UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) September 30, 2005
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Diomed Holdings, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 000-32045 84-1480636
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(State or Other Jurisdiction of (Commission (I.R.S. Employer
Incorporation) File Number) Identification No.)
1 Dundee Park, Andover, Massachusetts 01810
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(Address of Principal Executive Offices) (Zip Code)
(978) 475-7771
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01. ENTRY INTO MATERIAL DEFINITIVE AGREEMENTS.
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On September 30, 2005, the Company entered into definitive agreements
for the sale and issuance of shares of the Company's preferred stock, par value
$0.001 per share (the "Preferred Stock"), and warrants (the "Warrants") to
purchase the Company's common stock, par value $0.001 per share (the "Common
Stock") to certain accredited investors (the "Investors") in a private placement
financing transaction. On that same day, the Company completed the sale of 4
million shares of Preferred Stock and Warrants to purchase up to 1.6 million
shares of Common Stock to the Investors, and received gross proceeds of $10
million. The Company will use the proceeds for its general working capital
purposes.
The terms and conditions of the Preferred Stock are described below
and in Items 3.02 and 3.03 of this Current Report. The terms and conditions of
the Warrants are described below and under Item 3.02 of this Current Report.
The material agreements that the Company entered into in connection
with this transaction are described below:
Securities Purchase Agreement
On September 30, 2005, the Company entered into a Securities
Purchase Agreement with the Investors, under which the Company issued and sold
to the Investors 4 million shares of Preferred Stock at a purchase price of
$2.50 per share. The Company received aggregate gross proceeds of $10 million
from the sale of these shares. In addition, the Company issued to the Investors
Warrants to purchase an aggregate of 1.6 million shares of Common Stock with an
exercise price of $2.50 per share (subject to adjustment as provided in the
Warrants).
The Securities Purchase Agreement provides that shares of the
Preferred Stock are exchangeable for shares of Common Stock, as more fully
described in a separate Share Exchange Agreement. Preferred Stock is
exchangeable for Common Stock initially on a share-for-share basis. However, the
exchange rate may decrease under antidilution provisions of the Share Exchange
Agreement, which would result in the issuance of a higher number of shares of
Common Stock upon exchange of shares of Preferred Stock.
The Company is obligated to register for resale in a registration
statement to be filed with the Commission the shares of Common Stock into which
the Preferred Stock may be exchanged and the Common Stock issuable upon exercise
of the Warrants. The Company and the Investors entered into a Registration
Rights Agreement specifying the terms and conditions upon which the Company will
register these shares of Common Stock.
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The Securities Purchase Agreement provides for a number of covenants
of the Company and the Investor. Among these, the Company is to provide access
to certain information if so requested by an Investor, and the Investors have
the right to designate a board observer, who will have access to certain
meetings of the Company's board of directors, in each case subject to
appropriate confidentiality agreements. In addition, the Investors agreed that
they will not be able to exchange Preferred Stock for Common Stock or exercise
their Warrants to the extent that such exchange or exercise by an Investor would
cause that Investor to beneficially own more than a certain percentage of the
Company's Common Stock. Depending on the Investor, this limitation on ownership
is either 4.99% or 9.99%. However, each Investor may opt out of its limitation
on ownership restriction by providing prior notice to the Company.
A copy of the form of Securities Purchase Agreement is attached hereto
as Exhibit 10.1, a copy of the form of Share Exchange Agreement is attached
hereto as Exhibit 10.2, a copy of the form of the Warrant is attached hereto as
Exhibit 10.3, a copy of the form of Registration Rights Agreement is attached
hereto as Exhibit 10.4 and a copy of the Certificate of Designations for the
Preferred Stock is attached hereto as Exhibits 10.5. Each of these documents is
hereby incorporated by reference into this Current Report on Form 8-K.
Share Exchange Agreement
In connection with the Securities Purchase Agreement, the Company
entered into a Share Exchange Agreement, dated September 30, 2005, among the
Company and the Investors. Under the Share Exchange Agreement, the Investors may
exchange shares of Preferred Stock for shares of Common Stock. Each share of
Preferred Stock may be exchanged for that number of shares of Common Stock that
equals the issue price of the Preferred Stock ($2.50) divided by an exchange
rate, initially set at $2.50 and subject to reduction in the case of dilutive
issuances.
The antidilution adjustment provides that if the Company sells Common
Stock (or the rights to acquire Common Stock) for a price lower than the
then-current exchange rate, the exchange rate will be reduced to the amount paid
for the shares of Common Stock (or the rights to acquire Common Stock) issued by
the Company at such lower price, subject to a floor of $2.17, unless the
stockholders of the Company approve the elimination of the floor price. The
Company agreed to propose to its stockholders that the floor price be
eliminated. If the stockholders approve this proposal and the Company makes a
dilutive issuance, then the exchange rate for the Preferred Stock may be
decreased, first to the floor price, then to the weighted average price of the
securities issued after giving effect to the dilutive issuance.
The Company will pay liquidated damages to the Investors if the Company
fails to comply with an Investor's request to exchange Preferred Stock for
Common Stock, if the registration statement covering the Common Stock underlying
the Preferred Stock and the Warrants is not declared effective by the Commission
within 120 days of the September 30, 2005 closing date (or, after being declared
effective by the Commission, is unavailable to the Investors for the resale of
their Common Stock) or if the Common Stock is suspended from trading or is not
listed on an exchange. The liquidated damages will be equal to 3% per month of
the aggregate purchase price paid by Investors for the Preferred Stock that may
be exchanged under the Share Exchange Agreement.
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If certain redemption events set forth in the Share Exchange Agreement
occur, the Investors have the right to redeem their shares of Preferred Stock
for cash at a 20% redemption premium over the issue price. These events include
those events entitling the Investors to receive liquidated damages if not
remedied during applicable cure periods, and in addition the failure to remove
restrictive legends upon an Investor's request when permitted under applicable
law, the Company's announcement that it intends not to issue Common Stock in
exchange for Preferred Stock, bankruptcy events, a default under indebtedness of
the Company or one of the Company's material agreements or a concentration of
ownership of the Company's capital stock of 35% which continues for 30 days.
After five years, the Company also has the right to redeem the Preferred Stock
at a 20% premium over the issue price.
Registration Rights Agreement
In connection with the Securities Purchase Agreement and the Share
Exchange Agreement, the Company also entered into a registration rights
agreement, dated September 30, 2005, among the Company and the Investors.
Pursuant to the Registration Rights Agreement, the Company has agreed to file a
Form SB-2 registration statement with the Commission covering the shares of
Common Stock that are issuable upon exchange under the Share Exchange Agreement
and the Common Stock that is issuable upon exercise of the Warrants. The Company
agreed to file the registration statement within 45 days of the date of the
Registration Rights Agreement, and to use its best efforts to cause the
registration statement to be declared effective within 120 days of the closing
date of the purchase and sale of the Preferred Stock and the Warrants.
The Investors have the right to liquidated damages if the registration
statement is not filed by the 45th day following the closing date, is not
declared effective within 120 days of the closing date, does not remain
effective for any 20 consecutive days or 30 aggregate days during any 12 month
period or if the Common Stock does not remain listed on an applicable stock
exchange. If any of the foregoing occurs, the Company will pay each Investor
liquidated damages for the period from and including the date on which such
event occurred until the event is cured, at a rate per month equal to 3% of the
original purchase price of the securities purchased under the Securities
Purchase Agreement (prorated for partial months based on the number of days in
the month).
The Company has agreed to pay all fees and expenses related to the
registration statement. Additionally, the Company has agreed to indemnify all
holders of securities that are able to be registered under the registration
statement for any losses incurred by those persons that are related to the
registration statement.
Engagement of Placement Agents
The Company engaged Roth Capital Partners, LLC and Musket Research
Associates, Inc. as its placement agents in connection with this private
placement transaction. Under its agreements with the placement agents, the
Company will pay, in cash, fees of 5% of the gross proceeds of the financing,
or, $500,000 (in the aggregate). A copy of the form of the Company's agreement
with Roth Capital Partners is included as Exhibit 10.6 to this Current Report
and a copy of the form of the Company's agreement with Musket Research
Associates is included as Exhibit 10.7 to this Current Report, each of which are
hereby incorporated by reference into this Current Report.
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ITEM 3.02. UNREGISTERED SALES OF EQUITY SECURITIES.
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As described above, on September 30, 2005, the Company entered into
definitive agreements for the sale and issuance of Preferred Stock and Warrants
to purchase Common Stock to certain accredited investors in a private placement
financing transaction. On that same day, the Company completed the sale of 4
million shares of Preferred Stock and Warrants to purchase up to 1.6 million
shares of Common Stock, from which the Company received gross proceeds of $10
million. The Company will use the proceeds for its general working capital
purposes.
As noted under Item 1.01 of this Current Report, the Company engaged
Roth Capital Partners, LLC and Musket Research Associates, Inc. as its placement
agents in connection with this transaction. The Company will pay a total of
$500,000 in fees to these placement agents.
The names of the Investors and the amount invested, number of shares of
Preferred Stock purchased and the number shares of Common Stock underlying
Warrants issued by the Company to each Investor are as follows:
Shares
(Preferred)
Investor Amount Issued at Warrant
Invested Closing Shares
ProMed Partners, L.P. $360,000 144,000 57,600
ProMed Partners II, L.P. $90,000 36,000 14,400
ProMed Offshore Fund, Ltd. $60,000 24,000 9,600
ProMed Offshore Fund II, Ltd. $1,490,000 596,000 238,400
Advantage Advisors Catalyst Partners L.P. $105,000 42,000 16,800
Advantage Advisors Catalyst Intl. Ltd. $75,000 30,000 12,000
Ridgecrest Partners Ltd. $60,000 24,000 9,600
Ridgecrest Partners L.P. $10,000 4,000 1,600
Ridgecrest Partners QP, L.P. $250,000 100,000 40,000
Lagunitas Partners LP $1,300,000 520,000 208,000
Gruber & McBaine International $400,000 160,000 64,000
Jon D. and Linda W. Gruber Trust $150,000 60,000 24,000
J. Patterson McBaine $150,000 60,000 24,000
Broadfin Healthcare Fund LP $150,000 60,000 24,000
Alpha Capital $300,000 120,000 48,000
Fractal Holdings, LLC $50,000 20,000 8,000
North Sound Legacy International Ltd. $3,600,000 1,440,000 576,000
North Sound Legacy Institutional Fund LLC $1,400,000 560,000 224,000
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Total $10,000,000 4,000,000 1,600,000
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In addition to the Warrants issued to the Investors, the Company also
issued Warrants to purchase up to 200,000 shares of Common Stock to the three
holders of the Company's Variable Rate Convertible Debentures due 2008 (the
"Debentures") as an inducement to, and in consideration for, the Debenture
holders' waiver of certain negative covenants that the Company had made in
connection with the Debentures. The waiver relates to the Company's agreement to
redeem the Preferred Stock in those instances where redemption is permitted
under the Share Exchange Agreement, described above in Section 1.01 of this
Current Report. The Warrants issued to the holders of the Debentures have the
same terms as those issued to the Investors. The identities of the three holders
of Debentures and the number of shares of Common Stock underlying the Warrants
issued to them are as follows:
Debenture Holder Warrant
Shares
Omicron Master Trust 119,181
Iroquois Capital LP 26,940
Cranshire Capital, LP 53,879
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Total 200,000
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A copy of the form of Waiver by the Debenture holders is included as
Exhibit 10.8 to this Current Report and is hereby incorporated by reference into
this Current Report.
The Preferred Stock and Warrants issued in this private placement
financing transaction were issued without registration with the Commission,
pursuant to Section 4(2) of the Securities Act of 1933, as amended, and Rule 506
promulgated thereunder. This exemption is applicable to the transaction because
the Company did not make any public offer to sell the securities. Rather, the
Company only accepted offers to purchase the securities from persons known by
the Company or its placement agents to be accredited investors and only sold
securities to persons who represented to the Company in writing that they are
accredited investors.
The Warrants are exercisable for five years from the date of listing of
the underlying shares of Common Stock with the American Stock Exchange at an
exercise price of $2.50 per share, subject to reduction in the case of dilutive
issuances. The antidilution adjustment provides that if the Company sells Common
Stock (or the rights to acquire Common Stock) for a price lower than the
then-current exercise price, the exercise price will be reduced to the amount
paid for the shares of Common Stock (or the rights to acquire Common Stock)
issued by the Company at such lower price, subject to a floor of $2.12, unless
the stockholders of the Company approve the elimination of the floor price. The
Company agreed to propose to its stockholders that the floor price be
eliminated. If the stockholders approve this proposal and the Company makes a
dilutive issuance, then the exercise price of the Warrants may be decreased,
first to the floor price, then to the weighted average price of the securities
issued after giving effect to the dilutive issuance. If the exercise price of
the Warrants is so adjusted, then there will concurrently be an adjustment to
the number of shares for which the Warrant will be exercisable, by dividing the
product of the former exercise price multiplied by the number of shares
underlying the Warrant by the adjusted exercise price.
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In addition, the holders of the Warrant may exercise their Warrants
by means of a "cashless exercise" at a formula set forth in the form of Warrant
instead of paying cash to the Company upon exercise, in which case the purchase
price otherwise payable in cash by the holder will be paid by crediting the
holder for the excess of the market value of the Common Stock at the time of
exercise over the exercise price of the stock.
Further Information
The full terms and conditions of the financing are set forth in the
Securities Purchase Agreement for the Preferred Stock and Warrants, the Share
Exchange Agreement for the Preferred Stock, the Warrant, the Registration Rights
Agreement and the Certificate of Designations, forms of each of which are filed
as exhibits to this Current Report and are incorporated herein by reference. For
a further summary of the material terms of this financing, see Item 1.01 of this
Current Report on Form 8-K.
The Company also issued a press release relating to the financing
transaction on October 3, 2005, which is filed as an Exhibit 99.1 to this
Current Report and is hereby incorporated by reference into this Current Report.
ITEM 3.03. MATERIAL MODIFICATIONS TO RIGHTS OF SECURITY HOLDERS.
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The Company's board of directors has the authority to issue up to 20
million shares of Preferred Stock. On September 30, 2005, the Company filed a
Certificate of Designations of Preferred Stock (the "Certificate of
Designations") with the Secretary of State of the State of Delaware, designating
the rights and preferences of 4.2 million shares of preferred stock for issuance
in the September 30, 2005 private placement transaction. The following is a
description of the material terms of the Preferred Stock:
o Dividends. The holders of outstanding shares of Preferred Stock are
entitled to cumulative annual dividends at the rate of: (i) 6%, for
the first 18 months following the initial sale of Preferred Stock
under the Securities Purchase Agreement (as described in Item 1.01
herein), (ii) 10% from the 19th through the 24th month following the
initial sale of Preferred Stock under the Securities Purchase
Agreement and (iii) 15% after the 24th month following the initial
sale of Preferred Stock under the Securities Purchase Agreement. The
dividends shall accrue from day-to-day on each share of Preferred
Stock, whether or not earned or declared, and shall accrue until
paid. The Company may pay the dividends with either cash or shares
of Common Stock. The dividends will not accrue on any days where the
volume weighted average price of the Common Stock for the 30 prior
trading days equals or exceeds $6.25, so long as the shares of
Common Stock for which the Preferred Stock may be exchanged under
the Share Exchange Agreement are subject to an effective
registration statement, the shares of Common Stock for which the
Preferred Stock may be exchanged and the Common Stock underlying
Warrants is authorized and reserved for issuance and listed on a
trading market, none of the events giving rise to an Investor's
right to redeem the Preferred Stock under the Share Exchange
Agreement shall have occurred and not been cured and the Company
does not owe the Investors more than $15,000, in the aggregate,
under the transaction documents for the private placement financing.
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o Voting. Each holder of Preferred Stock is entitled to one vote per
share of issued and outstanding Preferred Stock owned by such holder
on the record date for the determination of stockholders entitled to
vote, and the holders of the Preferred Stock and the Common Stock
shall vote together as a single class (except where the Delaware
General Corporation Law provides that a separate vote of the holders
of Preferred Stock is required for approval of certain matters, in
which case a majority of the shares of Preferred Stock outstanding
shall be required for approval).
o Liquidation. The Preferred Stock is preferred over the Common Stock,
and any class or series of capital stock that the Company's board of
directors may create in the future, as to the assets of the Company
available for distribution to the stockholders in the event of the
liquidation, dissolution or winding up of the Company, the sale of
all or substantially all of the assets of the Company or the merger
or consolidation of the Company with another entity that results in
either the stockholders of the Company having less than 50% of the
outstanding voting securities of the successor company in the merger
or combination transaction or the members of the board of directors
of the Company constituting 50% or less than the members of the
board of directors of the successor company in the merger. Upon the
occurrence of one of the transactions listed above, the holders of
Preferred Stockholders are to receive, before any distribution or
payment is made to any holders of Common Stock, the greater of: (i)
$3.00 per share of Preferred Stock, plus all accrued and unpaid
dividends thereon, and (ii) such amount per share of Preferred Stock
that would have been payable had each share of Preferred Stock been
tendered in exchange for Common Stock immediately prior to the
transaction.
ITEM 5.03. AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN
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FISCAL YEAR.
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As described in Item 3.03 of this Current Report, on September 30,
2005, the Company filed a Certificate of Designation containing the terms of the
Preferred Stock issued pursuant to the Securities Purchase Agreement described
in Item 1.01 above.
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ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
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10.1 Form of Securities Purchase Agreement, dated September 30,
2005, by and among the Company and the Investors
10.2 Form of Share Exchange Agreement, dated September 30, 2005,
between the Company and the Investors
10.3 Form of Warrant, dated as of September 30, 2005, by the
Company in favor of the Investors and the Debenture Holders
10.4 Form of Registration Rights Agreement, dated September 30,
2005, by and among the Company and the Investors
10.5 Certificate of Designations of Preferred Stock, filed
September 30, 2005
10.6 Form of Engagement Letter between the Company and Roth Capital
Partners LLC
10.7 Form of Engagement Letter between the Company and Musket
Research Advisors, Inc.
10.8 Form of Waiver of Negative Covenants by Holders of Debentures
99.1 Press Release, dated October 3, 2005, regarding private
placement financing
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Diomed Holdings, Inc.
(Registrant)
Date: October 4, 2005 By: /s/ James A. Wylie, Jr.
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Name: James A. Wylie, Jr.
Title: President and Chief Executive Officer
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List of Exhibits:
10.1 Form of Securities Purchase Agreement, dated September 30,
2005, by and among the Company and the Investors
10.2 Form of Share Exchange Agreement, dated September 30, 2005,
between the Company and the Investors
10.3 Form of Warrant, dated as of September 30, 2005, by the
Company in favor of the Investors and the Debenture Holders
10.4 Form of Registration Rights Agreement, dated September 30,
2005, by and among the Company and the Investors
10.5 Certificate of Designations of Preferred Stock, filed
September 30, 2005
10.6 Form of Engagement Letter between the Company and Roth Capital
Partners LLC
10.7 Form of Engagement Letter between the Company and Musket
Research Advisors, Inc.
10.8 Form of Waiver of Negative Covenants by Holders of Debentures
99.1 Press Release, dated October 3, 2005, regarding private
placement financing
11