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EXHIBIT 4.2
THE DEBENTURE REPRESENTED BY THIS CERTIFICATE AND THE COMMON STOCK
UNDERLYING SUCH DEBENTURE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF (a) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE DEBENTURE AND/OR COMMON STOCK UNDER THE
SECURITIES ACT OF 1933 OR (b) AN OPINION REASONABLY SATISFACTORY TO RADIANCE
MEDICAL SYSTEMS, INC. FROM COUNSEL FOR RADIANCE MEDICAL SYSTEMS, INC., OR FROM
COUNSEL FOR THE PROPOSED TRANSFEROR REASONABLY SATISFACTORY TO RADIANCE MEDICAL
SYSTEMS, INC. TO THE EFFECT THAT THE TRANSFER MAY BE EFFECTED WITHOUT SUCH
REGISTRATION.
RADIANCE MEDICAL SYSTEMS, INC.
5% CONVERTIBLE DEBENTURE
JUNE 15, 2000
NO. 0001 $1,000,000.00
RADIANCE MEDICAL SYSTEMS, INC., a Delaware corporation (the "Company"),
for value received, hereby promises to pay to the order of Cosmotec Co. Ltd.
("Holder") or its registered assigns, the sum of One Million Dollars
($1,000,000), or such lesser amount as shall then equal the outstanding
principal amount hereof and any unpaid accrued interest hereon, as set forth
below, on June 15, 2003.
This Debenture has been issued pursuant and subject to that certain
International Distributor Agreement, dated June 15, 1999, by and among the
Company and the Holder, as the same may from time to time be amended, modified
or supplemented (the "Distributor Agreement"). The holder of this Debenture is
subject to certain restrictions set forth in the Distributor Agreement and shall
be entitled to certain rights and privileges set forth in the Distributor
Agreement. This Debenture is the Debenture attached as Exhibit B and referred to
in Section 2(b) of the International Distributor Agreement dated June 15, 1999,
by and among Holder, the Company and the joint venture under the Joint Venture.
The following is a statement of the rights of the Holder of this
Debenture and the conditions to which this Debenture is subject, and to which
the Holder hereof, by the acceptance of this Debenture, agrees:
1. Definitions. As used in this Debenture, the following terms,
unless the context otherwise requires, have the following meanings:
(a) "Common Stock" means the Common Stock, $0.001 par value
per share, of the Company.
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(b) "Company" includes any corporation which shall succeed
to or assume the obligations of the Company under this Debenture.
(c) "Debenture Shares" means the Common Stock issuable or
issued upon conversion of this Debenture.
(d) "Holder," when the context refers to a holder of this
Debenture, shall mean any person who shall at the time be the registered holder
of this Debenture.
2. Interest.
(a) Interest Rate. The unpaid principal balance of this
Debenture shall bear simple interest at a rate equal to 5% per annum from the
date hereof until paid in full.
(b) Default Rate. Notwithstanding the foregoing provisions
of this Section 2, but subject to applicable law, any overdue principal of and
overdue interest on this Debenture shall bear interest, payable on demand in
immediately available funds, for each day from the date payment thereof was due
to the date of actual payment, at the rate of eight percent (8%) per annum.
(c) Maximum Rate Permitted by Law. In the event that any
interest rate(s) provided for in this Section 2 shall be determined to be
unlawful, such interest rate(s) shall be computed at the highest rate permitted
by applicable law. Any payment by the Company of any interest amount in excess
of that permitted by law shall be considered a mistake, with the excess being
applied to the principal amount of this Debenture without prepayment premium or
penalty.
3. Voluntary Prepayment. The Company shall have the right at any
time to prepay, in whole or in part this Debenture, by tender to the Holder of
funds by check or wire transfer of a portion or all of the outstanding principal
and accrued interest. In the event that less than all the principal and accrued
interest shall be paid, such payment shall be allocated first to accrued
interest and any remaining balance to principal.
4. Mandatory Prepayment Upon Liquidation of the Company. In the
event of any voluntary or involuntary liquidation, dissolution or winding up of
the Company, prior and in preference to any distribution of any of the assets or
surplus funds of the Company to the holders of capital stock of the Company by
reason of their ownership thereof, all outstanding principal and unpaid accrued
interest on this Debenture shall be immediately due and payable.
5. Conversion.
(a) The Holder has the right at the Holder's option, at any
time prior to payment in full of the principal balance of this Debenture, to
convert this Debenture, in whole or in part, into fully paid and nonassessable
shares of Common Stock of the Company (the "Common Stock"). The number of shares
of Common Stock into which this Debenture may be converted ("Conversion Shares")
shall be determined by dividing the outstanding principal balance hereof to be
converted by the Conversion Price (defined below) in effect at the time of
conversion. The initial conversion price shall be $7.00 (as adjusted as
hereinafter provided, the "Conversion Price").
(b) The Company shall pay all interest on the principal
amount of this Debenture surrendered for conversion accrued to the date of
conversion.
(c) In order to convert this Debenture, the Holder shall
surrender this Debenture at the office of the Company and shall give written
notice by mail, postage prepaid, to the Company
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of the election to convert this Debenture pursuant hereto and shall state
therein the principal amount hereof to be converted and the name or names in
which the certificate or certificates for the shares of Common Stock are to be
issued. The Company shall, as soon as practicable thereafter, issue and deliver
to the Holder a certificate or certificates for the number of shares of Common
Stock to which the holder shall be entitled upon which conversion, and a new
Debenture, evidencing the principal and interest which is not converted. The
conversion shall be deemed to have been made immediately prior to the close of
business on the date of the surrender of the Debenture. The person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock as of such date.
6. Adjustments. The Conversion Price and the number of shares of
Common Stock issuable upon the conversion of this Debenture shall be subject to
adjustment from time to time as follows:
(a) Dividend, Subdivision, Combination or Reclassification
of Common Stock. If the Company shall, at any time after the issuance of this
Debenture, or from time to time thereafter, (i) declare a dividend on the Common
Stock payable in shares of its capital stock (including Common Stock), (ii)
subdivide the outstanding Common Stock into a larger number of shares of Common
Stock, (iii) combine the outstanding Common Stock into a smaller number of
shares of its Common Stock, or (iv) issues any shares of its capital stock in a
reclassification of the Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
corporation), then in each such case, the Conversion Price in effect at the time
of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number and kind of shares
of capital stock issuable on such date shall be proportionately adjusted so that
the Holder of any Debenture converted after such date shall be entitled to
receive, upon conversion, the aggregate number and kind of shares of capital
stock which, if such Debenture had been converted immediately prior to such
date, such Holder would have owned upon such conversion and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification. Any such adjustment shall become effective immediately after
the record date of such dividend or the effective date of such subdivision,
combination or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur. If a dividend is declared and such
dividend is not paid, the Conversion Price shall again be adjusted to be the
Conversion Price in effect immediately prior to such record date (giving effect
to all adjustments that otherwise would be required to be made pursuant to this
Section 6 from and after such record date).
(b) Issuance of Common Stock or Rights to Purchase Common
Stock Below the Conversion Price.
(i) If the Company shall, for two years after the
issuance of this Debenture, or from time to time thereafter, sell or issue or
fix a record date for the sale or issuance of, Common Stock, or rights, options,
warrants or convertible or exchangeable securities to any party, including all
holders of Common Stock, entitling such parties to subscribe for or purchase
Common Stock, or securities convertible into Common Stock at a price per share
of Common Stock or having a conversion price per share of Common Stock if a
security is convertible into Common Stock (determined in either such case by
dividing (x) the total consideration payable to the Company upon exercise,
conversion or exchange of such rights, options, warrants or other securities
convertible into Common Stock by (y) the total number of shares of Common Stock
covered by such rights, options, warrants or other securities convertible into
Common Stock) which is lower than the lesser of Conversion Price or 70% of the
Current Market Price, then, subject to clause 6(b)(ii), the Conversion Price
shall be reduced to the price determined by multiplying the Conversion Price in
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effect immediately prior to such record date by a fraction, the numerator of
which shall be the sum of the number of shares of Common Stock outstanding on
such record date plus the number of additional shares of Common Stock which the
aggregate offering price of the total number of shares of Common Stock so to be
offered (or the aggregate initial conversion price of the convertible securities
so to be offered) would purchase at the lesser of the Conversion Price or
Current Market Price, and the denominator of which shall be the number of shares
of Common Stock outstanding on such record date plus the number of additional
shares of Common Stock to be offered for subscription or purchase (or into which
the convertible securities so to be offered are initially convertible). In case
such price for subscription or purchase may be paid in a consideration part or
all of which shall be in a form other than cash, the value of such consideration
shall be determined in good faith by the Board of Directors of the Company. Any
such adjustment shall become effective immediately after the record date for
such rights or warrants. Such adjustment shall be made successively whenever
such a record date is fixed. If such Common Stock, rights, options or warrants
are not so issued, the Conversion Price shall again be adjusted to the
Conversion Price in effect immediately prior to the transaction or record date
(giving effect to all adjustments that otherwise would be required to be made
pursuant to this Section 6 from and after such record date).
(ii) No adjustment shall be made to the Conversion
Price pursuant to the foregoing clause 6(b)(I) in connection with (A) shares
issued upon the exercise of options granted or to be granted or common stock
issued or to be issued pursuant to the Company's employee and non-employee stock
option and stock purchase plans; (B) shares issued as consideration for
technology licenses, distribution rights or other intangibles in connection with
strategic alliances or similar transactions; (C) shares issued upon conversation
of this Debenture; and (D) shares issued in any of the transactions described in
Subsections 6(a) and (c) hereof.
(iii) Notwithstanding any provision in Section 6 to
the contrary and without limitation to any provision contained in Section 6, in
event any securities of the Company (other than this Debenture), including
without limitation those securities set forth as exceptions in Subsection
6(b)(ii) (for purposes of this Subsection, collectively, the "Subject
Securities"), are amended or otherwise modified by operation of its terms or
otherwise (including without limitation by operation of such Subject Securities
anti-dilution provisions) in any manner whatsoever after the issuance of this
Debenture that results in (i) the reduction of the exercise, conversion or
exchange price of such Subject Securities payable upon the exercise for, or
conversion or exchange into, Common Stock or other securities exercisable for,
or convertible or exhangeable into Common Stock and/or (ii) such Subject
Securities becoming exercisable for, or convertible or exchangeable into (A)
more shares or dollar amount of such Subject Securities which are, in turn
exercisable for, or convertible or exchangeable into, Common Stock, or (B) more
shares of Common Stock, then such amendment or modification shall be treated for
purposes of Section 6 as if the Subject Securities which have been amended or
modified have been terminated and new securities have been issues with the
amended or modified terms. The Company shall make all necessary adjustments
(including successive adjustments if require) to the Conversion Price in
accordance with Section 6, but in no event shall the Conversion Price be greater
than it was immediately prior to the application of this Subsection to the
transaction in question. On the expiration or termination of any such amended or
modified Subject Securities for which adjustment has been made pursuant to the
operation of the provisions of this Subsection, without such Subject Securities
having been exercised, converted or exchanged in full pursuant to their terms,
the adjusted Conversion Price shall be appropriately readjusted in the manner
specified herein.
(c) Certain Distributions. If the Company shall, at any time
after the issuance of this Debenture, or from time to time thereafter, fix a
record date for the distribution to all holders of Common Stock (including any
such distribution made in connection with a consolidation or merger
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in which the Company is the continuing corporation) of evidences of
indebtedness, assets or other property (other than regularly scheduled cash
dividends or cash distributions payable out of consolidated earnings or earned
surplus or dividends payable in capital stock for which adjustment is made under
Subsection 6(a)) or subscription rights, options or warrants (excluding those
referred to in Subsection 6(b)), then the Conversion Price shall be reduced to
the price determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction (which shall in no event be less than
zero), the numerator of which shall be the Current Market Price per share of
Common Stock on such record date (or, if an ex-dividend date has been
established for such record date, on the next day preceding such ex-dividend
date), less the fair market value (as determined in good faith by the Board of
Directors of the Company) of the portion of the assets, evidences of
indebtedness, other property, subscription rights or warrants so to be
distributed applicable to one share of Common Stock and the denominator of which
shall be such Current Market Price per share of Common stock. Any such
adjustment shall become effective immediately after the record date for such
distribution. Any such adjustment shall become effective immediately after the
record date for such distribution period. Such adjustments may be made
successively whenever such a record date is fixed. In the event that such
distribution is not so made, the Conversion Price shall be adjusted to the
Purchase Price in effect immediately prior to such record date (giving effect to
all adjustments that otherwise would be required to be made pursuant to this
Section 6 from and after such record date).
(d) Determination of Current Market Price. For the purpose
of any computation under Subsections (b) or (c) of this Section 6 or any other
provision of this Debenture, the Current Market Price per share of Common Stock
on any date shall be deemed to be the average of the daily closing prices per
share of Common Stock for the 10 consecutive trading days commencing before such
date. If on any such date the shares of Common Stock are not listed or admitted
for trading on any national securities exchange or quoted by NASDAQ or a similar
service, or otherwise quoted or listed in a regularly available form then the
Current Market Price shall be determined in good faith by the Board of
Directors.
(e) Adjustments as to Other Shares. In the event that at any
time, as a result of an adjustment made pursuant to Subsection 6(a), the Holder
shall become entitled to receive, upon conversion of this Debenture, any shares
of capital stock of the Company other than shares of Common Stock, the number of
such other shares so receivable upon conversion of the Debenture shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the shares of Common
Stock contained in Subsections 6(a), (b), and (c), inclusive.
(f) Reorganization, Reclassification, Merger and Sale of
Assets. If after the issuance of this Debenture there occurs any capital
reorganization or any reclassification of the Common Stock of the Company, the
consolidation or merger of the Company with or into another person (other than a
merger or consolidation of the Company in which the Company is the continuing
corporation and which does not result in any reclassification or change of
outstanding shares of its Common Stock) or the sale or conveyance of all or
substantially all of the assets of the Company to another person, then the
Holder will thereafter be entitled to receive, upon the conversion of this
Debenture in accordance with the terms hereof, the same kind and amounts of
securities (including shares of stock) or other assets, or both, which were
issuable or distributable to the holders of outstanding Common Stock of the
Company upon such reorganization, reclassification, consolidation, merger, sale
or conveyance, in respect of that number of shares of Common Stock then
deliverable upon the conversion of this Debenture as if this Debenture had been
converted immediately prior to such reorganization, reclassification,
consolidation, merger, sale or conveyance; and, in any such case, appropriate
adjustments (as determined in good faith by the
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Board of Directors of the Company) shall be made to assure that the provisions
hereof (including provisions with respect to changes in, and other adjustments
of, the Conversion Price) shall thereafter be applicable, as nearly as
reasonably may be practicable, in relation to any securities or other assets
thereafter deliverable upon conversion of this Debenture.
7. Notice of Certain Events. In case at any time after the issuance
of this Debenture:
(a) The Company shall declare any dividend upon its Common
Stock payable otherwise than in cash or in Common Stock of the Company; or
(b) The Company shall offer for subscription to the holders
of its Common Stock any additional shares of stock of any class or any other
securities convertible into shares of stock or any rights to subscribe thereto
other than the sale of any additional shares of Common Stock contemplated under
the Agreement; or
(c) There shall be any capital reorganization or
reclassification of the capital stock of the Company, or a sale of all or
substantially all of the assets of the Company, or a consolidation or merger of
the Company with another corporation (other than a merger with a subsidiary in
which merger the Company is the continuing corporation and which does not result
in any reclassification), or change of the then outstanding shares of Common
Stock or other capital stock issuable upon conversion of this Debenture (other
than a change in par value, or from par value or as a result of subdivision or
combination); or
(d) There shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company then, in any one or more of said cases,
the Company shall cause to be mailed to the Holder at the earliest practicable
time (and, in any event, not less than 20 days before any record date or other
date set for definitive action), 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 such reorganization, reclassification,
sale, consolidation, merger, dissolution, or liquidation shall take place, as
the case may be. Such notice shall also set forth such facts as shall indicate
the effect of such action (to the extent such effect may be known at the date of
such notice) on the Conversion Price and the kind and amount of the shares of
stock and other securities and property deliverable upon exercise of the
Debentures. Such notice shall also specify the date as of which the holders of
the Common Stock of record shall participate in said dividend, distribution or
subscription rights or shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, sale, consolidation, merger, dissolution, liquidation, winding
up or conversion, as the case may be (on which date, in the event of voluntary
or involuntary dissolution, or liquidation of the Company, the right to exercise
the Debentures shall terminate).
8. Investment Representations. By acceptance of this Debenture,
Holder represents that:
(a) Holder is acquiring this Debenture and will acquire the
Debenture Shares for its own account, not as nominee or agent, for investment
and not with a view to, or for resale in connection with, any distribution or
public offering thereof within the meaning of the Securities Act of 1933 (the
"Securities Act").
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(b) Holder understands that (i) this Debenture and the
Debenture Shares have not been registered under the Securities Act by reason of
a specific exemption therefrom, that such securities must be held by it
indefinitely, and that Holder must, therefore, bear the economic risk of such
investment indefinitely, unless a subsequent disposition thereof is registered
under the Securities Act or is exempt from such registration; (ii) each
certificate representing the Debenture Shares and each Debenture will be
endorsed with the following legend:
A) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR
RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE
ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED
TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
B) Any legend required to be placed thereon by the Company's bylaws
or under applicable state securities laws;
and (iii) the Company will instruct any transfer agent not to register the
transfer of any of the Debenture or the Debenture Shares unless the conditions
specified in the forgoing legend are satisfied;
(c) Holder has been furnished with such materials and has
been given access to such information relating to the Company as its qualified
representative has requested and it has been afforded the opportunity to ask
questions regarding the Company and the Debenture, all as it has found necessary
to make an informed investment decision.
9. Registration under Securities Act of 1933.
(a) If, at any time after Holder converts all or a portion
of this Debenture, the Company shall receive from the Holder a written demand
that the Company effect a registration under Act of the Debenture Shares held by
the Holder (or issuable upon exercise of this Debenture), the Company will use
its best efforts to reasonably promptly effect such registration after such
notice as will permit or facilitate the sale and distribution of all or such
portion of the Debenture Shares as are specified in such demand, provided that
the Company shall not be obligated to take any of the following action to effect
any such registration, pursuant to this Section 9(a):
(i) Within 90 days immediately following the
effective date of any registration statement pertaining to an underwritten
public offering of securities of the Company for its own account (other than a
registration on Form S-4 relating solely to an SEC Rule 145 transaction, or a
registration relating solely to employee benefit plans); or
(ii) After the Company has effected one such
registration pursuant to this Section 9(a); or
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(iii) If the Company shall furnish to the Holder a
certificate signed by the President of the Company, stating that in the good
faith judgment of the Board of Directors of the Company it would be materially
detrimental to the Company and its stockholders for such registration statement
to be filed at the date filing would be required, in which case the Company
shall have an additional period of not more than 90 days within which to file
such Registration Statement; provided, however, that the Company may not
exercise its right under this clause more than once in any 12 month period.
The Company shall use its best efforts to keep any registration
statement filed pursuant to this Section 9(a) effective for such period of time
requested by the Holder to sell the Debenture Shares requested to be registered,
but in no event more than two hundred seventy (270) days.
If the Holders intend to distribute the Debenture Shares covered
by their demand by means of an underwriting, they shall so advise the Company as
part of their demand made pursuant to this Section 9(a). The Company shall,
together with the Holders proposing to distribute their securities through such
underwriting, enter into an underwriting agreement in customary form with the
underwriter or underwriters selected by the Holder. If the underwriter has not
limited the number of shares of Common Stock to be underwritten, the Company may
include securities for its own account (or for the account of other
stockholders) in such registration if the underwriter so agrees and if the
number of Debenture Shares that would otherwise have been included in such
registration and underwriting will not thereby be limited.
(b) The Company's obligation to include any Debenture Shares
in a registration statement shall terminate when such Debenture Shares are
transferable without restriction on the transferee pursuant to Rule 144(k).
(c) The Company shall, upon the filing of the registration
statement hereunder, furnish to the Holder (and to each underwriter, if any)
such number of copies of prospectuses and preliminary prospectuses in conformity
with the requirements of the Act and such other documents as the Holder may
reasonably request, in order to facilitate the public sale or other disposition
of all or any of the Debenture Shares; provided, however, that the obligation of
the Company to deliver copies of prospectuses or preliminary prospectuses to the
Holder shall be subject to the receipt by the Company of reasonable assurances
from the Holder that the Holder will comply with the applicable provisions of
the Act and of such other securities or blue sky laws as may be applicable in
connection with any use of such prospectuses or preliminary prospectuses, (ii)
use its best efforts to register or qualify such Debenture Shares under the blue
sky laws (to the extent applicable) of such jurisdiction or jurisdictions as the
Holders of any such Debenture Shares and each underwriter of Debenture Shares
being sold by such Holders shall reasonably request and (iii) take such other
actions as may be reasonably necessary or advisable to enable such Holders and
such underwriters to consummate the sale or distribution in such jurisdiction or
jurisdictions in which such Holders shall have reasonably requested that the
Debenture Shares be sold.
(d) The Company shall pay all its expenses incurred in
connection with any registration or other action pursuant to the provisions of
this Section 9 and the reasonable fees (not to exceed $15,000) and expenses of a
single counsel to the Holder, other than underwriting discounts and commissions.
(e) If the Company at any time (other than pursuant to
Section 9(a) hereof) proposes to register any of its securities under the Act
for sale to the public, whether for its own account or for the account of other
security holders or both (except with respect to registration
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statements on Form S-8 or another form not available for registering Common
Stock for sale to the public), each such time it will give written notice to the
Holder of its intention so to do. Upon the written request of the Holder, given
within 20 days after the date of any such notice, to register any of its
Debenture Shares (which request shall state the intended method of disposition
thereof), the Company will use its best efforts to cause the Debenture Shares as
to which registration shall have been so requested to be included in the
securities to be covered by the registration statement proposed to be filed by
the Company, all to the extent requisite to permit the sale or other disposition
by the Holder (in accordance with its written request). The Company may withdraw
any such registration statement before it becomes effective or postpone the
offering of securities contemplated by such registration statement without any
obligation to the Holder. In the event that any registration pursuant to this
Section 9(e) shall be, in whole or in part, an underwritten public offering of
Common Stock, any request by a holder pursuant to this Section 9(e) to register
Debenture Shares shall specify that either (i) such Debenture Shares are to be
included in the underwriting on the same terms and conditions as the shares of
Common Stock otherwise being sold through underwriters under such registration
or (ii) such Debenture Shares are to be sold in the open market without any
underwriting, on terms and conditions comparable to those normally applicable to
offerings of common stock in reasonably similar circumstances. The number of
Debenture Shares to be included in such an underwriting may be reduced if and to
the extent that the managing underwriter shall be of the opinion that such
inclusion would adversely affect the marketing of the securities to be sold by
the Company therein; provided, however, that if any shares are to be included in
such underwriting for the account of any person other than the Company (other
than a stockholder exercising demand registration rights), the number of shares
to be included by any such persons shall be reduced first; and provided further,
however, that the number of any such shares held by any person (other than a
stockholder exercising demand registration rights) other than the holders of
Debenture Shares hereunder shall be reduced proportionately based on the number
of shares requested to be registered with the shares held by the holders of
Debenture Shares.
(f) If, at a time when Form S-3 is available for such
registration, the Company shall receive Holder a written request or requests
that the Company effect a registration on Form S-3 of any of its Debenture
Shares, the Company will, as soon as practicable, effect such registration and
all such related qualifications and compliances as may be requested and as would
permit or facilitate the sale and distribution of all Debenture Shares as are
specified in such request. The Company shall not be required to file a
registration statement under Form S-3 if it would not be required to file a
registration statement under Section 9(a) hereof. The Company shall have no
obligation to effect a registration under this Section 9(f) unless either (i)
all the outstanding Debenture Shares are requested to be sold pursuant to such
registration or (ii) the aggregate offering price of the securities requested to
be sold pursuant to such registration is, in the good faith judgment of the
Company, expected to be equal to or greater than $1,000,000. Any registration
under this Section 9(f) will be counted as a registration under Section 9(a)
above.
(g) The Company agrees to indemnify and hold harmless the
Holder and each underwriter of Debenture Shares, and each other person, if any,
who controls such Holder or underwriter within the meaning of the Act from and
against any losses, claims, damages or liabilities to which the Holder may
become subject (under the Act or otherwise) insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of, or are based upon, any untrue or alleged untrue statement of a material fact
contained in any registration statement under which Debenture Shares were
registered under the Act pursuant to this Section 9, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereof
(collectively, the "Registration Statement"), or arise out of or are based upon
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make statements therein not misleading, or any
failure by the Company to fulfill any undertaking included
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in the Registration Statement and the Company will reimburse the Holder for any
reasonable legal or other expenses reasonably incurred in investigating,
defending or preparing to defend any such action, proceeding or claim; provided,
however, that the Company shall not be liable in any such case to the extent
that such loss, claim, damage or liability arises out of, or is based upon, an
untrue statement made in such Registration Statement in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
the Holder specifically for use in preparation of the Registration Statement.
The Holder agrees to indemnify and hold harmless the Company,
and each underwriter of Debenture Shares, and each other person, if any, who
controls such Holder or underwriter within the meaning of the Act, each person,
if any, who controls the Company within the meaning of Section 15 of the Act,
each officer of the Company who signs the Registration Statement and each
director of the Company, from and against any losses, claims, damages or
liabilities to which the Company (or any such officer, director or controlling
person) may become subject (under the Act or otherwise), insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of, or are based upon, any untrue or alleged untrue statement of a
material fact contained in any Registration Statement under which Debenture
Shares were registered under the Act pursuant to this Section 9, on the
effective date thereof if such untrue statement was made in reliance upon and in
conformity with written information furnished by or on behalf of the Holder
specifically for use in preparation of the Registration Statement, and the
Holder will reimburse the Company (or such officer, director or controlling
person), as the case may be, for any legal or other expenses reasonably incurred
in investigating, defending or preparing to defend any such action, proceeding
or claim; provided, however, that the Holder will be liable hereunder in any
such case if and only to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with information pertaining to Holder, as such, furnished in writing
to the Company by the Holder for use in the Registration Statement; provided,
further, however, that the liability of the Holder hereunder shall be limited to
the proportion of any such loss, claim, damage, liability or expense which is
equal to the proportion that the public offering price of the Debenture Shares
sold by the Holder under the Registration Statement bears to the total public
offering price of all securities proceeds received by the Holder from the sale
of such Debenture Shares covered by the Registration Statement.
Promptly after receipt by any indemnified person of a notice of
a claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 9(g), such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and such indemnifying person shall have been notified
thereof, such indemnifying person shall be entitled to participate therein, and,
to the extent it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified person. After notice from the
indemnifying person to such indemnified person of its election to assume the
defense thereof, such indemnifying person shall not be liable to such
indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof; provided, however,
that if there exists or shall exist a conflict of interest that would make it
inappropriate, in the opinion of counsel to the indemnified person, for the same
counsel to represent both the indemnified person and such indemnifying person or
any affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person; provided,
however, that no indemnifying person shall be responsible for the fees and
expenses of more than one separate counsel for all indemnified parties.
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10. No Fractional Shares. The Company shall not be required to issue
certificates representing fractional shares of Common Stock, but will make a
payment in cash based on the fair market value of one share of Common Stock on
the date of Conversion for any fractional share.
11. Reservation of Shares. All shares which may be issued upon the
conversion of this Debenture shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable and free from all preemptive rights of any
stockholder and all taxes, liens and charges with respect to the issue thereof
(other than taxes in respect of any transfer occurring contemporaneously with
such issue) during the conversion period within which the conversion rights
represented by this Debenture may be converted, the Company will at all times
have authorized, and reserved, a sufficient number of shares of its Common Stock
to provide for the conversion of this Debenture.
12. Delivery of Stock Certificates. As promptly as practicable after
the conversion of this Debenture, the Company at its expense will issue and
deliver to the holder of this Debenture a certificate or certificates for the
number of full shares of Common Stock issuable upon such conversion and, if
applicable, a new Debenture evidencing the principal amount hereof not so
converted.
13. Rights. Until the conversion of this Debenture, or portion
thereof, as set forth above, the Holder shall not be deemed a stockholder of the
Company and shall have no rights of a stockholder unless set forth specifically.
14. Cumulative Rights. No delay on the part of the holder of this
Debenture in the exercise of any power or right under this Debenture, or under
any document or instrument executed in connection herewith, shall operate as a
waiver thereof, nor shall a single or partial exercise of any other power or
right. Enforcement by the holder of this Debenture of any security for the
payment hereof shall not constitute any election by it of remedies so as to
preclude the exercise of any other remedy available to it.
15. Waiver. The Company waives demand, presentment, protest, notice
of intention to accelerate, notice of acceleration, and notice of protest.
16. Subordination. The indebtedness, including interest, principal
and default interest, if any, evidenced by this Debenture is hereby expressly
subordinated, to the extent and in the manner set forth in this Section 16, in
right of payment to the prior payment in full of all the Company's Senior
Indebtedness (as hereinafter defined) whether now outstanding or hereafter
defined. Notwithstanding the foregoing, for so long as there is no event of
default under the Senior Indebtedness, the Company may pay, and the Holder may
receive for its own account, all regular installments of interest hereunder.
(a) Senior Indebtedness. As used in this Note, the term
"Senior Indebtedness" shall mean the principal of and unpaid accrued interest on
indebtedness of the Company to banks, insurance companies or other financial
institutions regularly engaged in the business of lending money, which is for
money borrowed by the Company (whether or not secured).
(b) Default on Senior Indebtedness. If there should occur
any receivership, insolvency, assignment for the benefit of creditors,
bankruptcy, reorganization or arrangements with creditors (whether or not
pursuant to bankruptcy or other insolvency laws), sale of all or substantially
all of the assets, dissolution, liquidation or any other marshaling of the
assets and liabilities of the Company, or if this Debenture shall be declared
due and payable upon the occurrence of an event of default with respect to any
Senior Indebtedness, then (i) no amount shall
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be paid by the Company in respect of the principal of or interest on this
Debenture at the time outstanding, unless and until the principal of and
interest on the Senior Indebtedness then outstanding shall be paid in full, and
(ii) no claim or proof of claim shall be filed with the Company by or on behalf
of the holder of this Debenture that shall assert any right to receive any
payments in respect of the principal of and interest on this Debenture, except
subject to the payment in full of the principal of and interest on all of the
Senior Indebtedness then outstanding. If there occurs an event of default that
has been declared in writing with respect to any Senior Indebtedness, or in the
instrument under which any Senior Indebtedness is outstanding, permitting the
holder of such Senior Indebtedness to accelerate the maturity thereof, then,
unless and until such event of default shall have been cured or waived or shall
have ceased to exist, or all Senior Indebtedness shall have been paid in full,
no payment shall be made in respect of the principal of or interest on this
Debenture.
(c) Effect of Subordination. Subject to the rights, if any,
of the holders of Senior Indebtedness under this Section 16 to receive cash,
securities or other properties otherwise payable or deliverable to the holder of
this Debenture, nothing contained in this Section 16 shall impair, as between
the Company and the holder, the obligation of the Company, subject to the terms
and conditions hereof, to pay to the holder the principal hereof and interest
hereon as and when the same become due and payable, or shall prevent the holder
of this Debenture, upon default hereunder, from exercising all rights, powers
and remedies otherwise provided herein or by applicable law.
(d) Subrogation. Subject to the payment in full of all
Senior Indebtedness and until this Debenture shall be paid in full, the holder
shall be subrogated to the rights of the holders of Senior Indebtedness (to the
extent of payments or distributions previously made to such holders of Senior
Indebtedness pursuant to the provisions of Section 16(b) above) to receive
payments or distributions of assets of the Company applicable to the Senior
Indebtedness. No such payments or distributions applicable to the Senior
Indebtedness shall, as between the Company and its creditors, other than the
holders of Senior Indebtedness and the holder, be deemed to be a payment by the
Company to or on account of this Debenture; and for the purposes of such
subrogation, no payments or distributions to the holders of Senior Indebtedness
to which the holder would be entitled except for the provisions of this Section
16 shall, as between the Company and its creditors, other than the holders of
Senior Indebtedness and the holder, be deemed to be a payment by the Company to
or on account of the Senior Indebtedness.
(e) Undertaking. By its acceptance of this Debenture, the
holder agrees to execute and deliver such documents as may be reasonably
requested from time to time by the Company or the lender of any Senior
Indebtedness in order to implement the foregoing provisions of this Section 16.
If the Holder receives any payment on this Debenture which is prohibited by this
Section 16, such payment shall be held in trust by the Holder for the benefit
of, and shall be paid and delivered upon written request to, the holders of
Senior Indebtedness or their agent, for application to the payment on such
Senior Indebtedness.
17. Defaults and Remedies.
(a) Events of Default. An "EVENT OF DEFAULT" shall occur if:
(i) the Company shall default in the payment of the
principal and interest of this Debenture, when and as the same shall become due
and payable, whether at maturity or at a date fixed for prepayment or by
acceleration or otherwise; or
(ii) the Company shall default in the due observance
or performance of any material covenant, condition or agreement on the part of
the Company to be observed or
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performed pursuant to the terms hereof or pursuant to the terms of J.V.
Agreement or the Distribution Agreement (other than those referred to in clause
(i) of this Section 17(a)), and such default shall continue for 90 days after
the date of written notice thereof, specifying such default and, if such default
is capable of being remedied, requesting that the same be remedied, shall have
been given to the Company by the Holder; or
(iii) any event or condition shall occur that results
in (A) the acceleration of the maturity of any indebtedness of the Company or
any subsidiary, or (B) a default of any indebtedness of the Company or any
subsidiary, which continues beyond any applicable period of cure and which would
permit the holder to accelerate (automatically or upon notice and declaration)
such Indebtedness, in either case in a principal amount aggregating $1,000,000
or more; or
(iv) an involuntary proceeding shall be commenced or
an involuntary petition shall be filed in a court of competent jurisdiction
seeking (a) relief in respect of the Company, or of a substantial part of its
property or assets, under Title 11 of the United States Code, as now constituted
or hereafter amended, or any other Federal or state bankruptcy, insolvency,
receivership or similar law, (b) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the Company, or for
a substantial part of its property or assets, or (c) the winding up or
liquidation of the Company; and such proceeding or petition shall continue
undismissed for 60 days, or an order or decree approving or ordering any of the
foregoing shall be entered; or
(v) the Company shall (a) voluntarily commence any
proceeding or file any petition seeking relief under Title 11 of the United
States Code, as now constituted or hereafter amended, or any other Federal or
state bankruptcy, insolvency, receivership or similar law, (b) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or the filing of any petition described in paragraph (iv) of this
Section 17(a), (c) apply for or consent to the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for the
Company or any subsidiary, or for a substantial part of its property or assets,
(d) file an answer admitting the material allegations of a petition filed
against it in any such proceeding, (e) make a general assignment for the benefit
of creditors, (f) become unable, admit in writing its inability or fail
generally to pay its debts as they become due or (g) take any action for the
purpose of effecting any of the foregoing.
(b) Acceleration. If an Event of Default occurs under
Section 17(a)(iv) or (v), then the outstanding principal of and all accrued
interest on this Debenture shall automatically become immediately due and
payable, without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived. If any other Event of Default occurs and is
continuing the Holder, by written notice to the Company, may declare the
principal of and accrued interest on this Debenture to be immediately due and
payable. The Holder may rescind an acceleration and its consequences if all
existing Events of Default have been cured or waived, except nonpayment of
principal or interest that has become due solely because of the acceleration,
and if the rescission would not conflict with any judgment or decree. Any notice
or rescission shall be given in the manner specified in Section 18 of this
Debenture.
18. Notices. All notices, claims, demands and other communications
hereunder shall be in writing and shall be deemed given upon (a) confirmation of
receipt of a facsimile transmission, (b) confirmed delivery by a standard
overnight carrier (c) when delivered by hand or (d) the expiration of five
business days after the day when mailed by registered or certified mail
(postpaid prepaid, return receipt requested), addressed to the respective
parties at the following addresses (or such other address for party as shall be
specified by like notice):
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(a) if to the registered holder of a Debenture at the
address of such holder as shown on the books of the Company; or
(b) if to the Company, at:
Radiance Medical Systems, Inc.
13700 Alton Parkway, Suite 160
Irvine, CA 92618
Attn: Chief Executive Officer
19. Transferability. This Debenture evidenced hereby may not be
pledged, sold, assigned or transferred except with the express written consent
of the Company, which may be withheld in its sole discretion. Any pledge, sale,
assignment or transfer in violation of the foregoing shall be null and void.
20. Headings; References. All headings used herein are used for
convenience only and shall not be used to construe or interpret this Debenture.
Except where otherwise indicated, all references herein to Sections refer to
Sections hereof.
21. Successors and Assigns. All of the covenants, stipulations,
promises, and agreements in this Debenture by or on behalf of the Company shall
bind its successors and assigns, whether so expressed or not.
22. Governing Law. This Debenture shall be governed by the laws of
the State of California, and the laws of such state (other than conflicts of
laws principles) shall govern the construction, validity, enforcement, and
interpretation hereof, except to the extent federal laws otherwise govern the
validity, construction, enforcement, and interpretation hereof.
23. Payments. Each payment on this Debenture shall be due and
payable in lawful money of the United States of America, at the address of
Holder as shown on the books of the Company, in funds which are or will be
available for next business day use by Holder. In any case where the payment of
principal and interest hereon is due on a non-business Day, the Company shall be
entitled to delay such payment until the next succeeding business day, but
interest shall continue to accrue until the payment is, in fact, made.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
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IN WITNESS WHEREOF, the Company has caused this Debenture to be issued
this 15th day of June, 1999.
RADIANCE MEDICAL SYSTEMS, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Name of Holder: Cosmotec Co. , Ltd.
Address: Twin View Ochanomizu Bldg. 1F
2-3-9 Hongo, Bunkyo-ku,
Tokyo 113-0033, Japan
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ELECTION TO CONVERT
To RADIANCE MEDICAL SYSTEMS, INC.
The undersigned owner of the accompanying Debentures hereby irrevocably
exercises the option to convert to shares of Common Stock in accordance with the
terms of such Debenture, and directs that the shares issuable and deliverable
upon such conversion be issued in the name of and delivered to the undersigned.
Dated:________________________________
COMPLETE FOR REGISTRATION OF SHARES OF COMMON STOCK ON THE STOCK TRANSFER
RECORDS MAINTAINED BY THE COMPANY:
________________________________________________________________________________
Name of Debenture Holder
Name(s) of Person(s) in which Common Stock Certificate(s) are to be registered:
________________________________________________________________________________
Address: _______________________________
________________________________________________________________________________
Taxpayer Identification Number
Principal Portion to be converted
(if less than all)
$__________________
Shares of Common Stock to be Issued
_______________ shares