EXHIBIT 10.10 - NOTE AND WARRANT PURCHASE AGREEMENT
CANDELA CORPORATION
Note and Warrant Purchase Agreement
Dated as of October 15, 1998
CANDELA CORPORATION
Note and Warrant Purchase Agreement
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Dated as of October 15, 1998
INDEX
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ARTICLE I.................................................................................................1
PURCHASE, SALE AND TERMS OF NOTES AND WARRANTS.........................................................1
1.01. The Notes....................................................................................1
1.02. The Warrants.................................................................................1
1.03. Purchase and Sale of Notes and Warrants......................................................1
(a) The Closing..................................................................................1
(b) Allocation of Purchase Price.................................................................2
(c) Use of Proceeds..............................................................................2
1.04. Payments and Endorsements....................................................................2
1.05. Redemptions of Notes.........................................................................2
(a) Required Redemptions.........................................................................2
(b) Optional Redemptions With and Without Premium................................................2
(c) Notice of Redemptions; Pro Rata Redemptions..................................................2
1.06. Payment on Non-Business Days.................................................................3
1.07. Registration, etc............................................................................3
1.08. Transfer and Exchange of Notes...............................................................3
1.09. Replacement of Notes.........................................................................3
1.10. Subordination................................................................................3
(a) Payment of Senior Debt.......................................................................4
(b) No Payment on Notes Under Certain Conditions.................................................4
(c) Payments Held in Trust.......................................................................4
(d) Subrogation..................................................................................4
(e) Scope of Section.............................................................................4
(f) Survival of Rights...........................................................................5
(g) Amendment or Waiver..........................................................................5
(h) Senior Debt Defined..........................................................................5
1.11. Representations by the Purchasers............................................................5
1.12. Disclosure of Information by the Purchasers..................................................5
ARTICLE II................................................................................................6
CONDITIONS TO PURCHASERS' OBLIGATION....................................................................6
2.01. Representations and Warranties...............................................................6
2.02. Documentation at Closing.....................................................................6
ARTICLE III...............................................................................................7
REPRESENTATIONS AND WARRANTIES.........................................................................7
3.01. Organization and Standing....................................................................7
3.02. Corporate Action.............................................................................7
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3.03. Governmental Approvals.......................................................................7
3.04. Litigation...................................................................................7
3.05. Compliance with Other Instruments............................................................8
3.06. Federal Reserve Regulations..................................................................8
3.07. Title to Assets, Patents.....................................................................8
3.08. Financial Information........................................................................8
3.09. Taxes........................................................................................8
3.10. ERISA........................................................................................9
3.11. Transactions with Affiliates.................................................................9
3.12. Assumptions or Guaranties of Indebtedness of Other Persons...................................9
3.13. Investments in Other Persons.................................................................9
3.14. Equal Employment Opportunity.................................................................9
3.15. Status of Notes and Warrants as Qualified Investments........................................9
3.16. Securities Act..............................................................................10
3.17. Disclosure..................................................................................10
3.18. No Brokers or Finders.......................................................................10
3.19. Other Agreements of Officers................................................................10
3.20. Capitalization; Status of Capital Stock.....................................................10
3.21. Labor Relations.............................................................................10
3.22. Insurance...................................................................................11
3.23. Books and Records...........................................................................11
3.24. Foreign Corrupt Practices Act...............................................................11
ARTICLE IV...............................................................................................11
COVENANTS OF THE COMPANY..............................................................................11
4.01. Affirmative Covenants of the Company........................................................11
(a) Punctual Payment............................................................................11
(b) Payment of Taxes and Trade Debt.............................................................11
(c) Maintenance of Insurance....................................................................11
(d) Preservation of Corporate Existence.........................................................11
(e) Compliance with Laws........................................................................12
(f) Visitation Rights...........................................................................12
(g) Keeping of Records and Books of Account.....................................................12
(h) Maintenance of Properties, etc..............................................................12
(i) Compliance with ERISA.......................................................................12
(j) Maintenance of Debt to Equity Ratio.........................................................12
(k) Maintenance of Net Worth....................................................................12
(l) Maintenance of Profitability................................................................12
(m) Maintenance of Quick Ratio..................................................................12
(n) Foreign Corrupt Practices Act...............................................................13
(o) Equal Employment Opportunity................................................................13
(p) Status of Notes and Warrants as Qualified Investments.......................................13
(q) Attendance at Board Meetings................................................................13
(r) Compliance with Security Agreement..........................................................13
4.02. Negative Covenants of the Company...........................................................13
(ii)
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(a) Liens.......................................................................................13
(b) Indebtedness................................................................................14
(c) Lease Obligations...........................................................................14
(d) Assumptions or Guaranties of Indebtedness of Other Persons..................................14
(e) Mergers, Sale of Assets, etc................................................................15
(f) Investments in Other Persons................................................................15
(g) Distributions...............................................................................15
(h) Dealings with Affiliates....................................................................16
(i) Maintenance of Ownership of Subsidiaries....................................................16
(j) Change in Nature of Business................................................................16
4.03. Reporting Requirements......................................................................16
ARTICLE V................................................................................................17
REGISTRATION RIGHTS...................................................................................17
5.01. "Piggy Back" Registration...................................................................17
5.02. Required Registration.......................................................................17
5.03. Registration on Form S-3....................................................................18
5.04. Effectiveness...............................................................................18
5.05. Indemnification of Holder of Registrable Shares.............................................18
5.06. Indemnification of Company..................................................................18
5.07. Exchange Act Registration...................................................................19
5.08. Damages.....................................................................................19
5.09. Further Obligations of the Company..........................................................19
5.10. Expenses....................................................................................20
5.11. Termination of Registration Rights..........................................................20
ARTICLE VI...............................................................................................20
EVENTS OF DEFAULT.....................................................................................20
6.01. Events of Default...........................................................................20
6.02. Annulment of Defaults.......................................................................22
ARTICLE VII..............................................................................................22
DEFINITIONS AND ACCOUNTING TERMS......................................................................22
7.01. Certain Defined Terms.......................................................................22
7.02. Accounting Terms............................................................................24
ARTICLE VIII.............................................................................................24
MISCELLANEOUS..........................................................................................24
8.01. No Waiver; Cumulative Remedies..............................................................24
8.02. Amendments, Waivers and Consents............................................................24
8.03. Addresses for Notices, etc..................................................................25
8.04. Costs, Expenses and Taxes...................................................................25
8.05. Binding Effect; Assignment..................................................................25
8.06. Survival of Representations and Warranties..................................................25
8.07. Prior Agreements............................................................................25
8.08. Severability................................................................................25
(iii)
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8.09. Governing Law...............................................................................26
8.10. Headings....................................................................................26
8.11. Sealed Instrument...........................................................................26
8.12. Counterparts................................................................................26
8.13. Acknowledgment..............................................................................26
8.14. Further Assurances..........................................................................26
SCHEDULE
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Schedule of Purchasers
EXHIBITS
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1.01 Form of Notes
1.02 Form of Common Stock Purchase Warrant
2.02(a) Form of Security Agreement
2.02(c) Matters to be Covered by Opinion Letter
3.01 Schedule of Subsidiaries
3.05 Schedule of Indebtedness
3.07 Schedule of Mortgages, Pledges, etc.
3.15 Certificate re "Qualified Investments"
3.20 Schedule of Options and Other Rights
(iv)
CANDELA CORPORATION
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
As of October 15, 1998
To the Persons Listed in the
Schedule of Purchasers
Attached Hereto
Re: Notes due 2006 and Common
Stock Purchase Warrants
Gentlemen:
CANDELA CORPORATION, a Delaware corporation (the "Company"), hereby agrees
with each Person listed in the Schedule of Purchasers attached hereto
(individually a "Purchaser" and collectively the "Purchasers") as follows:
ARTICLE I
PURCHASE, SALE AND TERMS OF NOTES AND WARRANTS
1.01. THE NOTES. The Company has authorized the issuance and sale to the
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Purchasers, in the respective amounts set forth in the Schedule of Purchasers
attached hereto, of the Company's Notes, due October 31, 2006, in the original
principal amount of $3,700,000. The Notes shall be substantially in the form set
forth in Exhibit 1.01 hereto and is herein referred to individually as a "Note"
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and collectively as the "Notes", which terms shall also include any notes
delivered in exchange or replacement therefor.
1.02. THE WARRANTS. The Company has also authorized the issuance and sale
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to the Purchasers, in the respective amounts set forth in the Schedule of
Purchasers attached hereto, of the Company's Common Stock Purchase Warrants for
the purchase (subject to adjustment as provided therein) of 370,000 shares of
the Company's Common Stock. The Common Stock Purchaser Warrants shall be
substantially in the form set forth in Exhibit 1.02 hereto and is herein
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referred to individually as a "Warrant" and collectively as the "Warrants,"
which terms shall also include any warrants delivered in exchange or replacement
therefor.
1.03. PURCHASE AND SALE OF NOTES AND WARRANTS.
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(A) THE CLOSING. The Company agrees to issue and sell to the
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Purchasers, and, subject to and in reliance upon the representations,
warranties, terms and conditions of this Agreement, the Purchasers, severally
and not jointly, agree to purchase the Notes and Warrants set forth opposite
their respective names in the Schedule of Purchasers attached hereto for the
aggregate purchase price set forth therein. Such purchase and sale shall take
place at a closing (the "Closing") to be held at the office of ▇▇▇▇▇, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, LLP, High Street Tower, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, on
October 15, 1998 at 2:00 p.m., or on such other date and at such time as may be
mutually agreed upon. At the Closing, the Company will issue and deliver to each
Purchaser (i) one Note, payable to the order of such Purchaser, in the principal
amount set forth opposite such Purchaser's name in the Schedule of Purchasers
attached hereto, and (ii) one Warrant, registered in the name of such Purchaser,
exercisable for that number of shares of Common Stock set forth opposite such
Purchaser's name in the Schedule of Purchasers attached hereto, against delivery
of a check or receipt of a wire transfer in payment of the purchaser price for
the Notes and Warrants to be purchased by such Purchaser.
(B) ALLOCATION OF PURCHASE PRICE. The Company and the Purchasers,
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having adverse interests and as a result of arm's length bargaining, agree that
(i) none of the Purchasers nor any of their partners has rendered or has agreed
to render any services to the Company in connection with this Agreement or the
issuance of the Notes and Warrants; (ii) the Warrants are not being issued as
compensation; and (iii) the fair market value of the Warrants is $44,000. The
Company and the Purchasers recognize that this Agreement determines the original
issue discount to be taken into account with respect to the Notes and they agree
to adhere to this Agreement for such purposes.
(C) USE OF PROCEEDS. The Company agrees to use the full proceeds from
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the sale of the Notes and Warrants for general corporate purposes, including
repayment of indebtedness, payment of outstanding payables and working capital
and agrees that full proceeds from the sale of the Notes and Warrants will be
utilized for purposes which increase or maintain equal opportunity employment in
the Commonwealth of Massachusetts.
1.04. PAYMENTS AND ENDORSEMENTS. Payments of principal, interest and
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premium, if any, on the Notes, shall be made directly by check or wire transfer
to each Purchaser at the address referred to in the Schedule of Purchasers
attached hereto, without any presentment or notation of payment, except that
prior to any transfer of any Note, the holder of record shall endorse on such
Note a record of the date to which interest has been paid and all payments made
on account of principal of such Note.
1.05. REDEMPTIONS OF NOTES.
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(A) REQUIRED REDEMPTIONS. Beginning on and with January 31, 2002, and
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on the last day of April, July, October and January in each year thereafter
through and including October 31, 2006, the Company will redeem, without
premium, $185,000 in principal amount of the Notes, or such lesser amount as may
be then outstanding, together with all accrued and unpaid interest then due on
the amount so redeemed. On the stated or accelerated maturity of the Notes, the
Company will pay the principal amount of the Notes then outstanding together
with all accrued and unpaid interest then due thereon. No optional redemption of
less than all of the Notes shall affect the obligation of the Company to make
the redemptions required by this subsection.
(B) OPTIONAL REDEMPTIONS WITH AND WITHOUT PREMIUM. Except as provided
in subsection 1.05(a) and in addition thereto, the Company may, at its sole
election, at any time on and after November 1, 2001 (no redemptions under this
subsection being permitted prior to that date), redeem the Notes in whole or in
part (in integral multiples of $50,000) together with interest due on the amount
so redeemed through the date of redemption, and a premium equal to the
percentage of the principal amount of the Notes redeemed under this subsection
applicable to the twelve month period in which such redemption is made, as
follows:
12-month period ending Premium
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October 31, 2002 10%
October 31, 2003 8%
October 31, 2004 6%
October 31, 2005 and thereafter 0%
The foregoing provisions of this subsection 1.05(b) to the contrary
notwithstanding, the Company may redeem, without premium, all, but not less than
all, of the Notes then outstanding, together with interest due on the amounts
redeemed through the date of redemption at any time within five (5) days from
the closing of the sale of shares of the Company's Common Stock in which the
purchase price is of at least $10 per share (such amount to be equitably
adjusted in the event of any stock dividend, stock split or consolidation
occurring after the date of this Agreement) and with proceeds to the Company
from such sale of not less than $20,000,000.
(C) NOTICE OF REDEMPTIONS; PRO RATA REDEMPTIONS. Notice of any
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optional redemptions pursuant to subsection 1.05(b) shall be given to all
registered holders of the Notes at least ten (10) business days prior to the
date of such redemption. Each redemption of Notes pursuant to subsections
1.05(a) or (b) shall be made to the holders of the Notes in the same ratio as
the total principal amount of Notes then held by such holder bears to the
aggregate principal amount of the Notes then outstanding.
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1.06. PAYMENT ON NON-BUSINESS DAYS. Whenever any payment to be made shall
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be due on a Saturday, Sunday or a public holiday under the laws of the
Commonwealth of Massachusetts, such payment may be made on the next succeeding
business day, and such extension of time shall in such case be included in the
computation of payment of interest due.
1.07. REGISTRATION, ETC. The Company shall maintain at its principal office
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a register of the Notes and shall record therein the names and addresses of the
registered holders of the Notes, the address to which notices are to be sent and
the address to which payments are to be made as designated by the registered
holder if other than the address of the holder, and the particulars of all
transfers, exchanges and replacements of Notes. No transfer of a Note shall be
valid unless made on such register for the registered holder or his executors or
administrators or his or their duly appointed attorney, upon surrender therefor
for exchange as hereinafter provided, accompanied by an instrument in writing,
in form and execution reasonably satisfactory to the Company. Each Note issued
hereunder, whether originally or upon transfer, exchange or replacement of a
Note or Notes, shall be registered on the date of execution thereof by the
Company and shall be dated the date to which interest has been paid on such
Notes or Note. The registered holder of a Note shall be that Person in whose
name the Note has been so registered by the Company. A registered holder shall
be deemed the owner of a Note for all purposes of this Agreement and, subject to
the provisions hereof, shall be entitled to the principal, premium, if any, and
interest evidenced by such Note free from all equities or rights of setoff or
counterclaim between the Company and the transferor of such registered holder or
any previous registered holder of such Note.
1.08. TRANSFER AND EXCHANGE OF NOTES. Subject to compliance with applicable
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federal and state securities laws, the registered holder of any Note or Notes
may, prior to maturity or prepayment thereof, surrender such Note or Notes at
the principal office of the Company for transfer or exchange. Within a
reasonable time after notice to the Company from a registered holder of its
intention to make such exchange and without expense (other than transfer taxes,
if any) to such registered holder, the Company shall issue in exchange therefor
another Note or Note, in such denominations as requested by the registered
holder, for the same aggregate principal amount as the unpaid principal amount
of the Note or Notes so surrendered, and having the same maturity and rate of
interest, containing the same provisions and subject to the same terms and
conditions as the Note or Notes so surrendered. Each new Note shall be made
payable to such Person or Persons, or registered assigns, as the registered
holder of such surrendered Note or Notes may designate, and such transfer or
exchange shall be made in such a manner that no gain or loss of principal or
interest shall result therefrom.
1.09. REPLACEMENT OF NOTES. Upon receipt of evidence satisfactory to the
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Company of the loss, theft, destruction or mutilation of any Note and, if
requested in the case of any such loss, theft or destruction, upon delivery of
an indemnity bond or other agreement or security reasonably satisfactory to the
Company, or, in the case of any such mutilation, upon surrender and cancellation
of such Note, the Company will issue a new Note, of like tenor and amount and
dated the date to which interest has been paid, in lieu of such lost, stolen,
destroyed or mutilated Note; provided, however, if any Note of which a Purchaser
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whose name is set forth in the Schedule of Purchasers attached hereto, its
nominee, or any of its partners is the registered holder is lost, stolen or
destroyed, the affidavit of the President, Treasurer or any Assistant Treasurer
or any other authorized representative of the registered holder setting forth
the circumstances with respect to such loss, theft or destruction shall be
accepted as satisfactory evidence thereof, and no indemnification bond or other
security shall be required as a condition to the execution and delivery by the
Company of a new Note in replacement of such lost, stolen or destroyed Note
other than the registered holder's written agreement to indemnify the Company.
1.10. SUBORDINATION. The Company, for itself, its successors and assigns,
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covenants and agrees, and each Purchaser and each successor holder of the Notes
by his or its acceptance thereof, likewise covenants and agrees, that
notwithstanding any other provision of this Agreement or the Notes, the payment
of the principal of and interest on each and all of the Notes shall be
subordinated in right of payment, to the extent and in the manner hereinafter
set forth, to the prior payment in full of all Senior Debt (as hereinafter
defined) at any time outstanding. The provisions of this Section 1.10 shall
constitute a continuing representation to all Persons who, in reliance upon such
provisions, become the holders of or continue to hold Senior Debt, and such
provisions are made for the benefit of the holders of Senior Debt, and such
holders are hereby made obligees hereunder the same as if their names were
written herein as such, and they or any of them may proceed to enforce such
provisions against the Company or against the holder of any Note without the
necessity of joining the Company as a party.
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(A) PAYMENT OF SENIOR DEBT. In the event of any insolvency or
----------------------
bankruptcy proceedings, or any receivership, liquidation, reorganization or
other similar proceedings in connection therewith, relative to the Company or to
its property, or, in the event of any proceedings for voluntary liquidation,
dissolution or other winding up of the Company or distribution or marshaling of
its assets or any composition with creditors of the Company, whether or not
involving insolvency or bankruptcy, then and in any such event all Senior Debt
shall be paid in full before any payment or distribution of any character,
whether in cash, securities or other property, shall be made on account of the
Notes; and any such payment or distribution, except securities which are
subordinated and junior in right of payment to the payment of all Senior Debt
then outstanding in terms of substantially the same tenor as this Section 1.10,
which would, but for the provisions hereof, be payable or deliverable in respect
of the Notes shall be paid or delivered directly to the holders of Senior Debt
(or their duly authorized representatives), in the proportions in which they
hold the same, until all Senior Debt shall have been paid in full, and every
holder of the Notes by becoming a holder thereof shall have designated and
appointed the holder or holders of Senior Debt (and their duly authorized
representatives) as his or its agents and attorney-in-fact to demand, ▇▇▇ for,
collect and receive such Senior Debt holder's ratable share of all such payments
and distributions and to file any necessary proof of claim therefor and to take
all such other action in the name of the holders of the Notes or otherwise, as
such Senior Debt holders (or their authorized representatives) may determine to
be necessary or appropriate for the enforcement of this Section 1.10. Each
Purchaser and each successor holder of the Notes by its or his acceptance
thereof agrees to execute, at the request of the Company, a separate agreement
with any holder of Senior Debt on the terms set forth in this Section 1.10, and
to take all such other action as such holder or such holder's representative may
request in order to enable such holder to enforce all claims upon or in respect
of such holder's ratable share of the Notes.
(B) NO PAYMENT ON NOTES UNDER CERTAIN CONDITIONS. In the event that
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any default occurs in the payment of the principal of or interest on any Senior
Debt (whether as a result of the acceleration thereof by the holders of such
Senior Debt or otherwise) and during the continuance of such default for a
period up to ninety (90) days and thereafter if judicial proceedings shall have
been instituted with respect to such defaulted payment, or (if a shorter period)
until such payment has been made or such default has been cured or waived in
writing by such holder of Senior Debt then and during the continuance of such
event no payment of principal or interest on the Notes shall be made by the
Company or accepted by any holder of the Notes who has received notice from the
Company or from a holder of Senior Debt of such events.
(C) PAYMENTS HELD IN TRUST. In case any payment or distribution shall
----------------------
be paid or delivered to any holder of the Notes before all Senior Debt shall
have been paid in full, despite or in violation or contravention of the terms of
this subordination, such payment or distribution shall be held in trust for and
paid and delivered ratably to the holders of Senior Debt (or their duly
authorized representatives), until all Senior Debt shall have been paid in full.
(D) SUBROGATION. Subject to the payment in full of all Senior Debt
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and until the Notes shall be paid in full, the holders of the Notes shall be
subrogated to the rights of the holders of Senior Debt (to the extent of
payments or distributions previously made to such holders of Senior Debt
pursuant to the provisions of subsections (a) and (c) of this Section 1.10) to
receive payments or distributions of assets of the Company applicable to the
Senior Debt. No such payments or distributions applicable to the Senior Debt
shall, as between the Company and its creditors, other than the holders of
Senior Debt and the holders of the Notes, be deemed to be a payment by the
Company to or on account of the Notes; and for the purposes of such subrogation,
no payments or distributions to the holders of Senior Debt to which the holders
of the Notes would be entitled except for the provisions of this Section 1.10
shall, as between the Company and its creditors, other than the holders of
Senior Debt and the holders of the Notes, be deemed to be a payment by the
Company to or on account of the Senior Debt.
(E) SCOPE OF SECTION. The provisions of this Section 1.10 are
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intended solely for the purpose of defining the relative rights of the holders
of the Notes, on the one hand, and the holders of the Senior Debt, on the other
hand. Nothing contained in this Section 1.10 or elsewhere in this Agreement or
the Notes is intended to or shall impair, as between the Company, its creditors
other than the holders of Senior Debt, and the holders of the Notes, the
obligation of the Company, which is unconditional and absolute, to pay to the
holders of the Notes the principal of and interest on the Notes as and when the
same shall become due and payable in accordance with the terms thereof, or to
affect the relative rights of the holders of the Notes and creditors of the
Company other than the
-4-
holders of the Senior Debt, nor shall anything herein or therein prevent the
holder of any Note from accepting any payment with respect to such Note or
exercising all remedies otherwise permitted by applicable law upon default under
such Note, subject to the rights, if any, under this Section 1.10 of the holders
of Senior Debt in respect of cash, property or securities of the Company
received by the holders of the Notes.
(F) SURVIVAL OF RIGHTS. The right of any present or future holder of
------------------
Senior Debt to enforce subordination of the Notes pursuant to the provisions of
this Section 1.10 shall not at any time be prejudiced or impaired by any act or
failure to act on the part of the Company or any such holder of Senior Debt,
including, without limitation, any forbearance, waiver, consent, compromise,
amendment, extension, renewal, or taking or release of security of or in respect
of any Senior Debt or by noncompliance by the Company with the terms of such
subordination regardless of any knowledge thereof such holder may have or
otherwise be charged with.
(G) AMENDMENT OR WAIVER. The provisions of this Section 1.10 may not
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be amended or waived in any manner which is detrimental to any Senior Debt
without the consent of the holders of all then existing Senior Debt.
(H) SENIOR DEBT DEFINED. The term "Senior Debt" shall mean (i) all
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Indebtedness of the Company for money borrowed from banks or other institutional
lenders, including any extension or renewals thereof, whether outstanding on the
date hereof or he reafter created or incurred, which is not by its terms
subordinate and junior to or on a parity with the Notes and which is permitted
hereby at the time it is created or incurred, and (ii) all guaranties by the
Company which are not by their terms subordinate and junior to or on a parity
with the Notes and which are permitted hereby at the time they are made, of
Indebtedness of any Subsidiary if such Indebtedness would have been Senior Debt
pursuant to the provisions of clause (i) of this sentence had it been
Indebtedness of the Company. In making any loans which are (or the guaranties of
which are) intended to be Senior Debt, the lenders or purchasers shall be
entitled to rely as to the fact that such Indebtedness or guaranty is permitted
hereby upon a certificate by the Company's chief financial officer purporting to
show such Indebtedness or guaranty will not result in the Company's failure to
comply with the provisions of Article IV hereof as of the date of the loan or
guarantee.
1.11. REPRESENTATIONS BY THE PURCHASERS. Each Purchaser represents that it
---------------------------------
is its present intention to acquire the Notes and Warrants being acquired by it
for its own account and that the Notes and Warrants being acquired by it are
being and will be acquired by it for the purpose of investment and not with a
view to distribution or resale thereof; subject, nevertheless, to the condition
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that the disposition of the property of each Purchaser shall at all times be
within its control. The acquisition by each Purchaser of the Notes and Warrants
being acquired by it shall constitute a confirmation of this representation.
1.12. DISCLOSURE OF INFORMATION BY THE PURCHASERS. The Company understands
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that Massachusetts Capital Resource Company ("MCRC"), one of the Purchasers
hereunder, is a special purpose limited partnership organized under Chapter 109
of the General Laws of the Commonwealth of Massachusetts and Chapter 816 of the
Acts and Resolves of 1977 of the Commonwealth of Massachusetts (the "Capital
Resource Company Act"), and as such, in accordance with such provisions, MCRC,
in order to obtain certain benefits for itself and its partners, is required to
file certain reports and otherwise disclose information relating to the
business, financial affairs, and future prospects of the Company and its
affiliates (as defined in the aforesaid legislation) with the Clerk of the
Senate and the Clerk of the House of Representatives of the General Court of the
Commonwealth of Massachusetts, the Secretary of Manpower Affairs, the
Commissioner of Insurance and the Department of Revenue of the Commonwealth of
Massachusetts, and that such reports and other information may constitute
"public records" within the purview of Section 7 of Chapter 4 of the General
Laws of the Commonwealth of Massachusetts. In addition, information relating to
the business, financial affairs and future prospects of the Company and its
affiliates must be disclosed to others in order to obtain independent
confirmation that financing on substantially similar terms to financing provided
pursuant to this Agreement was not elsewhere available to the Company. The
Company hereby authorizes MCRC to disclose all such information relating to the
business, financial affairs and future prospects of the Company and its
affiliates as has been or may in the future be presented to MCRC to all such
persons as MCRC in good ▇▇▇▇▇ ▇▇▇▇▇ necessary or appropriate in order to fulfill
its obligations under the Capital Resource Company Act.
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Each Purchaser, severally and not jointly, agree that except for
disclosures (i) by MCRC pursuant to the Capital Resource Company Act as provided
for above, (ii) to partners and advisors in connection with the Purchaser's
valuation process and (iii) in connection with the enforcement of the
Purchaser's rights under this Agreement, the Security Agreement, the Notes and
the Warrant, the Purchaser will use its best efforts to hold in confidence any
proprietary or confidential information which it receives from the Company
pursuant to this Agreement.
ARTICLE II
CONDITIONS TO PURCHASERS' OBLIGATION
The obligation of the Purchasers to purchase and pay for the Notes and
Warrants at the Closing is subject to the following conditions:
2.01. REPRESENTATIONS AND WARRANTIES. Each of the representations and
------------------------------
warranties of the Company set forth in Article III hereof shall be true on the
date of the Closing.
2.02. DOCUMENTATION AT CLOSING. The Purchasers shall have received prior to
------------------------
or at the Closing all of the following, each in form and substance satisfactory
to the Purchasers and their counsel:
(A) A Security Agreement, in the form attached as Exhibit 2.02(a),
---------------
(the "Security Agreement") and all related financing statements and other
similar instruments and documents, shall have been executed and delivered to the
Purchasers by a duly authorized officer of the Company.
(B) A certified copy of all charter documents of the Company; a
certified copy of the resolutions of the Board of Directors and, to the extent
required, the stockholders of the Company evidencing approval of this Agreement,
the Notes, the Warrants, the Security Agreement and all other matters
contemplated hereby; a certified copy of the By-laws of the Company; and
certified copies of all documents evidencing other necessary corporate or other
action and governmental approvals, if any, with respect to this Agreement, the
Notes, the Warrants and the Security Agreement.
(C) A favorable opinion of ▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, counsel
for the Company, as to matters set forth in Exhibit 2.02(c), and as to such
---------------
other matters as the Purchasers, or their counsel, may reasonably request.
(D) A certificate of the Secretary or an Assistant Secretary of the
Company which shall certify the names of the officers of the Company, authorized
to sign this Agreement, the Notes, the Warrants, the Security Agreement and all
other documents or certificates to be delivered pursuant to this Agreement or
the Security Agreement by the Company, or any of its officers, together with the
true signatures of such officers. The Purchasers may conclusively rely on such
certificates until it shall receive a further certificate of the Secretary or an
Assistant Secretary of the Company canceling or amending the prior certificate
and submitting the signatures of the officers named in such further certificate.
(E) A certificate from a duly authorized officer of the Company
stating that: (i) the representations and warranties of the Company contained in
Article III hereof and otherwise made by the Company in writing in connection
with the transactions contemplated hereby are true and correct and (ii) no
condition or event has occurred or is continuing or will result from execution
and delivery of this Agreement, the Notes, the Warrants or the Security
Agreement which constitute an Event of Default or would constitute an Event of
Default but for the requirement that notice be given or time elapse or both.
(F) A certificate, in the form attached as Exhibit 3.15 hereto,
------------
shall have been executed and delivered to MCRC by a duly authorized officer of
the Company.
-6-
(G) Payment for the costs, expenses, taxes and filing fees
identified in Section 8.04 as to which the Purchasers give the Company notice
prior to the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants as follows:
3.01. ORGANIZATION AND STANDING. The Company and each Subsidiary is a duly
-------------------------
organized and validly existing corporation in good standing under the laws of
the jurisdiction in which it was organized and has all requisite corporate power
and authority for the ownership and operation of its properties and for the
carrying on of its business as now conducted and as now proposed to be
conducted. The Company and each Subsidiary is duly licensed or qualified and in
good standing as a foreign corporation authorized to do business in all
jurisdictions wherein the character of the property owned or leased, or the
nature of the activities conducted, by it makes such licensing or qualification
necessary, except where the failure to qualify would not have a material adverse
effect on the Company or any Subsidiary. Attached hereto as Exhibit 3.01 is a
------------
schedule which correctly identifies all Subsidiaries of the Company as of the
date hereof and shows with respect to each Subsidiary its jurisdiction of
incorporation. All of the outstanding capital stock of each Subsidiary has been
duly authorized and validly issued, is fully paid and nonassessable, and is
owned beneficially and of record by the Company or by another Subsidiary as
indicated in Exhibit 3.01, free and clear of any lien, right, encumbrance or
------------
restriction of any nature, including, without limitation, any lien, right,
encumbrance or restriction on transfer, except for the pledge by the Company of
the stock of one or more Subsidiaries to Fleet National Bank as collateral for
money borrowed.
3.02. CORPORATE ACTION. The Company has all necessary corporate power and
----------------
has taken all corporate action required to make all the provisions of this
Agreement, the Notes, the Warrants, the Security Agreement and any other
agreements and instruments executed in connection herewith and therewith the
valid and enforceable obligations they purport to be. Sufficient shares of
authorized but unissued Common Stock of the Company have been reserved by
appropriate corporate action in connection with the prospective exercise of the
Warrants. Neither the issuance of the Notes or Warrants, nor the issuance of
shares of Common Stock upon the exercise of the Warrants, is subject to
preemptive or other similar statutory or contractual rights and will not
conflict with any provisions of any agreement or instrument to which the Company
or any Subsidiary is a party or by which it is bound.
3.03. GOVERNMENTAL APPROVALS. No authorization, consent, approval, license,
----------------------
exemption of or filing or registration with any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, is or will be necessary for, or in connection with, the offer,
issuance, sale, execution or delivery by the Company of, or for the performance
by it of its obligations under, this Agreement, the Notes, the Warrants or the
Security Agreement.
3.04. LITIGATION. Except as is set forth in Item 3 of the Form 10-K, there
----------
is no litigation or governmental proceeding or investigation pending or, to the
best of the knowledge of the Company, threatened against the Company or any
Subsidiary affecting any of its properties or assets, or against any officer,
key employee or principal stockholder of the Company or any Subsidiary where
such litigation, proceeding or investigation, either individually or in the
aggregate, would have a material adverse effect on the Company or any
Subsidiary. Neither the Company nor any Subsidiary, nor, to the best of the
knowledge of the Company, any officer or key employee of the Company or any
Subsidiary, or principal stockholder of the Company or any Subsidiary, is in
default with respect to any order, writ, injunction, decree, ruling or decision
of any court, commission, board or other government agency affecting the Company
or any Subsidiary. There are no actions or proceedings pending or threatened
which might result, either in any case or in the aggregate, in any material
adverse change in the business, operations, affairs or condition of the Company
or any Subsidiary or in any of its properties or assets, or which might call
into question the validity of this Agreement, the Notes, the Warrants, the
Security Agreement or any action taken or to be taken pursuant hereto or
thereto.
-7-
3.05. COMPLIANCE WITH OTHER INSTRUMENTS. The Company and each Subsidiary is
---------------------------------
in compliance in all respects with the terms and provisions of this Agreement
and of its charter and by-laws and in all material respects with the terms and
provisions of the mortgages, indentures, leases, agreements and other
instruments and of all judgments, decrees, governmental orders, statutes, rules
and regulations by which it is bound or to which its properties or assets are
subject. There is no term or provision in any of the foregoing documents and
instruments which materially adversely affects the business, assets or financial
condition of the Company or any Subsidiary. Neither the execution and delivery
of this Agreement, the Notes, the Warrants or the Security Agreement, nor the
consummation of any transactions contemplated hereby or thereby has constituted
or resulted in or will constitute or result in a default or violation of any
term or provision in any of the foregoing documents or instruments. A schedule
of Indebtedness of the Company and each Subsidiary (including lease obligations
required to be capitalized in accordance with applicable Statements of Financial
Accounting Standards) is attached as Exhibit 3.05.
------------
3.06. FEDERAL RESERVE REGULATIONS. Neither the Company nor any Subsidiary
---------------------------
is engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation G of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of the
Notes or Warrants will be used to purchase or carry any margin security or to
extend credit to others for the purpose of purchasing or carrying any margin
security or in any other manner which would involve a violation of any of the
regulations of the Board of Governors of the Federal Reserve System.
3.07. TITLE TO ASSETS, PATENTS. Except as is set forth in Exhibit 3.07, the
------------------------ ------------
Company and each Subsidiary has good and clear record and marketable title in
fee to such of its fixed assets as are real property, and good and merchantable
title to all of its other assets, now carried on its books including those
reflected in the most recent consolidated balance sheet of the Company and its
Subsidiaries referred to in Section 3.08, or acquired since the date of such
balance sheet (except personal property disposed of since said date in the
ordinary course of business) free of any mortgages, pledges, charges, liens,
security interests or other encumbrances. The Company and each Subsidiary enjoys
peaceful and undisturbed possession under all leases under which it is
operating, and all said leases are valid and subsisting and in full force and
effect. The Company and each Subsidiary owns or has a valid right to use the
patents, patent rights, licenses, permits, trade secrets, trademarks, trademark
rights, trade names or trade name rights or franchises, copyrights, inventions
and intellectual property rights being used to conduct its business as now
operated and as now proposed to be operated; and the conduct of its business as
now operated and as now proposed to be operated does not and will not conflict
with valid patents, patent rights, licenses, permits, trade secrets, trademarks,
trademark rights, trade names or trade name rights or franchises, copyrights,
inventions and intellectual property rights of others. Except as set forth in
Exhibit 3.07, neither the Company nor any Subsidiary has any obligation to
------------
compensate any Person for the use of any such patents or such rights nor has the
Company or any Subsidiary granted to any Person any license or other rights to
use in any manner any of such patents or such rights of the Company or any
Subsidiary.
3.08. FINANCIAL INFORMATION. The financial statements which are included in
---------------------
the Company's Form 10-K present fairly the consolidated financial position of
the Company and its Subsidiaries as at the dates thereof and its results of
operations for the periods covered thereby and have been prepared in accordance
with generally accepted accounting principles consistently applied. The
financial statements so included are for the two years ended June 27, 1998 and
June 28, 1997, certified by Pricewaterhouse, Coopers, LLP. Neither the Company
nor any Subsidiary has any liability contingent or otherwise not disclosed in
the aforesaid financial statements or in the notes thereto that could, together
with all such other liabilities, materially affect the financial condition of
the Company or any Subsidiary, nor does the Company have any reasonable grounds
to know of any such liability. Since the date of said certified financial
statements, (i) there has been no adverse change in the business, assets or
condition, financial or otherwise, operations or prospects, of the Company or
any Subsidiary; (ii) neither the business, condition, operations or prospects of
the Company or any Subsidiary nor any of their properties or assets has been
adversely affected as a result of any legislative or regulatory change, any
revocation or change in any franchise, license or right to do business, or any
other event or occurrence, whether or not insured against; and (iii) neither the
Company nor any Subsidiary has entered into any material transaction or made any
distribution on its capital stock.
3.09. TAXES. The Company and each Subsidiary has accurately prepared and
-----
timely filed all federal, state and other tax returns required by law to be
filed by it, and all taxes shown to be due and all additional assessments have
been paid or provision made therefor. The Company knows of no additional
assessments or adjustments
-8-
pending or threatened against the Company or any Subsidiary for any period, nor
of any basis for any such assessment or adjustment.
3.10. ERISA. No employee benefit plan established or maintained, or to
-----
which contributions have been made, by the Company or any Subsidiary, which is
subject to part 3 of Subtitle B of Title I of The Employee Retirement Income
Security Act of 1974, as amended ("ERISA") had an accumulated funding deficiency
(as such term is defined in Section 302 of ERISA) as of the last day of the most
recent fiscal year of such plan ended prior to the date hereof, and no material
liability to the Pension Benefit Guaranty Corporation has been incurred with
respect to any such plan by the Company or any of its Subsidiaries.
3.11. TRANSACTIONS WITH AFFILIATES. There are no loans, leases, royalty
----------------------------
agreements or other continuing transactions between the Company or any
Subsidiary and any Person owning five percent (5%) or more of any class of
capital stock of the Company or any Subsidiary or other entity controlled by
such stockholder or a member of such stockholder's family.
3.12. ASSUMPTIONS OR GUARANTIES OF INDEBTEDNESS OF OTHER PERSONS. Neither
----------------------------------------------------------
the Company nor any Subsidiary has assumed, guaranteed, endorsed or otherwise
become directly or contingently liable on (including, without limitation,
liability by way of agreement, contingent or otherwise, to purchase, to provide
funds for payment, to supply funds to or otherwise invest in the debtor or
otherwise to assure the creditor against loss) any Indebtedness of any other
Person.
3.13. INVESTMENTS IN OTHER PERSONS. Neither the Company nor any Subsidiary
----------------------------
has made any loan or advance to any Person which is outstanding on the date of
this Agreement, nor is the Company or any Subsidiary obligated or committed to
make any such loan or advance, nor does the Company or any Subsidiary own any
capital stock or assets comprising the business of, obligations of, or any
interest in, any Person.
3.14. EQUAL EMPLOYMENT OPPORTUNITY. The Company has reviewed its employment
----------------------------
practices and policies and those of each Subsidiary and, to the best of its
knowledge, the Company and each Subsidiary is in full compliance with (a) all
applicable laws of the United States, of the Commonwealth of Massachusetts and
of each other applicable jurisdiction, relating to equal employment opportunity
(including, without limitation, Title VII of the Civil Rights Act of 1964, as
amended (42 U.S.C. ss.000e-17), the Age Discrimination in Employment Act of
1967, as amended (29 U.S.C. ss.ss.621-634), the Equal Pay Act of 1963 (29 U.S.C.
ss.206(d)), and any rules, regulations and administrative orders and Executive
Orders relating thereto; Mass. Gen. Laws. c. 151B, Mass. Gen. Laws c. 149 ss.24A
et seq. and ss.105A et seq., and any rules or regulations relating thereto; and
(b) the applicable terms, relating to equal employment opportunity, of any
contract, agreement or grant the Company or any Subsidiary has with, from, or
relating (by way of subcontract or otherwise) to any other contract, agreement
or grant of, any federal or state governmental unit ("Government Contract"),
including, without limitation, any terms required pursuant to Federal Executive
Order No. 11246 and Massachusetts Executive Order No. 74 (both as amended). To
the best of the Company's knowledge, it and each Subsidiary has kept all records
required to be kept, and has filed all reports, affirmative action plans and
forms (including, without limitation and where applicable, Form EEO-1) required
to be filed pursuant to any such applicable law or the terms of any such
Government Contract. Neither the Company nor any Subsidiary has been subject to
any adverse final determination or order, with respect to any charge of
employment discrimination made against it, by the United States Equal Employment
Opportunity Commission, the Massachusetts Commission Against Discrimination or
any other governmental unit (including, without limitation, any such
governmental unit with which it has a Government Contract), and neither the
Company nor any Subsidiary is presently, to the best of the Company's knowledge,
subject to any formal proceedings before, or investigations by, such commissions
or governmental units.
3.15. STATUS OF NOTES AND WARRANTS AS QUALIFIED INVESTMENTS. The Company
-----------------------------------------------------
has duly authorized the execution and delivery to MCRC on behalf of the Company
of the certificate attached as Exhibit 3.15 hereto, setting forth such
------------
statements, information and related data as are necessary to permit MCRC to
determine and demonstrate that the Notes and Warrants issued pursuant to this
Agreement will constitute "qualified investments" within the meaning of that
term as set forth in the Capital Resource Company Act and that the full proceeds
of the Notes and Warrants will be used for purposes which will materially
increase or maintain equal opportunity employment in the Commonwealth of
Massachusetts. All such statements, information and related data presented in
such certificate as
-9-
are not based on estimates and projections of future events are true and correct
as of the date of such certificate and all such statements, information and
related data based upon estimates or projections of future events have been
carefully considered and prepared on behalf of the Company.
3.16. SECURITIES ACT. Neither the Company nor anyone acting on its behalf
--------------
has offered any of the Notes, Warrants or similar securities, or solicited any
offers to purchase or made any attempt by preliminary conversation or
negotiations to dispose of the Notes, Warrants or similar securities, to any
Person other than the Purchasers or the institutions described in Exhibit 3.15.
------------
Neither the Company nor anyone acting on its behalf has offered or will offer to
sell the Notes, Warrants or similar securities to, or solicit offers with
respect thereto from, or enter into any preliminary conversations or
negotiations relating thereto with, any Person, so as to bring the issuance and
sale of the Notes and Warrants under the registration provisions of the
Securities Act.
3.17. DISCLOSURE. Neither this Agreement, the financial statements referred
----------
to in Section 3.08, the Certificate set forth as Exhibit 3.15 hereof, the Form
------------
10-K, the Proxy Statement, nor any other agreement, document, certificate or
written statement furnished to the Purchasers or their counsel by or on behalf
of the Company or any Subsidiary in connection with the transactions
contemplated hereby contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
or therein not misleading.
3.18. NO BROKERS OR FINDERS. No Person has or will have, as a result of the
---------------------
transactions contemplated by this Agreement, any right, interest or valid claim
against or upon the Company or any Subsidiary for any commission, fee or other
compensation as a finder or broker because of any act or omission by the Company
or any Subsidiary or any agent of the Company or any Subsidiary.
3.19. OTHER AGREEMENTS OF OFFICERS. To the best of the knowledge of the
----------------------------
Company, no officer or key employee of the Company or any Subsidiary is a party
to or bound by any agreement, contract or commitment, or subject to any
restrictions, particularly but without limitation in connection with any
previous employment of any such person, which materially and adversely affects,
or in the future may (so far as the Company can reasonably foresee) materially
and adversely affect, the business or operations of the Company or any
Subsidiary or the right of any such person to participate in the affairs of the
Company or any Subsidiary. To the best of the knowledge of the Company, no
officer or key employee has any present intention of terminating his employment
with the Company or any Subsidiary and neither the Company nor any Subsidiary
has any present intention of terminating any such agreement.
3.20. CAPITALIZATION; STATUS OF CAPITAL STOCK. The Company has a total
---------------------------------------
authorized capitalization consisting of 30,000,000 shares of Common Stock, of
which _______ shares are issued and outstanding and no shares of which are held
by the Company as Treasury Stock. The Proxy Statement sets forth a complete list
of those persons who, as of December 1, 1997, were the record and, to the best
of the Company's knowledge, beneficial owners of more than five percent (5%) of
the Company's outstanding Common Stock. All the outstanding shares of capital
stock of the Company have been duly authorized, are validly issued and are fully
paid and nonassessable. The shares of Common Stock issuable upon exercise of the
Warrants, when so issued, will be duly authorized, validly issued and fully paid
and nonassessable. Except as otherwise indicated on Exhibit 3.20, there are no
------------
options, warrants or rights to purchase shares of capital stock or other
securities of the Company authorized, issued or outstanding, nor is the Company
obligated in any other manner to issue shares of its capital stock or other
securities. There are no restrictions on the transfer of shares of capital stock
of the Company other than those imposed by relevant state and federal securities
laws. No holder of any security of the Company is entitled to preemptive or
similar statutory or contractual rights, either arising pursuant to any
agreement or instrument to which the Company is a party, or which are otherwise
binding upon the Company. Neither the issuance of the Notes or the Warrants nor
the shares of Common Stock issued upon exercise of the Warrants will result in
an adjustment under the antidilution or exercise rights of any holders of any
outstanding shares of capital stock, options, warrants or other rights to
acquire any securities of the Company. The offer and sale of all shares of
capital stock and other securities of the Company issued before the Closing
complied with or were exempt from all federal and state securities laws.
3.21. LABOR RELATIONS. To the best of the knowledge of the Company, no
---------------
labor union or any representative thereof has made any attempt to organize or
represent employees of the Company or any Subsidiary.
-10-
There are no unfair labor practice charges, pending trials with respect to
unfair labor practice charges, pending material grievance proceedings or adverse
decisions of a Trial Examiner of the National Labor Relations Board against the
Company or any Subsidiary. Furthermore, to the best of the knowledge of the
Company, relations with employees of the Company and each Subsidiary are good
and there is no reason to believe that any labor difficulties will arise in the
foreseeable future.
3.22. INSURANCE. The Company and each Subsidiary carries insurance covering
---------
its properties and business adequate and customary for the type and scope of the
properties and business, but in any event in amounts sufficient to prevent the
Company or any Subsidiary from becoming a co-insurer.
3.23. BOOKS AND RECORDS. The books of account, ledgers, order books,
-----------------
records and documents of the Company and each Subsidiary accurately and
completely reflect all material information relating to the business of the
Company and each Subsidiary, the nature, acquisition, maintenance, location and
collection of the assets of the Company and each Subsidiary, and the nature of
all transactions giving rise to the obligations or accounts receivable of the
Company and each Subsidiary.
3.24. FOREIGN CORRUPT PRACTICES ACT. The Company has reviewed its practices
-----------------------------
and policies and that of each Subsidiary and to the best of its knowledge and
belief neither it nor any Subsidiary is engaged, nor has any officer, director,
employee or agent of the Company or any Subsidiary engaged, in any act or
practice which would constitute a violation of the Foreign Corrupt Practices Act
of 1977, or any rules or regulations promulgated thereunder.
ARTICLE IV
COVENANTS OF THE COMPANY
4.01. AFFIRMATIVE COVENANTS OF THE COMPANY. Without limiting any other
------------------------------------
covenants and provisions hereof, the Company covenants and agrees that, as long
as any of the Notes are outstanding, it will perform and observe the following
covenants and provisions and will cause each Subsidiary to perform and observe
such of the following covenants and provisions as are applicable to such
Subsidiary:
(A) PUNCTUAL PAYMENT. Pay the principal of, premium, if any, and
----------------
interest on each of the Notes at the times and place and in the manner provided
in the Notes and herein.
(B) PAYMENT OF TAXES AND TRADE DEBT. Pay and discharge, and cause
-------------------------------
each Subsidiary to pay and discharge, all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or profits or business, or
upon any properties belonging to it, prior to the date on which penalties attach
thereto, and all lawful claims which, if unpaid, might become a lien or charge
upon any properties of the Company or any Subsidiary, provided that neither the
Company nor the Subsidiary shall be required to pay any such tax, assessment,
charge, levy or claim which is being contested in good faith and by appropriate
proceedings if the Company or Subsidiary concerned shall have set aside on its
books adequate reserves with respect thereto. Pay and cause each Subsidiary to
pay, when due, or in conformity with customary trade terms, all lease
obligations, all trade debt, and all other Indebtedness incident to the
operations of the Company or its Subsidiaries, except such as are being
contested in good faith and by appropriate proceedings if the Company or
Subsidiary concerned shall have set aside on its books adequate reserves with
respect thereto.
(C) MAINTENANCE OF INSURANCE. Maintain, and cause each Subsidiary
------------------------
to maintain, insurance with responsible and reputable insurance companies or
associations in such amounts and covering such risks as is usually carried by
companies engaged in similar businesses and owning similar properties in the
same general areas in which the Company or such Subsidiary operates, but in any
event in amounts sufficient to prevent the Company or such Subsidiary from
becoming a co-insurer.
(d) PRESERVATION OF CORPORATE EXISTENCE. Preserve and maintain, and
-----------------------------------
cause each Subsidiary to preserve and maintain, its corporate existence, rights,
franchises and privileges in the jurisdiction of its
-11-
incorporation, and qualify and remain qualified, and cause each Subsidiary to
qualify and remain qualified, as a foreign corporation in each jurisdiction in
which such qualification is necessary or desirable in view of its business and
operations or the ownership of its properties; provided, however, that nothing
-------- -------
herein contained shall prevent any merger, consolidation or transfer of assets
permitted by subsection 4.02(e). Preserve and maintain, and cause each
Subsidiary to preserve and maintain, all licenses and other rights to use
patents, processes, licenses, trademarks, trade names, inventions, intellectual
property rights or copyrights owned or possessed by it and necessary to the
conduct of its business.
(E) COMPLIANCE WITH LAWS. Comply, and cause each Subsidiary to
--------------------
comply, with all applicable laws, rules, regulations and orders of any
governmental authority, noncompliance with which could materially adversely
affect its business or condition, financial or other.
(F) VISITATION RIGHTS. At any reasonable time and from time to
-----------------
time, permit any Purchaser or any agents or representatives thereof, to examine
and make copies of and extracts from the records and books of account of, and
visit and inspect the properties of, the Company and any Subsidiary, and to
discuss the affairs, finances and accounts of the Company and any Subsidiary
with any of their officers or directors and independent accountants.
(G) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Keep, and cause
---------------------------------------
each Subsidiary to keep, adequate records and books of account, in which
complete entries will be made in accordance with generally accepted accounting
principles consistently applied, reflecting all financial transactions of the
Company and such Subsidiary, and in which, for each fiscal year, all proper
reserves for depreciation, depletion, obsolescence, amortization, taxes, bad
debts and other purposes in connection with its business shall be made.
(H) MAINTENANCE OF PROPERTIES, ETC. Maintain and preserve, and
------------------------------
cause each Subsidiary to maintain and preserve, all of its properties, necessary
or useful in the proper conduct of its business, in good repair, working order
and condition, ordinary wear and tear excepted.
(I) COMPLIANCE WITH ERISA. Comply, and cause each Subsidiary
---------------------
to comply, with all minimum funding requirements applicable to any pension or
other employee benefit or employee contribution plans which are subject to ERISA
or to the Internal Revenue Code of 1986, as amended (the "Code"), and comply,
and cause each Subsidiary to comply, in all other material respects with the
provisions of ERISA and the Code, and the rules and regulations thereunder,
which are applicable to any such plan. Neither the Company nor any Subsidiary
will permit any event or condition to exist which could permit any such plan to
be terminated under circumstances which would cause the lien provided for in
Section 4068 of ERISA to attach to the assets of the Company or any Subsidiary.
(J) MAINTENANCE OF DEBT TO EQUITY RATIO. Maintain a ratio of
-----------------------------------
Consolidated Indebtedness (other than Indebtedness represented by the Notes) to
Consolidated Net Worth (plus Indebtedness represented by the Notes) of not more
than 2.00 to 1 for the quarter ended December 31, 1998, not more than 1.75 to 1
for the quarter ended March 31, 1999, not more than 1.50 to 1 for the quarter
ended June 30, 1999 and not more than 1.50 to 1 thereafter, such ratio to be
measured at the end of each fiscal quarter of the Company.
(K) MAINTENANCE OF NET WORTH. Commencing on or with the
------------------------
quarter ending December 31, 1998, maintain a Consolidated Net Worth of not less
than the sum of (i) $8,500,000 plus (ii) eighty percent (80%) of the Company's
quarterly Consolidated Net Income earned after December 31, 1998 (and without
regard to any consolidated net deficit) plus (iii) one hundred percent (100%) of
any stockholder equity or subordinated debt raised by the Company after December
31, 1998, such amount to be measured at the end of each fiscal quarter of the
Company.
(L) MAINTENANCE OF PROFITABILITY. Maintain at all times
----------------------------
quarterly Consolidated Net Income before taxes of at least $500,000.
(M) MAINTENANCE OF QUICK RATIO. Maintain a ratio of (i) cash
--------------------------
plus accounts receivable to (ii) current liabilities (including borrowings from
Fleet National Bank but excluding any deferred revenues) of at least .80 to 1
for the quarter ended December 31, 1998, of at least .85 to 1 for the quarter
ended March 31, 1999, of at
-12-
least .90 to 1 for the quarter ended June 30, 1999 and of at least .90 to 1
thereafter, such ratio to be measured at the end of each fiscal quarter of the
Company.
(N) FOREIGN CORRUPT PRACTICES ACT. Comply, and cause each
-----------------------------
Subsidiary to comply, and cause each officer, director, employee and agent of
the Company and each Subsidiary to comply, at all times with the prohibitions on
certain acts and practices set forth in the Foreign Corrupt Practices Act of
1977, and any rules or regulations promulgated thereunder.
(O) EQUAL EMPLOYMENT OPPORTUNITY. Comply, and cause each
----------------------------
Subsidiary to comply, with all applicable laws of the United States, the
Commonwealth of Massachusetts, and of each other applicable jurisdiction
relating to equal employment opportunity, any rules, regulations, administrative
orders and Executive Orders relating thereto and the applicable terms, relating
to equal employment opportunity, of any Government Contract; and keep, and cause
each Subsidiary to file, all reports, affirmative action plans and forms
required to be filed, pursuant to any such applicable law or the terms of any
such Government Contract; provided, however, the Company or any Subsidiary shall
-------- -------
not be considered to have failed to comply with the foregoing during any period
that any matter relating to the Company's or such Subsidiary's employment
practices is being contested by the Company or such Subsidiary in appropriate
proceedings, or thereafter, if the Company or such Subsidiary complies with any
final determination issued in such proceedings.
(P) STATUS OF NOTES AND WARRANTS AS QUALIFIED INVESTMENTS. In
-----------------------------------------------------
the event that any of the statements, information and related data provided by
or on behalf of the Company or any Subsidiary and relied upon by MCRC in
determining that the Notes and Warrants constitute "qualified investments"
within the meaning of that term in the Capital Resource Company Act shall be put
in issue in any formal or informal proceedings initiated or conducted by or on
behalf of the Commonwealth of Massachusetts, the Company shall, upon reasonable
notice and at its expense, provide, and, cause each Subsidiary to provide, such
additional information, witnesses and related data as may be reasonably
necessary or appropriate to support the representations and warranties set forth
in Article III.
(Q) ATTENDANCE AT BOARD MEETINGS. The Company shall permit
----------------------------
MCRC to have one observer attend each meeting of its Board of Directors and each
meeting of any committee thereof. The Company shall send to MCRC the notice of
the time and place of such meeting in the same manner and at the same time as it
shall send such notice to its directors or committee members, as the case may
be. The Company shall also provide to MCRC copies of all notices, reports,
minutes and consents at the time and in the manner as they are provided to the
Board of Directors or committee.
(R) COMPLIANCE WITH SECURITY AGREEMENT. The Company shall
----------------------------------
comply at all times with all of the terms and conditions of the Security
Agreement.
4.02. NEGATIVE COVENANTS OF THE COMPANY. Without limiting any other
---------------------------------
covenants and provisions hereof, the Company covenants and agrees that, as long
as any of the Notes are outstanding, it will comply with and observe the
following covenants and provisions, and will cause each Subsidiary to comply
with and observe such of the following covenants and provisions as are
applicable to such Subsidiary, and will not:
(A) LIENS. Create, incur, assume or suffer to exist, or permit
-----
any Subsidiary to create, incur, assume or suffer to exist, any mortgage, deed
of trust, pledge, lien, security interest or other charge or encumbrance
(including the lien or retained security title of a conditional vendor) of any
nature, upon or with respect to any of its properties, now owned or hereinafter
acquired, or assign or otherwise convey any right to receive income, except that
the foregoing restrictions shall not apply to mortgages, deeds of trust,
pledges, liens, security interests or other charges or encumbrances:
(i) for taxes, assessments or governmental
charges or levies on property of the Company or any Subsidiary if the
same shall not at the time be delinquent or thereafter can be paid
without penalty, or are being contested in good faith and by
appropriate proceedings;
-13-
(ii) imposed by law, such as carriers',
warehousemen's and mechanics' liens and other similar liens arising in
the ordinary course of business;
(iii) arising out of pledges or deposits under
workmen's compensation laws, unemployment insurance, old age pensions,
or other social security or retirement benefits, or similar
legislation;
(iv) securing the performance of bids, tenders,
contracts (other than for the repayment of borrowed money), statutory
obligations and surety bonds;
(v) in the nature of zoning restrictions,
easements and rights or restrictions of record on the use of real
property which do not materially detract from its value or impair its
use;
(vi) arising by operation of law in favor of the
owner or sublessor of leased premises and confined to the property
rented;
(vii) arising from any litigation or proceeding
which is being contested in good faith by appropriate proceedings,
provided, however, that no execution or levy has been made;
(viii) described in Exhibit 3.07 which secure the
------------
Indebtedness set forth in Exhibit 3.05, provided that no such lien is
------------
extended to cover other or different property of the Company or any
Subsidiary;
(ix) now or hereafter granted to the Purchasers
pursuant to the Security Agreement;
(x) arising out of a purchase money mortgage or
security interest on personal property to secure the purchase price of
such property (or to secure Indebtedness incurred solely for the
purpose of financing the acquisition of any such property), provided
that such purchase money mortgage or security interest does not extend
to any other or different property of the Company or any Subsidiary;
and
(xi) securing Senior Debt, whether presently
existing or hereafter created.
(B) INDEBTEDNESS. Create, incur, assume or suffer to exist, or
------------
permit any Subsidiary to create, incur, assume or suffer to exist, any liability
with respect to Indebtedness except for:
(i) the Notes;
(ii) Indebtedness for money borrowed, provided
that such Indebtedness for money borrowed does not result in the
Company's failure to comply with all of the provisions of Article IV
hereof;
(iii) Current Liabilities, other than for borrowed
money, which are incurred in the ordinary course of business; and
(iv) Indebtedness with respect to lease
obligations, provided that such lease obligations do not violate
subsection 4.02(c).
(C) LEASE OBLIGATIONS. Create, incur, assume or suffer to
-----------------
exist, or permit any Subsidiary to create, incur, assume or suffer to exist, any
obligations as lessee for the rental or hire of real or personal property in
connection with any sale and leaseback transaction; or become obligated to pay
any rent for real property or personal property under any lease with an original
term, including any lessor options to renew or extend, of more than three years
if the aggregate of consolidated fixed annual rent which would be payable in any
fiscal year by the Company and its Subsidiaries under all such leases would
exceed $627,342.
(D) ASSUMPTIONS OR GUARANTIES OF INDEBTEDNESS OF OTHER
--------------------------------------------------
PERSONS. Assume, guarantee, endorse or otherwise become directly or contingently
-------
liable on, or permit any Subsidiary to assume, guarantee,
-14-
endorse or otherwise become directly or contingently liable on (including,
without limitation, liability by way of agreement, contingent or otherwise, to
purchase, to provide funds for payment, to supply funds to or otherwise invest
in the debtor or otherwise to assure the creditor against loss) any Indebtedness
of any other Person, except for guaranties by endorsement of negotiable
instruments for deposit or collection in the ordinary course of business.
(E) MERGERS, SALE OF ASSETS, ETC. Merge or consolidate with,
----------------------------
or sell, assign, lease or otherwise dispose of or voluntarily part with the
control of (whether in one transaction or in a series of transactions) a
material portion of its assets (whether now owned or hereinafter acquired) or
sell, assign or otherwise dispose of (whether in one transaction or in a series
of transactions) any of its accounts receivable (whether now in existence or
hereinafter created) at a discount or with recourse, to, any Person, or permit
any Subsidiary to do any of the foregoing, except for sales or other
dispositions of assets in the ordinary course of business and except that (1)
any Subsidiary may merge into or consolidate with or transfer assets to any
other Subsidiary, (2) any Subsidiary may merge into or transfer assets to the
Company, and (3) the Company may merge any Person into it or otherwise acquire
such Person as long as the Company is the surviving entity, such merger or
acquisition does not result in the violation of any of the provisions of this
Agreement and no such violation exists at the time of such merger or
acquisition, and, provided that such merger or acquisition does not result in
the issuance (in one or more transactions) of shares of the voting stock of the
Company representing in the aggregate more than twenty percent (20%) of the
total outstanding voting stock of the Company, on a fully diluted basis,
immediately following the issuance thereof. The foregoing provisions
notwithstanding, it is expressly agreed that the Company may sell the stock or
assets of Candela Skin Care Centers, Inc.
(F) INVESTMENTS IN OTHER PERSONS. Make or permit any
----------------------------
Subsidiary to make, any loan or advance to any person, or purchase, otherwise
acquire, or permit any Subsidiary to purchase or otherwise acquire, the capital
stock, assets comprising the business of, obligations of, or any interest in,
any Person, except:
(i) investments by the Company or a Subsidiary in
evidences of indebtedness issued or fully guaranteed by the United
States of America and having a maturity of not more than one year from
the date of acquisition;
(ii) investments by the Company or a Subsidiary in
certificates of deposit, notes, acceptances and repurchase agreements
having a maturity of not more than one year from the date of
acquisition issued by a bank organized in the United States having
capital, surplus and undivided profits of at least $100,000,000 and
whose parent holding company has long-term debt rated Aa1 or higher,
and whose commercial paper (if rated) is rated Prime 1, by ▇▇▇▇▇'▇
Investors Service, Inc.;
(iii) investments by the Company or a Subsidiary in
the highest-rated commercial paper having a maturity of not more than
one year from the date of acquisition; and
(iv) loans or advances from a Subsidiary to the
Company.
(G) DISTRIBUTIONS. Declare or pay any dividends, purchase,
-------------
redeem, retire, or otherwise acquire for value any of its capital stock (or
rights, options or warrants to purchase such shares) now or hereafter
outstanding, return any capital to its stockholders as such, or make any
distribution of assets to its stockholders as such, or permit any Subsidiary to
do any of the foregoing (such transactions being hereinafter referred to as
"Distributions"), except that the Subsidiaries may declare and make payment of
------
cash and stock dividends, return capital and make distributions of assets to the
Company; provided, however, that nothing herein contained shall prevent the
-------- -------
Company from:
(i) effecting a stock split or declaring or paying
any dividend consisting of shares of any class of capital stock to the
holders of shares of such class of capital stock, or
(ii) redeeming any stock of a deceased stockholder
out of insurance held by the Company on that stockholder's life,
-15-
if in the case of any such transaction there does not exist at the time of such
Distribution an Event of Default or an event which, but for the requirement that
notice be given or time elapse or both, would constitute an Event of Default and
provided that such Distribution can be made in compliance with the other terms
of this Agreement.
(H) DEALINGS WITH AFFILIATES. Enter or permit any Subsidiary
------------------------
to enter into any transaction with any holder of 5% or more of any class of
capital stock of the Company, or any member of their families or any corporation
or other entity in which any one or more of such stockholders or members of
their immediate families directly or indirectly holds five percent (5%) or more
of any class of capital stock except in the ordinary course of business and on
terms not less favorable to the Company or the Subsidiary than it would obtain
in a transaction between unrelated parties.
(I) MAINTENANCE OF OWNERSHIP OF SUBSIDIARIES. Sell or
----------------------------------------
otherwise dispose of any shares of capital stock of any Subsidiary, except to
the Company or another Subsidiary, or permit any Subsidiary to issue, sell or
otherwise dispose of any shares of its capital stock or the capital stock of any
Subsidiary, except to the Company or another Subsidiary, provided, however, that
nothing herein contained shall prevent any merger, consolidation or transfer of
assets permitted by subsection 4.02(e). The foregoing provisions
notwithstanding, it is expressly agreed that the Company may sell the stock or
assets of Candela Skin Care Centers, Inc.
(J) CHANGE IN NATURE OF BUSINESS. Make, or permit any
----------------------------
Subsidiary to make, any material change in the nature of its business as carried
on at the date hereof, provided that material changes in the nature of the
business presently conducted by Candela Skin Care Centers, Inc. may be made.
4.03. REPORTING REQUIREMENTS. The Company will furnish to each
----------------------
registered holder of any Note, any Warrant and any shares of Common Stock issued
upon exercise of any Warrants:
(A) as soon as possible and in any event within five (5) days
after the occurrence of each Event of Default or each event which, with the
giving of notice or lapse of time or both, would constitute an Event of Default,
the statement of the chief financial officer of the Company setting forth
details of such Event of Default or event and the action which the Company
proposes to take with respect thereto;
(B) as soon as available and in any event within forty-five
(45) days after the end of each of the first three quarters of each fiscal year
of the Company, consolidated and consolidating balance sheets of the Company and
its Subsidiaries as of the end of such quarter and consolidated and
consolidating statements of income and retained earnings and of changes in
financial position of the Company and its Subsidiaries for the period commencing
at the end of the previous fiscal year and ending with the end of such quarter,
setting forth in each case in comparative form the corresponding figures for the
corresponding period of the preceding fiscal year, all in reasonable detail and
duly certified (subject to year-end audit adjustments) by the chief financial
officer of the Company as having been prepared in accordance with generally
accepted accounting principles consistently applied;
(C) as soon as available and in any event within ninety (90)
days after the end of each fiscal year of the Company, a copy of the annual
audit report for such year for the Company and its Subsidiaries, including
therein consolidated and consolidating balance sheets of the Company and its
Subsidiaries as of the end of such fiscal year and consolidated and
consolidating statements of income and retained earnings and of changes in
financial position of the Company and its Subsidiaries for such fiscal year,
setting forth in each case in comparative form the corresponding figures for the
preceding fiscal year, all duly certified by independent public accountants of
recognized standing;
(D) at the time of delivery of each quarterly and annual
statement, a certificate, executed by the chief financial officer in the case of
quarterly statements and the Company's independent public accountants in the
case of annual statements, stating that such officer or accountants, as the case
may be, has caused this Agreement, the Notes, the Warrants and the Security
Agreement to be reviewed and has no knowledge of any default by the Company or
any Subsidiary in the performance or observance of any of the provisions of this
Agreement, the Notes, the Warrants or the Security Agreement or, if such officer
or accountant has such knowledge, specifying such
-16-
default and the nature thereof. Each such certificate shall set forth
computations in reasonable detail demonstrating compliance with the provisions
of subsections 4.01(j), (k), (l) and (m) and subsections 4.02(b) and (c);
(E) promptly upon receipt thereof, any written report
submitted to the Company by independent public accountants in connection with an
annual or interim audit of the books of the Company and its Subsidiaries made by
such accountants;
(F) prior to the start of each fiscal year, consolidated
capital and operating expense budgets, cash flow projections and income and loss
projections for the Company and its Subsidiaries in respect of such fiscal year,
all itemized in reasonable detail and prepared on a monthly basis, and, promptly
after preparation, any revisions to any of the foregoing;
(G) promptly after the commencement thereof, notice of all
actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting the Company or any Subsidiary of the type described in Section 3.04;
and
(H) promptly after sending, making available, or filing the
same, such reports and financial statements as the Company or any Subsidiary
shall send or make available to the stockholders of the Company or the
Securities and Exchange Commission and such other information respecting the
business, properties or the condition or operations, financial or otherwise, of
the Company or any of its Subsidiaries as any Purchaser may from time to time
reasonably request.
ARTICLE V
REGISTRATION RIGHTS
5.01. "PIGGY BACK" REGISTRATION. If at any time the Company shall
-------------------------
determine to register under the Securities Act (including pursuant to a demand
of any stockholder of the Company exercising registration rights) any of its
Common Stock of the type which has been or may be issued upon the exercise of
the Warrants, other than on Form S-4 or Form S-8 or their then equivalents, it
shall send to each holder of Registrable Shares, including each holder who has
the right to acquire Registrable Shares, written notice of such determination
and, if within thirty (30) days after receipt of such notice, such holder shall
so request in writing, the Company shall use its best efforts to include in such
registration statement all or any part of the Registrable Shares such holder
requests to be registered, except that if, in connection with any offering
involving an underwriting of Common Stock to be issued by the Company, the
managing underwriter shall impose a limitation on the number of shares of such
Common Stock which may be included in any such registration statement because,
in its judgment, such limitation is necessary to effect an orderly public
distribution, and such limitation is imposed pro rata among the holders of such
Common Stock having an incidental ("piggy back") right to include such Common
Stock in the registration statement according to the amount of such Common Stock
which each holder had requested to be included pursuant to such right, then the
Company shall be obligated to include in such registration statement only such
limited portion of the Registrable Shares with respect to which such holder has
requested inclusion hereunder. No incidental right under this Section 5.01 shall
be construed to limit any registration required under Section 5.02.
5.02. REQUIRED REGISTRATION. If on any two occasions, one or more
---------------------
holders of at least forty percent (40%) of the Registrable Shares shall notify
the Company in writing that it or they intend to offer or cause to be offered
for public sale at least twenty percent (20%) of the Registrable Shares, the
Company will so notify all holders of Registrable Shares, including all holders
who have a right to acquire Registrable Shares. Upon written request of any
holder given within thirty (30) days after the receipt by such holder from the
Company of such notification, the Company will use its best efforts to cause
such of the Registrable Shares as may be requested by any holder thereof
(including the holder or holders giving the initial notice of intent to offer)
to be registered under the Securities Act as expeditiously as possible. If the
Company determined to include shares to be sold by it in any registration
requests pursuant to this Section 5.02, such registration shall be deemed to
have been a registration under Section 5.01 of this Article V.
-17-
5.03. REGISTRATION ON FORM S-3. In addition to the rights provided the
------------------------
holder of Registrable Shares in Sections 5.01 and 5.02 above, if the
registration of Registrable Shares under the Securities Act can be effected on
Form S-3 (or any similar form promulgated by the Securities and Exchange
Commission), the Company will at any time, and from time to time, thereafter, as
expeditiously as possible, use its best efforts to effect qualification and
registration under the Securities Act on said Form S-3 of all or such portion of
the Registrable Shares as the holder or holders shall specify.
5.04. EFFECTIVENESS. The Company will use its best efforts to maintain
-------------
the effectiveness for up to nine (9) months of any registration statement
pursuant to which any of the Registrable Shares are being offered, and from time
to time will amend or supplement such registration statement and the prospectus
contained therein as and to the extent necessary to comply with the Securities
Act and any applicable state securities statute or regulation. Notwithstanding
the previous sentences, the Company may suspend the effectiveness of a
registration statement for a period not to exceed ninety (90) days in any twelve
(12) month period if there exists at the time material non-public information
relating to the Company which, in the reasonable opinion of the Board of
Directors of the Company, should not be disclosed. The Company will also provide
each holder of Registrable Shares with as many copies of the prospectus
contained in any such registration statement as it may reasonably request.
5.05. INDEMNIFICATION OF HOLDER OF REGISTRABLE SHARES. In the event
-----------------------------------------------
that the Company registers any of the Registrable Shares under the Securities
Act, the Company will indemnify and hold harmless each holder and each
underwriter of the Registrable Shares so registered (including any broker or
dealer through whom such shares may be sold) and each person, if any, who
controls such holder or any such underwriter within the meaning of Section 15 of
the Securities Act from and against any and all losses, claims, damages,
expenses or liabilities, joint or several, to which they or any of them become
subject under the Securities Act or under any other statute or at common law or
otherwise, and, except as hereinafter provided, will reimburse each such holder,
each such underwriter and each such controlling person, if any, for any legal or
other expenses reasonably incurred by them or any of them in connection with
investigating or defending any actions whether or not resulting in any
liability, insofar as such losses, claims, damages, expenses, liabilities or
actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the registration statement or in the
prospectus (or the registration statement or prospectus as from time to time
amended or supplemented by the Company) or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading or any violation by the Company of any rule or regulation promulgated
under the Securities Act applicable to the Company and relating to action or
inaction required of the Company in connection with such registration, unless
such untrue statement or omission was made in such registration statement,
preliminary or amended, preliminary prospectus or prospectus in reliance upon
and in conformity with information furnished in writing to the Company in
connection therewith by such holder of Registrable Shares, any such underwriter
or any such controlling person expressly for use therein. Promptly after receipt
by any holder of Registrable Shares, any underwriter or any controlling person,
of notice of the commencement of any action in respect of which indemnity may be
sought against the Company, such holder of Registrable Shares, or such
underwriter or such controlling person, as the case may be, will notify the
Company in writing of the commencement thereof, and, subject to the provisions
hereinafter stated, the Company shall assume the defense of such action
(including the employment of counsel, who shall be counsel reasonably
satisfactory to such holder of Registrable Shares, such underwriter or such
controlling person, as the case may be), and the payment of expenses insofar as
such action shall relate to any alleged liability in respect of which indemnity
may be sought against the Company. Such holder of Registrable Shares, any such
underwriter or any such controlling person shall have the right to employ
separate counsel in any such action and to participate in the defense thereof
but the fees and expenses of such counsel shall not be at the expense of the
Company unless the employment of such counsel has been specifically authorized
by the Company in writing. The Company shall not be liable to indemnify any
person for any settlement of any such action effected without the Company's
consent. The Company shall not, except with the approval of each party being
indemnified under this Section 5.05, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to the parties being so indemnified of a
release from all liability in respect to such claim or litigation.
5.06. INDEMNIFICATION OF COMPANY. In the event that the Company
--------------------------
registers any of the Registrable Shares under the Securities Act, each holder of
the Registrable Shares so registered will indemnify and hold
-18-
harmless the Company, each of its directors, each of its officers who have
signed the registration statement, each underwriter of the Registrable Shares so
registered (including any broker or dealer through whom such of the shares may
be sold) and each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act from and against any and all losses, claims,
damages, expenses or liabilities, joint or several, to which they or any of them
may become subject under the Securities Act or under any other statute or at
common law or otherwise, and, except as hereinafter provided, will reimburse the
Company and each such director, officer, underwriter or controlling person for
any legal or other expenses reasonably incurred by them or any of them in
connection with investigating or defending any actions whether or not resulting
in any liability, insofar as such losses, claims, damages, expenses, liabilities
or actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the registration statement or in the
prospectus (or the registration statement or prospectus as from time to time
amended or supplemented) or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary in order to make the statements therein not misleading, but only
insofar as any such statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Company in connection
therewith by such holder of Registrable Shares expressly for use therein;
provided, however, that such holder's obligations hereunder shall be limited to
-------- -------
an amount equal to the proceeds to such holder of the Registrable Shares sold in
such registration. Promptly after receipt of notice of the commencement of any
action in respect of which indemnity may be sought against such holder of
Registrable Shares, the Company will notify such holder of Registrable Shares in
writing of the commencement thereof, and such holder of Registrable Shares
shall, subject to the provisions hereinafter stated, assume the defense of such
action (including the employment of counsel, who shall be counsel satisfactory
to the Company) and the payment of expenses insofar as such action shall relate
to the alleged liability in respect of which indemnity may be sought against
such holder of Registrable Shares. The Company and each such director, officer,
underwriter or controlling person shall have the right to employ separate
counsel in any such action and to participate in the defense thereof but the
fees and expenses of such counsel shall not be at the expense of such holder of
Registrable Shares unless employment of such counsel has been specifically
authorized by such holder of Registrable Shares. Such holder of Registrable
Shares shall not be liable to indemnify any person for any settlement of any
such action effected without such holder's consent.
5.07. EXCHANGE ACT REGISTRATION. If the Company at any time shall list
-------------------------
any of its Common Stock of the type which may be issued upon the exercise of the
Warrants on any national securities exchange and shall register such Common
Stock under the Exchange Act, the Company will, at its expense, simultaneously
list on such exchange and maintain such listing of, all of the Common Stock from
time to time issuable upon exercise of the Warrants. If the Company becomes
subject to the reporting requirements of either Section 13 or Section 15(d) of
the Exchange Act, the Company will use its best efforts to timely file with the
Securities and Exchange Commission such information as the Securities and
Exchange Commission may require under either of said Sections; and in such
event, the Company shall use its best efforts to take all action as may be
required as a condition to the availability of Rule 144 under the Securities Act
(or any successor exemptive rule hereinafter in effect) with respect to such
Common Stock. The Company shall furnish to any holder of Registrable Shares
forthwith upon request (i) a written statement by the Company as to its
compliance with the reporting requirements of Rule 144, (ii) a copy of the most
recent annual or quarterly report of the Company as filed with the Securities
and Exchange Commission, and (iii) such other reports and documents as a holder
may reasonably request in availing itself of any rule or regulation of the
Securities and Exchange Commission allowing a holder to sell any such
Registrable Securities without registration.
5.08. DAMAGES. The Company recognizes and agrees that the holder of
-------
Registrable Shares may not have an adequate remedy if the Company fails to
comply with this Article V and that damages will not be readily ascertainable,
and the Company expressly agrees that, in the event of such failure, it shall
not oppose an application by the holder of Registrable Shares or any other
person entitled to the benefits of this Article V requiring specific performance
of any and all provisions hereof or enjoining the Company from continuing to
commit any such breach of this Article V.
5.09. FURTHER OBLIGATIONS OF THE COMPANY. Whenever under the preceding
----------------------------------
Sections of this Article V, the Company is required hereunder to register
Registrable Shares, it agrees that it shall also do the following:
-19-
(A) Furnish to each selling holder such copies of each
preliminary and final prospectus and such other documents as said holder may
reasonably request to facilitate the public offering of its Registrable Shares;
(B) Use its best efforts to register or qualify the
Registrable Shares covered by said registration statement under the applicable
securities or "blue sky" laws of such jurisdictions as any selling holder may
reasonably request; provided, however, that the Company shall not be obligated
-------- -------
to qualify to do business in any jurisdiction where it is not then so qualified
or to take any action which would subject it to the service of process in suits
other than those arising out of the offer or sale of the securities covered by
the registration statement in any jurisdiction where it is not then so subject;
(C) Furnish to each selling holder a signed counterpart of
(i) an opinion of counsel for the Company,
dated the effective date of the registration statement, and
(ii) "comfort" letters signed by the Company's
independent public accountants who have examined and reported on the
Company's financial statements included in the registration statement,
to the extent permitted by the standards of the American Institute of
Certified Public Accountants,
covering substantially the same matters with respect to the registration
statement (and the prospectus included therein) and (in the case of the
accountants' "comfort" letters) with respect to events subsequent to the date of
the financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' "comfort" letters delivered to the underwriters in
underwritten public offerings of securities, to the extent that the Company is
required to deliver or cause the delivery of such opinion or "comfort" letters
to the underwriters in an underwritten public offering of securities;
(D) Permit each selling holder or his counsel or other
representatives to inspect and copy such corporate documents and records as may
reasonably be requested by them;
(E) Furnish to each selling holder a copy of all documents
filed and all correspondence from or to the Securities and Exchange Commission
in connection with any such offering; and
(F) Use its best efforts to insure the obtaining of all
necessary approvals from the National Association of Securities Dealers, Inc.
5.10. EXPENSES. In the case of a registration under Section 5.01, 5.02
--------
or 5.03, the Company shall bear all costs and expenses of each such
registration, including, but not limited to, printing, legal and accounting
expenses, Securities and Exchange Commission filing fees and "blue sky" fees and
expenses; provided, however, that the Company shall have no obligation to pay or
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otherwise bear (i) any portion of the fees or disbursements of more than one
counsel for the selling holders of Registrable Shares in connection with the
registration of their Registrable Shares, or (ii) any portion of the
underwriters' commissions or discounts attributable to the Registrable Shares
being offered and sold by the holders of Registrable Shares.
5.11. TERMINATION OF REGISTRATION RIGHTS. The Company shall be under no
----------------------------------
obligation to effect a registration of a holder's Registrable Shares after such
Registrable Shares are freely tradable without restrictions pursuant to Rule
144(k) of the Securities Act or otherwise.
ARTICLE VI
EVENTS OF DEFAULT
6.01. EVENTS OF DEFAULT. If any of the following events ("Events of
-----------------
Default") shall occur and be continuing:
-20-
(A) The Company shall fail to pay any installment of principal
of any of the Notes when due; or
(B) The Company shall fail to pay any interest or premium on
any of the Notes when due and such failure shall continue for five (5) business
days; or
(C) The Company shall default in the performance of any
covenant contained in subsections 4.01(j), (k), (l) or (m) or shall default for
ten (10) days in the performance of any covenant contained in Section 4.02; or
(D) Any representation or warranty made by the Company or any
Subsidiary in this Agreement or by the Company or any Subsidiary (or any
officers of the Company or any Subsidiary) in any certificate, instrument or
written statement contemplated by or made or delivered pursuant to or in
connection with this Agreement or the Security Agreement, shall prove to have
been incorrect when made in any material respect; or
(E) The Company or any Subsidiary shall fail to perform or
observe any other term, covenant or agreement contained in this Agreement, the
Notes, the Warrants or the Security Agreement on its part to be performed or
observed and any such failure remains unremedied for ten (10) business days
after written notice thereof shall have been given to the Company by any
registered holder of the Notes; or
(F) The Company or any Subsidiary shall fail to pay any
Indebtedness for borrowed money (other than as evidenced by the Notes) owing by
the Company or such Subsidiary (as the case may be), or any interest or premium
thereon, when due (or, if permitted by the terms of the relevant document,
within any applicable grace period), whether such Indebtedness shall become due
by scheduled maturity, by required prepayment, by acceleration, by demand or
otherwise, or shall fail to perform any term, covenant or agreement on its part
to be performed under any agreement or instrument (other than this Agreement or
the Notes) evidencing or securing or relating to any Indebtedness owing by the
Company or any Subsidiary, as the case may be, when required to be performed
(or, if permitted by the terms of the relevant document, within any applicable
grace period), if the effect of such failure to pay or perform is to accelerate,
or to permit the holder or holders of such Indebtedness, or the trustee or
trustees under any such agreement or instrument to accelerate, the maturity of
such Indebtedness, unless such failure to pay or perform shall be waived by the
holder or holders of such Indebtedness or such trustee or trustees; or
(G) The Company or any Subsidiary shall be involved in
financial difficulties as evidenced (i) by its admitting in writing its
inability to pay its debts generally as they become due; (ii) by its
commencement of a voluntary case under Title 11 of the United States Code as
from time to time in effect, or by its authorizing, by appropriate proceedings
of its Board of Directors or other governing body, the commencement of such a
voluntary case; (iii) by its filing an answer or other pleading admitting or
failing to deny the material allegations of a petition filed against it
commencing an involuntary case under said Title 11, or seeking, consenting to or
acquiescing in the relief therein provided, or by its failing to controvert
timely the material allegations of any such petition; (iv) by the entry of an
order for relief in any involuntary case commenced under said Title 11; (v) by
its seeking relief as a debtor under any applicable law, other than said Title
11, of any jurisdiction relating to the liquidation or reorganization of debtors
or to the modification or alteration of the rights of creditors, or by its
consenting to or acquiescing in such relief; (vi) by the entry of an order by a
court of competent jurisdiction (a) finding it to be bankrupt or insolvent, (b)
ordering or approving its liquidation, reorganization or any modification or
alteration of the rights of its creditors, or (c) assuming custody of, or
appointing a receiver or other custodian for, all or a substantial part of its
property; or (vii) by its making an assignment for the benefit of, or entering
into a composition with, its creditors, or appointing or consenting to the
appointment of a receiver or other custodian for all or a substantial part of
its property; or
(H) Any judgment, writ, warrant of attachment or execution or
similar process shall be issued or levied against a substantial part of the
property of the Company or any Subsidiary and such judgment, writ, or similar
process shall not be released, vacated or fully bonded within sixty (60) days
after its issue or levy;
then, and in any such event, any Purchaser or any other holder of the Notes may,
by notice to the Company, declare the entire unpaid principal amount of the
Notes, all interest accrued and unpaid thereon and all other amounts
-21-
payable under this Agreement to be forthwith due and payable, whereupon the
Notes, all such accrued interest and all such amounts shall become and be
forthwith due and payable (unless there shall have occurred an Event of Default
under subsection 6.01(g) in which case all such amounts shall automatically
become due and payable), without presentment, demand, protest or further notice
of any kind, all of which are hereby expressly waived by the Company.
6.02. ANNULMENT OF DEFAULTS. Section 6.01 is subject to the condition
---------------------
that, if at any time after the principal of any of the Notes shall have become
due and payable, and before any judgment or decree for the payment of the moneys
so due, or any thereof, shall have been entered, all arrears of interest upon
all the Notes and all other sums payable under the Notes and under this
Agreement (except the principal of the Notes which by such declaration shall
have become payable) shall have been duly paid, and every other default and
Event of Default shall have been made good or cured, then and in every such case
the holders of sixty percent (60%) or more in principal amount of all Notes then
outstanding may, by written instrument filed with the Company, rescind and annul
such declaration and its consequences; but no such rescission or annulment shall
extend to or affect any subsequent default or Event of Default or impair any
right consequent thereon.
ARTICLE VII
DEFINITIONS AND ACCOUNTING TERMS
7.01. CERTAIN DEFINED TERMS. As used in this Agreement, the following
---------------------
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Agreement" means this Note and Warrant Purchase Agreement as from time
to time amended and in effect between the parties.
"Capital Resource Company Act" shall have the meaning assigned to that
term in Section 1.12.
"Closing" shall have the meaning assigned to that term in Section
1.03(a).
"Code" shall have the meaning assigned to that term in Section 4.01(i).
"Company" means and shall include Candela Corporation and its
successors and assigns.
"Common Stock" includes the Company's Common Stock, $.01 par value per
share, as authorized on the date of this Agreement, and any other securities
into which or for which any such Common Stock may be converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger, sale of assets
or otherwise.
"Consolidated" and "consolidating" when used with reference to any term
defined herein mean that term as applied to the accounts of the Company and its
Subsidiaries consolidated in accordance with generally accepted accounting
principles.
"Consolidated Net Earnings Available for Interest Charges" means, for
any period, Consolidated Net Income for such period plus (a) interest paid or
accrued by the Company and its Subsidiaries with respect to all Indebtedness for
such period and (b) income and excess profit taxes for such period and all other
taxes for such period which are imposed on or measured by income after deduction
of interest charges.
"Consolidated Net Income" means, for any period, the net income (or net
deficit) of the Company and its Subsidiaries for such period, after all
expenses, taxes and other proper charges, determined in accordance with
generally accepted accounting principles eliminating (i) all intercompany items,
(ii) all earnings attributable to equity interests in Persons that are not
Subsidiaries unless actually received by the Company or its Subsidiaries, (iii)
all income arising from the forgiveness, adjustment or negotiated settlement of
any Indebtedness, and (iv) any increase or decrease of income arising from any
change in the method of accounting for any item from that employed in the
preparation of the financial statements referred to in Section 3.08.
-22-
"Consolidated Net Worth" means, at any dates, the sum of (a) the par
value of all of the stock of the Company issued and outstanding, (b) the amount
of any additional paid-in-capital, and (c)
(i) plus, the positive retained earnings, if
any, of the Company and its Subsidiaries, or
(ii) less, the amount of any deficit in the
retained earnings of the Company and its Subsidiaries
as the same appears on a consolidated balance sheet of the Company and its
Subsidiaries prepared in accordance with generally accepted accounting
principles consistently applied as of such date, after eliminating all
intercompany items and all amounts properly attributable to (1) any write-up in
the book value of any asset resulting from a revaluation thereof after the date
of this Agreement; (2) the amount of any intangible assets including patents,
trademarks, unamortized debt discount and expense, goodwill, covenants and
agreements and the excess of the purchase price paid for assets or stock
acquired over the value assigned thereto on the books of the Company or of the
Subsidiary which shall have acquired the same; (3) earnings attributable to any
other Person unless actually received by the Company or its Subsidiaries; and
(4) changes in the method of accounting.
"Current Liabilities" means all liabilities of any corporation which
would, in accordance with generally accepted accounting principles consistently
applied, be classified as current liabilities of a corporation conducting a
business the same as or similar to that of such corporation, including, without
limitation, all rental payments due under leases required to be capitalized in
accordance with applicable Statements of Financial Accounting Standards and
fixed prepayments of, and sinking fund payments with respect to, Indebtedness
(including Indebtedness evidenced by the Notes), which payments are required to
be made within one year from the date of determination.
"Distribution" shall have the meaning assigned to that term in Section
4.02(g).
"ERISA" shall have the meaning assigned to that term in Section 3.10.
"Events of Default" shall have the meaning assigned to that term in
Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934 or any similar
federal statute, and the rules and regulations of the Securities and Exchange
Commission (or of any other Federal Agency then administering the Exchange Act)
thereunder, all as the same shall be in effect at the time.
"Form 10-K" means the Company's Form 10-K for the fiscal year ended
June 27, 1998 as filed with the Commission pursuant to the Exchange Act.
"Government Contract" shall have the meaning assigned to that in
Section 3.14.
"Indebtedness" means all obligations, contingent and otherwise, which
should, in accordance with generally accepted accounting principles consistently
applied, be classified upon the obligor's balance sheet as liabilities, but in
any event including, without limitation, liabilities secured by any mortgage on
property owned or acquired subject to such mortgage, whether or not the
liability secured thereby shall have been assumed, and also including, without
limitation, (i) all guaranties, endorsements and other contingent obligations,
in respect of Indebtedness of others, whether or not the same are or should be
so reflected in said balance sheet, except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business and (ii) the present value of any lease payments due
under leases required to be capitalized in accordance with applicable Statements
of Financial Accounting Standards, determined in accordance with applicable
Statements of Financial Accounting Standards.
"Interest Charges" means the interest expense of the Company and its
Subsidiaries on Indebtedness (including the current portion thereof).
"MCRC" shall have the meaning assigned to that term in Section 1.12.
-23-
"Notes" shall have the meaning assigned to that term in Section 1.01.
"Person" means an individual, corporation, partnership, joint venture,
trust, or unincorporated organization, or a government or any agency or
political subdivision thereof.
"Proxy Statement" means the Proxy Statement of the Company, dated
December 11, 1998, used in connection with its January 20, 1998 annual meeting
of stockholders.
"Purchasers" means and shall include not only the Purchasers listed in
the Schedule of Purchasers attached hereto but also any other holder or holders
of any of the Notes or Warrants.
"Registrable Shares" means and includes the shares of Common Stock
issued and issuable upon exercise of the Warrants.
"Security Agreement" shall have the meaning assigned to that term in
Section 2.02(a).
"Securities Act" means the Securities Act of 1933 or any similar
federal statute, and the rules and regulations of the Securities and Exchange
Commission (or of any other federal agency then administering the Securities
Act) thereunder, all as the same shall be in effect at the time.
"Senior Debt" shall have the meaning assigned to that term in Section
1.10(h).
"Subsidiary" or "Subsidiaries" means any corporation or trust of which
the Company and/or any of its other Subsidiaries (as herein defined) directly or
indirectly owns at the time all of the outstanding shares of every class of such
corporation or trust other than directors' qualifying shares.
"Warrants" shall have the meaning assigned to that term in Section
1.02.
7.02. ACCOUNTING TERMS. All accounting terms not specifically defined
----------------
herein shall be construed in accordance with generally accepted accounting
principles consistent with those applied in preparation of the financial
statements referred to in Section 3.08, and all financial data submitted
pursuant to this Agreement and all financial tests to be calculated in
accordance with this Agreement shall be prepared and calculated in accordance
with such principles.
ARTICLE VIII
MISCELLANEOUS
8.01. NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on the part
------------------------------
of any Purchaser, or any other holder of the Notes or Warrants in exercising any
right, power or remedy hereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy hereunder. The remedies herein provided are cumulative and not exclusive
of any remedies provided by law.
8.02. AMENDMENTS, WAIVERS AND CONSENTS. Any provision in this
--------------------------------
Agreement, the Notes or the Warrants to the contrary notwithstanding, changes in
or additions to this Agreement may be made, and compliance with any covenant or
provision herein or therein set forth may be omitted or waived, if the Company
(i) shall, in the case of the Notes, obtain consent thereto in writing from the
holder or holders of at least sixty percent (60%) in principal amount of all
Notes then outstanding and (ii) shall, in the case of the Warrants, obtain the
consent thereto in writing from the holder or holders of at least sixty percent
(60%) of the Common Stock issued and issuable upon exercise of the Warrants;
provided that no such consent shall be effective to reduce the amount of or to
--------
postpone any date for the payment of the principal (including any required
redemption) or interest payable on any Note, without the consent of the holder
thereof, or to reduce the percentage of the Notes and Warrants the consent of
the holders of which is required under this Section. Any waiver or consent may
be given subject to satisfaction of conditions
-24-
stated therein and any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. Written notice of any
waiver or consent effected under this subsection shall promptly be delivered by
the Company to any holders who did not execute the same.
8.03. ADDRESSES FOR NOTICES, ETC. All notices, requests, demands and
--------------------------
other communications provided for hereunder shall be in writing (including
telegraphic communication) and mailed or telegraphed or delivered to the
applicable party at the addresses indicated below:
If to the Company:
Candela Corporation
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
If to a Purchaser:
At such Purchaser's address as listed in the
Schedule of Purchasers attached hereto.
If to any other holder of the Notes or Warrants: at such holder's
address for notice as set forth in the register maintained by the Company, or,
as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to the other party complying as to delivery with
the terms of this Section. Any communication provided for herein shall become
effective only upon and at the time of receipt by the Person to whom it is
given, unless such communication is mailed by registered or certified mail, in
which case it shall be deemed to have been received on (a) the third business
day following the mailing thereof, or (b) the day of its receipt, if a business
day, or the next succeeding business day, whichever of (a) or (b) is earlier.
8.04. COSTS, EXPENSES AND TAXES. The Company agrees to pay on demand
-------------------------
all costs and expenses of the Purchasers in connection with the preparation,
execution and delivery of this Agreement, the Notes, the Warrants, the Security
Agreement and other instruments and documents to be delivered hereunder,
including the reasonable fees and out-of-pocket expenses of ▇▇▇▇▇, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇▇, LLP, counsel for the Purchasers, with respect thereto, as well as the
reasonable fees and out-of-pocket expenses of legal counsel, independent public
accountants and other outside experts reasonably retained by the Purchasers in
connection with the amendment or enforcement of this Agreement, the Notes, the
Warrants, the Security Agreement and other instruments and documents to be
delivered hereunder or thereunder. In addition, the Company shall pay any and
all stamp and other taxes payable or determined to be payable in connection with
the execution and delivery of this Agreement, the Notes, the Warrants, the
Security Agreement and the other instruments and documents to be delivered
hereunder or thereunder and agrees to save the Purchasers harmless from and
against any and all liabilities with respect to or resulting from any delay in
paying or omission to pay such taxes and filing fees.
8.05. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon
--------------------------
and inure to the benefit of the Company and the Purchasers and their respective
successors and assigns, except that the Company shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Purchasers.
8.06. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
------------------------------------------
and warranties made in this Agreement, the Notes, the Warrants or the Security
Agreement or any other instrument or document delivered in connection herewith
or therewith, shall survive the execution and delivery hereof or thereof and the
making of the loans.
8.07. PRIOR AGREEMENTS. This Agreement constitutes the entire agreement
----------------
between the parties and supersedes any prior understandings or agreements
concerning the subject matter hereof.
8.08. SEVERABILITY. The invalidity or unenforceability of any provision
------------
hereof shall in no way affect the validity or enforceability of any other
provision.
-25-
8.09. GOVERNING LAW. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the Commonwealth of Massachusetts.
8.10. HEADINGS. Article, Section and subsection headings in this
--------
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
8.11. SEALED INSTRUMENT. This Agreement is executed as an instrument
-----------------
under seal.
8.12. COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument, and each of the parties hereto may execute this Agreement by signing
any such counterpart.
8.13. ACKNOWLEDGMENT. The Company and each Purchaser hereby acknowledge
--------------
that the Purchasers, other than MCRC, would not have provided to the Company the
financing being provided hereunder on the terms agreed to herein had not MCRC
agreed to participate for the amount and on the terms agreed to herein.
8.14. FURTHER ASSURANCES. From and after the date of this Agreement,
------------------
upon the request of any Purchaser, the Company and each Subsidiary shall execute
and deliver such instruments, documents and other writings as may be necessary
or desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement, the Notes, the Warrants and the Security Agreement.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
-26-
Signature Page to Note and Warrant Purchase Agreement
-----------------------------------------------------
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
CANDELA CORPORATION
By:/s/ F. ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
F. ▇▇▇▇ ▇▇▇▇▇▇, Chief Financial Officer
MASSACHUSETTS CAPITAL RESOURCE COMPANY
By:/s/ ▇▇▇ ▇▇▇▇▇▇ III
-----------------------------------------
▇▇▇ ▇▇▇▇▇▇ III, Vice President
By:/s/ /▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-27-
CANDELA CORPORATION
Schedule of Purchasers
----------------------
Number of
Shares of
Principal Common Stock
Amount Of Under Total Aggregate
Name and Address of Purchaser Notes Warrant Purchase Price
----------------------------- ----- ------- --------------
Massachusetts Capital Resource Company* $3,000,000 300,000 $3,000,000
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 500,000 50,000 500,000
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Inc.
▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 200,000 20,000 200,000
---------- -------- ----------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Inc.
▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
TOTAL $3,700,000 370,000 $3,700,000
--------- ------- ---------
______________________
* Payments to MCRC should be made to:
Massachusetts Capital Resource Company
P. O. Box 3707
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Exhibit 1.01
------------
Payment of this Note is subject to the terms and conditions of a Subordination
Agreement dated October 15, 1998 between the Company and Fleet National Bank. A
copy of said Subordination Agreement may be obtained, upon written request of
any holder of this Note, from Fleet National Bank, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇.
CANDELA CORPORATION
NOTE DUE 2006
$_____________ October 15, 1998
For value received, Candela Corporation, a Delaware corporation (the
"Company"), hereby promises to pay to [name of registered holder] or registered
assigns (hereinafter referred to as the "Payee"), on or before October 31, 2006,
the principal sum of ______________________________ Dollars ($_____________) or
such part thereof as then remains unpaid, and to pay interest from the date
hereof on the whole amount of said principal sum remaining from time to time
unpaid at the rate of nine and three-quarters percent (9-3/4%) per annum, such
interest to be payable quarterly on the last day of April, July, October and
January, the first such payment to be due and payable on October 31, 1998, until
the whole amount of the principal hereof remaining unpaid shall become due and
payable, and to pay interest at the rate of fourteen percent (14%) (so far as
the same may be legally enforceable) on all overdue principal (including any
overdue required redemption), premium and interest. Principal, premium, if any,
and interest shall be payable in lawful money of the United States of America,
in immediately available funds, at the principal office of the Payee or at such
other place as the legal holder may designate from time to time in writing to
the Company. Interest shall be computed on the basis of a 360-day year and a
30-day month.
This Note is issued pursuant to and is entitled to the benefits of a
certain Note and Warrant Purchase Agreement, dated as of October 15, 1998,
between the Company and the Persons listed in the Schedule of Purchasers
attached thereto (as the same may be amended from time to time, hereinafter
referred to as the "Agreement"), and each holder of this Note, by his acceptance
hereof, agrees to be bound by the provisions of the Agreement, including,
without limitation, that (i) this Note is subject to mandatory prepayments as
specified in said Agreement, (ii) the principal of and interest on this Note is
subordinated to Senior Debt, as defined in the Agreement, and (iii) in case of
an Event of Default, as defined in the Agreement, the principal of this Note may
become or may be declared due and payable in the manner and with the effect
provided in the Agreement.
As further provided in the Agreement, upon surrender of this Note for
transfer or exchange, a new Note or new Notes of the same tenor dated the date
to which interest has been paid on the surrendered Note and in an aggregate
principal amount equal to the unpaid principal amount of the Note so surrendered
will be issued to, and registered in the name of, the transferee or transferees.
The Company may treat the person in whose name this Note is registered as the
owner hereof for the purpose of receiving payment and for all other purposes.
This Note is secured by and entitled to the benefits of a certain
Security Agreement (as that term is defined in the Agreement), dated October 15,
1998, between the Company and the Persons listed in the Schedule of Purchasers
to the Agreement.
In case any payment herein provided for shall not be paid when due, the
Company promises to pay all cost of collection, including all reasonable
attorney's fees.
This Note shall be governed by, and construed in accordance with, the
laws of the Commonwealth of Massachusetts and shall have the effect of a sealed
instrument.
The Company and all endorsers and guarantors of this Note hereby waive
presentment, demand, notice of nonpayment, protest and all other demands and
notices in connection with the delivery, acceptance, performance or enforcement
of this Note.
CANDELA CORPORATION
By_____________________________________________
F. ▇▇▇▇ ▇▇▇▇▇▇, Chief Financial Officer
-2-
Exhibit 1.02
------------
No. WA-__ Right to Purchase ____ Shares of Common
Stock of Candela Corporation
CANDELA CORPORATION
COMMON STOCK PURCHASE WARRANT
Candela Corporation, a Delaware corporation (the "Company"), hereby
certifies that, for value received _________________________________, or
assigns, is entitled, subject to the terms set forth below, to purchase from the
Company at any time or from time to time before 5:00 P.M., Boston time, on
October 31, 2006, or such later time as may be specified in Section 17 hereof,
_________ fully paid and nonassessable shares of Common Stock, $.01 par value,
of the Company, at a purchase price per share of $4.00 (such purchase price per
share as adjusted from time to time as herein provided is referred to herein as
the "Purchase Price"). The number and character of such shares of Common Stock
and the Purchase Price are subject to adjustment as provided herein.
This Warrant is one of the Common Stock Purchase Warrants (the
"Warrants") evidencing the right to purchase shares of Common Stock of the
Company, issued pursuant to a certain Subordinated Note and Warrant Purchase
Agreement (the "Agreement"), dated as of October 15, 1998, between the Company
and the Persons listed in the Schedule of Purchasers attached thereto, a copy of
which is on file at the principal office of the Company and the holder of this
Warrant shall be entitled to all of the benefits of the Agreement, as provided
therein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" shall include Candela
Corporation and any corporation which shall succeed or assume the
obligations of the Company hereunder.
(b) The term "Common Stock" includes the Company's
Common Stock, $.01 par value per share, as authorized on the date of
the Agreement and any other securities into which or for which any of
such Common Stock may be converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock
(other than Common Stock) and other securities of the Company or any
other person (corporate or otherwise) which the holders of the Warrants
at any time shall be entitled to receive, or shall have received, on
the exercise of the Warrants, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued
in exchange for or in replacement of Common Stock or Other Securities
pursuant to section 5 or otherwise.
1. EXERCISE OF WARRANT.
-------------------
1.1. FULL EXERCISE. This Warrant may be exercised in full by
-------------
the holder hereof by surrender of this Warrant, with the form of subscription at
the end hereof duly executed by such holder, to the Company at its principal
office, accompanied by payment, in cash or by certified or official bank check
payable to the order of the Company, in the amount obtained by multiplying the
number of shares of Common Stock for which this Warrant is then exercisable by
the Purchase Price then in effect.
1.2. PARTIAL EXERCISE. This Warrant may be exercised in part
----------------
by surrender of this Warrant in the manner and at the place provided in
subsection 1.1 except that the amount payable by the holder on such partial
exercise shall be the amount obtained by multiplying (a) the number of shares of
Common Stock designated by the holder in the subscription at the end hereof by
(b) the Purchase Price then in effect. On any such partial exercise the Company
at its expense will forthwith issue and deliver to or upon the order of the
holder hereof a new Warrant or Warrants of like tenor, in the name of the holder
hereof or as such holder (upon payment by such holder of any
applicable transfer taxes) may request, calling in the aggregate on the face or
faces thereof for the number of shares of Common Stock for which such Warrant or
Warrants may still be exercised.
1.3. PAYMENT BY NOTES SURRENDER. Notwithstanding the payment
--------------------------
provisions of subsections 1.1 and 1.2, all or part of the payment due upon
exercise of this Warrant in full or in part may be made by the surrender by such
holder to the Company of any of the Company's Notes issued pursuant to the
Agreement and such Notes so surrendered shall be credited against such payment
in an amount equal to the principal amount thereof plus premium (if any) and
accrued interest to the date of surrender.
1.4 NET ISSUE ELECTION. The holder hereof may elect to
------------------
receive, without the payment by such holder of any additional consideration,
shares equal to the value of this Warrant or any portion hereof by the surrender
of this Warrant or such portion to the Company, with the form of subscription at
the end hereof duly executed by such holder, at the office of the Company.
Thereupon, the Company shall issue to such holder such number of fully paid and
nonassessable shares of Common Stock as is computed using the following formula:
X = Y (A-B)
-------
A
where X = the number of shares to be issued to such holder pursuant to
this subsection 1.4.
Y = the number of shares covered by this Warrant in respect of which the
net issue election is made pursuant to this subsection 1.4.
A = the fair market value of one share of Common Stock, as determined in
good faith by the Board of Directors of the Company, as at the time the net
issue election is made pursuant to this subsection 1.4.
B = the Purchase Price in effect under this Warrant at the time the net
issue election is made pursuant to this subsection 1.4.
The Board of Directors of the Company shall promptly respond in writing to an
inquiry by the holder hereof as to the fair market value of one share of Common
Stock.
1.5. COMPANY ACKNOWLEDGMENT. The Company will, at the time of
----------------------
the exercise of the Warrant, upon the request of the holder hereof acknowledge
in writing its continuing obligation to afford to such holder any rights to
which such holder shall continue to be entitled after such exercise in
accordance with the provisions of this Warrant. If the holder shall fail to make
any such request, such failure shall not affect the continuing obligation of the
Company to afford to such holder any such rights.
1.6. TRUSTEE FOR WARRANT HOLDERS. In the event that a bank or
---------------------------
trust company shall have been appointed as trustee for the holders of the
Warrants pursuant to subsection 4.2, such bank or trust company shall have all
the powers and duties of a warrant agent appointed pursuant to section 12 and
shall accept, in its own name for the account of the Company or such successor
person as may be entitled thereto, all amounts otherwise payable to the Company
or such successor, as the case may be, on exercise of this Warrant pursuant to
this section 1.
2. DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE. As soon as
-------------------------------------------------
practicable after the exercise of this Warrant in full or in part, and in any
event within 10 days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the holder hereof, or as such holder (upon payment by such
holder of any applicable transfer taxes) may direct, a certificate or
certificates for the number of fully paid and nonassessable shares of Common
Stock (or Other Securities) to which such holder shall be entitled on such
exercise, plus, in lieu of any fractional share to which such holder would
otherwise be entitled, cash equal to such fraction multiplied by the then
current market value of one full share, together with any other stock or other
securities and property (including cash, where applicable) to which such holder
is entitled upon such exercise pursuant to section 1 or otherwise.
-2-
3. ADJUSTMENT FOR DIVIDENDS IN OTHER STOCK, PROPERTY, ETC.;
--------------------------------------------------------
RECLASSIFICATION, ETC. In case at any time or from time to time, the holders of
---------------------
Common Stock (or Other Securities) shall have received, or (on or after the
record date fixed for the determination of shareholders eligible to receive)
shall have become entitled to receive, without payment therefor,
(a) other or additional stock or other securities or
property (other than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely
out of earnings or earned surplus of the Company), or
(c) other or additional stock or other securities or
property (including cash) by way of spin-off, split-up,
reclassification, recapitalization, combination of shares or similar
corporate rearrangement,
other than additional shares of Common Stock (or Other Securities) issued as a
stock dividend or in a stock-split (adjustments in respect of which are provided
for in subsection 5.4), then and in each such case the holder of this Warrant,
on the exercise hereof as provided in section 1, shall be entitled to receive
the amount of stock and other securities and property (including cash in the
cases referred to in subdivisions (b) and (c) of this section 3) which such
holder would hold on the date of such exercise if on the date hereof he had been
the holder of record of the number of shares of Common Stock called for on the
face of this Warrant and had thereafter, during the period from the date hereof
to and including the date of such exercise, retained such shares and all such
other or additional stock and other securities and property (including cash in
the cases referred to in subdivisions (b) and (c) of this section 3) receivable
by him as aforesaid during such period, giving effect to all adjustments called
for during such period by sections 4 and 5.
4. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER, ETC.
---------------------------------------------------------
4.1. REORGANIZATIONS, MERGERS, ETC.. In case at any time or
-----------------------------
from time to time, the Company shall (a) effect a reorganization, (b)
consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, the holder of this Warrant, on the exercise hereof as provided in section
1 at any time after the consummation of such reorganization, consolidation or
merger or the effective date of such dissolution, as the case may be, shall
receive, in lieu of the Common Stock (or Other Securities) issuable on such
exercise prior to such consummation or such effective date, the stock and other
securities and property (including cash) to which such holder would have been
entitled upon such consummation or in connection with such dissolution, as the
case may be, if such holder had so exercised this Warrant, immediately prior
thereto, all subject to further adjustment thereafter as provided in sections 3
and 5.
4.2. DISSOLUTION. In the event of any dissolution of the
-----------
Company following the transfer of all or substantially all of its properties or
assets, the Company, prior to such dissolution, shall at its expense deliver or
cause to be delivered the stock and other securities and property (including
cash, where applicable) receivable by the holders of the Warrants after the
effective date of such dissolution pursuant to this section 4 to a bank or trust
company having its principal office in Boston, Massachusetts, as trustee for the
holder or holders of the Warrants.
4.3. CONTINUATION OF TERMS. Upon any reorganization,
---------------------
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this section 4, this Warrant shall continue in full force and
effect and the terms hereof shall be applicable to the shares of stock and other
securities and property receivable on the exercise of this Warrant after the
consummation of such reorganization, consolidation or merger or the effective
date of dissolution following any such transfer, as the case may be, and shall
be binding upon the issuer of any such stock or other securities, including, in
the case of any such transfer, the person acquiring all or substantially all of
the properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Warrant as provided in section 6.
-3-
5. ADJUSTMENT FOR ISSUE OR SALE OF COMMON STOCK AT LESS THAN THE PURCHASE
----------------------------------------------------------------------
PRICE IN EFFECT.
---------------
5.1. GENERAL. If the Company shall at any time or from time to
-------
time, issue any additional shares of Common Stock (other than shares of Common
Stock excepted from the provisions of this section 5 by subsections 5.4 and 5.5)
without consideration or for a net consideration per share less than the
Purchase Price in effect immediately prior to such issuance, then, and in each
such case: (a) the Purchase Price shall be lowered to an amount determined by
multiplying such Purchase Price then in effect by a fraction:
(1) the numerator of which shall be (a) the number of
shares of Common Stock outstanding immediately prior to the issuance of
such additional shares of Common Stock, plus (b) the number of shares of
Common Stock which the net aggregate consideration, if any, received by the
Company for the total number of such additional shares of Common Stock so
issued would purchase at the Purchase Price in effect immediately prior to
such issuance, and
(2) the denominator of which shall be (a) the number of
shares of Common stock outstanding immediately prior to the issuance of
such additional shares of Common Stock plus (b) the number of such
additional shares of Common Stock so issued;
and (b) the holder of this Warrant shall thereafter, on the exercise hereof as
provided in section 1, be entitled to receive the number of shares of Common
stock determined by multiplying the number of shares of Common Stock which would
otherwise (but for the provisions of this subsection 5.1) be issuable on such
exercise by the fraction of which (i) the numerator is the Purchase Price which
would otherwise (but for the provisions of this subsection 5.1) be in effect,
and (ii) the denominator is the Purchase Price in effect on the date of such
exercise.
5.2. DEFINITIONS, ETC. For purposes of this section 5 and of
----------------
section 7:
The issuance of any warrants, options or other subscription
or purchase rights with respect to shares of Common Stock and the issuance
of any securities convertible into or exchangeable for shares of Common
Stock (or the issuance of any warrants, options or any rights with respect
to such convertible or exchangeable securities) shall be deemed an issuance
at such time of such Common Stock if the Net Consideration Per Share which
may be received by the Company for such Common Stock (as hereinafter
determined) shall be less than the Purchase Price at the time of such
issuance and, except as hereinafter provided, an adjustment in the Purchase
Price and the number of shares of Common Stock issuable upon exercise of
this Warrant shall be made upon each such issuance in the manner provided
in subsection 5.1. Any obligation, agreement or undertaking to issue
warrants, options, or other subscription or purchase rights at any time in
the future shall be deemed to be an issuance at the time such obligation,
agreement or undertaking is made or arises. No adjustment of the Purchase
Price and the number of shares of Common Stock issuable upon exercise of
this Warrant shall be made under subsection 5.1 upon the issuance of any
shares of Common Stock which are issued pursuant to the exercise of any
warrants, options or other subscription or purchase rights or pursuant to
the exercise of any conversion or exchange rights in any convertible
securities if any adjustment shall previously have been made upon the
issuance of any such warrants, options or other rights or upon the issuance
of any convertible securities (or upon the issuance of any warrants,
options or any rights therefor) as above provided. Any adjustment of the
Purchase Price and the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to this subsection 5.2 which relates
to warrants, options or other subscription or purchase rights with respect
to shares of Common Stock shall be disregarded if, as, and when all of such
warrants, options or other subscription or purchase rights expire or are
canceled without being exercised, so that the Purchase Price effective
immediately upon such cancellation or expiration shall be equal to the
Purchase Price in effect at the time of the issuance of the expired or
canceled warrants, options or other subscriptions or purchase rights, with
such additional adjustments as would have been made to that Purchase Price
had the expired or canceled warrants, options or other subscriptions or
purchase rights not been issued. For purposes of this subsection 5.2, the
"Net Consideration Per Share" which may be received by the Company shall be
determined as follows:
-4-
(A) The "Net Consideration Per Share" shall mean the amount
equal to the total amount of consideration, if any, received by the Company
for the issuance of such warrants, options, subscriptions, or other
purchase rights or convertible or exchangeable securities, plus the minimum
amount of consideration, if any, payable to the Company upon exercise or
conversion thereof, divided by the aggregate number of shares of Common
Stock that would be issued if all such warrants, options, subscriptions, or
other purchase rights or convertible or exchangeable securities were
exercised, exchanged or converted.
(B) The "Net Consideration Per Share" which may be received by
the Company shall be determined in each instance as of the date of issuance
of warrants, options, subscriptions or other purchase rights, or
convertible or exchangeable securities without giving effect to any
possible future price adjustments or rate adjustments which may be
applicable with respect to such warrants, options, subscriptions or other
purchase rights or convertible securities.
For purposes of this section 5, if a part or all of the consideration
received by the Company in connection with the issuance of shares of the
Common Stock or the issuance of any of the securities described in this
section 5, consists of property other than cash, such consideration shall
be deemed to have the same value as shall be determined in good faith by
the Board of Directors of the Company.
This subsection 5.2 shall not apply under any of the circumstances
described in subsection 5.4.
5.3. DILUTION IN CASE OF OTHER SECURITIES. In case any Other
------------------------------------
Securities shall be issued or sold, or shall become subject to issue upon the
conversion or exchange of any stock (or Other Securities) of the Company (or any
other issuer of Other Securities or any other person referred to in section 4)
or to subscription, purchase or other acquisition pursuant to any rights or
options granted by the Company (or such other issuer or person), for a
consideration per share such as to dilute the purchase rights evidenced by this
Warrant, the computations, adjustments and readjustments provided for this
section 5 with respect to the Purchase Price and the number of shares of Common
Stock issuable upon exercise of this Warrant shall be made as nearly as possible
in the manner so provided and applied to determine the amount of Other
Securities from time to time receivable on the exercise of the Warrants, so as
to protect the holders of the Warrants against the effect of such dilution.
5.4. EXTRAORDINARY EVENTS. In the event that the Company shall
--------------------
(i) issue additional shares of the Common Stock as a dividend or other
distribution on outstanding Common Stock, (ii) subdivide its outstanding shares
of Common Stock, or (iii) combine its outstanding shares of the Common Stock
into a smaller number of shares of the Common Stock, then, in each such event,
the Purchase Price shall, simultaneously with the happening of such event, be
adjusted by multiplying the then Purchase Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such event and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after such event, and the product so
obtained shall thereafter be the Purchase Price then in effect. The Purchase
Price, as so adjusted, shall be readjusted in the same manner upon the happening
of any successive event or events described herein in this subsection 5.4. The
holder of this Warrant shall thereafter, on the exercise hereof as provided in
section 1, be entitled to receive that number of shares of Common Stock
determined by multiplying the number of shares of Common Stock which would
otherwise (but for the provisions of this subsection 5.4) be issuable on such
exercise by a fraction of which (i) the numerator is the Purchase Price which
would otherwise (but for the provisions of this subsection 5.4) be in effect,
and (ii) the denominator is the Purchase Price in effect on the date of such
exercise.
5.5. EXCLUDED SHARES. Section 5.1 shall not apply to the issuance
---------------
of shares of Common Stock, or options therefor, to directors, officers and
employees of the Company pursuant to any stock options, stock purchase, stock
ownership or compensation plan approved by the Company's Board of Directors,
provided that the aggregate number of shares, and options therefor, so issued to
directors, officers and employees after the date of the Agreement does not
exceed 500,000.
6. NO DILUTION OR IMPAIRMENT. The Company will not, by amendment of its
-------------------------
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any
-5-
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of the Warrants, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the holders of the
Warrants against dilution or other impairment. Without limiting the generality
of the foregoing, the Company (a) will not increase the par value of any shares
of stock receivable on the exercise of the Warrants above the amount payable
therefor on such exercise, (b) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of stock on the exercise of all Warrants from time to
time outstanding, (c) will not issue any capital stock of any class which is
preferred as to dividends or as to the distribution of assets upon voluntary or
involuntary dissolution, liquidation or winding up, unless the rights of the
holders thereof shall be limited to a fixed sum or percentage of par value in
respect of participation in dividends and in any such distribution of assets,
and (d) will not transfer all or substantially all of its properties and assets
to any other person (corporate or otherwise), or consolidate with or merge into
any other person or permit any such person to consolidate with or merge into the
Company (if the Company is not the surviving person), unless such other person
shall expressly assume in writing and will be bound by all the terms of the
Warrants.
7. ACCOUNTANTS' CERTIFICATE AS TO ADJUSTMENTS. In each case of any
------------------------------------------
adjustment or readjustment in the shares of Common Stock (or Other Securities)
issuable on the exercise of the Warrants, the Company at its expense will
promptly cause independent certified public accountants of recognized standing
selected by the Company to compute such adjustment or readjustment in accordance
with the terms of the Warrants and prepare a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares of
Common Stock (or Other Securities) issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock (or Other Securities)
outstanding or deemed to be outstanding, and (c) the Purchase Price and the
number of shares of Common Stock to be received upon exercise of this Warrant,
in effect immediately prior to such issue or sale and as adjusted and readjusted
as provided in this Warrant. The Company will forthwith mail a copy of each such
certificate to each holder of a Warrant, and will, on the written request at any
time of any holder of a Warrant, furnish to such holder a like certificate
setting forth the Purchase Price at the time in effect and showing how it was
calculated.
8. NOTICES OF RECORD DATE, ETC. In the event of
---------------------------
(a) any taking by the Company of a record of the holders of
any class or securities for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, or any
right to subscribe for, purchase or otherwise acquire any shares of stock
of any class or any other securities or property, or to receive any other
right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or
any transfer of all or substantially all the assets of the Company to or
consolidation or merger of the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation
or winding-up of the Company,
then and in each such event the Company will mail or cause to be mailed to each
holder of a Warrant a notice specifying (i) the date on which any such record is
to be taken for the purpose of such dividend, distribution or right, and stating
the amount and character of such dividend, distribution or right, and (ii) the
date on which any such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up is to
take place, and the time, if any is to be fixed, as of which the holders of
record of Common Stock (or Other Securities) shall be entitled to exchange their
shares of Common Stock (or Other Securities) for securities or other property
deliverable on such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up. Such
notice shall be mailed at least 20 days prior to the date specified in such
notice on which any such action is to be taken.
-6-
9. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF WARRANTS. The
------------------------------------------------------------
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of the Warrants, all shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of the Warrants.
10. EXCHANGE OF WARRANTS. On surrender for exchange of any Warrant,
--------------------
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of the holder thereof a new Warrant or Warrants of
like tenor, in the name of such holder or as such holder (on payment by such
holder of any applicable transfer taxes) may direct, calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant or Warrants so surrendered.
11. REPLACEMENT OF WARRANTS. On receipt of evidence reasonably satisfactory
-----------------------
to the Company of the loss, theft, destruction or mutilation of any Warrant and,
in the case of any such loss, theft or destruction of any Warrant, on delivery
of an indemnity agreement or security reasonably satisfactory in form and amount
to the Company or, in the case of any such mutilation, on surrender and
cancellation of such Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
12. WARRANT AGENT. The Company may, by written notice to each holder of a
-------------
Warrant, appoint an agent having an office in either Boston, Massachusetts or
New York, New York for the purpose of issuing Common Stock (or Other Securities)
on the exercise of the Warrants pursuant to section 1, exchanging Warrants
pursuant to section 10, and replacing Warrants pursuant to section 11, or any of
the foregoing, and thereafter any such issuance, exchange or replacement, as the
case may be, shall be made at such office by such agent.
13. REMEDIES. The Company stipulates that the remedies at law of the holder
--------
of this Warrant in the event of any default or threatened default by the Company
in the performance of or compliance with any of the terms of this Warrant are
not and will not be adequate, and that such terms may be specifically enforced
by a decree for the specific performance of any agreement contained herein or by
an injunction against a violation of any of the terms hereof or otherwise.
14. NEGOTIABILITY, ETC. This Warrant is issued upon the following terms, to
------------------
all of which each holder or owner hereof by the taking hereof consents and
agrees:
(a) title to this Warrant may be transferred by endorsement (by
the holder hereof executing the form of assignment at the end hereof) and
delivery in the same manner as in the case of a negotiable instrument
transferable by endorsement and delivery;
(b) any person in possession of this Warrant properly endorsed
is authorized to represent himself as absolute owner hereof and is
empowered to transfer absolute title hereto by endorsement and delivery
hereof to a bona fide purchaser hereof for value; each prior taker or owner
waives and renounces all of his equities or rights in this Warrant in favor
of each such bona fide purchaser, and each such bona fide purchaser shall
acquire absolute title hereto and to all rights represented hereby; and
(c) until this Warrant is transferred on the books of the
Company, the Company may treat the registered holder hereof as the absolute
owner hereof for all purposes, notwithstanding any notice to the contrary.
15. NOTICES, ETC. All notices and other communications from the Company to
------------
the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder or, until any such holder furnishes to the
Company an address, then to, and at the address of, the last holder of this
Warrant who has so furnished an address to the Company.
16. MISCELLANEOUS. This Warrant and any term hereof may be changed, waived,
-------------
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the Commonwealth of Massachusetts. The headings in this
Warrant are for purposes of reference only, and
-7-
shall not limit or otherwise affect any of the terms hereof. This Warrant is
being executed as an instrument under seal. The invalidity or unenforceability
of any provision hereof shall in no way affect the validity or enforceability of
any other provision.
17. EXPIRATION; AUTOMATIC EXERCISE. The right to exercise this Warrant
------------------------------
shall expire at 5:00 P.M., Boston time, on the later of (i) October 31, 2006 or
(ii) at such time as all principal and interest on the Notes (as defined in the
Agreement) is paid in full. Notwithstanding the foregoing, this Warrant shall
automatically be deemed to be exercised in full pursuant to the provisions of
subsection 1.4 hereof, without any further action on behalf of the holder
hereof, immediately prior to the time this Warrant would otherwise expire
pursuant to the preceding sentence.
Dated: October 15, 1998 CANDELA CORPORATION
By____________________________________________
F. ▇▇▇▇ ▇▇▇▇▇▇, Chief Financial Officer
-8-
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO CANDELA CORPORATION
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise this Warrant for, and to purchase thereunder, ........ shares
of Common Stock of CANDELA CORPORATION and herewith makes payment of $........
therefor, and requests that the certificates for such shares be issued in the
name of, and delivered to .............., whose address is .............
Dated: .....................................
(Signature must conform to name of holder as
specified on the face of the Warrant)
.....................................
(Address)
--------------------
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto ......... the right represented by the within Warrant to purchase .........
shares of Common Stock of CANDELA CORPORATION to which the within Warrant
relates, and appoints .............. Attorney to transfer such right on the
books of CANDELA CORPORATION with full power of substitution in the premises.
Dated: .....................................
(Signature must conform to name of holder as
specified on the face of the Warrant)
.....................................
(Address)
Signed in the presence of:
.............
-9-
EXHIBIT 2.02(A)
---------------
SECURITY AGREEMENT
------------------
The undersigned, CANDELA CORPORATION, a Delaware corporation with a place
of business and executive office located at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (hereinafter referred to as a "Debtor") hereby grants to
MASSACHUSETTS CAPITAL RESOURCE COMPANY, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ AND ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
(hereinafter called the "Secured Parties"), a security interest in and agrees
and acknowledges that Secured Parties have and will continue to have a security
interest in the following:
(A) All of Debtor's inventory of whatever name, nature, kind or
description, all Debtor's goods held for sale or lease or to be furnished under
contracts of service, finished goods, work in process, raw materials, materials
used or consumed by the Debtor, parts, supplies, all wrapping, packaging,
advertising, labeling, and shipping materials, devices, names and marks, all
contract rights and documents relating to any of the foregoing, whether any of
the foregoing be now existing or hereafter arising, wherever located, now owned
or hereafter acquired by the Debtor (all of which is sometimes hereinafter
referred to as "Inventory");
(B) All of the Debtor's presently owned and hereafter acquired equipment,
machinery, furniture, fixtures and all other tangible personal property of
whatsoever kind or nature, together with all proceeds thereof, additions and
accessions thereto or replacements thereof or substitutions therefor (all of
which is sometimes hereinafter referred to as "Equipment");
(C) All of the Debtor's accounts, accounts receivable, notes, bills,
drafts, acceptances, instruments, documents, chattel paper and all other debts,
obligations and liabilities in whatever form owing to the Debtor for goods sold
by it or for services rendered by it, or however otherwise established or
created, all guaranties and security therefor, all right, title and interest of
the Debtor in the goods or services which gave rise thereto, including rights of
an unpaid seller of goods or services; whether any of the foregoing be now
existing or hereafter arising, now or hereafter received by or owing or
belonging to the Debtor (all of which are sometimes hereinafter referred to as
"Accounts");
(D) All of the Debtor's general intangibles, including without limitation,
names, goodwill, trade secrets, copyrights, trademarks, trademark applications,
tradenames, patents, patent applications, licenses, other intellectual property,
permits, governmental approvals, deposit accounts, tax refunds, claims under
insurance policies (whether or not proceeds from Collateral), other rights to
payment, rights of setoff, choses in action, rights under judgments, computer
programs and software, contract rights, and all contracts and agreements to, or
of which it is a party or beneficiary, and all intangible personal property of
whatsoever kind or nature now owned by the Debtor as well as any and all thereof
that may be hereafter acquired and in and to all proceeds thereof;
(E) All of the Debtor's books and records, as they exist from time to
time, relating to (A) through (D) above, inclusive;
(F) All other assets of every nature and description, whether it be now
existing or hereafter arising and whether now or hereafter belonging to the
Debtor;
(all hereinafter sometimes collectively referred to as "Collateral"); to secure
the payment of all sums due or which may become due under certain Notes, due
October 31, 2006, of the Debtor in the original aggregate principal amount of
Three Million Seven Hundred Thousand Dollars ($3,700,000), such notes being
issued pursuant to a certain Note and Warrant Purchase Agreement (the "Purchase
Agreement") by and between the Debtor and Secured Parties of even date herewith
(hereinafter sometimes collectively referred to as "Obligation" or
"Obligations").
I. WARRANTIES AND COVENANTS.
------------------------
The Debtor hereby warrants and covenants that:
(A) The Equipment and Inventory are used primarily for business purposes.
(B) The Equipment and Inventory of the Debtor will be kept at the Debtor's
places of business, set forth in Exhibit A attached hereto. The Debtor will
---------
promptly notify the Secured Parties of any change in the location of the
Collateral, and the Debtor will not remove the Equipment from the locations set
forth in Exhibit A without the prior written consent of the Secured Parties. The
---------
Debtor will notify the Secured Parties, at least twenty (20) days prior to any
such event, of any change in the Debtor's exact legal name, any change in its
places of business or locations of Equipment or Inventory as set forth in
Exhibit A or its establishment of any new place of business or location of
---------
Equipment or Inventory or office where its records concerning Accounts and other
assets are kept.
(C) Except for (i) the security interest granted hereby and (ii) the
encumbrances permitted under Section 4.02(a) of the Purchase Agreement (the
"Permitted Encumbrances"), the Debtor is the owner of its presently owned
Collateral and will be the owner of its Collateral hereafter acquired free from
any adverse lien, security interest or encumbrance, and the Debtor will defend
the Collateral against the claims and demands of all persons at any time
claiming the same or any interest therein.
(D) No financing statements (other than the Permitted Encumbrances, if
any) covering any Collateral or any proceeds thereof are on file in any public
office, and at the request of Secured Parties, the Debtor will join with Secured
Parties in executing one or more (i) financing statements pursuant to the
Uniform Commercial Code, (ii) title certificate lien application forms; and
(iii) other documents necessary or advisable to perfect the security interests
evidenced hereby, all in form satisfactory to Secured Parties and the Debtor
will pay the cost of filing the same or filing or recording this Agreement in
all public offices wherever filing or recording is deemed by Secured Parties to
be necessary or desirable.
(E) The Debtor will have and maintain insurance at all times with respect
to all its Collateral against risks of fire (including so-called extended
coverage), theft, embezzlement and such other risks as Secured Parties may
reasonably require containing such terms, in such form, for such periods and
written by such companies as may be reasonably satisfactory to Secured Parties;
and, if requested by the Secured Parties, all policies of insurance shall
provide for at least twenty (20) days' written cancellation notice to Secured
Parties. If and when requested by the Secured Parties, the Debtor shall furnish
Secured Parties with certificates or other evidence satisfactory to Secured
Parties of compliance with the foregoing insurance provision and the Secured
Parties may act either in its name or as attorney for the Debtor (for that
purpose by these presents duly authorized and appointed with full power of
substitution and revocation) in obtaining, adjusting, settling and canceling
such insurance and endorsing any drafts in payment of any loss.
(F) The Debtor will upon request made by the Secured Parties render to the
Secured Parties a list of all Accounts assigned hereunder and a statement
indicating the total dollar amount of the Accounts then outstanding.
(G) The only offices where the Debtor keeps records concerning any
Accounts are listed on Exhibit A and the Debtor will not remove any of such
---------
records from said offices without written consent of the Secured Parties.
(H) The Debtor will keep its Collateral free from any adverse lien,
security interest or encumbrances except the Permitted Encumbrances, if any. The
Debtor will at all times keep accurate and complete records of its Accounts, and
the Secured Parties or any of their agents shall have the right at reasonable
times and upon prior notice, to inspect the Debtor's books and records relating
to said Accounts or to any other transactions to which the Debtor is a party and
from which an Account might arise and to make extracts from said books and
records. The Debtor shall immediately notify the Secured Parties of any event
causing material loss or depreciation in value of any of its Accounts and the
amount of such loss or depreciation.
(I) If any of a Debtor's Accounts arise out of contracts with the United
States or any department, agency or instrumentality thereof, the Debtor will
immediately notify the Secured Parties thereof in writing and will execute any
instruments and take any steps required by the Secured Parties in order that all
monies due and to become due under such contracts shall be assigned to the
Secured Parties and notice thereof given to the government under the Federal
Assignment of Claims Act. Notwithstanding the foregoing, the Secured Parties
shall not request the Debtor
-2-
to provide notice to the United States or any department, agency or
instrumentality thereof until an Event of Default has occurred.
(J) Subsequent to the occurrence of any Event of Default, if any of a
Debtor's Accounts should be evidenced by promissory notes, trade acceptances or
other instruments for the payment of money, the Debtor will immediately deliver
same to the Secured Parties, appropriately endorsed to the Secured Parties'
order and, regardless of the form of such endorsement, such Debtor hereby waives
presentment, demand or notice of any kind with respect thereto. This Agreement
may, but need not be supplemented by separate assignments of Accounts to the
Secured Parties and if such assignments are given the rights and security
interests given thereby shall be in addition to and not in limitation of the
rights and security interests given by this Agreement.
(K) The Debtor will pay promptly when due all taxes and assessments upon
its Collateral or for its use or operation or upon this Agreement or upon any
note or notes secured hereby. In its sole discretion, the Secured Parties may:
(i) discharge taxes and liens levied or placed on Collateral; (ii) pay for
insurance thereon or the maintenance and preservation thereof; or (iii) if the
Debtor shall fail to make required deposits in respect of F.I.C.A. or any
withholding taxes, make such deposits or pay such taxes, in whole or in part, or
set up such reserves as the Secured Parties in its sole discretion deem
necessary in respect of the Debtor's liability therefor. Any amount so paid,
deposited or reserved for shall constitute a loan for all purposes hereunder,
and the Debtor promises to repay the Secured Parties such amounts upon the
Secured Parties' demand. Nothing herein shall be deemed to obligate the Secured
Parties to do any of the foregoing and the making of any one or more such
payments; deposits or reserves shall not constitute an agreement by the Secured
Parties to take any further or similar action or a waiver of any right of the
Secured Parties hereunder.
(L) The Debtor will keep its Collateral at all times in good order and
repair, reasonable wear and tear excepted, and will make necessary renewals of
and replacements to the same with goods of equal value and serviceability, free
of all liens, security interests and encumbrances, which goods shall
automatically become subject to this Agreement.
II. ADDITIONAL RIGHTS AND ASSURANCES.
--------------------------------
(A) At the Secured Parties' request, the Debtor at its expense will
promptly and duly execute and deliver such documents and assurances and take
such actions as may be necessary or desirable or as the Secured Parties may
request in order to correct any defect, error or omission which may at any time
be discovered or to more effectively carry out the intent and purpose of this
Agreement and to establish, perfect and protect the Secured Parties' security
interest, rights and remedies created or intended to be created hereunder.
(B) Subject to Article VI of this Agreement, the Secured Parties may at
any time following an occurrence of an Event of Default and while an Event of
Default is continuing hereunder have the right to take physical possession of
the Collateral and to maintain such possession on the Debtor's premises or to
remove the Collateral or any part thereof to such other places as the Secured
Parties may desire. If the Secured Parties exercises such right, the Debtor
shall at its sole expense upon the Secured Parties' request assemble the same
and make it available to the Secured Parties at a place reasonably convenient to
the Secured Parties. If any Inventory is in the possession or control of any of
the Debtor's agents or processors, the Debtor shall, at the Secured Parties'
request, notify them of the Secured Parties' security interest therein and, at
the Secured Parties' request, instruct them to hold the same for the Secured
Parties' account and subject to the Secured Parties' instructions.
(C) The Secured Parties may at any time after an occurrence of an Event of
Default (i) in its own name or in the name of others communicate with account
debtors in order to verify with them to the Secured Parties' satisfaction the
existence, amount and terms of any Accounts and the absence of any reductions,
discounts, defenses or offsets with respect thereto, or (ii) notify account
debtors that Collateral has been assigned to the Security Party and that
payments by such debtors shall be made directly to the Secured Parties. At the
Secured Parties' request, the Debtor will notify any or all such debtors of such
assignment, give instruction and/or indicate on ▇▇▇▇▇▇▇▇ to such debtors that
their Accounts shall be paid to the Secured Parties and/or supply such debtors
with a copy of this Agreement.
-3-
(D) Subsequent to the occurrence of any Event of Default and while an
Event of Default shall be continuing, the Secured Parties shall have full power,
in its own name or that of the Debtor, to collect, endorse, compromise, settle,
sell or otherwise deal with any or all of the Collateral or proceeds thereof.
Subsequent to the occurrence of any Event of Default, the Debtor agrees upon
request of the Secured Parties to appoint any officer or agent of the Secured
Parties as true and lawful attorney-in-fact, with power of substitution, to
endorse the name of the Debtor or any of its officers, trustees or agents upon
any Accounts, notes, checks, drafts, money orders, or other instruments of
payment (including under any policy of insurance on Collateral) or Collateral
that may come into possession of the Secured Parties in full or part payment of
any amounts owing to Secured Parties; to sign and endorse the name of the Debtor
or any of its officers, trustees or agents upon any invoice, freight or express
▇▇▇▇, ▇▇▇▇ of lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with Accounts, and any
instruments or documents relating thereto or to the Debtor's rights therein; to
give written notice to such offices and officials of the United States Postal
Service to effect such change or changes of address so that all mail addressed
to the Debtor may be delivered directly to the Secured Parties; to take any and
all other actions necessary or appropriate to collect, compromise, settle, sell
or otherwise deal with any or all of the Collateral or proceeds thereof; and to
obtain, adjust, settle and cancel any insurance; hereby granting to each said
attorney-in-fact or his substitute full power to do any and all things necessary
or appropriate to be done in and about the premises as fully and effectually as
the Debtor might or could do, and hereby ratifying all that any said attorney-
in-fact or his substitute shall lawfully do or cause to be done by virtue
hereof.
(E) The Debtor hereby assigns to the Secured Parties all sums, including
without limitation return of premiums, which may become payable under any and
all of such Debtor's policies of insurance and directs each insurance company
issuing any such policy to make payment which would otherwise be due thereunder
to the Debtor directly to the Secured Parties.
(F) To the extent permitted by Debtor's lease on any premises or place of
business, the Debtor hereby grants to the Secured Parties, for a term commencing
on the date of the occurrence of any Event of Default and continuing as long as
any of the Obligations remain outstanding, at a rental of $1.00 for such entire
term, the right to the use of all premises or places of business which such
Debtor now or hereafter may have and where any Collateral may be located for the
purpose of protecting or enforcing the Secured Parties' rights to the
Collateral.
(G) In the event of the sale, exchange or disposition of any of the
Collateral (other than finished goods in the ordinary course of business) or any
interest therein (and no such sale, exchange or other disposition is hereby
authorized or consented to), the Secured Parties' security interest shall
nevertheless continue in such Collateral (including without limitation all
proceeds, cash and non-cash) notwithstanding such sale, exchange or other
disposition; and the Secured Parties' receipt of any such proceeds shall not be
deemed or construed to be an authorization of or consent to any such sale,
exchange or other disposition.
(H) Any and all instruments, documents, policies and certificates of
insurance, securities, goods, accounts, choses in action, general intangibles,
chattel paper, cash, property and the proceeds thereof (whether or not the same
are Collateral or proceeds thereof) owned by the Debtor or in which the Debtor
has an interest, which now or hereafter are at any time in possession or control
of the Secured Parties or any affiliate of the Secured Parties or in transit by
mail or carrier to or from the Secured Parties or such affiliate or in the
possession of any third party acting in its behalf, without regard to whether
the Secured Parties or such affiliate received the same in pledge, for
safekeeping, as agent for collection or transmission or otherwise or had
conditionally released the same, shall constitute security for Obligations and
may be applied at any time to Obligations which are then owing, whether due or
not due.
(I) A carbon, photographic, or other reproduction of a security agreement
or a financing statement is sufficient as a financing statement to the extent
permitted under applicable law.
III. EVENTS OF DEFAULT.
-----------------
The Debtor shall be in default under this Agreement upon the happening of
any of the following events or conditions (individually and collectively an
"Event of Default"):
-4-
(A) Failure by the Debtor to observe or perform any covenant or agreement
referred to herein and, if no other grace or cure period is applicable thereto,
the continuance of such failure for ten (10) business days;
(B) Sale, transfer or assignment of any of the Collateral (including via
an assignment of transfer of any interest of the Debtor) (except the sale of
inventory in the ordinary course of business), loss, theft, or substantial
damage or destruction of any of the Collateral which is not fully and adequately
insured against as hereinbefore provided; or
(C) An Event of Default (as defined in the Purchase Agreement or under any
of the documents referred to therein) shall have occurred and is continuing and
such Event of Default has not been annulled.
IV. REMEDIES.
--------
(A) If an Event of Default occurs:
(1) The Secured Parties may declare all obligations secured
hereby to be immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived.
(2) The Secured Parties may exercise and shall have any and all
rights and remedies accorded it by the Massachusetts Uniform Commercial Code or
the Uniform Commercial Code as adopted in such state whose laws govern the
disposition of certain Collateral. The requirement of reasonable notice shall be
met, if notice containing such information as may be required under applicable
law is mailed, postage prepaid, to the Debtor or other person entitled thereto
at least ten (10) days (including non-business days) before the time of sale or
disposition of the Collateral. The Debtor shall pay to the Secured Parties on
demand any and all expenses, including reasonable legal expenses and reasonable
attorney's fees, incurred or paid the Secured Parties in protecting or enforcing
any rights of the Secured Parties hereunder, including its right to take
possession of the Collateral, storing and disposing of the same or in collecting
the proceeds thereof.
(3) The Debtor designates and appoints the Secured Parties its
true and lawful attorney with full power of substitution in its own name or in
the name of such Debtor to demand, collect, receive, receipt for, ▇▇▇ for,
compound and give acquittance for, any and all amounts due and to become due on
the Accounts and to endorse the name of such Debtor on all commercial paper
given in payment or part-payment thereof and in its reasonable discretion to
file any claim or take any other action which the Secured Parties may reasonably
deem necessary or appropriate to protect and preserve and realize upon the
security interest of the Secured Parties in the Accounts or the proceeds
thereof. The Secured Parties shall also have the right to (i) open all mail
addressed to the Debtor; (ii) change the Post Office box or mailing address of
the Debtor; and (iii) use the Debtor's stationery and billing forms or
facsimiles thereof, for the purpose of collecting Accounts and realizing upon
the Collateral.
(B) The Debtor understands and agrees the Secured Parties may exercise its
rights hereunder without affording the Debtor an opportunity for a preseizure
hearing before the Secured Parties, through judicial process or otherwise, takes
possession of the Collateral upon the occurrence of an Event of Default, and the
Debtor expressly waives its constitutional right, if any, to such prior hearing.
(C) No delay in accelerating the maturity of any obligation as aforesaid
or in taking any other action with respect to any Event of Default or in
exercising any rights with respect to the Collateral such affect the rights of
the Secured Parties later to take such action with respect thereto, and no
waiver as to one Event of Default shall affect rights as to any other default.
V. MISCELLANEOUS.
-------------
(A) The Debtor irrevocably
-5-
(1) agrees that any suit, action, or other legal proceeding
arising out of this Agreement may be brought in the courts of record of the
Commonwealth of Massachusetts or the courts of the United States located in such
state;
(2) consents to the jurisdiction of each such court in any
such suit; action or proceeding; and
(3) to the extent permitted under applicable law, waives any
objection which it may have to the laying of venue of such suit, action or
proceeding in any of such courts and waives any right to a trial by jury in any
of such courts.
For such time as the Obligations shall be unpaid in whole or in part,
the Debtor irrevocably designates F. ▇▇▇▇ ▇▇▇▇▇▇ as its agent to accept and
acknowledge on its behalf service of any and all process in any such suit,
action or proceeding brought in any such court and agree and consent that any
such service of process upon such agent and written notice of such service to
the Debtor by registered or certified mail shall be taken and held to be valid
personal service upon the Debtor whether the Debtor shall then be doing business
within the Commonwealth of Massachusetts and that any such service of process
shall be of the same force and validity as if service were made upon it
according to the laws governing the validity and requirements of such service in
such states and waives all claim of error by reason of any such service. Any
notice, process, pleadings or other papers served upon the aforesaid designated
agent shall, at the same time, be sent by certified or registered mail to the
Debtor.
(B) In case any one or more of the provisions contained herein should
be invalid, illegal or unenforceable in any respect, the validity, legality or
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
(C) All rights of the Secured Parties hereunder shall inure to the
benefit of its successors and assigns; and all obligations of the Debtor shall
bind the successors or assigns of the Debtor. All the provisions of this
Agreement shall be construed by and administered in accordance with the local
laws of the Commonwealth of Massachusetts. This Agreement shall become effective
when it is signed by the Debtor. The Debtor acknowledges receipt of a copy of
this Agreement.
(D) In the absence of gross negligence or willful misconduct, neither
the Secured Parties nor any attorney-in-fact appointed hereunder shall be liable
to the Debtor or any other person for any act or omission, any mistake of fact
or any error of judgment in exercising any right or remedy granted herein.
VI. FIRST RIGHTS OF BANK.
--------------------
The Secured Parties and the Debtor acknowledge that the Debtor has
granted a security interest to Fleet National Bank ("Bank") to secure certain
obligations of the Debtor to the Bank. Both the Secured Parties and the Debtor
hereby expressly acknowledge that the security interest in the Collateral
created hereby is subordinate and junior to the security interest of the Bank in
the Collateral.
Signed, sealed and delivered this 15th day of October 1998.
CANDELA CORPORATION
By__________________________________
F. ▇▇▇▇ ▇▇▇▇▇▇, Chief Financial Officer
-6-
Signature Page to Security Agreement
------------------------------------
Acknowledged and Accepted:
MASSACHUSETTS CAPITAL RESOURCE COMPANY
BY____________________________________________
▇▇▇ ▇▇▇▇▇▇ III, VICE PRESIDENT
______________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
______________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
EXHIBIT A
---------
LOCATIONS OF EQUIPMENT, INVENTORY, RECORDS CONCERNING
-----------------------------------------------------
ACCOUNTS RECEIVABLES AND OTHER ASSETS
-------------------------------------
Debtor's Places of Business
The Debtor's sole places of business are located at:
A) ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
EXHIBIT 2.02(c)
---------------
CANDELA CORPORATION
MATTERS TO BE COVERED BY OPINION LETTER
---------------------------------------
[Note: Captioned terms used in this Exhibit have the same meaning assigned to
them in the Agreement to which this Exhibit is attached.]
1. The Company and each Subsidiary is a duly organized and validly
existing corporation in good standing under the laws of the jurisdiction in
which it was organized and each has all requisite corporate power and authority
for the ownership and operation of its properties and for the carrying on of its
business as now conducted and as now proposed to be conducted. The Company and
each Subsidiary is duly licensed or qualified and in good standing as a foreign
corporation authorized to do business in all jurisdictions wherein the character
of the property owned or leased, or the nature of the activities conducted, by
it makes such licensing or qualification necessary. Attached as Exhibit 3.01 to
------------
the Agreement is a schedule which correctly identifies all Subsidiaries of the
Company and shows with respect to each Subsidiary its jurisdiction of
incorporation and the principal business in which it is engaged. All of the
outstanding capital stock of each subsidiary has been duly authorized and
validly issued, is fully paid and nonassessable, and is owned beneficially and
of record by the Company or by another Subsidiary or Person as indicated in
Exhibit 3.01, free and clear of any liens, rights, encumbrance or restriction of
------------
any nature, including without limitation, any liens, rights, encumbrances or
restrictions on transfer.
2. The Company has all necessary corporate power and has taken all
corporate action required to make all the provisions of the Agreement, the
Notes, the Warrants, the Security Agreement and each other agreements and
instruments executed in connection therewith the valid and enforceable
obligations they purport to be. The Company has duly executed and delivered the
Agreement, the Notes, the Warrants, the Security Agreement and each other
agreement and instrument executed in connection therewith and each is a legal,
valid and binding obligation of the Company enforceable in accordance with its
terms; provided, however, that the opinion as to enforceability of any document
in accordance with its terms is subject to bankruptcy, insolvency,
reorganization and other similar laws of general application affecting the
rights and remedies of creditors. Sufficient shares of authorized but unissued
Common Stock of the Company have been reserved by appropriate corporate action
in connection with the prospective exercise of all of the Warrants. Neither the
issuance of the Notes or Warrants, nor the issuance of shares of Common Stock
upon the exercise of the Warrants (i) will require any further corporate action,
(ii) are subject to preemptive or other similar statutory or contractual rights,
or (iii) will conflict with any provisions of any agreement, known to us after
due inquiry to which the Company or any Subsidiary is a party or by which it is
bound.
3. No authorization, consent, approval, license, exemption of or filing
or registration with any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, is or will be necessary
for, or in connection with, the offer, issuance, sale, execution or delivery by
the Company of, or for the performance by it of its obligations under, the
Agreement, the Notes, the Warrants or the Security Agreement.
4. Except as is set forth in Item 3 of the Form 10-K, there is, to the
best or our knowledge after due inquiry, no litigation or governmental
proceeding or investigation pending or threatened against the Company or any
Subsidiary affecting any of its properties or assets, or, to the best of our
knowledge after due inquiry, against any officer, key employee or principal
stockholder of the Company or any Subsidiary which might result, either in any
case or in the aggregate in any material adverse change in the business,
operations, affairs or conditions of the Company or any Subsidiary or any of its
properties or assets, or which might call into question the validity of the
Agreement, the Notes, the Warrants, the Security Agreement, or any action taken
or to be taken pursuant thereto, nor, to the best of our knowledge after due
inquiry, has there occurred any event or does there exist any condition on the
basis of which any litigation, proceeding or investigation might properly be
instituted. To the best of our knowledge after due inquiry, neither the Company
nor any Subsidiary nor any officer, key employee or principal stockholder of the
Company or any Subsidiary is in default with respect to any order, writ,
injunction, decree, ruling or decision of any court, commission, board or other
government agency which might result, either in any case or in
the aggregate, in any material adverse change in the business, operations,
affairs or conditions of the Company or any Subsidiary or any of their
properties or assets.
5. The Company and each Subsidiary is in compliance in all respects
with the terms and provisions of the Agreement, the Notes, the Warrants, the
Security Agreement and of its charter and by-laws and in all material respects
with the terms and provisions of the mortgages, indentures, leases, agreements
and other instruments, known to us after due inquiry, and of all judgments,
decrees, governmental orders, statutes, rules or regulation by which it is bound
or to which it or any of its properties or assets are subject and of which we
have knowledge. Neither the execution and delivery of the Agreement, the Notes,
the Warrants, the Security Agreement nor the consummation of any transaction
contemplated thereby has constituted or resulted in or will constitute or result
in a default or violation of any term or provision in any of the foregoing
documents or instruments.
6. The Company has complied with, or is exempt from, all registration
requirements of applicable federal and state securities laws in connection with
the issuance and sale of the Notes and Warrants.
7. The Company has a total authorized capitalization consisting of
30,000,000 shares of Common Stock, of which ______ shares are issued and
outstanding and no shares of which are held by the Company as Treasury Stock.
All the outstanding shares of capital stock of the Company have been duly
authorized, are validly issued and are fully paid and nonassessable. The shares
of Common Stock issuable upon exercise of the Warrants, when so issued, will be
duly authorized, validly issued and fully paid and nonassessable. Except as
otherwise indicated as Exhibit 3.20 to the Agreement, there are no options,
------------
warrants or rights to purchase shares of capital stock or other securities of
the Company authorized, issued or outstanding, nor is the Company obligated in
any other manner to issue shares of its capital stock or other securities. There
are no restrictions on the transfer of shares of capital stock of the Company
other than those imposed by relevant state and federal securities laws. No
holder of any security of the Company is entitled to preemptive or similar
statutory or contractual rights, either arising pursuant to any agreement or
instrument, known to us after due inquiry, to which the Company is a party, or
which are otherwise binding upon the Company. Neither the issuance of the Notes
or Warrants nor the shares of Common Stock issued upon exercise of the Warrants
will result in an adjustment under the antidilution or exercise rights of any
holders of any outstanding shares of capital stock, options, warrants or other
rights to acquire any securities of the Company. The offer and sale of all
shares of capital stock or other securities of the Company issued before the
Closing complied with or were exempt from all federal and state securities laws.
8. Subject to the qualifications set forth below in this paragraph 8,
upon the due filing of the Form UCC-1 financing statements delivered by the
Company at the Closing (the "Form UCC-1") in the offices of (i) the Clerk of the
Town of Wayland, Massachusetts, and (ii) the Secretary of State of the
Commonwealth of Massachusetts, the security interest granted to you pursuant to
the Security Agreement will constitute a valid, binding and enforceable
perfected security interest in the Collateral described in the Forms UCC-1. The
Forms UCC-1 are in the appropriate form, and the recording and filing thereof in
each of the offices listed above in this paragraph 8, and the giving of value by
entering into the Security Agreement, will perfect the interest of the
Purchasers in such of the Collateral as is described on the Forms UCC-1 in which
a security interest may be perfected by the filing of financing statements under
the Uniform Commercial Code ("UCC"). However, we call your attention to the fact
that your security interest in certain of such Collateral may not be perfected
by the filing of financing statements under the UCC. We also call your attention
to the necessity of filing continuation statements from time to time under the
applicable provisions of the UCC in order to preserve the aforesaid security
interests.
-2-
EXHIBIT 3.01
------------
CANDELA CORPORATION
LIST OF SUBSIDIARIES
--------------------
As of the date of the Agreement to which this Exhibit is attached, the
Company had the following Subsidiaries (as defined in Section 7.01 of the
Agreement):
JURISDICTION OF
NAME OF SUBSIDIARY INCORPORATION OWNERSHIP OF CAPITAL STOCK
------------------ ------------- --------------------------
EXHIBIT 3.05
------------
CANDELA CORPORATION
SCHEDULE OF INDEBTEDNESS
------------------------
As of the date of the Agreement to which this Exhibit is attached, the
Company and its Subsidiaries had the following Indebtedness (as defined in
Section 7.01 of the Agreement) outstanding:
EXHIBIT 3.07
------------
CANDELA CORPORATION
SCHEDULE OF MORTGAGES, PLEDGES, ETC.
------------------------------------
As of the date of the Agreement to which this Exhibit is attached, the
Company and its Subsidiaries had the following outstanding mortgages, pledges,
charges, liens, security interest and other encumbrances:
EXHIBIT 3.15
------------
CERTIFICATE
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I, F. ▇▇▇▇ ▇▇▇▇▇▇, Chief Financial Officer of Candela Corporation, a
Delaware corporation (the "Company"), certify that I am fully familiar with the
financial and business affairs of the Company and the terms and conditions of a
certain Note and Warrant Purchase Agreement, dated as of October 15, 1998, (the
"Purchase Agreement") pursuant to which the Company proposes to sell to
Massachusetts Capital Resource Company ("MCRC") $3,000,000 in principal amount
of its Notes, due October 31, 2006, (the "Notes") and Common Stock Purchase
Warrants for the purchase (subject to adjustments as provided therein) 300,000
shares of its Common Stock (the "Warrants"). I understand that the commitment of
MCRC to purchase the Notes and Warrants is in part dependent on MCRC's ability
to determine that such purchase will constitute a "qualified investment" within
the meaning of that term in Section 16 of Chapter 816 of the Acts and Resolves
of 1977 of the Commonwealth of Massachusetts and that the full proceeds of the
Notes and Warrants will be utilized for purposes which will materially increase
or assist in maintaining equal opportunity employment in Massachusetts. In order
to assist MCRC in making the foregoing determination, I hereby certify that I
have been authorized to deliver this certificate on behalf of the Company and
that the statements, information and related data set forth below which are not
based on estimates and projections made with respect to future events are true
and correct as of the date hereof and all such statements, information and
related data as are based on estimates and projections of future events, have
been carefully considered and prepared on behalf of the Company and represent
the reasonable expectations and belief of the Company as of the date hereof:
1. BUSINESS OF COMPANY. The business of the Company consists primarily
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of the development, manufacture and distribution of innovative clinical
solutions which enable physicians, surgeons and personal care practitioners to
treat selected cosmetic and medical conditions using lasers and other related
technologies. The Company is not primarily engaged in the development of real
estate, the business of a financial intermediary, construction contractor,
public utility (including refuse and waste facilities) or the retailing of goods
and the Company does not directly or indirectly own or control ten percent (10%)
or more of the voting securities or otherwise direct the management or policies
of any person engaged in such businesses. The principal facilities of the
Company are located in Massachusetts.
2. AFFILIATES. To the best of my knowledge, there is:
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(i) no person directly or indirectly owning, holding
or otherwise having power to vote ten percent (10%) or more of the
outstanding voting securities of the Company;
(ii) no person ten percent (10%) or more of whose
voting securities are directly or indirectly owned, held or otherwise
subject to power to vote, by the Company;
(iii) no person directly or indirectly possessing the
power to direct or cause the direction of the management and policies of
the Company pursuant to the terms of a contract or contracts entered
into for that purpose; or
(iv) any officer, director, partner, co-partner or
employee of such person
who is (A) primarily engaged in the development of real estate or the business
of a financial intermediary, construction contractor or public utility
(including refuse or waste facilities) or (B) whose senior debt is either rated
Baa or above by ▇▇▇▇▇'▇ Investors Services, Inc. or would have the same
characteristics as debt so rated.
3. USE OF PROCEEDS. The proceeds of the sale of the Notes and Warrants
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to MCRC will be used solely for the purposes set forth in Section 1.03(c) of the
Purchase Agreement.
4. ALTERNATIVE FINANCING. The Company has carefully considered
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alternative sources of obtaining funds to meet its current financing needs and
it has attempted to obtain financing on substantially similar terms to that
provided by MCRC. Based on the foregoing, I hereby certify that the Company has
attempted but was unable to obtain elsewhere financing on substantially similar
terms to that provided or agreed to be provided, subject to certain conditions,
by MCRC.
5. MASSACHUSETTS EMPLOYMENT. As of the date of this Certificate, the
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Company employs a total of 124 employees in its non-spa business who are located
in Massachusetts. The Company forecasts a total employment by the Company at
October 31, 2003 of approximately 145 persons in Massachusetts, an increase over
its current employment in its non-spa business in Massachusetts of 21 persons in
its non-spa business. This estimated increase will be principally due to
activities relating to the growth of the market or the increased market share
for the Company's products. Based on the foregoing, it is estimated that MCRC's
investment will permit the creation of a minimum of 15 new jobs in Massachusetts
by October 31, 2003.
6. EQUAL EMPLOYMENT OPPORTUNITY. The Company has reviewed its
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employment practices and policies and those of its Subsidiaries and, to the best
of its knowledge, the Company and each such Subsidiary is in full compliance
with all applicable laws, rules, regulations and administrative orders of the
United States and of the Commonwealth of Massachusetts relating to equal
employment opportunity, and the provisions relating to equal employment
opportunity of any government contracts, subcontracts or grants entered into or
received by the Company or any Subsidiary. To the best of the Company's
knowledge, it and each Subsidiary has filed all forms, reports and affirmative
action plans required to be filed and has kept all records required to be kept
pursuant to the aforementioned laws, rules, regulations, and terms of such
government grants, contracts or subcontracts. Neither the Company nor any
Subsidiary has been subject to any adverse final determination or order, with
respect to any charge of employment discrimination made against it, by the
United States Equal Employment Opportunities Commission, the Massachusetts
Commission Against Discrimination or any other governmental unit (including,
without limitation, any such unit with or through which it has entered into or
received a government contract, subcontract or grant).
7. CONCLUSION. Based upon the facts and circumstances set forth above,
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the Company has determined and hereby further certifies that:
(a) the Company has attempted but was unable to obtain
elsewhere financing on substantially similar terms to the financing
being provided by MCRC, and
(b) the full proceeds of the MCRC investment will be
utilized for purposes which will materially increase or maintain equal
opportunity employment in the Commonwealth of Massachusetts.
CANDELA CORPORATION
By:_________________________________
F. ▇▇▇▇ ▇▇▇▇▇▇, Chief Financial Officer
Dated: October 15, 1998
EXHIBIT 3.20
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CANDELA CORPORATION
SCHEDULE OF OPTIONS AND OTHER RIGHTS
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As of the date of this Agreement to which this Exhibit is attached, the
following options, warrants or other rights to purchase shares of capital stock
or other securities of the Company are authorized, issued or outstanding: