SECURED CONVERTIBLE DEBENTURE PURCHASE AGREEMENT (this
"AGREEMENT"), dated as of May 17, 1999, among Premier Laser Systems Inc., a
California corporation (the "COMPANY"), and the investors signatory hereto (each
such investor is a "PURCHASER" and all such investors are, collectively, the
"PURCHASERS").
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers and the
Purchasers, severally and not jointly, desire to purchase from the Company an
aggregate principal amount of $4,000,000 of the Company's 6% Secured Convertible
Debentures, due three (3) years from the date of issuance, which shall be in the
form of EXHIBIT A (the "DEBENTURES") and which are convertible into shares of
the Company's Class A Common Stock, no par value per share (the "COMMON STOCK").
IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy are
hereby acknowledged, the Company and the Purchasers agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 THE CLOSING.
(a) Subject to the terms and conditions set forth in this
Agreement, the Company shall issue and sell to the Purchasers and the Purchasers
shall, severally and not jointly, purchase from the Company the Debentures for
an aggregate purchase price of $4,000,000. The closing of the purchase and sale
of the Debentures (the "CLOSING") shall take place at the offices of Robinson
Silverman Pearce Aronsohn & Berman LLP ("ROBINSON SILVERMAN"), 1290 Avenue of
the Americas, New York, New York 10104, immediately following the execution
hereof or such later date as the parties shall agree. The date of the Closing is
hereinafter referred to as the "CLOSING DATE."
(b) Prior to the Closing Date, the parties shall deliver or shall
cause to be delivered the following: (A) the Company shall deliver to Robinson
Silverman for the benefit of the Purchasers in accordance with the Escrow
Agreement, dated as of the date hereof, by and among the Company, the Purchasers
and Robinson Silverman in the form of EXHIBIT F (the "ROBINSON SILVERMAN ESCROW
AGREEMENT"), (1) the Debentures in the aggregate principal amount indicated
below each Purchaser's name on the signature page to this Agreement, registered
in the name of each such Purchaser, (2) two Common Stock purchase warrants, each
in the form of EXHIBIT D, registered in the name of the appropriate Purchasers,
pursuant to which the Purchasers shall have the right at any time and from time
to time thereafter through the fifth anniversary of the Closing Date to acquire
an aggregate of 60,000 shares of Common Stock, at an exercise price per share
(subject to adjustment as provided therein) equal to 120% of the average of the
Per Share Market Values for the five (5) days immediately preceding the Closing
Date (collectively, the "WARRANTS"), (3) the legal opinion of Rutan & Tucker,
LLP, outside counsel to the Company (the "ESCROW AGENT"), in the form of EXHIBIT
C, and (4) all other documents, instruments and writings required to have been
delivered at or prior to the Closing by the Company pursuant to this Agreement,
including (A) an executed Registration Rights Agreement, dated the date hereof,
by and among the Company and the Purchasers, in the form of EXHIBIT B (the
"REGISTRATION RIGHTS AGREEMENT"), (B) an executed Security Agreement, dated the
date hereof, by and among the Company and the Purchasers, in the form of EXHIBIT
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F (the "SECURITY AGREEMENT"), (C) an executed Intellectual Property Security
Agreement, dated the date hereof, by and among the Company and the Purchasers,
in the form of EXHIBIT G (the "IP SECURITY AGREEMENT"), (D) an executed Escrow
Agreement, dated the date hereof, by and among the Company, the Purchasers and
the Escrow Agent, in form acceptable to the parties hereto (the "ESCROW
AGREEMENT"), (E) the Irrevocable Transfer Agent Instructions, in the form of
EXHIBIT E, delivered to and acknowledged by the Company's transfer agent (the
"TRANSFER AGENT INSTRUCTIONS"), and (F) an executed Robinson Silverman Escrow
Agreement; and (B) each Purchaser shall deliver (1) to Robinson Silverman, for
delivery in accordance with the Robinson Silverman Escrow Agreement, one half
(1/2) of the purchase price for the Debentures indicated below such Purchaser's
name on the signature page to this Agreement in United States dollars in
immediately available funds by wire transfer to an account designated in writing
by the Company for such purpose, (2) to the Escrow Agent, one half (1/2) of the
purchase price for the Debentures indicated below such Purchaser's name on the
signature page to this Agreement in United States dollars in immediately
available funds by wire transfer to an account designated in writing by the
Escrow Agent for such purpose, and (3) to Robinson Silverman, for delivery in
accordance with the Robinson Silverman Escrow Agreement, all documents,
instruments and writings required to have been delivered at or prior to the
Closing Date by such Purchaser pursuant to this Agreement, including, without
limitation, an executed Registration Rights Agreement, Security Agreement, IP
Security Agreement and Escrow Agreement.
1.2 CERTAIN DEFINED TERMS. For purposes of this Agreement,
"CONVERSION PRICE," "ORIGINAL ISSUE DATE" and "TRADING DAY" shall have the
meanings set forth in the Debentures; "BUSINESS DAY" shall mean any day except
Saturday, Sunday and any day which shall be a federal legal holiday or a day on
which banking institutions in the State of New York or the State of California
are authorized or required by law or other governmental action to close.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
makes the following representations and warranties to the Purchasers:
(a) ORGANIZATION AND QUALIFICATION. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of California, with the requisite corporate power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. The Company has no subsidiaries other than as set forth in SCHEDULE
2.1(a) (collectively the "SUBSIDIARIES"). Each of the Subsidiaries is an entity,
duly incorporated or otherwise organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization (as
applicable), with the full power and authority to own and use its properties and
assets and to carry on its business as currently conducted. Each of the Company
and the Subsidiaries is duly qualified to do business and is in good standing as
a foreign corporation in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be,
could not, individually or in the aggregate, (x) adversely affect the legality,
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validity or enforceability of the Debentures or any of this Agreement, the
Registration Rights Agreement, the Warrants, the Escrow Agreement, the Robinson
Silverman Escrow Agreement, the Security Agreement or the IP Security Agreement
(collectively, the "TRANSACTION DOCUMENTS"), (y) have or result in a material
adverse effect on the results of operations, assets, prospects, or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole,
or (z) adversely impair the Company's ability to perform fully on a timely basis
its obligations under any of the Transaction Documents (any of (x), (y) or (z),
a "MATERIAL ADVERSE EFFECT").
(b) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company. Each of
the Transaction Documents and the Debentures has been duly executed by the
Company and, when delivered (or filed, as the case may be) in accordance with
the terms hereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms. Neither
the Company nor any Subsidiary is in violation of any of the provisions of its
respective certificate of incorporation, by-laws or other charter documents.
(c) CAPITALIZATION. The number of authorized, issued and
outstanding capital stock of the Company is set forth in SCHEDULE 2.1(c). No
shares of Common Stock are entitled to preemptive or similar rights, nor is any
holder of the Common Stock entitled to preemptive or similar rights arising out
of any agreement or understanding with the Company by virtue of any of the
Transaction Documents. Except as a result of the purchase and sale of the
Debentures and the Warrants and except as disclosed in SCHEDULE 2.1(c), there
are no outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person (as
defined below) any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings, or arrangements by which the
Company or any Subsidiary is or may become bound to issue additional shares of
Common Stock, or securities or rights convertible or exchangeable into shares of
Common Stock. To the knowledge of the Company, except as specifically disclosed
in the SEC Documents (as defined below) or SCHEDULE 2.1(c), no Person or group
of related Persons beneficially owns (as determined pursuant to Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT")), or has the right to acquire by agreement with or by obligation binding
upon the Company, in excess of 5% of the Common Stock. A "PERSON" means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any kind.
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(d) ISSUANCE OF THE DEBENTURES AND THE WARRANTS. The Debentures and
the Warrants are duly authorized and, when issued and paid for in accordance
with the terms hereof, will be duly and validly issued, fully paid and
nonassessable, free and clear of all liens, encumbrances and rights of first
refusal of any kind (collectively, "LIENS"). The Company has on the date hereof
and will, at all times while the Debentures and the Warrants are outstanding,
maintain an adequate reserve of duly authorized shares of Common Stock, reserved
for issuance to the holders of the Debentures and the Warrants, to enable it to
perform its conversion, exercise and other obligations under this Agreement, the
Debentures and the Warrants. Such number of reserved and available shares of
Common Stock is not less than the sum of (i) 200% of the number of shares of
Common Stock which would be issuable upon conversion in full of the Debentures,
assuming such conversion occurred on the Original Issue Date for the Debentures,
the Filing Date or the Effectiveness Date (each as defined in the Registration
Rights Agreement), whichever yields the lowest Conversion Price, (ii) the number
of shares of Common Stock issuable upon exercise of the Warrants, and (iii) the
number of shares Common Stock which would be issuable upon payment of interest
on the Debentures, assuming the Debentures are outstanding for three years and
all interest is paid in shares of Common Stock (such number of shares of Common
Stock as contemplated in clauses (i)-(iii), the "INITIAL MINIMUM"). All such
authorized shares of Common Stock shall be duly reserved for issuance to the
holders of the Debentures and the Warrants. The shares of Common Stock issuable
upon conversion of the Debentures, as payment of interest thereon and upon
exercise of the Warrants are collectively referred to herein as the "UNDERLYING
SHARES." The Debentures, the Warrants and the Underlying Shares are collectively
referred to herein as, the "SECURITIES." When issued in accordance with the
Debentures and the Warrants, the Underlying Shares will be duly authorized,
validly issued, fully paid and nonassessable, free and clear of all Liens.
(e) NO CONFLICTS. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of its articles of incorporation, bylaws or other charter
documents (each as amended through the date hereof), or (ii) subject to
obtaining the Required Approvals (as defined below), conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse of time
or both) of, any agreement, credit facility, indenture or instrument (evidencing
a Company debt or otherwise) to which the Company or any Subsidiary is a party
or by which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company is subject (including Federal and state
securities laws and regulations), or by which any property or asset of the
Company is bound or affected, except in the case of each of clauses (ii) and
(iii), as could not, individually or in the aggregate, have or result in a
Material Adverse Effect. The business of the Company is not being conducted in
violation of any law, ordinance or regulation of any governmental authority,
except for violations which, individually or in the aggregate, could not have or
result in a Material Adverse Effect. The sale and issuance of the Securities
hereunder shall not cause any Purchaser or Purchasers to be an "Acquiring
Person" under the Rights Plan (as defined in Section 3.18).
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(f) FILINGS, CONSENTS AND APPROVALS. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any court or other
Federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filings required pursuant to Section
3.11, (ii) the filing with the Securities and Exchange Commission (the
"COMMISSION") of a registration statement meeting the requirements set forth in
the Registration Rights Agreement and covering the resale of the Underlying
Shares by the Purchasers (the "UNDERLYING SHARES REGISTRATION STATEMENT"), (iii)
the application(s) to the Nasdaq National Market ("NASDAQ") for the listing of
the Underlying Shares for trading on the NASDAQ (and with any other national
securities exchange or market on which the Common Stock is then listed), (iv)
applicable Blue Sky filings and (v) in all other cases where the failure to
obtain such consent, waiver, authorization or order, or to give such notice or
make such filing or registration could not have or result in, individually or in
the aggregate, a Material Adverse Effect (collectively, the "REQUIRED
APPROVALS").
(g) LITIGATION; PROCEEDINGS. Except as specifically disclosed in
SCHEDULE 2.1(g), there is no action, suit, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries or any of their respective
properties before or by any court, governmental or administrative agency or
regulatory authority (Federal, state, county, local or foreign) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) could, individually or in
the aggregate, have or result in a Material Adverse Effect.
(h) NO DEFAULT OR VIOLATION. Neither the Company nor any Subsidiary
(i) is in default under or in violation of (and no event has occurred which has
not been waived which, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under or that it is
in violation of, any indenture, loan or credit agreement or any other agreement
or instrument to which it is a party or by which it or any of its properties is
bound, (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is in violation of any statute, rule or regulation
of any governmental authority, except as could not individually or in the
aggregate, have or result in a Material Adverse Effect. The security interests
granted to the Purchasers pursuant to the Security Agreement and IP Security
Agreement will convey and grant to the Purchasers a first priority security
interest in all of the Collateral (as such terms is defined in such agreements).
(i) PRIVATE OFFERING. Assuming the accuracy of the representations
and warranties of the Purchasers set forth in Sections 2.2(b)-(g), the offer,
issuance and sale of the Securities to the Purchasers as contemplated hereby are
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "SECURITIES ACT"). Neither the Company nor any Person acting on its
behalf has taken any action that could subject the offering, issuance or sale of
the Securities to the registration requirements of the Securities Act.
(j) SEC DOCUMENTS; FINANCIAL STATEMENTS. Except as set forth in
SCHEDULE 2.1 (j) attached hereto, the Company has filed all reports required to
be filed by it under the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the three years preceding the date hereof (or such shorter
period as the Company was required by law to file such material) (the foregoing
materials being collectively referred to herein as the "SEC DOCUMENTS" and,
together with the Schedules to this Agreement and the Supplementary Disclosure
delivered to the Purchasers prior to the date hereof, the "DISCLOSURE
MATERIALS") on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Documents prior to the expiration of any such
extension. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the Commission promulgated thereunder, and
none of the SEC Documents, when filed, contained any untrue statement of a
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material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. All material
agreements to which the Company is a party or to which the property or assets of
the Company are subject have been filed as exhibits to the SEC Documents as
required. The financial statements of the Company included in the SEC Documents
comply in all material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto as in effect at the
time of filing. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved ("GAAP"), except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all material
respects the financial position of the Company and its consolidated subsidiaries
as of and for the dates thereof and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments. Since March 31, 1998, except as
specifically disclosed in the SEC Documents, (a) there has been no event,
occurrence or development that has or that could result in a Material Adverse
Effect, (b) the Company has not incurred any liabilities (contingent or
otherwise) other than (x) liabilities incurred in the ordinary course of
business consistent with past practice and (y) liabilities not required to be
reflected in the Company's financial statements pursuant to GAAP or required to
be disclosed in filings made with the Commission, (c) the Company has not
altered its method of accounting or the identity of its auditors and (d) the
Company has not declared or made any payment or distribution of cash or other
property to its stockholders or officers or directors (other than in compliance
with existing Company stock option plans) with respect to its capital stock, or
purchased, redeemed (or made any agreements to purchase or redeem) any shares of
its capital stock. The Company last filed audited financial statements with the
Commission on August 21, 1998, and has not received any comments from the
Commission in respect thereof.
(k) INVESTMENT COMPANY. The Company is not, and is not an Affiliate
(as defined in Rule 405 under the Securities Act) of, an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
(l) CERTAIN FEES. Except for certain fees payable by the Company to
Wharton Capital Partners, Ltd., and its Affiliates, no fees or commissions will
be payable by the Company to any broker, financial advisor or consultant,
finder, placement agent, investment banker, or bank with respect to the
transactions contemplated by this Agreement. The Purchasers shall have no
obligation with respect to any fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this Section that may
be due in connection with the transactions contemplated by this Agreement. The
Company shall indemnify and hold harmless the Purchasers, their employees,
officers, directors, agents, and partners, and their respective Affiliates, from
and against all claims, losses, damages, costs (including the costs of
preparation and attorney's fees) and expenses suffered in respect of any such
claimed or existing fees, as such fees and expenses are incurred.
(m) SOLICITATION MATERIALS. Neither the Company nor any Person
acting on the Company's behalf has solicited any offer to buy or sell the
Securities by means of any form of general solicitation or advertising.
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(n) FORM S-3 ELIGIBILITY. Assuming that between the date hereof and
August 22, 1999 the Company (i) timely files all reports required to be filed by
it under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
and (ii) does not default on any of its material debt obligations, the Company
will, on August 22, 1999, be eligible to use Form S-3 promulgated under the
Securities Act to register its securities for resale with the Commission.
(o) EXCLUSIVITY. The Company shall not issue and sell the
Debentures to any Person other than the Purchasers other than with the specific
prior written consent of the Purchasers.
(p) SENIORITY. No indebtedness of the Company is senior to the
Debentures in right of payment, whether with respect to interest or upon
liquidation, dissolution or otherwise.
(q) LISTING AND MAINTENANCE REQUIREMENTS COMPLIANCE. Except as
specified in SCHEDULE 2.1(q) hereto, the Company has not, in the two years
preceding the date hereof, received notice (written or oral) from the NASDAQ or
any other stock exchange, market or trading facility on which the Common Stock
is or has been listed (or on which it has been quoted) to the effect that the
Company is not in compliance with the listing or maintenance requirements of
such exchange or market. The Company is, and has no reason to believe that it
will not in the foreseeable future continue to be, in compliance with all such
maintenance requirements.
(r) PATENTS AND TRADEMARKS. The Company has, or has rights to use,
all patents, patent applications, trademarks, trademark applications, service
marks, trade names, copyrights, licenses and rights which are necessary or
material for use in connection with its business, and which the failure to so
have would have a Material Adverse Effect (collectively, the "INTELLECTUAL
PROPERTY RIGHTS"). The patents and trademark specified in the IP Security
Agreement are the only patent or trademark intellectual property rights (or
applications therefor) held by the Company and the Subsidiaries for which
applications for patents and trademarks have been made or granted in the United
States (excluding, for such purposes, patents and trademarks held by Ophthalmic
Imaging Systems, Inc.). To the best knowledge of the Company all such
Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights.
(s) REGISTRATION RIGHTS; RIGHTS OF PARTICIPATION. Except as set
forth on SCHEDULE 6(b) to the Registration Rights Agreement, the Company has not
granted or agreed to grant to any Person any rights (including "piggy-back"
registration rights) to have any securities of the Company registered with the
Commission or any other governmental authority which has not been satisfied. No
Person, has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents.
(t) REGULATORY PERMITS. The Company and its Subsidiaries possess
all certificates, authorizations and permits issued by the appropriate Federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses as described in the SEC Documents, except where the failure to
possess such permits could not, individually or in the aggregate, have or result
in a Material Adverse Effect ("MATERIAL PERMITS"), and neither the Company nor
any such Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.
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(u) TITLE. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property and personal property owned
by them which is material to the business of the Company and its Subsidiaries,
in each case free and clear of all Liens, except for Liens granted to the
Purchasers pursuant to the Security Agreement and IP Security Agreement and for
other Liens as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and its Subsidiaries. Any real property and facilities held under lease
by the Company and its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
(v) DISCLOSURE. The Company confirms that it has not provided any
of the Purchasers or its agents or counsel with any information that constitutes
or might constitute material non-public information. The Company understands and
confirms that the Purchasers shall be relying on the foregoing representations
in effecting transactions in securities of the Company. All disclosure provided
to the Purchasers regarding the Company, its business and the transactions
contemplated hereby, including the Schedules to this Agreement, furnished by or
on behalf of the Company are true and correct and do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading.
(w) OPHTHALMIC IMAGING SYSTEMS, INC. The Company owns free and
clear of all Liens 2,131,758 shares of the common stock, no par value, of
Ophthalmic Imaging Systems, Inc., a California corporation, representing 51% of
the total issued and outstanding shares of voting stock of such entity (the
"OPHTHALMIC SHARES").
2.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser
hereby represents and warrants to the Company as follows:
(a) ORGANIZATION; AUTHORITY. Such Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation with the requisite corporate power and
authority, to enter into and to consummate the transactions contemplated by the
Transaction Documents and otherwise to carry out its obligations thereunder. The
purchase by such Purchaser of the Securities hereunder has been duly authorized
by all necessary action on the part of such Purchaser. Each of this Agreement,
the Registration Rights Agreement, the Escrow Agreement, the Security Agreement
and the Intellectual Property Security Agreement has been duly executed and
delivered by such Purchaser and constitutes the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance with its
terms.
(b) INVESTMENT INTENT. Such Purchaser is acquiring the Securities
for its own account for investment purposes only and not with a view to or for
distributing or reselling such Securities or any part thereof or interest
therein, without prejudice, however, to such Purchaser's right, subject to the
provisions of this Agreement and the Registration Rights Agreement, at all times
to sell or otherwise dispose of all or any part of such Securities pursuant to
an effective registration statement under the Securities Act and in compliance
with applicable state securities laws or under an exemption from such
registration. Nothing contained herein shall be deemed a representation or
warranty by such Purchaser to hold Securities for any amount of time.
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(c) PURCHASER STATUS. At the time such Purchaser was offered the
Debentures and the Warrant, it was, and at the date hereof it is, and at each
exercise date under the Warrant, it will be, an "accredited investor" as defined
in Rule 501(a) under the Securities Act.
(d) EXPERIENCE OF THE PURCHASER. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment.
(e) ABILITY OF THE PURCHASER TO BEAR RISK OF INVESTMENT. Such
Purchaser is able to bear the economic risk of an investment in the Securities
and, at the present time, is able to afford a complete loss of such investment.
(f) ACCESS TO INFORMATION. Such Purchaser acknowledges that it has
reviewed the Disclosure Materials and has been afforded (i) the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained in the Disclosure
Materials. Neither such inquiries nor any other investigation conducted by or on
behalf of such Purchaser or its representatives or counsel shall modify, amend
or affect such Purchaser's right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.
(g) GENERAL SOLICITATION. Such Purchaser is not purchasing the
Securities as a result of or subsequent to any advertisement, article, notice or
other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general advertisement.
(h) RELIANCE. Such Purchaser understands and acknowledges that (i)
the Securities are being offered and sold to it without registration under the
Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and such Purchaser hereby consents to such
reliance.
The Company acknowledges and agrees that each of the
Purchasers makes no representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in this
Section 2.2.
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ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 TRANSFER RESTRICTIONS. (a) Securities may only be disposed of
pursuant to an effective registration statement under the Securities Act, to the
Company or pursuant to an available exemption from or in a transaction not
subject to the registration requirements of the Securities Act. In connection
with any transfer of Securities other than pursuant to an effective registration
statement or to the Company, except as otherwise set forth herein, the Company
may require the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under the
Securities Act. Notwithstanding the foregoing, the Company, without requiring a
legal opinion as described in the immediately preceding sentence, hereby
consents to and agrees to register on the books of the Company and with any
transfer agent for the securities of the Company any transfer of Securities by a
Purchaser to an Affiliate of such Purchaser or to one or more funds or managed
accounts under common management with such Purchaser, and any transfer among any
such Affiliates or one or more funds or managed accounts, provided that the
transferee certifies to the Company that it is an "accredited investor" as
defined in Rule 501(a) under the Securities Act and that it is acquiring the
Securities solely for investment purposes (subject to the qualifications
hereof). Any such transferee shall agree in writing to be bound by the terms of
this Agreement and shall have the rights of a Purchaser under this Agreement and
the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is required
by this Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED WITH
THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.
Underlying Shares shall not contain the legend set forth above nor
any other legend if the conversion of Debentures, the payment of interest
thereon, and exercise of the Warrants or other issuances of Underlying Shares as
contemplated hereby, by the Debentures or the Warrants occurs at any time while
an Underlying Shares Registration Statement is effective under the Securities
Act or, in the event there is not an effective Underlying Shares Registration
Statement, at such time, in the opinion of counsel to the Company, such legend
is not required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the staff of the
Commission). The Company shall cause its counsel to issue the legal opinion
included in the Transfer Agent Instructions to the Company's transfer agent on
the day that the Underlying Shares Registration Statement is declared effective
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by the Commission. The Company agrees that, in the event any Underlying Shares
are issued with a legend in accordance with this Section 3.1(b), it will, within
three (3) Trading Days after request therefor by a Purchaser, provide such
Purchaser with a certificate or certificates representing such Underlying
Shares, free from such legend at such time as such legend would not have been
required under this Section 3.1(b) had such issuance occurred on the date of
such request. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company which enlarge the restrictions
of transfer set forth in this Section. However, the Company may provide
appropriate instructions to any transfer agent of the Company to enforce the
provisions of this Section 3.1(b) when the Underlying Shares Registration
Statement is not effective.
3.2 ACKNOWLEDGMENT OF DILUTION. The Company acknowledges that the
issuance of the Underlying Shares upon (i) conversion of the Debentures and
payment of interest thereon in accordance with the terms of the Debentures, and
(ii) exercise of the Warrants in accordance with their terms, will result in
dilution of the outstanding shares of Common Stock, which dilution may be
substantial under certain market conditions. The Company further acknowledges
that its obligation to issue Underlying Shares upon (x) conversion of the
Debentures and payment of interest thereon in accordance with the terms of the
Debentures, and (y) exercise of the Warrants in accordance with their terms, is
unconditional and absolute, subject to the limitations set forth herein in the
Debentures or pursuant to the Warrants, regardless of the effect of any such
dilution.
3.3 FURNISHING OF INFORMATION. As long as the Purchasers own
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act. As long as the Purchasers own Securities, if
the Company is not required to file reports pursuant to such sections, it will
prepare and furnish to the Purchasers and make publicly available in accordance
with Rule 144(c) promulgated under the Securities Act such information as is
required for the Purchasers to sell the Securities under Rule 144 promulgated
under the Securities Act. The Company further covenants that it will take such
further action as any holder of Securities may reasonably request, all to the
extent required from time to time to enable such Person to sell Underlying
Shares without registration under the Securities Act within the limitation of
the exemptions provided by Rule 144 promulgated under the Securities Act,
including the legal opinion referenced above in this Section. Upon the request
of any such Person, the Company shall deliver to such Person a written
certification of a duly authorized officer as to whether it has complied with
such requirements.
3.4 INTEGRATION. The Company shall not, and shall use its best efforts
to ensure that, no Affiliate of the Company shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers.
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3.5 INCREASE IN AUTHORIZED SHARES. If on any date the Company would
be, if a notice of conversion or exercise (as the case may be) were to be
delivered on such date, precluded from (a) issuing 200% of the number of
Underlying Shares as would then be issuable upon a conversion in full of the
Debentures and as payment of any accrued and unpaid interest in respect thereof
in shares of Common Stock, or (b) issuing the number of Underlying Shares upon
exercise in full of the Warrants (the "CURRENT REQUIRED MINIMUM"), in either
case, due to the unavailability of a sufficient number of authorized but
unissued or reserved shares of Common Stock, then the Board of Directors of the
Company shall promptly (and in any case, within 30 Business Days from such date)
prepare and mail to the stockholders of the Company proxy materials requesting
authorization to amend the Company's Articles of Incorporation to increase the
number of shares of Common Stock which the Company is authorized to issue to at
least such number of shares as reasonably requested by the Purchasers in order
to provide for such number of authorized and unissued shares of Common Stock to
enable the Company to comply with its issuance, conversion exercise and
reservation of shares obligations as set forth in this Agreement, the Debentures
and the Warrants (the sum of (x) the number of shares of Common Stock then
outstanding plus all shares of Common Stock issuable upon exercise of all
outstanding options, warrants and convertible instruments, and (y) the Current
Required Minimum, shall be a reasonable number). In connection therewith, the
Board of Directors shall (a) adopt proper resolutions authorizing such increase,
(b) recommend to and otherwise use its best efforts to promptly and duly obtain
stockholder approval to carry out such resolutions (and hold a special meeting
of the stockholders no later than the 60th day after delivery of the proxy
materials relating to such meeting) and (c) within five (5) Business Days of
obtaining such stockholder authorization, file an appropriate amendment to the
Company's Articles of Incorporation to evidence such increase.
3.6 RESERVATION AND LISTING OF UNDERLYING SHARES. (a) The Company shall
(i) in the time and manner required by NASDAQ and such other exchange, market or
quotation system on which the Common Stock is traded, prepare and file with the
NASDAQ (and such other national securities exchange or market or trading or
quotation facility) an additional shares listing application covering a number
of shares of Common Stock which is not less than the Initial Minimum, (ii) take
all steps necessary to cause such shares of Common Stock to be approved for
listing in the NASDAQ (as well as on any such other national securities exchange
or market or trading or quotation facility on which the Common Stock is then
listed) as soon as possible thereafter, and (iii) provide to the Purchasers
evidence of such listing, and the Company shall maintain the listing of its
Common Stock thereon. If the number of Underlying Shares issuable upon
conversion in full of the then outstanding Debentures, as payment of interest
thereon, and upon exercise of the then unexercised portion of the Warrants
exceeds 85% of the number of Underlying Shares previously listed on account
thereof with NASDAQ (and any such other required exchanges), then the Company
shall take the necessary actions to immediately list a number of Underlying
Shares as equals no less than the then Current Required Minimum.
(b) The Company shall maintain a reserve of shares of Common Stock
for issuance upon conversion of the Debentures and for payment of interest
thereupon in shares of Common Stock and upon exercise in full of the Warrants in
accordance with this Agreement, the Debentures and the Warrants, respectively,
in such amount as may be required to fulfill its obligations in full under the
Transaction Documents, which reserve shall equal no less than the then Current
Required Minimum.
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3.7 CONVERSION AND EXERCISE PROCEDURES. The Transfer Agent
Instructions, Conversion Notice (as defined in EXHIBIT A) and Form of Election
to Purchase under the Warrants set forth the totality of the procedures with
respect to the conversion of the Debentures and exercise of the Warrants,
including the form of legal opinion, if necessary, that shall be rendered to the
Company's transfer agent and such other information and instructions as may be
reasonably necessary to enable the Purchasers to convert their Debentures and
exercise their Warrants as contemplated in the Debentures and the Warrants (as
applicable).
3.8 NOTICE OF BREACHES. Each of the Company and the Purchasers shall
give prompt written notice to the other of any breach by it of any
representation, warranty or other agreement contained in any Transaction
Document, as well as any events or occurrences arising after the date hereof
which would reasonably be likely to cause any representation or warranty or
other agreement of such party, as the case may be, contained therein to be
incorrect or breached as of the Closing Date. However, no disclosure by either
party pursuant to this Section shall be deemed to cure any breach of any
representation, warranty or other agreement contained in any Transaction
Document.
3.9 CONVERSION AND EXERCISE OBLIGATIONS OF THE COMPANY. The Company
shall honor conversions of the Debentures and exercises of the Warrants and
shall deliver Underlying Shares in accordance with the respective terms,
conditions and time periods set forth in the Debentures and the Warrants.
3.10 RIGHT OF FIRST REFUSAL; SUBSEQUENT REGISTRATIONS. (a) The Company
shall not, directly or indirectly, without the prior written consent of the
Purchasers, offer, sell, grant any option to purchase, or otherwise dispose of
(or announce any offer, sale, grant or any option to purchase or other
disposition) any of its or its Affiliates' equity or equity-equivalent
securities (including the issuance of any debt or other instrument is at any
time over life thereof convertible into or exchangeable for Common Stock or any
other transaction intended to be exempt or not subject to registration under the
Securities Act (a "SUBSEQUENT PLACEMENT") for a period of 180 days after the
later to occur of the Effectiveness Date (as defined in the Registration Rights
Agreement) and the date that the Commission first declares effective an
Underlying Shares Registration Statement, except (i) the granting of options or
warrants to employees, consultants, officers and directors, and the issuance of
shares upon exercise of options granted, under any stock option plan heretofore
or hereinafter duly adopted by the Company, (ii) shares of Common Stock issuable
upon exercise of any currently outstanding warrants (including the Class B
Warrants (as defined herein)) and upon conversion of any currently outstanding
convertible securities of the Company, in each case only if such security is
disclosed in SCHEDULE 2.1(c), (iii) shares of Common Stock or Common Stock
Equivalents (as defined in the Debentures) permitted to be issued without giving
rise to an Event of Default under Sections 3(a)(xii) or 3(a)(xiii)(a) of the
Debentures, and (iv) shares of Common Stock issuable upon conversion of
Debentures, as payment of interest thereon and upon exercise of the Warrants in
accordance with the Debentures or the Warrants, respectively, unless (A) the
Company delivers to the Purchasers a written notice (the "SUBSEQUENT PLACEMENT
NOTICE") of its intention effect such Subsequent Placement, which Subsequent
Placement Notice shall describe in reasonable detail the proposed terms of such
Subsequent Placement, the amount of proceeds intended to be raised thereunder,
the Person with whom such Subsequent Placement shall be effected, and attached
to which shall be a term sheet or similar document relating thereto and (B) the
Purchasers shall not have notified the Company by 5:00 p.m. (New York City time)
on the tenth (10th) Trading Day after their receipt of the Subsequent Placement
Notice of their willingness to cause the Purchasers to provide (or to cause its
sole designee to provide), subject to completion of mutually acceptable
documentation, financing to the Company on the same terms set forth in the
Subsequent Placement Notice. If the Purchasers shall fail to notify the Company
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of their intention to enter into such negotiations within such time period, the
Company may effect the Subsequent Placement substantially upon the terms and to
the Persons (or Affiliates of such Persons) set forth in the Subsequent
Placement Notice; PROVIDED, that the Company shall provide the Purchasers with a
second Subsequent Placement Notice, and the Purchasers shall again have the
right of first refusal set forth above in this paragraph (a), if the Subsequent
Placement subject to the initial Subsequent Placement Notice shall not have been
consummated for any reason on the terms set forth in such Subsequent Placement
Notice within thirty (30) Trading Days after the date of the initial Subsequent
Placement Notice with the Person (or an Affiliate of such Person) identified in
the Subsequent Placement Notice. If the Purchasers shall indicate a willingness
to provide financing in excess of the amount set forth in the Subsequent
Placement Notice, then each Purchaser shall be entitled to provide financing
pursuant to such Subsequent Placement Notice up to an amount equal to such
Purchaser's pro rata portion of the aggregate principal amount of Debentures
purchased by the Purchasers under this Agreement, but the Company shall not be
required to accept financing from the Purchasers in an amount in excess of the
amount set forth in the Subsequent Placement Notice.
(b) Except for (x) Underlying Shares, (y) other "Registrable
Securities" (as such term is defined in the Registration Rights Agreement) to be
registered, and securities of the Company permitted pursuant to Schedule 6(b) of
the Registration's Rights Agreement to be registered, in the Underlying Shares
Registration Statement in accordance with the Registration Rights Agreement, and
(z) Common Stock permitted to be issued pursuant to paragraph (a)(i), (ii) and
(iv) of Section 3.10(a), the Company shall not, for a period of not less than 90
Trading Days after the date that the Underlying Shares Registration Statement is
declared effective by the Commission, without the prior written consent of the
Purchasers (i) issue or sell any of its or any of its Affiliates' equity or
equity-equivalent securities pursuant to Regulation S promulgated under the
Securities Act, or (ii) register for resale any securities of the Company. Any
days that a Purchaser is not permitted to sell Underlying Shares under the
Underlying Shares Registration Statement shall be added to such 90 Trading Day
period for the purposes of (i) and (ii) above.
3.11 CERTAIN SECURITIES LAWS DISCLOSURES; PUBLICITY. The Company shall:
(i) on the Closing Date issue a press release acceptable to the Purchasers
disclosing the transactions contemplated hereby, (ii) file with the Commission a
Report on Form 8-K disclosing the transactions contemplated hereby within ten
(10) Business Days after the Closing Date, and (iii) timely file with the
Commission a Form D promulgated under the Securities Act as required under
Regulation D promulgated under the Securities Act and provide a copy thereof to
the Purchasers promptly after the filing thereof. The Company shall, no less
than two (2) Business Days prior to the filing of any disclosure required by
clauses (ii) and (iii) above, provide a copy thereof to the Purchasers. No such
filing or disclosure may be made that mentions the Purchasers by name without
the prior consent of the Purchasers. Such filings shall be subject to Section
4.11 hereof.
3.12 TRANSFER OF INTELLECTUAL PROPERTY RIGHTS. Except in connection
with the sale of all or substantially all of the assets of the Company or
licensing arrangements in the ordinary course of the Company's business, the
Company shall not transfer, sell or otherwise dispose of any Intellectual
Property Rights, or allow any of the Intellectual Property Rights to become
subject to any Liens, or fail to renew such Intellectual Property Rights (if
renewable and it would otherwise lapse if not renewed), without the prior
written consent of the Purchasers.
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3.13 USE OF PROCEEDS. If delivered to the Company in accordance with
the terms of the Robinson Silverman Escrow Agreement, the Company shall use the
net proceeds from the funds delivered to it in accordance with the Robinson
Silverman Escrow Agreement for working capital purposes only and not for the
satisfaction of any Company debt (which, for such purposes, shall include
accounts payable) in excess of $750,000 or to redeem any Company equity or
equity equivalent securities or to pay in excess of $250,000 to settle any
litigation or claim against the Company or any Subsidiary. In accordance with
Section 1.1(b), $2,000,000 of proceeds from the sale of the Securities shall be
deposited on the Closing Date into a special segregated trust account maintained
under the Company's name with the Escrow Agent for such purposes pursuant to the
Escrow Agreement, and shall not be released from such account until permitted in
accordance with the Escrow Agreement. Upon such release, if any, such remaining
net proceeds shall only be used in the manner permitted by the first sentence of
this Section and not for the satisfaction of any portion of Company debt, to
redeem any Company equity or equity-equivalent securities or to pay or settle
any litigation or claim against the Company or any Subsidiary.
3.14 REIMBURSEMENT. If any Purchaser, other than by reason of its gross
negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by or against any Person, including
stockholders of the Company, in connection with or as a result of the
consummation of the transactions contemplated by Transaction Documents, the
Company will reimburse such Purchaser for its reasonable legal and other
expenses (including the cost of any investigation and preparation) incurred in
connection therewith, as such expenses are incurred. In addition, other than
with respect to any matter in which a Purchaser is a named party, the Company
will pay such Purchaser the charges, as reasonably determined by such Purchaser,
for the time of any officers or employees of such Purchaser devoted to appearing
and preparing to appear as witnesses, assisting in preparation for hearings,
trials or pretrial matters, or otherwise with respect to inquiries, hearings,
trials, and other proceedings relating to the subject matter of this Agreement.
The reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliates of the Purchasers who are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and controlling persons (if any), as the case may
be, of the Purchasers and any such Affiliate, and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company in connection with or as a result of the consummation of
the Transaction Documents except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Company result from the gross negligence
or willful misconduct of the applicable Purchaser or entity in connection with
the transactions contemplated by this Agreement.
3.15 FORM S-3 ELIGIBILITY. The Company use its best efforts to, become
eligible to register for resale its securities pursuant to Form S-3 promulgated
under the Securities Act no later than August 22, 1999.
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3.16 CERTAIN TRADING RESTRICTIONS. The Purchasers will not enter into
any Short Sales (as hereinafter defined) at a price below the Initial Conversion
Price (as defined in the Debentures), PROVIDED, that the limitations set forth
in this Section shall cease to be in effect on the date that an Underlying
Shares Registration Statement is first declared effective by the Commission or
if, by the Effectiveness Date, the Underlying Shares Registration Statement has
not been declared effective by the Commission and, thereafter, shall resume on
the date, if any, the Underlying Shares Registration Statement is declared
effective by the Commission. For purposes of this Section, a "Short Sale" by a
Purchaser shall mean a sale of Common Stock by such Purchaser that is marked as
a short sale and that is made at a time when there is no equivalent offsetting
long position in Common Stock held by such Purchaser. For purposes of
determining whether there is an equivalent offsetting long position in Common
Stock held by a Purchaser, Underlying Shares that have not yet been issued but
for which the Company has received a Conversion Notice (with respect to
Debentures) or Form of Election to Purchase (with respect to Warrants), as the
case may be, shall be deemed held long by a Purchaser.
3.17 CERTAIN FUTURE ACTIONS. Subject to compliance with the Transaction
Documents relating thereto, the Company is expressly permitted to (i) lower the
exercise price of its Class B Warrants, entitling the holders thereof to
purchase an aggregate of 7,592,460 shares of Common Stock (the "CLASS B
WARRANTS") and (ii) issue up to 2,250,000 shares of Common Stock in satisfaction
of the litigation described in SCHEDULE 2.1(g) hereto.
3.18 RIGHTS PLAN. The Company may not claim or enforce any claims that
any Purchaser is (or that the Purchasers taken collectively are) an "Acquiring
Person" under the Company's Shareholders Rights Agreement, dated as of March
1998 (or any amendment thereto) (the "RIGHTS PLAN"), by virtue of its purchase
or beneficial ownership of Securities.
3.19 CONTINUED OWNERSHIP OF THE OPHTHALMIC SHARES. So long as the
security interests granted to the Purchasers under the Security Agreement and
the IP Security Agreement shall be in effect the Company shall not without the
prior written consent of the Purchasers pledge, sell, transfer, or assign or
otherwise dispose of the Ophthalmic Shares.
ARTICLE IV
MISCELLANEOUS
4.1 FEES AND EXPENSES. At the Closing the Company shall reimburse the
Purchasers for their legal fees and expenses incurred in connection with the
preparation and negotiation of the Transaction Documents by paying to Robinson
Silverman (i) $25,000 for the preparation and negotiation of the Transaction
Documents and (ii) $5,000 for due diligence expenses. Such sums shall be
deducted from the funds deposited by the Purchasers in accordance with the
Robinson Silverman Escrow Agreement and shall be retained by Robinson Silverman
and deducted from the amounts, if any, to be delivered to the Company in
accordance with the Robinson Silverman Escrow Agreement. Other than the amounts
contemplated in the immediately preceding sentence, and except as otherwise set
forth in the Registration Rights Agreement, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all stamp and other taxes and duties levied in connection with the
issuance of the Securities.
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4.2 ENTIRE AGREEMENT; AMENDMENTS. The Transaction Documents, together
with the Exhibits and Schedules thereto, and the Transfer Agent Instructions
contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters, which the parties acknowledge have been
merged into such documents, exhibits and schedules.
4.3 NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 6:30 p.m. (New York City
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Agreement later than 6:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) the Business Day following the date of mailing, if sent by nationally
recognized overnight courier service, or (iv) upon actual receipt by the party
to whom such notice is required to be given. The address for such notices and
communications shall be as follows:
If to the Company: Premier Laser Systems, Inc.
3 Morgan
Irvine, CA 92618
Facsimile No.: (949) 859-5241
Attn: Chief Financial Officer
With copies to: Rutan & Tucker, LLP
611 Anton Boulevard, 14th floor
Costa Mesa, CA 92626-1998
Facsimile No.: (714) 546-9035
Attn: Thomas G. Brockington, Esq.
If to a Purchaser: To the address
set forth under such
Purchaser's name on the
signature pages hereto.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
4.4 AMENDMENTS; WAIVERS. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and each of the Purchasers or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or require ment of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
4.5 HEADINGS. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
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4.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Except as set forth in
Section 3.1(a), the Purchasers may not assign this Agreement or any of the
rights or obligations hereunder without the consent of the Company. This
provision shall not limit each Purchaser's right to transfer securities or
transfer or assign rights under the Registration Rights Agreement.
4.7 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
4.8 GOVERNING LAW. The corporate laws of the State of California shall
govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
4.9 SURVIVAL. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery and conversion or
exercise (as the case may be) of the Debentures and the Warrants.
4.10 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
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4.11 PUBLICITY. The Company and the Purchasers shall consult with each
other in issuing any press releases or otherwise making public statements or
filings and other communications with the Commission or any regulatory agency or
stock market or trading facility with respect to the transactions contemplated
hereby and neither party shall issue any such press release or otherwise make
any such public statement, filings or other communications without the prior
written consent of the other, which consent shall not be unreasonably withheld
or delayed, except that no prior consent shall be required if such disclosure is
required by law, in which such case the disclosing party shall provide the other
party with prior notice of such public statement, filing or other communication.
Notwithstanding the foregoing, the Company shall not publicly disclose the names
of the Purchasers, or include the names of the Purchasers in any filing with the
Commission, or any regulatory agency, trading facility or stock market without
the prior written consent of the Purchasers, except to the extent such
disclosure (but not any disclosure as to the controlling Persons thereof) is
required by law, in which case the Company shall provide the Purchasers with
prior notice of such disclosure.
4.12 SEVERABILITY. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
4.13 REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers will be entitled to specific performance of the obligations of the
Company under the Transaction Documents. The Company and each of the Purchasers
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of its obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be adequate.
-19-
4.14 INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of any other Purchaser hereunder, and neither Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement or out of the
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
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SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this
Secured Convertible Debenture Purchase Agreement to be duly executed by their
respective authorized signatories as of the date first indicated above.
PREMIER LASER SYSTEMS, INC.
By: /S/ COLETTE COZEAN
--------------------------------
Name: Colette Cozean
Title: CEO
STRONG RIVER INVESTMENTS, INC.
By: /S/ KENNETH L. HENDERSON
-------------------------------
Kenneth L. Henderson
Attorney-in
Address for Notice:
Strong River Investments, Inc.
c/o Cavallo Capital Corp.
630 Fifth Avenue, Suite 2000
New York, NY 10111
Facsimile No.: (212) 332-3256
Attn: Avi Vigder
Debentures Purchase Price: $2,000,000
HERKIMER LLC
By: /S/ L. FAMINGON /S/ JUDITH PATRICK
-----------------------------------
Name: CTC Corporation Ltd.
Title: Director
Address for Notice:
c/o Citco Trustees (Cayman) Limited
Commercial Centre
P.O. Box 31106 SMB
Grand Cayman
Cayman Islands
British West Indies
Facsimile No.: (345) 945-7566
with a copy to: Southridge Capital Management LLC
Executive Pavillon
20 Grove Street
Ridgefield, CT 06877
Facsimile No.: (203) 431-8301
Debentures Purchase Price: $2,000,000
With copies for
communications to
any Purchaser to: Robinson Silverman Pearce Aronsohn &
Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630
Attn: Kenneth L. Henderson, Esq.
Eric L. Cohen. Esq.
SCHEDULE 2.1(a) TO SECURED CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
SUBSIDIARIES
- ------------
1. EyeSys - Premier Inc., a Delaware corporation.
100% owned
2. CRS U.S.A., Inc., a California mutual benefit nonprofit corporation
(Premier Laser Systems, Inc. is the sole member.)
3. Data.Site, LLC, a California limited liability company
(51% owned by Premier Laser Systems, Inc., now in the process of being
shut down).
4. Ophthalmic Imaging Systems, a California corporation (51% owned by
Premier Laser Systems, Inc.)
Schedule 2.1(c) to Secured Convertible Debenture Purchase Agreement
OUTSTANDING OR RESERVED
-----------------------
1. Class A Common Stock Outstanding (35,600,000 14, 961,436
shares authorized)
2. Class A Common Stock Reserved for class action 2,250,000
settlement
3. Class E-1 Common Stock Outstanding (2,200,000 shares 1,257,461
authorized)
4. Class E-2 Common Stock Outstanding (2,200,000 shares 1,257,461
authorized
5. Class B Warrants 7,591,760
6. Other Warrants and Options(1) 4,094,522
7. Rights(2) 1 per share of
Common Stock
8. Blank check Preferred Stock (8,850,000 shares 0(3)
authorized)
- --------
(1) Outstanding at December 31, 1998. Expire between March 2003 and March 2007,
having exercise prices of from $1.00 to $11.06.
(2) Issued under Shareholder Rights Plan.
(3) Class C Preferred shares authorized under Rights Plan.
SCHEDULE 2.1(g) TO SECURED CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
LITIGATION
- ----------
1. PREMIER LASER SYSTEMS, INC. SECURITIES LITIGATION (including derivative
claims). United States District Court, Central District of California, Master
file No. SACV-98-388-AHS (EEx); and ESKELAND V. COZEAN, ET AL., Orange County,
California Superior Court Case No. 797326.
2. FRONTENAC VI LIMITED PARTNERSHIP, ET AL. V. PREMIER LASER SYSTEMS, INC.
United States District Court Case No. CV 98-7880 CBM (ANx). (Dispute with former
shareholders of EyeSys Technologies, Inc., related to securities class action).
3. Litigation against Infrared Fiber Systems, Inc., Coherent, Inc. and
Westinghouse (as described in Item 3 to Premier Laser Systems Form 10-K for the
year ended March 31, 1998).
4. Premier's majority owned subsidiary, Ophthalmic Imaging Systems, Inc. is
engaged in litigation in the Sacramento County, California Superior Court,
brought by a former employee who alleges he was wrongfully terminated.
5. TELEPHONE REAL ESTATE EQUITY TRUST INC. V. EYESYS TECHNOLOGIES, INC.,
District Court of Harris County, Texas. Lessor of property formerly occupied by
EyeSys Technologies, Inc. claims that EyeSys owes amounts in excess of $100,000
as a result of abandonment of leasehold premises.
6. STOTHERS V. EYESYS TECHNOLOGIES, INC., Harris County, Texas State Court,
Cause No. 96- 15283.
Plaintiff claims Defendant EyeSys Technologies, Inc. failed to protect
Plaintiff, a business invitee, in that Defendant failed to exercise
ordinary care to protect Plaintiff from danger either by adequately
warning Plaintiff of the condition or making that condition reasonably
safe.
7. BRITESMILE, INC., A UTAH CORPORATION, PLAINTIFF, V. INTERDENT, INC., A
CALIFORNIA CORPORATION, PREMIER LASER SYSTEMS, INC. A CALIFORNIA CORPORATION.
This is a patent infringement case filed 09/22/97 regarding a laser
method for bleaching teeth.
8. Securities and Exchange Commission investigation into accounting practices,
commenced May-June 1998.
SCHEDULE 2.1(j) TO SECURED CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
DELINQUENT REPORTS
- ------------------
1. Annual report on Form 10-K for the fiscal year ended March 31, 1998, due June
29, 1998, filed August 31, 1998.
2. Quarterly Report for the Quarter ended December 31, 1997, filed (amended)
August 31, 1997.
SCHEDULE 2.1(q) TO SECURED CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
NOTICES RE COMPLIANCE WITH NASDAQ RULES
- ---------------------------------------
1. Letter from NASDAQ Stock Market dated June 23, 1998.