subscription pro rata to all of the holders
of its Common Stock any additional shares of capital stock of any
class or other rights;
(iii) to effect any capital reorganization, or
reclassification of the capital stock of the Company, or
consolidation, merger or share exchange of the Company with another
Person, or sale, transfer or other disposition of all or
substantially all of its assets;
(iv) to effect a voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(v) to effect any other matter described in Section 3.1.8
hereof.
then, in any one or more of such cases, the Company shall give the Holder hereof
(a) at least 10 days (but not more than 90 days) prior written notice of the
date on which the books of the Company shall close or a record shall be taken
for such dividend, distribution or subscription rights or for determining rights
to vote in respect of any such issuance, reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer, disposition, dissolution,
liquidation or winding up, and (b) in the case of any such issuance,
reorganization, reclassification, consolidation, merger,
13
share exchange, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 10 days (but not more than 90 days) prior written notice of the
date when the same shall take place. Such notice in accordance with the
foregoing clause (a) shall also specify, in the case of any such dividend,
distribution or subscription rights, the date on which the holders of Common
Stock shall be entitled thereto, and such notice in accordance with the
foregoing clause (b) shall also specify the date on which the holders of Common
Stock shall be entitled to exchange their Common Stock, as the case may be, for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, share exchange, sale, transfer,
disposition, dissolution, liquidation or winding up, as the case may be.
5.10 COMPANY TO PREVENT DILUTION. If any event or condition occurs as to
which other provisions of this Article are not strictly applicable or if
strictly applicable would not fairly protect the exercise or purchase rights of
this Note evidenced hereby in accordance with the essential intent and
principles of such provisions, or that might materially and adversely affect the
exercise or purchase rights of the holder hereof under any provisions of this
Note, then the Company shall make such adjustments in the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such exercise and purchase rights as aforesaid, and any adjustments
necessary with respect to the Conversion Price and the number of Shares
purchasable hereunder so as to preserve the rights of the holder hereunder. In
no event shall any such adjustment have the effect of increasing the Conversion
Price as otherwise determined pursuant to this Article except in the event of a
combination of shares.
ARTICLE VI
Covenants
The Company covenants and agrees that, so long as this Note is
outstanding:
6.1 PAYMENT OF PRINCIPAL AND ACCRUED INTEREST. The Company will duly and
punctually pay or cause to be paid the principal sum of this Note, together with
interest accrued thereon from the date hereof to the date of payment, in
accordance with the terms hereof.
6.2 CORPORATE EXISTENCE. The Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, rights (charter and statutory) and franchises; provided, however,
that the Company shall not be required to preserve any such right or franchise
if it shall reasonably determine that the preservation thereof is no longer
desirable in the conduct of its business.
6.3 TAXES; CLAIMS; ETC. The Company will promptly pay and discharge all
lawful taxes, assessments, and governmental charges or levies imposed upon it or
upon its income or profits, or upon any of its properties, real, personal, or
mixed, before the same shall become in default, as well as all lawful claims for
labor, materials, and supplies or otherwise which, if unpaid, might become a
lien or charge upon such properties or any part thereof, and which lien or
charges will have a
14
material adverse effect on the business of the Company; PROVIDED, however, that
the Company shall not be required to pay or cause to be paid any such tax,
assessment, charge, levy, or claim prior to institution of foreclosure
proceedings if the validity thereof shall concurrently be contested in good
faith by appropriate proceedings and if the Company shall have established
reserves deemed by the Company adequate with respect to such tax, assessment,
charge, levy, or claim.
6.4 MAINTENANCE OF EXISTENCE AND PROPERTIES. The Company will, and will
cause each Subsidiary to, keep its material properties in good repair, working
order, and condition, ordinary wear and tear excepted, so that the business
carried on may be properly conducted at all times in accordance with prudent
business management.
6.5 SEC REPORTS. The Company will deliver to the Holder within 10 days
after it files them with the SEC, copies of its annual and quarterly reports and
of the information, documents, and other reports (or copies of such portions of
any of the foregoing as the SEC may by rules and regulations prescribe) which
the Company is required to file with the SEC pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934. The Company will timely comply with its
reporting and filing obligations under the applicable federal securities laws.
6.6 NOTICE OF DEFAULTS. The Company will promptly notify the Holder in
writing of the occurrence of (i) any Event of Default under this Note, and (ii)
any event of default (or if any event of default would result upon any payment
with respect to this Note) with respect to any Indebtedness as such event of
default is defined therein or in the instrument under which it is outstanding,
permitting holders to accelerate the maturity of such Indebtedness.
6.7 LIMITATION ON FUNDED DEBT. The Company will not create, incur, assume
or suffer to exist Restricted Debt (defined below) in excess of $500,000 owed
and outstanding at any given time. The term "Restricted Debt" shall mean all
Funded Debt of the Company other than:
(a) Funded Debt of the Company under this Note, the Security
Instruments and any and all other documents and instruments executed in
connection therewith;
(b) Funded Debt of the Company under the Senior Indebtedness not
exceeding $10,000,000 in aggregate principal amount at any one time outstanding;
(c) Funded Debt of the Company deemed to be Funded Debt as a result
of a change in the requirements of GAAP since the date such obligation was
originally incurred; and
(d) Funded Debt of the Company incurred with respect to the purchase
or lease or raw materials, equipment and inventory in the ordinary course of
business.
6.8 LIMITATION ON LIENS. The Company will not create, incur, assume or
suffer to exist any Lien upon any of its property, assets or revenues, whether
now owned or hereafter acquired, except for:
15
(a) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings, PROVIDED that adequate reserves with respect
thereto are maintained on the books of the Company in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business in
respect of obligations which are not overdue for a period of more than 90 days
beyond the Company's customary payment terms or which are being contested in
good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements;
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business not to exceed $1,000,000 in the aggregate at
any given time;
(e) encumbrances and restrictions on the use of real property
which do not materially impair the use thereof;
(f) any interest or title of (i) a lessor in assets being leased to
the Company or (ii) a seller in assets being purchased by the Company pursuant
to a transaction not prohibited by Section 6.7 hereof;
(g) Liens created pursuant to the Security Instruments; and
(h) Liens granted in connection with the Senior Indebtedness.
6.9 LIMITATION ON OPTIONS, WARRANTS, ETC. The Company shall not at any
time issue or reserve for issuance options or warrants to officers, directors or
employees of the Company except pursuant to the Current Plans or any other stock
option or agreement or an employment, severance or consulting agreement in
effect as of the date hereof.
ARTICLE VII
Miscellaneous
7.1 COLLECTION FEES. If this Note is placed in the hands of an attorney
for collection, and if it is collected through any legal proceedings at law or
in equity or in bankruptcy, receivership or other court proceedings, the Company
hereby undertakes to pay all costs and expenses of collection including, but not
limited to, court costs and the reasonable attorney's fees of Holder.
16
7.2 CONSENT TO AMENDMENTS. This Note may be amended, and the Company may
take any action herein prohibited, or omit to perform any act herein required to
be performed by it, if and only if the Company shall obtain the written consent
to such amendment, action or omission to act from the holders of a majority of
the aggregate principal amount of this Note.
7.3 BENEFITS OF NOTE; NO IMPAIRMENT OF RIGHTS OF HOLDER OF SENIOR
INDEBTEDNESS. Nothing in this Note, express or implied, shall give to any
Person, other than the Company, Holder, and their successors any benefit or any
legal or equitable right, remedy or claim under or in respect of this Note.
7.4 SUCCESSORS AND ASSIGNS. All covenants and agreements in this Note
contained by or on behalf of the Company and the Holder shall bind and inure to
the benefit of the respective successors and assigns of the Company and the
Holder.
7.5 RESTRICTIONS ON TRANSFER. Subject to the provisions of this Section,
this Note is transferable in the same manner and with the same effect as in the
case of a negotiable instrument payable to a specified person.
7.6 WAIVER. No failure to exercise and no delay on the part of Holder in
exercising any power or right in connection herewith shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No course of dealing between the Company and Holder shall
operate as a waiver of any right of Holder under this Note. No modification or
waiver of any provision of this Note or any other instrument evidencing,
securing, or guaranteeing this Note nor any consent to any departure therefrom
shall in any event be effective unless the same shall be in writing and signed
by the person against whom enforcement thereof is to be sought, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given.
7.7 NOTICE; ADDRESS OF PARTIES. Except as otherwise provided, all
communications to the Company or Holder provided for herein or with reference to
this Note shall be deemed to have been sufficiently given or served for all
purposes on the third business day after being sent as certified or registered
mail, postage and charges prepaid, to the following addresses: if to the
Company: 2427 FM 1092, Missouri City, Texas 77459 or at any other address
designated by the Company in writing to Holder; if to Holder: Maxxim Medical,
Inc., 104 Industrial Blvd., Sugar Land, Texas 77478, Attn: President, or at any
other address designated by Holder to the Company in writing.
7.8 SEPARABILITY CLAUSE. In case any provision in this Note shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions in such jurisdiction shall not in
any way be affected or impaired thereby; provided, however, such construction
does not destroy the essence of the bargain provided for hereunder.
17
7.9 GOVERNING LAW. This Note shall be governed by, and construed in
accordance with, the internal laws of the State of Texas (without regard to
principles of choice of law).
7.10 USURY. It is the intention of the parties hereto to conform strictly
to the applicable laws of the State of Texas and the United States of America,
and judicial or administrative interpretations or determinations thereof
regarding the contracting for, charging and receiving of interest for the use,
forbearance, and detention of money (referred to as "Applicable Law"). The
Holder shall have no right to claim, to charge or to receive any interest in
excess of the maximum rate of interest, if any, permitted to be charged on that
portion of the amount representing principal which is outstanding and unpaid
from time to time by Applicable Law. Determination of the rate of interest for
the purpose of determining whether this Note is usurious under Applicable Law
shall be made by amortizing, prorating, allocating and spreading in equal parts
during the period of the actual time of this Note, all interest or other sums
deemed to be interest (referred to in this Section as "Interest") at any time
contracted for, charged or received from the Company in connection with this
Note. Any Interest contracted for, charged or received in excess of the maximum
rate allowed by Applicable Law shall be deemed a result of a mathematical error
and a mistake. If this Note is paid in part prior to the end of the full stated
term of this Note and the Interest received for the actual period of existence
of this Note exceeds the maximum rate allowed by Applicable Law, Holder shall
credit the amount of the excess against any amount owing under this Note or, if
this Note has been paid in full, or in the event that it has been accelerated
prior to maturity, Holder shall refund to the Company the amount of such excess,
and shall not be subject to any of the penalties provided by Applicable Law for
contracting for, charging or receiving Interest in excess of the maximum rate
allowed by Applicable Law. Any such excess which is unpaid shall be canceled.
THIS NOTE, THE SECURITY INSTRUMENTS, AND ALL DOCUMENTS AND INSTRUMENTS
EXECUTED IN CONNECTION HEREWITH OR THEREWITH, REPRESENT THE FINAL AGREEMENT
BETWEEN THE COMPANY AND HOLDER AND MAY NOT BE CONTRADICTED BY EVIDENCING OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE COMPANY AND
HOLDER.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed on the date first above written.
LASERMEDICS, INC.
MICHAEL M. BARBOUR
Michael M. Barbour, President
18
EXHIBIT 1.3
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of April 30, 1996
By and Between
MAXXIM MEDICAL, INC.
and
LASERMEDICS, INC.
===============================================================================
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is
entered into and made as of April 30, 1996, by and among LASERMEDICS,
INC., a Texas corporation having its headquarters at 2427 FM 1092,
Missouri City, Texas 77459 (the "Company"), and MAXXIM MEDICAL, INC., a
Delaware corporation ("Maxxim").
The Company has agreed to grant certain demand and piggyback
registration rights to Maxxim relating to the shares of Common Stock
(defined below) issuable on conversion of the Note (defined below) by
Maxxim.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
SECTION 1. DEFINITIONS. As used in this Agreement, the following terms
have the respective meanings set forth below or set forth in the Section
or paragraph following such term:
ADVICE - Section 3.1.
AFFILIATE - a Person who, with respect to that Person, directly,
or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, or is acting as agent on
behalf of, or as an officer or director of, that Person. As used in the
definition of Affiliate, the term "control" (including the terms
"controlling," "controlled by," or "under common control with") means
the possession, direct or indirect, of the power to direct, cause the
direction of, or influence the management and policies of a Person,
whether through the ownership of voting securities, by contract, through
the holding of a position as a partner, director or officer of such
Person, as a trustee, or otherwise.
AGENT - Section 5.1.
AGREEMENT - introductory paragraph.
BUSINESS DAY - day other than a Saturday, Sunday or legal holiday
for commercial banks in the State of Texas.
CHANGE IN CONTROL - the existence of any of the following events
occurrences or conditions: (i) any merger or consolidation of Maxxim
with or into any Person, or (ii) any sale of all or substantially all of
the assets or business of Maxxim.
COMMISSION - the United States Securities and Exchange Commission.
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COMMON STOCK - the Company's Common Stock, $.01 par value per
share, or any successor class of the Company's Common Stock.
COMPANY - introductory paragraph.
DEMAND REGISTRATION - Section 2.1.
EXCHANGE ACT - the Securities Exchange Act of 1934, as amended.
HOLDER - Maxxim or any other person that has properly assumed or
been properly assigned Maxxim's rights and obligations hereunder in
accordance with Section 6.12.
INSPECTORS - Section 3.1.
LIABILITIES - Section 5.1.
MAXXIM - introductory paragraph.
NEXT PUBLIC OFFERING - the first underwritten public offering and
sale of Common Stock by the Company occurring after the date hereof.
NOTE - that certain promissory note of even date herewith in the
original principal amount of $7,00,000 made by the Company payable to
the order of Maxxim delivered by the Company to Maxxim at the Closing or
any note issued in replacement thereof.
1933 ACT - the Securities Act of 1933, as amended.
PERSON - any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or a political subdivision, agency or instrumentality thereof
or other entity or organization of any kind.
PIGGYBACK REGISTRATION - Section 2.2.
RECORDS - Section 3.1.
REGISTRABLE SECURITIES - any (i) shares of Common Stock or other
securities issued upon conversion of the Note or otherwise issued or
issuable with request to the Note and (ii) any securities issued in
exchange for, as a dividend on, or in replacement or upon conversion of,
or otherwise issued in respect of (including securities issued in a
stock dividend, split or recombination or pursuant to the exercise of
preemptive rights), any shares of Common Stock or other securities
described in clause (i), until such time as such securities (or the
right to acquire
-2-
such securities pursuant to the Note) have been transferred to a Person
that does not qualify as a Holder pursuant to Section 6.12.
REGISTRATION EXPENSES - Section 2.4.
SECTION 2. REGISTRATION RIGHTS.
2.1 DEMAND REGISTRATION. Subject to section 2.5, if the Holder
shall, at any time or from time to time after the earlier of (x) nine
(9) months after a Public Offering, or (y) one (1) year after the date
of the execution of this Agreement, and prior to the fifth anniversary
of the execution of this Agreement, request the Company in writing to
register under the 1933 Act, all or any part of the Registrable
Securities, the Company shall, as expeditiously as reasonably possible
(but in any event not later than 60 days after receipt of a request to
file a demand registration), prepare and file, and use its best efforts
to cause to become effective as soon as practicable, a registration
statement under the 1933 Act to effect the offering of the Registrable
Securities specified in such request in an underwritten public offering
(a "Demand Registration"). Notwithstanding the foregoing, the Company
shall be entitled to defer for a reasonable period of time, but not in
excess of 75 days, the filing of any registration statement otherwise
required to be prepared and filed by it under this Section 2.1 if (i)
(A) the Company is at such time conducting or about to conduct an
underwritten public offering of its securities for its own account and
the Board of Directors of the Company determines in good faith that such
offering by the Company would be materially adversely affected by such
registration requested by the Holder, (B) the Company is pursuing an
acquisition, merger, reorganization, disposition or other similar
transaction and the Board of Directors of the Company determines in good
faith that the Company's ability to pursue or consummate such a
transaction would be materially adversely affected by such registration
requested by the Holder, or (C) the Company is in possession of material
nonpublic information concerning it or its business and affairs and the
Board of Directors of the Company determines in good faith that the
prompt public disclosure of such information in a registration statement
would have a material adverse effect on the Company; and (ii) the
Company so notifies the Holder within five days after the Holder so
requests. The Company's right to defer the filing of a registration
statement pursuant to the provisions of the preceding sentence may not
be exercised more than once during any 12 month period. The Holder will
select and obtain the investment banker or investment bankers and
manager or managers that will administer the underwritten offerings made
pursuant to this Section 2.1 who shall be reasonably acceptable to the
Company. In connection with any such underwritten offering, the Company
shall enter into underwriting agreement(s) with the underwriter(s) of
such offering, which agreement shall contain such representations and
warranties by the Company, and such other terms, conditions, indemnities
and contributions as are at the time customarily contained in
underwriting agreements for similar offerings by such underwriters. To
the extent that such underwriters require the Holder to make
representations and warranties regarding the Company the accuracy of
which is not and would not reasonably be expected to be within the
knowledge of the Holder, the Holder may, at its option, require that in
making such
-3-
representations and warranties, the Holder be permitted to rely on the
representations and warranties of the Company made to and for the
benefit of such underwriters, with the Company having similar rights
with respect to the Holder.
2.2 PIGGYBACK REGISTRATION.
(a) If at any time or from time to time prior to the fifth
anniversary of the execution of this Agreement the Company proposes to
file a registration statement under the 1933 Act with respect to an
offering by the Company for its own account or for the account of any
other Person of any class of equity security, including any security
convertible into or exchangeable for any equity security (other than the
Next Public Offering unless any officers or directors of the Company
sell Common Stock in connection therewith), then the Company shall in
each case give written notice of such proposed filing to the Holder at
least thirty days before the anticipated filing date, and such notice
shall offer the Holder the opportunity to register such number of
Registrable Securities as the Holder may request (a "PIGGYBACK
REGISTRATION"). The Company shall use reasonable diligence to cause the
managing underwriter or underwriters of a proposed underwritten offering
to permit the Holder to include the Registrable Securities requested by
the Holder to be included in the registration statement and in such
offering on the same terms and conditions as any similar securities of
the Company included therein, to the extent permitted by applicable law.
Notwithstanding the foregoing, if the managing underwriter or
underwriters of such offering indicates in writing to the Holder that
the total amount of Registrable Securities which the Holder requests to
include in such offering, together with any other securities with
similar piggyback registration rights (collectively, the "Requested
Securities") is sufficiently large to materially and adversely affect
the success of such offering, then the amount or kind of Requested
Securities to be offered for the accounts of all Persons whose shares of
Requested Securities were requested to be included in such offering
shall be reduced pro rata with respect to each such Person to the extent
necessary to reduce the total amount of securities to be included in
such offering to the amount recommended by such managing underwriter,
such a reduction not to include shares of (i) if the registration
initially occurs at the insistence of the Company, the Company, or (ii)
if such registration occurs due to a demand registration right,
including the Demand Registration provided for in Section 2.1, shares of
the Person making that demand.
(b) Notwithstanding anything to the contrary contained in Section
2.2(a), the Company shall not be required to include Registrable
Securities in any registration statement pursuant to this Section 2.2 if
the proposed registration is (i) a registration of a stock option or
other employee incentive compensation plan or of securities issued or
issuable pursuant to any such plan, (ii) a registration of securities
issued or issuable pursuant to a stockholder reinvestment plan or other
similar plan, (iii) a registration of securities issued in exchange for
any securities or any assets of, or in connection with a merger or
consolidation with, an unaffiliated company, or (iv) a registration of
securities pursuant to a "RIGHTS" or other similar plan designed to
protect the Company's stockholders from a coercive or other attempt to
take control of the Company.
-4-
(c) The Company may withdraw any registration statement and
abandon any proposed offering initiated by the Company without the
consent of the Holder notwithstanding the request of the Holder to
participate therein in accordance with this provision, if the Company
determines that such action is in the best interests of the Company and
its stockholders (for this purpose, the interests of the Holder shall
not be considered).
2.3 HOLDBACK AGREEMENTS; REQUIREMENTS OF THE HOLDER.
(a) RESTRICTIONS ON PUBLIC SALE BY THE HOLDER. To the extent not
inconsistent with applicable law, the Holder agrees that, it will not
effect any public sale or distribution of the issue being registered or
a similar security of the Company or any securities convertible into or
exchangeable or exercisable for such securities during the 14 days prior
to, and during the 90-day period beginning on, the effective date of
such registration statement (except as part of such registration), but
only if and to the extent requested in writing (with reasonable prior
notice) by the managing underwriter or underwriters in the case of an
underwritten public offering by the Company of securities similar to the
Registrable Securities.
(b) RESTRICTIONS ON PUBLIC SALE BY THE COMPANY. The Company agrees
not to effect any public sale or distribution of any securities being
registered, or any securities similar to those being registered, or any
securities convertible into or exchangeable or exercisable for such
securities, during the 14 days prior to, and during period beginning on
the effective date of any registration statement in which the Holder is
participating and ending on the earlier of (i) the date on which the
distribution covered by such registration statement is completed and
(ii) 90 days after the effective date of such registration statement
(except (i) pursuant to such registration statement, or (ii) pursuant to
sales to employee stock purchase or option plans which are exempt from
the registration requirements of the 1933 Act or are registered on Form
S-8 (or its successor form), or (iii) pursuant to any other stock option
or similar agreements in effect or outstanding on the effective date of
such registration statement which require the Company to issue
securities in accordance with the terms of such options or agreements,
which issuances set forth in clauses (ii) and (iii) preceding are exempt
from the registration requirements of the 1933 Act), or (iv) pursuant to
(x) the acquisition by the Company of substantially all of the assets of
another Person or division of another Person or (y) the merger of
another Person into the Company where the Company is the surviving
corporation), but only if and to the extent requested in writing (with
reasonable prior notice) by the managing underwriter or underwriters in
the case of an underwritten public offering by the Holder of the
Registrable Securities registered pursuant to Section 2.1.
(c) COOPERATION BY HOLDER. The offering of Registrable Securities
by the Holder shall comply in all respects with the applicable terms,
provisions and requirements set forth in this Agreement, and the Holder
shall timely provide the Company with all information and materials
required to be included in a registration statement that (a) relate to
the offering, (b) are in possession of the Holder, and (c) relate to the
Holder, and to take all such action as may be
-5-
reasonably required in order not to delay the registration and offering
of the securities by the Company. The Company shall have no obligation
to include in such registration statement shares of the Holder if the
Holder has failed to furnish such information or materials and if, in
the opinion of counsel to the Company, such information and materials
are required in order for the registration statement to be in compliance
with the 1933 Act.
2.4 REGISTRATION EXPENSES. All expenses incident to the Company's
performance of or compliance with this Agreement, including without
limitation, all Commission and securities exchange or National
Association of Securities Dealers, Inc. registration and filing fees,
all fees and expenses relating to compliance with securities or blue sky
laws (including fees and disbursements of counsel in connection with
blue sky qualifications of the Registrable Securities), all printing
expenses, messenger and delivery expenses, internal expenses (including,
without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), fees and expenses
incurred in connection with the listing of the securities to be
registered on securities exchanges, fees and disbursements of counsel
for the Company and its independent certified public accountants
(including the expenses required for "COLD COMFORT" letters required by
or incident to such performance), and fees and expenses of any special
experts retained by the Company in connection with such registration
(but not including any underwriting fees, discounts or commissions
directly attributable to the sale of Registrable Securities) (all such
expenses being herein called "REGISTRATION EXPENSES"), will be borne by
the Company; provided, however that, the Company shall not be obligated
to pay (i) the fees and disbursements of any counsel for the Holder or
liability insurance (if the Company elects to obtain such insurance) for
the Holder, or (ii) any out-of-pocket expenses of the Holder, which
fees, disbursements and expenses described in clauses (i) and (ii)
preceding shall be borne by the Holder.
2.5 NUMBER OF DEMAND REGISTRATIONS. The Company shall be obligated
to effect up to two Demand Registrations pursuant to Section 2.1,
provided that the Company shall not be obligated to effect more than one
such registration during any period of 12 consecutive months.
Notwithstanding the foregoing, the Company shall be deemed to have
effected a Demand Registration pursuant to Section 2.1 in connection
with any registration with respect to which the Holder has withdrawn or
canceled its demand registration request prior to the sale of the
Registrable Securities pursuant to such registration unless the Holder
terminates or withdraws due to a material adverse change in the
condition, business or prospects of the Company which was not known by
the Holder at the time of its request.
SECTION 3. COVENANTS OF THE COMPANY.
3.1 REGISTRATION PROCEDURES. Whenever any Registrable Securities
are to be registered pursuant to Section 2, the Company will use
reasonable diligence to effect the registration of such Registrable
Securities in accordance with the intended method of disposition thereof
as quickly as practicable and in accordance with the provisions of
Section 2. In connection with any offering of Registrable Securities
pursuant to the Agreement, the Company shall as expeditiously as
possible:
-6-
(a) prepare and file with the Commission a registration statement
that includes the Registrable Securities requested to be included
therein in accordance with Section 2 and use reasonable diligence to
cause such registration statement to become effective; provided,
however, that at least ten Business Days before filing a registration
statement or prospectus or any amendment or supplement thereto,
including documents incorporated by reference therein, the Company will
furnish to the Holder, and the underwriters, if any, draft copies of all
such documents proposed to be filed, which documents will be subject to
the review of the Holder and such underwriters, and the Company will not
file any registration statement or prospectus or amendment or supplement
thereto (including such documents incorporated by reference) to which
the Holder or the underwriters with respect to such Registrable
Securities, if any, shall reasonably object; and provided further,
however, that if the Company, in the case of a Piggyback Registration,
despite the reasonable objection of the Holder, desires to proceed with
the registration of its shares, the Holder may withdraw the Registrable
Securities from being included in such offering, using its good-faith
efforts to minimize delay caused by such withdrawal, and the Company may
then, notwithstanding anything to the contrary in the immediately
preceding proviso, proceed with such offering; the Company and the
Holder acknowledge that such withdrawal by the Holder will delay such
offering for as much time as is necessary to amend such registration
statement or prospectus to reflect the withdrawal of such Registrable
Securities from such offering;
(b) prepare and file with the Commission such amendments and
post-effective amendments to the registration statement as may be
necessary to keep the registration statement effective for a period of
six months (or such shorter period which will terminate when all
Registrable Securities covered by such registration statement have been
sold or withdrawn, but not prior to the expiration of the 90-day period
referred to in Section 4(3) of the 1933 Act and Rule 174 thereunder, if
applicable); cause the prospectus to be supplemented by any required
prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the 1933 Act; and comply with the provisions of the 1933
Act applicable to it with respect to the disposition of all securities
covered by such registration statement during the applicable period in
accordance with the intended methods of disposition by the sellers
thereof set forth in such registration statement or supplement to the
prospectus; the Company shall not be deemed to have complied with its
obligations hereunder to keep a registration statement effective during
the applicable period if it voluntarily takes any action that would
result in the prevention of the Holder from selling such Registrable
Securities during that period unless such action is required under
applicable law;
(c) furnish to the Holder and the underwriter or underwriters, if
any, without charge, such reasonable number of conformed copies of the
registration statement and any post-effective amendment thereto and such
reasonable number of copies of the prospectus (including each
preliminary prospectus) and any amendments or supplements thereto, and
any documents incorporated by reference therein, as the Holder or
underwriter may request in order to facilitate the disposition of the
Registrable Securities being sold by the Holder (it being understood
that the Company consents to the use of the prospectus and any amendment
or supplement thereto by the
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Holder and the underwriter or underwriters, if any, in connection with
the offering and sale of the Registrable Securities covered by the
prospectus or any amendment or supplement thereto);
(d) notify the Holder at any time when a prospectus relating
thereto is required to be delivered under the 1933 Act, when the Company
becomes aware of the happening of any event as a result of which the
prospectus included in such registration statement (as then in effect)
contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading and, as
promptly as practicable thereafter, prepare and file with the Commission
and furnish a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities,
such prospectus will not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
(e) use reasonable diligence to cause all Registrable Securities
included in such registration statement to be listed, by the date of the
first sale of Registrable Securities pursuant to such registration
statement, on each securities exchange (including, for this purpose,
NASDAQ) on which the Common Stock of the Company is then listed or
proposed to be listed, if any;
(f) make generally available to its security holders an earnings
statement satisfying the provisions of Section 11(a) of the 1933 Act no
later than 45 days after the end of the 12-month period beginning with
the first day of the Company's first fiscal quarter commencing after the
effective date of the registration statement, which earnings statement
shall cover said 12-month period, which requirement will be deemed to be
satisfied if the Company timely files complete and accurate information
on such forms and reports as the Company may be required to file under
the Exchange Act and otherwise complies with Rule 158 under the 1933 Act
as soon as feasible;
(g) notify the Holder of any stop order issued or threatened by
the Commission in connection therewith and take all reasonable actions
required to prevent the entry of such stop order or to remove it if
entered, and make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the registration statement at
the earliest possible moment;
(h) if requested by the managing underwriter or underwriters,
promptly incorporate in a prospectus supplement or post-effective
amendment such information as the managing underwriter or underwriters
or the Holder reasonably requests to be included therein, including,
without limitation, the purchase price being paid therefor by such
underwriter or underwriters and any other terms of the underwritten
offering of such Registrable Securities (excluding, however, information
with respect to the number of Registrable Securities being sold to such
underwriter or underwriters by the Holder), and promptly make all
required filings of such prospectus supplement or post-effective
amendment;
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(i) as promptly as practicable after filing with the Commission of
any document which is incorporated by reference into a registration
statement, deliver to the Holder as many copies of that document as may
be reasonably requested by the Holder;
(j) on or prior to the date on which the registration statement is
declared effective, use reasonable diligence to register or qualify, and
cooperate with the Holder the underwriter or underwriters, if any, and
their counsel, in connection with the registration or qualification of
the Registrable Securities covered by the registration statement for
offer and sale under the securities or blue sky laws of each state and
other jurisdiction of the United States as the Holder or underwriter
reasonably requests in writing, to use reasonable diligence to keep each
such registration or qualification effective, including through new
filings, or amendments or renewals, during the period such registration
statement is required to be kept effective and to do any and all other
acts or things necessary or advisable to enable the disposition in all
such jurisdictions of the Registrable Securities covered by the
applicable registration statement; provided that the Company will not be
required to qualify generally to do business in any jurisdiction where
it is not then so qualified or to take any action which would subject it
to general service of process in any such jurisdiction where it is not
then so subject; and provided, further, however, that while it is the
present intention of the Holder to cooperate with the Company to keep
the costs of compliance with state blue sky laws to a minimum, the
Holder shall have the right to require compliance by the Company with
the blue sky laws of as many states as the managing underwriter deems
reasonably necessary in its good faith judgment to realize the maximum
possible value for the Registrable Securities included in such
registration statement;
(k) cooperate with the Holder and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery
of certificates representing securities to be sold under the
registration statement and enable such securities to be in such
denominations and registered in such names as the managing underwriter
or underwriters, if any, may request, subject to the underwriters'
obligation to return any certificates representing securities not sold;
(l) use reasonable diligence to cause the Registrable Securities
covered by the registration statement to be registered with or approved
by such other governmental agencies or authorities within the United
States as may be necessary to enable the seller or sellers thereof or
the underwriter or underwriters, if any, to consummate the disposition
of such securities;
(m) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other
reasonable actions as the Holder or the underwriters retained by the
Holder participating in an underwritten public offering, if any,
reasonably request in order to expedite or facilitate the disposition of
such Registrable Securities;
(n) make available for inspection by the Holder, any underwriter
participating in any disposition pursuant to such registration
statement, and any attorney, accountant or other agent retained by any
such seller or underwriter (collectively, the "INSPECTORS"), all
financial and other records, pertinent corporate documents and
properties of the Company (collectively, the
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"RECORDS"), as shall be necessary to enable them to exercise their due
diligence responsibility; and cause the Company's officers, directors
and employees to make available for inspection and/or copying all
Records reasonably requested by any such Inspector in connection with
such registration statement; and
(o) use reasonable diligence to obtain a "COLD COMFORT" letter
from the Company's independent public accountants in customary form and
covering such matters of the type customarily covered by cold comfort
letters covering registration statements similar to the registration
statement at issue as the Holder reasonably requests.
The Holder, upon receipt of any notice from the Company of the
occurrence of any event of the kind described in subsection (d) of this
Section 3.1, will forthwith discontinue disposition of the Registrable
Securities until the Holder's receipt of the copies of the supplemented
or amended prospectus contemplated by subsection (d) of this Section 3.1
and copies of any additional or supplemental filings which are
incorporated by reference in the prospectus, or until it is advised in
writing (the "ADVICE") by the Company that the use of the prospectus may
be resumed. If so directed by the Company, the Holder shall deliver to
the Company (at the Company's expense) all copies in its possession or
control, other than permanent file copies then in the Holder's
possession, of the prospectus covering such Registrable Securities. In
the event the Company shall give any such notice, the time periods
mentioned in subsection (b) of this Section 3.1 shall be extended by the
number of days during the period from and including the date of the
giving of such notice to and including the date when each seller of
Registrable Securities covered by such registration statement shall have
received the copies of the supplemented or amended prospectus
contemplated by subsection (d) of this Section 3.1 hereof or the Advice.
If such registration statement refers to the Holder by name or
otherwise as the holder of any securities of the Company then the Holder
shall have the right to require (i) the insertion therein of language,
in form and substance satisfactory to the Holder to the effect that the
holding by such Holder of such securities is not to be construed as a
recommendation of such Holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that the
Holder will assist in meeting any future financial requirements of the
Company, or (ii) in the event that such reference to such Holder by name
or otherwise is not required by the Securities Act or any similar
federal statute then in force, the deletion of the reference to such
Holder.
3.2 RULE 144; INFORMATION. The Company covenants that, upon any
registration statement covering Company securities becoming effective,
it will file the reports required to be filed by it under the 1933 Act
and the Exchange Act and the rules and regulations adopted by the
Commission thereunder (or, if the Company is not required to file such
reports, it will, upon the request of the Holder make publicly available
other nonconfidential information as is necessary to permit sales under
Rule 144 under the 1933 Act), and it will take such other action as the
Holder may reasonably request, all to the extent required from time to
time to enable the Holder to sell Registrable Securities without
registration under the 1933 Act within the limitation of the
-10-
exemptions provided by (a) Rule 144 under the 1933 Act, as such Rule may
be amended from time to time, or (b) any similar rule or regulation
hereafter adopted by the Commission; provided further that if the
Company is not required to file reports under the 1933 Act and the
Exchange Act and the rules and regulations adopted by the Commission
thereunder, the Company shall, upon the request of the Holder, provide
the Holder audited financial statements and access to the books and
records of the Company and, if requested by the Holder sufficient
information to enable the Holder to comply with Rule 144 or Rule 144A
under the 1933 Act. Upon the request of the Holder, the Company will
deliver to the Holder a written statement as to whether it has complied
with such requirements.
3.3 FUTURE RIGHTS. From the date of this Agreement until the fifth
anniversary of the execution hereof, the Company will not grant to any
Person (excluding the Holder) any registration rights with respect to
any securities of the Company other than registration rights ("NEW
RIGHTS") that are granted in connection with the investment in the
Company by such grantee (or group of grantees) of at least $1,000,000.
Such new rights must (i) be of no greater priority than the registration
rights granted by the Company under this Agreement, and (ii) be approved
in writing by the Holder. Additionally, new rights may not be granted
without expressly providing that, with respect to demand registration
rights granted to such other Persons, the Holder has a piggyback right
upon the exercise of such new rights and shall be included in any
related registration statement on the same terms and conditions as the
holders of the new rights, subject to possible reduction at the
initiative of the managing underwriter or underwriters, on terms
substantially equivalent to those set forth in Section 2.2.
3.4 REPRESENTATION AND WARRANTY. The Company hereby represents and
warrants to Maxxim that on or prior to the date hereof, (a) the Company
has not granted registration rights to any Person except for the
registration rights granted under this Agreement and except as set forth
on Schedule 4.6 to that certain Agreement of Purchase and Sale of Assets
of even date herewith by and between the Company and Maxxim, and (b) no
consent, approval, authorization or waiver of any Person is required to
permit the Company to (i) execute or deliver this Agreement or (ii)
perform this Agreement in accordance with its terms other than with
respect to registration under the 1933 Act and comparable registrations
with state securities commissions.
SECTION 4. COVENANTS OF HOLDER.
4.1 PARTICIPATION IN UNDERWRITING REGISTRATIONS. Holder may not
participate in any underwritten registration hereunder unless the Holder
(a) agrees to sell its securities on the terms of and on the basis
provided in any underwriting arrangements approved by the Company and
(b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
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SECTION 5. INDEMNIFICATION; CONTRIBUTION.
5.1 INDEMNIFICATION; CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless each Holder of Registrable Securities, its
officers, directors, partners and each Person who controls such Holder
(within the meaning of the 1933 Act), and any Agent (as hereinafter
defined) or investment advisor thereto against all losses, claims,
damages, liabilities and expenses, joint or several (including
reasonable costs of investigation, and attorneys fees and expenses as
further provided in Section 5.1(c)) (collectively, "LIABILITIES")
arising out of or based upon any untrue or alleged untrue statement of
material fact contained in any registration statement, and amendment or
supplement thereto, or any prospectus or preliminary prospectus
contained therein, or any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as any such
Liabilities arise out of or are based upon any untrue statement or
omission based upon and in conformity with information regarding such
indemnified Person furnished in writing to the Company by such
indemnified Person expressly for use therein. In connection with an
underwritten offering, the Company will indemnify the underwriters
thereof, their officers and directors and each Person who controls such
underwriters (within the meaning of the 1933 Act) to the same extent as
provided above with respect to the indemnification of the Holders of
Registrable Securities or to such other extent as the Company and such
underwriters may agree. For purposes of this Section 5.1(a), an "AGENT"
of a Holder of Registrable Securities is any Person acting for or on
behalf of such Holder with respect to the holding or sale of such
Registrable Securities.
5.2 INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES. In
connection with any registration statement in which the Holder is
participating, the Holder will furnish to the Company in writing such
information with respect to the name and address of the Holder and the
amount of Registrable Securities held by the Holder and such other
information as the Company shall reasonably request for use in
connection with any such registration statement or prospectus, and
agrees to indemnify, to the extent permitted by law, the Company, its
directors and officers and each Person who controls the Company (within
the meaning of the 1933 Act) against any losses, claims, damages,
liabilities and expenses, joint or several, resulting from any untrue
statement or alleged untrue statement of a material fact or any omission
or alleged omission of a material fact required to be stated in the
registration statement or prospectus or any amendment thereof or
supplement thereto or necessary to make the statements therein not
misleading, to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission is
based upon and in conformity with any information regarding the Holder
so furnished in writing by the Holder specifically for inclusion in any
prospectus or registration statement. In connection with an underwritten
offering, the Holder participating in such offering will indemnify the
underwriters thereof, their officers and directors and each Person who
controls such underwriters (within the meaning of the 1933 Act) to the
same extent as provided in the immediately preceding sentence with
respect to indemnification of the Company. In no event shall the
liability of the Holder hereunder be greater in amount than the dollar
amount of the proceeds
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received by the Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
5.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person entitled to
indemnification hereunder agrees to give prompt written notice to the
indemnifying party after the receipt by such Person of any written
notice of the commencement of any action, suit, proceeding or
investigation or threat thereof made in writing for which such Person
may claim indemnification or contribution pursuant to this Agreement
and, unless in the written opinion of counsel for such indemnified party
a conflict of interest may exist between such indemnified party and the
indemnifying party with respect to such claim, permit the indemnifying
party to assume, at the sole cost and expense of the indemnifying party,
the defense of such claim with counsel reasonably satisfactory to such
indemnified party. Whether or not such defense is assumed by the
indemnifying party, neither the indemnifying party nor the indemnified
party shall have the authority to bind the other with respect to any
settlement made without the other's consent. No indemnifying party will
consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant
or plaintiff to such indemnified party of a release from all liability
in respect of such claim or litigation. If the indemnifying party is not
entitled to, or elects not to, assume the defense of a claim, the
indemnified party shall be entitled to hire counsel reasonably
satisfactory to it, the fees and expenses of which shall be borne by, in
their entirety, the indemnifying party; provided, however, that the
indemnifying party shall not be obligated to pay the fees and expenses
of more than one counsel with respect to such claim, unless in the
opinion of counsel for any indemnified party a conflict of interest may
exist between such indemnified party and any other of such indemnified
parties with respect to such claim, in which event the indemnifying
party shall be obligated to pay the fees and expenses of such additional
counsel or counsels.
5.4 CONTRIBUTION. If the indemnification provided for in this
Section 5 from the indemnifying party is unavailable to an indemnified
party hereunder in respect of any losses, claims, damages, liabilities
or expenses referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and indemnified
parties in connection with the actions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged
untrue statement of a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified parties,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or
payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in Section 5.3, any legal or other
fees or expenses reasonably incurred by such party in connection with
any investigation or proceeding.
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The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 5.4 were determined by pro rata
allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this Section 5.4,
the Holder shall not be required to contribute any amount in excess of
the amount by which the total price at which the Registrable Securities
of the Holder were offered to the public exceeds the amount of any
damages which the Holder has otherwise been required to pay by reason of
such untrue statement or omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act)
shall be entitled to contribution from any Person who was not guilty of
such fraudulent misrepresentation.
The obligations of the Company pursuant to this Section 5.4 shall
be further subject to such additional express agreements of the Company
as may be required to facilitate an underwritten offering, provided that
no such agreement shall in any way limit the rights of the Holder under
this Agreement, or create additional obligations of the Holder not set
forth herein, except as otherwise expressly agreed in writing by the
Holder.
SECTION 6. MISCELLANEOUS.
6.1 RECAPITALIZATION, EXCHANGES, ETC. The provisions of this
Agreement shall apply, to the full extent set forth herein with respect
to the Registrable Securities, to any and all shares of equity capital
of the Company or any successor or assign of the Company (whether by
merger, consolidation, sale of assets or otherwise) which may be issued
in respect of, in exchange for, or in substitution of the Registrable
Securities, in each case as the amounts of such securities outstanding
are appropriately adjusted for any equity dividends, splits, reverse
splits, combinations, recapitalization and the like occurring after the
date of this Agreement.
6.2 OPINIONS. When any legal opinion is required to be delivered
hereunder, such opinion may contain such qualifications as may be
customary or otherwise appropriate for legal opinions in similar
circumstances.
6.3 NOTICES. (a) All communications under this Agreement shall
be in writing to the following addresses:
(i) If to Company, to:
Lasermedics, Inc.
2427 FM 1092
Missouri City, Texas 77459
Attn: Michael M. Barbour, President
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with a copy to:
Porter & Hedges, L.L.P.
700 Louisiana, 35th Floor
Houston, Texas 77002-2764
Attn: Robert G. Reedy
(ii) If to the Holder, to:
Maxxim Medical, Inc.
104 Industrial
Sugar Land, Texas 77478
Attention: Kenneth W. Davidson
Facsimile No.: (713) 240-9123
with a copy to:
Boyer, Ewing & Harris Incorporated
9 Greenway Plaza, Suite 3100
Houston, Texas 77046
Attn: J. Randolph Ewing
or to such other address as any party may furnish to the others in
writing in accordance herewith, except that notices of changes of
address shall be effective only upon receipt.
(b) Any communication so addressed and mailed by first class
registered or certified mail, postage prepaid, shall be deemed to be
received on the third Business Day after so mailed, and if delivered by
personal delivery (including by courier) or facsimile to such address,
upon delivery during normal business hours.
6.4 APPLICABLE LAW. This contract is entered into under, and
shall be governed for all purposes by, the laws of the State of Texas.
6.5 AMENDMENT AND WAIVER. This Agreement may be amended, and the
provisions hereof may be waived, only by a written instrument signed by
the Holder and the Company. No failure by either party hereto at any
time to give notice of any breach by the other party of, or to require
compliance with, any condition or provision of this Agreement shall be
deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time.
6.6 REMEDY FOR BREACH OF CONTRACT. The parties agree that in the
event there is any breach or asserted breach of the terms, covenants or
conditions of this Agreement, the remedy of the parties hereto shall be
in law and in equity and injunctive relief shall lie for the enforcement
of or relief from any provisions of this Agreement. If any remedy or
relief is sought and obtained
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by any party against one of the other parties pursuant to this Section
6.6, the other party shall, in addition to the remedy of relief so
obtained, be liable to the party seeking such remedy or relief for the
reasonable expenses incurred by such party in successfully obtaining
such remedy or relief, including the fees and expenses of such party's
counsel.
6.7 SEVERABILITY. It is a desire and intent of the parties that
the terms, provisions. covenants and remedies contained in this
Agreement shall be enforceable to the fullest extent permitted by law.
If any such term, provision, covenant or remedy of this Agreement or the
application thereof to any Person or circumstances shall, to any extent,
be construed to be invalid or unenforceable in whole or in part, then
such term, provision, covenant or remedy shall be construed in a manner
so as to permit its enforceability under the applicable law to the
fullest extent permitted by law. In any case, the remaining provisions
of this Agreement or the application thereof to any Person or
circumstances other than those to which they have been held invalid or
unenforceable, shall remain in full force and effect.
6.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all
of which together will constitute one and the same Agreement.
6.9 HEADINGS. The section and paragraph headings have been
inserted for purposes of convenience and shall not be used for
interpretive purposes.
6.10 BINDING EFFECT. Unless otherwise provided herein, the
provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, legal
representatives, successors and permitted assigns, and is not intended
to confer upon any other Person any right or remedies hereunder.
6.11 ENTIRE AGREEMENT. This Agreement, together with the other
agreements referenced herein, constitutes the entire agreement and
supersedes all prior agreements, understandings, both written and oral,
among the parties with respect to the subject matter hereof.
6.12 ASSIGNMENT. This Agreement, and the rights and obligations of
the parties hereunder, are not assignable or transferable to any other
Person without the prior written consent of all parties to this
Agreement; provided however, that this Section 6.12 shall not be
construed to prohibit the assumption of the rights and obligations of
Maxxim hereunder by or the transfer or assignment of such rights and
obligations to any Person that succeeds to substantially all of the
business and assets of Maxxim as a result of a Change in Control.
-16-
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
LASERMEDICS, INC.,
a Texas corporation
By: MICHAEL M. BARBOUR
Michael M. Barbour, President
MAXXIM MEDICAL, INC.,
a Delaware corporation
By: KENNETH W. DAVIDSON
Kenneth W. Davidson, Chairman of
the Board, President, and Chief
Executive Officer
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EXHIBIT 1.4
VOTING AND SHAREHOLDERS AGREEMENT
This Voting and Shareholders Agreement ("Agreement") is entered into
as of this 30th day of April, 1996, by and between MICHAEL M. BARBOUR
("Barbour"), CHADWICK F. SMITH, M.D. ("Smith") and MAXXIM MEDICAL, INC., a
Delaware corporation ("Maxxim"). Barbour and Smith may be herein referred to
collectively as the "Shareholders" or singularly as the "Shareholder." The
Shareholders and Maxxim may be referred to herein collectively as the "Parties"
and singularly as the "Party." All capitalized terms not otherwise defined
herein shall have the same meaning as in that certain Agreement of Purchase and
Sale of Assets entered into on even date herewith by Lasermedics, Inc., a Texas
corporation ("Buyer"), and Maxxim except as otherwise specifically indicated
("Purchase Agreement").
WITNESSETH:
WHEREAS, on even date herewith, Maxxim has entered into that certain
Agreement and Purchase of Sale of Assets ("Purchase Agreement") whereby Maxxim
is selling the assets and certain liabilities of the Henley Division to
Lasermedics, Inc., a Texas corporation;
WHEREAS, pursuant to the Purchase Agreement, Maxxim is receiving
from Buyer a Convertible Subordinated Promissory Note in the principal amount of
$7,000,000 (the "Note") or any note issued in replacement thereof;
WHEREAS, the Board of Directors of Buyer (the "Board") currently
consists of four (4) directors;
WHEREAS, the Parties desire to provide for Maxxim to have
representation on the Board and to provide for certain requirements of voting
for such director position; and
WHEREAS, the Note is convertible into shares of the Buyer's Common
Stock, par value $.01 per share (the "Common Stock"), and each of the
Shareholders own Common Stock.
NOW, THEREFORE, for and in consideration of the mutual covenants
contained herein, the Parties hereto do hereby agree as follows:
1. NOMINEE.
(a) Effective upon the occurrence of the Closing, the Buyer and the
Shareholders will, as applicable, nominate and use their best efforts to
effect the election of one nominee appointed by Maxxim to serve on the
Board(the "Nominee(s)"), which Nominee(s) shall initially be Kenneth W.
Davidson.
(b) Throughout the term of this Agreement, the Buyer will nominate
and use its best efforts to effect the election of the Nominee(s) and to
create a sufficient number of vacancies on the Board to comply with the
terms of this Agreement.
(c) Throughout the term of this Agreement, each Shareholder will
vote all of his shares of Common Stock and take all other necessary or
desirable actions (in his capacity as a shareholder and a director of the
Company) as are reasonably requested by Maxxim to cause the Nominee(s) to
be elected to the Board, whether such election occurs at an annual or
special meeting of the shareholders or by the appointment by the remaining
directors, and whether or not such election shall occur because of the
existence of a vacancy on the Board arising for any reason whatsoever.
Maxxim agrees to vote all shares of Common Stock held by it to elect the
Nominee(s) to the Board for the term of this Agreement, subject to the
terms and conditions of this Agreement.
(d) Throughout the term of this Agreement, each Shareholder will
vote all of his shares of Common Stock and take all other necessary or
desirable actions (in his capacity as a shareholder of the Buyer), as are
reasonably requested by Maxxim to prevent the removal, without cause, of
the Nominee(s) as a director of the Buyer, without the prior written
consent of Maxxim. In the event the Nominee(s) is removed for cause, then
Maxxim shall have the right to designate a new Nominee, and the
obligations of the parties hereto contained in Sections 1(b) and 1(c)
hereof and in this Section 1(d) apply to the election of such Nominee.
(e) Shareholders and Maxxim will retain at all times the right to
vote their shares of Common Stock in their sole discretion on all matters
presented to the Buyer's shareholders for a vote other than those matters
set forth in Sections 1(a) through (d) above, except as otherwise limited
or controlled by the Buyer's Articles of Incorporation, as amended from
time to time.
(f) Notwithstanding the foregoing, if at any time the number of
positions authorized on the Board is increased to a number between seven
(7) and twelve (12), then the term "Nominee(s)" shall be defined for all
purposes herein as any two persons appointed by Maxxim to serve on the
Board. If at any time the number of positions authorized to serve on the
Board is increased to a number between thirteen (13) and eighteen (18),
then the term "Nominee(s)" shall be defined for all purposes herein as any
three persons appointed by Maxxim to serve on the Board.
(g) Notwithstanding the foregoing, the Parties hereby severally
agree that (i) they will not exercise their rights to cumulate their votes
with respect to electing members of the Board and (ii) they will vote all
of their shares of Common Stock in favor of an amendment to the Buyer's
Articles of Incorporation eliminating the right of the Buyer's
shareholders to cumulate their votes for the election of directors. Maxxim
further agrees to cause the Nominee to vote in favor of such amendment in
his capacity as a director.
2. RIGHT OF FIRST REFUSAL. If any Party desires to sell any shares of
Common Stock owned or held by such Party, then such Party (for purposes of this
Section 2, the "Selling Party"),
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prior to making such sale, shall first offer such shares of Common Stock (for
purposes of this Section 2, the "Offered Shares") for sale to the Buyer, and if
such offer is not accepted by the Buyer, then to the other Parties (for purposes
of this Section 2, the "Non-Selling Parties"), all in accordance with the
following provisions and on the terms and conditions set forth in this Section
2. Each Party agrees that he or it will not sell any shares of Common Stock to
any third party for consideration other than cash or a cash equivalents or a
publicly listed and traded stock on a recognized national securities exchange,
promissory notes or other debt securities.
(a) OFFERED SHARE PRICE; TERMS; OFFERING NOTICES. The price per
share (and the method of payment thereof) at which the Selling Party shall
be required to offer the Offered Shares shall be the price (the "Offered
Share Price") at which any proposed bona fide third-party purchaser shall
have offered (or agreed, subject to the Selling Party's compliance with
this Section 2,) in writing to purchase the Offered Shares from the
Selling Party (and the method of payment thereof), and which the Selling
Party is prepared to accept. Each offer required to be made by the Selling
Party pursuant to this Section 2 shall be made by a written notice (for
purposes of this Section 2, the "Offering Notice") which shall state that
the offer is being made pursuant to Section 2 of this Agreement and which
shall set forth (i) the number of Offered Shares, (ii) the name or names
of the proposed bona-fide third party purchaser(s) of the Offered Shares,
(iii) the Offered Share Price, (iv) the method, manner and schedule of
payment of the Offered Share Price, and (v) the scheduled date of
consummation of such proposed sale. A copy of the written offer (or
agreement) to purchase from any proposed bona-fide third-party purchaser
shall be attached to each Offering Notice.
(b) OFFER TO THE BUYER. The Selling Party shall offer (the "Primary
Offer") all of the Offered Shares to the Buyer by delivering an Offering
Notice to the Buyer. Within twenty (20) days from the date of receipt of
the Offering Notice, the Buyer shall deliver to the Selling Party a reply
notice accepting or rejecting the Primary Offer. If by such reply notice
the Buyer accepts the Primary Offer, such reply notice shall constitute an
agreement binding on both the Selling Party and the Buyer to sell and
purchase all of the Offered Shares at the Offered Share Price and
otherwise in accordance with the terms of the Offering Notice. If within
such 20-day period, Buyer shall have failed to deliver its reply notice
accepting the Primary Offer, the Buyer shall be deemed to have rejected
the Primary Offer.
(c) OFFER TO NON-SELLING PARTIES. Simultaneously with the delivery
of the Primary Offer, the Selling Party shall also offer (the "Secondary
Offer") all of the Offered Shares to the Non-Selling Parties by delivering
the Offering Notice to each of Non-Selling Parties. Within twenty (20)
days from the date of receipt of the Offering Notice, each Non-Selling
Party shall deliver to the Selling Party a reply notice either (i)
rejecting the Secondary Offer, or (ii) accepting the Secondary Offer and
specifying the number of Offered Shares (the "Requested Number") which
such Non-Selling Party wishes to
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purchase (not to exceed the total number of Offered Shares). If within
such 20-day period, a Non-Selling Party shall have failed to deliver its
reply notice accepting the Secondary Offer, such Non-Selling Party shall
be deemed to have rejected the Secondary Offer. In the event that the
Requested Number of both Non-Selling Parties is, in the aggregate, less
than the total number of Offered Shares, the Selling Party shall not be
required to sell any of the Offered Shares to either Non-Selling Party,
and the Non-Selling Parties will be deemed to have collectively rejected
the Secondary Offer. In the event that the Requested Number of both
Non-Selling Parties, in the aggregate, equals or exceeds the total number
of Offered Shares, each reply notice(s) shall, subject to the reduction or
cancellation in accordance with Section 2(d) hereof, constitute an
agreement binding on both the Selling Party and the applicable Non-Selling
Party to sell and purchase such Non-Selling Party's Requested Number of
Offered Shares at the Offered Share Price and otherwise in accordance with
the terms of the Offering Notice.
(d) CANCELLATION; PRORATA REDUCTION. In the event that the Buyer
accepts the Primary Offer, then to the extent that a binding agreement has
been established between the Selling Party and either Non-Selling Party
pursuant to Section 2(c) hereof, such agreement shall be canceled and of
no force or effect. In the event that the Buyer rejects the Primary Offer
and the Requested Number of both Non-Selling Parties, in the aggregate,
exceeds the total number of Offered Shares, the number of Offered Shares
which each Non-Selling Party will be entitled (and obligated) to purchase
will be reduced by the amount, if any, by which (i) such Non-Selling
Party's Requested Number exceeds (ii) the sum of (x) such Non-Selling
Party's Prorata Number (as defined hereinafter) plus (y) the amount, if
any, by which the other Non-Selling Party's Prorata Number exceeds that
Non-Selling Party's Requested Number. The term "Prorata Number" shall
mean, with respect to a Non-Selling Party, the total number of Offered
Shares multiplied by a fraction, the numerator of which is the total
number of shares of Common Stock held by such Non-Selling Party and the
denominator of which is the total number of shares of Common Stock held by
both Non-Selling Parties.
(e) REJECTION OF OFFERS. If the Primary Offer and the Secondary
Offer have been rejected, the Selling Party may sell not less than all of
the Offered Shares at any time within, but not subsequent to, ninety (90)
days after the Rejection Date (as defined hereinafter); provided, however,
that no sale of all or any portion of the Offered Shares shall be made at
any price lower than the Offered Share Price or on terms materially
different from those specified in the Offering Notice or to any person(s)
other than the person(s) specified in the Offering Notice. The term
"Rejection Date" shall mean (i) in the event that the Buyer and the
Non-Selling Parties do not each send reply notices pursuant to Section
2(b) and 2(c) hereof, the expiration of the 20-day periods referred to
therein, and (ii) in the event that the Buyer and the Non-Selling Parties
each send reply notices pursuant to Section 2(b) and 2(c) hereof, the date
the Selling Party receives the last reply notice. If after the lapse of
such 90-day period all of the Offered Shares shall not
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have been sold, all of the provisions of this Agreement, including the
provisions of this Section 2, shall apply to any future sale of shares of
Common Stock held by the Selling Party.
(f) CONSUMMATION OF PURCHASES. Each transaction of purchase and sale
of Offered Shares pursuant to this Section 2 shall be consummated by
delivery of the stock certificates representing the Offered Shares
endorsed in blank, or accompanied by duly executed stock powers or
assignments, as appropriate, and by actual registration of the transfer of
the Offered Shares on the books of the Buyer and such other deliveries as
contemplated in the Offering Notice. Any such transaction shall be
consummated at such time and place as shall be agreed upon by the Selling
Party and the applicable Non-Selling Party, or, if no such agreement is
reached, at the principal office of the Buyer on the tenth (10th) day
following the Acceptance Date (as defined hereinafter). The term
"Acceptance Date" shall mean (i) in the event that the Buyer and the
Non-Selling Parties do not each send reply notices pursuant to Section
2(b) and 2(c) hereof, the expiration of the 20-day periods referred to
therein, and (ii) in the event that the Buyer and the Non-Selling Parties
each send reply notices pursuant to Section 2(b) and 2(c) hereof, the date
the Selling Party receives the last reply notice.
(g) CORPORATE ACTION. The determination of the Buyer to accept or
reject the Primary Offer shall be made by the Board. If the Selling Party
is also a director of the Buyer , the Selling Party (or if Maxxim is the
Selling Party, the Nominee(s)), shall be disqualified and abstain from
voting on any such determination.
3. LEGEND. Each Shareholder and Maxxim consent to the placement of an
appropriate legend evidencing the voting restrictions provided for in this
Agreement on the certificates representing the shares of Common Stock, held by
the Shareholders or the certificates representing the Note or the shares of
Common Stock issuable on conversion of the Note held by Maxxim and any
certificates issued in replacement or exchange therefor. The restrictive legend
shall be substantially in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS
OF A CERTAIN VOTING AND SHAREHOLDERS AGREEMENT BETWEEN CERTAIN
SHAREHOLDERS DATED APRIL 30, 1996, AS IT MAY BE AMENDED FROM TIME TO
TIME, A COPY OF WHICH AGREEMENT IS ON FILE WITH THE SECRETARY OF THE
COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS, AND WILL BE DELIVERED AT
NO COST BY THE COMPANY UPON REQUEST.
4. NOTICES. Except as otherwise provided for in this Agreement, all
communications and notices provided for in this Agreement shall be in writing.
They shall become effective when
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mailed (postage-paid, certified mail, return receipt requested) or delivered or
faxed to the address as indicated on the signature page, or to such other
address and for such attention, as any party may from time to time designate by
notice duly given in accordance with the provisions of this Section 4.
5. NO TRANSFER RESTRICTIONS. This Agreement shall apply only to the shares
of Common Stock or other voting securities of the Buyer owned by each
Shareholder and Maxxim at the time of any vote of such shares. This Agreement
shall not obligate any Shareholder or Maxxim to own any minimum number of shares
or prevent either Shareholders or Maxxim from disposing of any such shares to
any other person free of restriction under this Agreement.
6. SEVERABILITY. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision hereof, and this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provisions had never been contained herein.
7. COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same agreement.
8. SUCCESSORS AND ASSIGNS. Except as expressly indicated herein, this
Agreement is not transferable or assignable, and is not enforceable against any
holder of the Common Stock, other than the Shareholders and Maxxim.
9. CHOICE OF LAW. All questions concerning the construction, validity and
interpretation of this Agreement will be governed by the internal law, and not
the law of conflicts, of the State of Texas.
10. AMENDMENTS AND WAIVERS. The provisions of this Agreement may be
amended or waived only with the written consent of the Parties.
11. TERMINATION. This Agreement shall automatically terminate upon the
occurrence of any one of the following: (i) the bankruptcy or lawful dissolution
of the Buyer, (ii) the merger or consolidation of the Buyer with another
corporation (provided the Buyer is not the surviving corporation of such merger
or consolidation and provided further that the surviving corporation is not
owned or controlled, directly or indirectly, by the Parties), (iii) the Buyer
making a public offering of any of the Common Stock, (iv) the breach by Maxxim
in any material respect of its covenants under Section 5.12 of the Purchase
Agreement, or (v) both (y) the principal amount outstanding under the Note is
reduced to less than $1,500,000, and (z) Maxxim's ownership of
6
Common Stock, either directly or through an Affiliate, is less than ten percent
(10%) of the then outstanding Common Stock. This Agreement may also be
terminated by an instrument in writing signed by all those who are parties to
this Agreement at the time of the signing of such instrument.
EXECUTED AND DELIVERED in multiple counterparts the 30th day of
April, 1996, to be EFFECTIVE as of the date first written above.
BUYER:
LASERMEDICS, INC.
a Texas corporation
By: MICHAEL M. BARBOUR
Michael M. Barbour, President
SELLER:
MAXXIM MEDICAL, INC.,
a Delaware corporation
By: KENNETH W. DAVIDSON
Kenneth W. Davidson, Chairman of the Board,
President and Chief Executive Officer
SHAREHOLDERS:
MICHAEL M. BARBOUR
Michael M. Barbour
CHADWICK F. SMITH, M.D.
Chadwick F. Smith, M.D.
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