Exhibit 10a
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
Among
PLC SYSTEMS INC.,
SOUTHBROOK INTERNATIONAL INVESTMENTS, LTD.,
HBK CAYMAN L.P.
and
HBK OFFSHORE FUND LTD.
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July 17, 1997
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CONVERTIBLE DEBENTURE PURCHASE AGREEMENT, dated as of July 17, 1997
(this "Agreement"), among PLC Systems Inc., a corporation organized and existing
under the laws of British Columbia, Canada (the "Company"), Southbrook
International Investments, Ltd., a British Virgin Islands corporation
("Southbrook"), HBK Cayman L.P., a Cayman Islands exempt limited partnership
("HBK Cayman"), and HBK Offshore Fund Ltd., a Cayman Islands exempt company
("HBK Offshore"). Southbrook, HBK Cayman and HBK Offshore are each sometimes
referred to herein as a "Purchaser" and collectively as the "Purchasers".
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers and the
Purchasers desire to purchase up to an aggregate principal amount of $20,000,000
of the Company's to be created 5% Convertible Debentures, due July 17, 2002 (the
"Convertible Debentures"), which are convertible into shares of the Company's
common stock, no par value (the "Common Stock").
IN CONSIDERATION of the mutual covenants and agreements set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF CONVERTIBLE DEBENTURES
1.1 Purchase and Sale. Subject to the terms and conditions set
forth herein, the Company shall issue and sell to the Purchasers and the
Purchasers shall purchase an aggregate principal amount of up to $20,000,000 of
Convertible Debentures, in denominations of $250,000 and integral multiples of
$50,000 in excess thereof, at the closings described below. All references
herein to "dollars" or "$" shall be to U.S. dollars (U.S.$) unless otherwise
specified.
1.2 The Closings.
(a) The Tranche 1 Closing. (i) Subject to the terms and
conditions set forth in this Agreement, the Company shall issue and sell to the
Purchasers and the Purchasers shall purchase an aggregate principal amount of
$10,000,000 of Convertible Debentures (the "Tranche 1 Debentures") for an
aggregate purchase price of $10,000,000, each Purchaser being obligated to pay a
purchase price equal to the principal amount of Tranche 1 Debentures to be
issued and sold to it at the Tranche 1 Closing (as defined below). The closing
of the purchase and sale of the Tranche 1 Debentures (the "Tranche 1 Closing")
shall take place at the offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
LLP ("▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇"), ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, immediately following the
execution hereof or such later date as the parties shall agree. The date of the
Tranche 1 Closing is hereinafter referred to as the "Tranche 1 Closing Date."
(ii) At the Tranche 1 Closing, (a) the Company shall
deliver (A) to Southbrook (1) $5,000,000 aggregate principal amount of Tranche 1
Debentures and the Southbrook Tranche 1 Warrant (as defined in Section 3.17),
each registered in the name of the Southbrook, (2) the legal opinion of Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C. and of DuMoulin, Black,
substantially in the form attached hereto as Exhibit E (the "Tranche 1
Opinion"), and (3) all other documents, instruments and writings required to
have been delivered at or prior to the Tranche 1 Closing by the Company to
Southbrook pursuant to this Agreement; (B) to HBK Cayman (1) $2,500,000
aggregate principal amount of Tranche 1 Debentures and the Tranche 1 HBK Cayman
Warrant (as defined in Section 3.17), each registered in the name of HBK Cayman,
(2) the Tranche 1 Opinion, and (3) all other documents, instruments and writings
required to have been delivered at or prior to the Tranche 1 Closing by the
Company to HBK Cayman pursuant to this Agreement; (C) to HBK Offshore (1)
$2,500,000 aggregate principal amount of Tranche 1 Debentures and the HBK
Offshore Tranche 1 Warrant (as defined in Section 3.17), each registered in the
name of HBK Offshore, (2) the Tranche 1 Opinion, and (3) all other documents,
instruments and writings required to have been delivered at or prior to the
Tranche 1 Closing by the Company to HBK Offshore pursuant to this Agreement, and
(b) each Purchaser shall deliver to the Company (1) the purchase price for the
Tranche 1 Debentures being purchased by it at the Tranche 1 Closing, determined
in accordance with Section 1.2(a)(i), in United States dollars in immediately
available funds by wire transfer to an account designated in writing by the
Company for such purpose on or prior to the Tranche 1 Closing Date, and (2) all
documents, instruments and writings required to have been delivered at or prior
to the Tranche 1 Closing by such Purchaser pursuant to this Agreement.
(b) The Tranche 2 Closing. (i) Subject to the terms and
conditions set forth in this Agreement, the Company shall have the right by
delivery of a written notice to the Purchasers (a "Subsequent Tranche Notice")
to require the Purchasers to purchase Convertible Debentures in such aggregate
principal amount up to $10,000,000 as the Company may designate in such notice
(the "Tranche 2 Debentures"), each Purchaser being obligated (subject to the
terms and conditions hereof) to purchase such portion of the aggregate principal
amount of such Convertible Debentures as equals such Purchaser's pro rata
portion of the aggregate principal amount of Tranche 1 Debentures issued and
sold at the Tranche 1 Closing. The Company may deliver a Subsequent Tranche
Notice no earlier than the expiration of the 60th Trading Day after the date
that a registration statement (an "Underlying Securities Registration
Statement") contemplated by the Registration Rights Agreement, dated the date
hereof, among the Purchasers and the Company substantially in the form of
Exhibit B attached hereto (the "Registration Rights Agreement") covering, among
other things, the shares of Common Stock issuable upon conversion of the Tranche
1 Debentures and the shares of Common Stock issuable upon exercise of the
Tranche 1 Warrants (as defined in Section 3.17) has been declared effective by
the Securities and Exchange Commission (the "Commission") (provided, that
Trading Days during which any Purchaser (or its successors, permitted assigns or
other successors in interest) is unable to resell securities under such
Underlying Securities
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Registration Statement shall be added to such 60 Trading Day period), and no
later than February 28, 1998 (the "Tranche 2 Closing Expiration Date"). The
closing of the purchase and sale of the Tranche 2 Debentures (the "Tranche 2
Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ on such date
(which may not be prior to the fifteenth Trading Day after receipt by the
Purchasers of the Subsequent Tranche Notice); provided that in no case shall the
Tranche 2 Closing take place unless and until the conditions listed in Section
4.1 have been satisfied or waived by the appropriate party. The date of the
Tranche 2 Closing is hereinafter referred to as the "Tranche 2 Closing Date."
Notwithstanding anything to the contrary contained herein, the Company may, by
written notice to each Purchaser provided prior to the Tranche 2 Closing Date,
revoke such Subsequent Tranche Notice in the event that the closing sale price
of the Common Stock, as reported by the American Stock Exchange or any other
exchange or market on which the Common Stock is then traded, decreases by more
than 20% from the date of the delivery of the Subsequent Tranche Notice and
prior to the Tranche 2 Closing Date.
(ii) At the Tranche 2 Closing, (a) the Company shall
deliver (A) to each Purchaser (1) a pro rata portion of the principal amount
(determined by reference to the principal amount of Tranche 1 Debentures issued
and sold at the Tranche 1 Closing) of the Tranche 2 Debentures to be issued and
sold thereat (or such other principal amount upon which the parties may agree)
and the applicable Tranche 2 Warrant (as defined in Section 3.17), each
registered in the name of the appropriate Purchaser, (2) the legal opinion
referenced in Section 4.1(k), substantially in the form attached hereto as
Exhibit E, and (3) all other documents, instruments and writings required to
have been delivered at or prior to the Tranche 2 Closing by the Company to the
Purchasers pursuant to this Agreement; and (b) each Purchaser shall deliver to
the Company (1) the purchase price for the Tranche 2 Debentures being purchased
by it at the Tranche 2 Closing, determined in accordance with Section 1.2(a)(i),
in United States dollars in immediately available funds by wire transfer to an
account designated in writing by the Company for such purpose on or prior to the
Tranche 2 Closing Date and (2) all documents, instruments and writings required
to have been delivered at or prior to the Tranche 2 Closing by such Purchaser
pursuant to this Agreement. In the event that a Purchaser ("Defaulting
Purchaser") fails to purchase Tranche 2 Debentures in accordance with this
Section 1.2(b)(ii) despite the performance by the Company of its obligations
under this Section and the satisfaction by the Company of the conditions set
forth in Section 4.1, the Company shall notify the non-Defaulting Purchaser of
such failure whereby the non-Defaulting Purchaser shall have the option to
purchase all or any portion of the remaining Tranche 2 Debentures within 5
Business Days from the later of the date it receives notice of such option and
the Tranche 2 Closing Date. If the non-Defaulting Purchaser does not elect to
purchase the remaining Tranche 2 Debentures, the Company may then assign the
Defaulting Purchaser's rights hereunder to a third party, which party shall be
reasonably acceptable to the non-Defaulting Purchaser, without further
obligation to the Defaulting Purchaser to purchase the Tranche 2 Debentures.
Failure by any Purchaser to buy Tranche 2 Debentures shall not affect the
Company's obligations with respect to the Tranche 1 Debentures acquired by such
Purchaser, which shall remain unaffected thereby.
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1.3 Form of Debentures. The Tranche 1 Debentures shall be in the
form of Exhibit A attached hereto. The Tranche 2 Debentures shall be identical
to the Tranche 1 Debentures, mutatis mutandis, except that the Conversion Price
(as defined below) for the Tranche 2 Debentures shall be reset as of the
Original Issue Date (as defined below) for the Tranche 2 Debentures.
For purposes of this Agreement, "Conversion Price," "Original
Issue Date," "Trading Day" and "Per Share Market Value" shall have the meanings
set forth in the Tranche 1 Debentures.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The
Company hereby makes the following representations and warranties to the
Purchasers:
(a) Organization and Qualification. The Company is a
corporation, duly incorporated, validly existing and in good standing under the
laws of British Columbia, Canada, with the requisite corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. The Company has no subsidiaries other than as set forth
in Schedule 2.1(a) (collectively, the "Subsidiaries"). Each of the Subsidiaries
is a corporation, duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization (as
applicable), with the full corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted. Each
of the Company and the Subsidiaries is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which the nature
of the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not, individually or in the aggregate reasonably be
expected to (x) adversely affect the legality, validity or enforceability of
this Agreement, the Convertible Debentures, the Warrants (as defined in Section
3.17), the Registration Rights Agreement and the documents setting forth the
terms of any preferred stock in which the Convertible Debentures are
exchangeable as provided under the Convertible Debentures, if any (collectively,
the "Transaction Documents"), (y) have or result in a material adverse effect on
the results of operations, assets, prospects, or financial condition of the
Company and the Subsidiaries, taken as a whole, or (z) adversely impair the
Company's ability to perform fully on a timely basis its obligations under the
Transaction Documents (a "Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action
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on the part of the Company. Each of the Transaction Documents has been duly
executed by the Company and when delivered in accordance with the terms hereof
shall constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application. Neither the Company nor any Subsidiary is in violation of any of
the provisions of its respective certificate of incorporation, articles, by-laws
or other charter documents (or their foreign equivalents).
(c) Capitalization. The authorized, issued and outstanding
capital stock of the Company is set forth in Schedule 2.1(c). No shares of
Common Stock are entitled to preemptive or similar rights, nor is any holder of
the Common Stock entitled to preemptive or similar rights arising out of any
agreement or understanding with the Company by virtue of any of the Transaction
Documents. Except as disclosed in Schedule 2.1(c), there are no outstanding
options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or, except as a result of the purchase and
sale of the Convertible Debentures and Warrants hereunder, securities, rights or
obligations convertible into or exchangeable for, or giving any person any right
to subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock. To
the knowledge of the Company, except as specifically disclosed in the SEC
Documents (as defined below) or Schedule 2.1(c), no Person (as defined below)
beneficially owns (as determined pursuant to Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) or has the
right to acquire by agreement with or by obligation binding upon the Company
beneficial ownership of in excess of 5% of the Common Stock. A "Person" means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any kind.
(c) Issuance of Convertible Debentures and Warrants. The
Convertible Debentures and the Warrants are duly authorized, and, when issued
and paid for in accordance with the terms hereof, shall be validly issued, fully
paid and nonassessable. The Company, as at the Tranche 1 Closing Date and
Tranche 2 Closing Date, as the case may be (each, a "Closing Date" and,
collectively, the "Closing Dates"), has and at all times while the Convertible
Debentures and the Warrants are outstanding will maintain an adequate reserve of
duly authorized shares of Common Stock to enable it to perform its conversion,
exercise and other obligations under this Agreement, the Warrants and the
Convertible Debentures, and in no circumstances shall such reserved and
available shares of Common Stock be less than the sum of (i) 1,000,000 shares of
Common Stock for issuance upon conversion of the Tranche 1 Debentures and to
enable the Company to pay interest on the Tranche 1 Debentures and (ii) the
number of shares of Common Stock which would be issuable upon exercise in full
of the Tranche 1 Warrants. The Company and the Purchasers agree that all penalty
interest, liquidated damages and early redemption or repayment amounts payable
pursuant to any
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Transaction Documents shall be paid in cash unless otherwise consented to by the
Purchasers. The shares of Common Stock issuable upon conversion of Convertible
Debentures and upon exercise of the Warrants are collectively referred to herein
as the "Underlying Shares." When issued in accordance with the terms of the
Convertible Debentures and the Warrants, the Underlying Shares will be duly
authorized, validly issued, fully paid and nonassessable. The Convertible
Debentures, Warrants and Underlying Shares are collectively referred to herein
as the "Securities."
(d) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of its Certificate of Incorporation or Articles (each as
amended through the date hereof) or (ii) subject to obtaining the Required
Approvals (as defined below), conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company is
a party, or (iii) to the knowledge of the Company, result in a violation of any
law, rule, regulation, order, judgment, injunction, decree or other restriction
of any court or governmental authority to which the Company is subject
(including Federal, state and foreign securities laws and regulations), or by
which any material property or asset of the Company is bound or affected, except
in the case of each of clauses (ii) and (iii), such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as could
not, individually or in the aggregate, have or result in a Material Adverse
Effect. Neither the business of the Company nor any Subsidiary is being
conducted in violation of any applicable law, ordinance or regulation of any
governmental authority which could, individually or in the aggregate, have a
Material Adverse Effect.
(e) Consents and Approvals. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or order of,
or make any filing or registration with, any court or other Federal, state,
local, foreign or other governmental authority or other Person in connection
with the execution, delivery and performance by the Company of the Transaction
Documents other than (i) the filing of the Underlying Securities Registration
Statements with the Commission, which shall be filed in the time periods set
forth in the Registration Rights Agreement, (ii) the applications for the
listing of the Underlying Shares with the American Stock Exchange (and with any
other national securities exchange or market on which the Common Stock is then
listed), and (iii) other than, in all other cases, where the failure to obtain
such consent, waiver, authorization or order, or to give or make such notice or
filing, could not reasonably be expected to have or result in, individually or
in the aggregate, a Material Adverse Effect and to deliver to the Purchasers the
Convertible Debentures or the Warrant (and, upon conversion or exercise thereof,
the Underlying Shares) in the manner contemplated hereby and by the Registration
Rights Agreement free and clear of all liens and encumbrances of any nature
whatsoever (the "Required Approvals").
(f) Litigation; Proceedings. Except as specifically disclosed
in the Disclosure Materials (as defined below), there is no action, suit, notice
of violation, proceeding or investigation pending or, to the best knowledge of
the Company, threatened
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against, or affecting the Company or any of its Subsidiaries or any of their
respective properties before or by any court, governmental or administrative
agency or regulatory authority (Federal, state, local or foreign) which (i)
adversely affects to or challenges the legality, validity or enforceability of
any of the Transaction Documents or the Securities or (ii) could, individually
or in the aggregate, have or result in a Material Adverse Effect.
(g) No Default or Violation. Neither the Company nor any
Subsidiary (i) is in default under or in violation of any indenture, loan or
credit agreement or any other agreement or instrument to which it is a party or
by which it or any of its properties is bound, (ii) is in violation of any order
of any court, arbitrator or governmental body (Federal, state, local or
foreign), or (iii) is in violation of any statute, rule or regulation of any
governmental authority, except in each case as could not reasonably be expected
to individually or in the aggregate have or result in, individually or in the
aggregate, a Material Adverse Effect.
(h) Private Offering. Neither the Company nor any Person
acting on its behalf has taken or will take any action which might subject the
offering, issuance or sale of the Securities to the registration requirements of
the Securities Act of 1933, as amended (the "Securities Act").
(i) SEC Documents. The Company has filed all reports required
to be filed by it under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), including pursuant to Section 13(a) or 15(d) thereof, for the
two years preceding the date hereof (or such shorter period as the Company was
required by law to file such material) (the foregoing materials being
collectively referred to herein as the "SEC Documents" and, together with the
Schedules to this Agreement and the Confidential Private Placement Memorandum
dated July 1, 1997 furnished by or on behalf of the Company, the "Disclosure
Materials") on a timely basis, or has received a valid extension of such time of
filing. As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Securities Act and the Exchange Act and
the rules and regulations of the Commission promulgated thereunder, and none of
the SEC Documents, when filed, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of the Company
included in the SEC Documents comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto. Such financial statements have been prepared in accordance with
United States generally accepted accounting principles applied on a consistent
basis during the periods involved, except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all material
respects the financial position of the Company and the Subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods shown, subject, in the case of unaudited statements, to normal year-end
audit adjustments. Since the date of the financial statements included in the
Company's last filed Quarterly Report on Form 10-Q, there has been no event,
occurrence or development that has had or that could have or result in a
Material Adverse Effect which has not been specifically disclosed in writing to
the Purchasers by the Company.
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The Company last filed audited financial statements with the Commission on April
15, 1997, and has not received any comments from the Commission in respect
thereof.
(j) Investment Company. The Company is not, and is not an
Affiliate of an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(k) Certain Fees. Other than fees due and payable to ▇▇▇▇▇
▇▇▇▇▇▇, Inc. as set forth in the engagement letter previously furnished to the
Purchasers, no fees or commissions will be payable by the Company to any broker,
financial or investment advisor, placement agent finder, investment banker, bank
or any other Person acting in a similar capacity with respect to the
transactions contemplated by this Agreement. The Purchasers shall have no
obligation with respect to such fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this Section that may
be due in connection with the transactions contemplated by this Agreement. The
Company shall indemnify and hold harmless each of the Purchasers, their
respective employees, officers, directors, agents, and partners, and their
respective Affiliates (as such term is defined under Rule 405 promulgated under
the Securities Act), from and against all claims, losses, damages, costs
(including the costs of preparation and reasonable attorney's fees) and expenses
suffered in respect of any such claimed or existing fees.
(l) Solicitation Materials. The Company has not (i)
distributed any offering materials in connection with the offering and sale of
the Securities other than the Disclosure Materials or (ii) solicited any offer
to buy or sell the Securities by means of any form of general solicitation or
advertising.
(m) Form S-3 Eligibility. The Company is, and at each Closing
Date will be, eligible to register securities for resale with the Commission
under Form S-3 promulgated under the Securities Act.
(n) Exclusivity. The Company shall not issue and sell the
Convertible Debentures to any Person other than the Purchasers and their
respective Affiliates and managed funds, if any, other than with the specific
prior written consent of the Purchasers.
(o) Listing and Maintenance Requirements Compliance. The
Company has not in the two years preceding the date hereof received written
notice from any stock exchange or market on which the Common Stock is or has
been listed (or on which it has been quoted) to the effect that the Company is
not in compliance with the listing or maintenance requirements of such exchange
or market.
2.2 Representations and Warranties of the Purchasers. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as follows:
(a) Organization; Authority. Such Purchaser is a corporation
duly incorporated or a limited partnership duly formed, validly existing and in
good standing under
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the laws of the jurisdiction of its incorporation or formation with the
requisite power and authority to enter into and to consummate the transactions
contemplated hereby and by the Registration Rights Agreement and otherwise to
carry out its obligations hereunder and thereunder. The purchase by such
Purchaser of the Securities to be purchased by it hereunder has been duly
authorized by all necessary action on the part of such Purchaser. Each of this
Agreement and the Registration Rights Agreement has been duly executed and
delivered by such Purchaser and constitutes the valid and legally binding
obligation of such Purchaser, enforceable against such Purchaser, in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights generally and to general principles of equity.
(b) Investment Intent. Such Purchaser is acquiring the
Securities to be purchased by it hereunder for its own account for investment
purposes only and not with a view to or for distributing or reselling such
Securities or any part thereof or interest therein, without prejudice, however,
to such Purchaser's right, subject to the provisions of this Agreement and the
Registration Rights Agreement, at all times to sell or otherwise dispose of all
or any part of such Securities pursuant to an effective registration statement
under the Securities Act and in compliance with applicable state securities laws
or under an exemption from such registration.
(c) Purchaser Status. At the time such Purchaser was offered
the Convertible Debentures and the Tranche 1 Warrant to be purchased by it
hereunder, it was, and at the date hereof, it is, and at each Closing Date (and
on the Tranche 2 Closing Expiration Date, if applicable), it will be, an
"accredited investor" as defined in Rule 501(a) under the Securities Act.
(d) Experience of Purchaser. Such Purchaser either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment.
(e) Ability of Purchaser to Bear Risk of Investment. Such
Purchaser is able to bear the economic risk of an investment in the Securities,
and, at the present time, is able to afford a complete loss of such investment.
Such Purchaser has received the Confidential Private Placement Memorandum dated
July 1, 1997.
(f) Access to Information. Each Purchaser acknowledges receipt
of the Disclosure Materials and further acknowledges that it has been afforded
(i) the opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms and
conditions of the offering of the Securities, and the merits and risks of
investing in the Securities; (ii) access to information about the Company and
the Company's financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment; and
(iii) the opportunity to obtain such additional information which the Company
possesses or can acquire
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without unreasonable effort or expense that such Purchaser believes is necessary
to make an informed investment decision with respect to the investment and to
verify the accuracy and completeness of the information contained in the
Disclosure Materials.
(g) Reliance. Each Purchaser understands and acknowledges that
(i) the Convertible Debentures and the Warrants to be sold to it hereunder are
being offered and sold to it in a private placement that is exempt from the
registration requirements of the Securities Act and (ii) the availability of
such exemption depends in part on and the Company will rely upon the accuracy
and truthfulness of, the foregoing representations and such Purchaser hereby
consents to such reliance.
The Company acknowledges and agrees that the Purchasers make
no representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) If any Purchaser should decide to
dispose of any portion of the Securities held by it, each such Purchaser
understands and agrees that it may do so only pursuant to an effective
registration statement under the Securities Act, to the Company or pursuant to
an available exemption from the registration requirements thereof. In connection
with any transfer of any portion of the Securities other than pursuant to an
effective registration statement or to the Company, the transferor shall provide
notice thereof to the Company who may require the transferor thereof to provide
to the Company an opinion of counsel experienced in the area of United States
securities laws selected by the transferor, the form and substance of which
opinion shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Securities under the
Securities Act.
(b) Each Purchaser agrees to the imprinting, so long as
is required by this Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED WITH
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF
11
THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS.
[FOR CONVERTIBLE DEBENTURES ONLY] THIS CONVERTIBLE DEBENTURE IS SUBJECT
TO CERTAIN RESTRICTIONS ON TRANSFER AND CONVERSIONS SET FORTH IN A
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT, DATED AS OF JULY 17, 1997,
EXECUTED BY THE ORIGINAL HOLDER HEREOF. A COPY OF THAT AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICE OF PLC SYSTEMS INC.
The Underlying Shares shall not contain the legend set forth
above (or any other legend) if the conversion of Convertible Debentures or
exercise of Warrants, as the case may be, pursuant to which such Underlying
Shares are to be issued occurs at any time while the Underlying Securities
Registration Statement is effective under the Securities Act or in the event
there is not an effective Underlying Securities Registration Statement at such
time, if in the opinion of counsel to the Company experienced in the area of
United States securities laws such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the Staff of the Commission). The Company agrees that
it will provide the Purchaser, upon request, with a certificate or certificates
representing Underlying Shares, free from any legend at such time as such
legends are no longer required pursuant to this Section.
3.2 Stop Transfer Instruction. The Company may not make any
notation on its records or give instructions to any transfer agent of the
Company which enlarge the restrictions of transfer set forth in Section 3.1.
3.3 Furnishing of Information. As long as any Purchaser owns
Underlying Shares, the Company covenants to timely file (or obtain extensions in
respect thereof) all reports required to be filed by the Company after the date
hereof pursuant to Section 13(a) or 15(d) of the Exchange Act. If the Company is
not at the time required to file reports pursuant to such sections, it will
prepare and furnish to the Purchasers and make publicly available in accordance
with Rule 144(c) promulgated under the Securities Act annual and quarterly
financial statements, together with a discussion and analysis of such financial
statements in form and substance substantially similar to those that would
otherwise be required to be included in reports required by Section 13(a) or
15(d) of the Exchange Act, as well as any other information required thereby, in
the time period that such filings would have been required to have been made
under the Exchange Act.
3.4 Copies and Use of Disclosure Materials. The Company consents
to the use of the Disclosure Materials, and any amendments and supplements
thereto, by the Purchasers in connection with resales of Securities other than
pursuant to an effective Underlying Securities Registration Statement.
3.5 Blue Sky Laws. In accordance with the Registration Rights
Agreement, the Company shall qualify the Underlying Shares under the securities
or Blue Sky laws of such
12
jurisdictions as any Purchaser may reasonably request and shall continue such
qualification at all times through the third anniversary of the last Closing
Date; provided, however, that neither the Company nor its Subsidiaries shall be
required in connection therewith to qualify as a foreign corporation where they
are not now so qualified or to take any action that would subject the Company to
general service of process in any such jurisdiction where it is not then so
subject.
3.6 Integration. The Company shall not and shall use its best
efforts to ensure that no Affiliate of the Company shall sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the issue or sale of any of the Securities to any
Purchaser.
3.7 Purchaser Ownership of Common Stock. No Purchaser may use its
ability to convert Convertible Debentures hereunder or use its ability to
acquire shares of Common Stock upon exercise of the Warrants to the extent that
such conversion or exercise would result in such Purchaser beneficially owning
(for purposes of Rule 13d-3 under the Exchange Act) more than 4.999% of the
outstanding shares of the Common Stock; provided, however, that (i) if (A) an
"Event of Default" (as defined in the Convertible Debentures) is declared by any
Purchaser or (B) the Company defaults in the performance of any of its
obligations under any Transaction Document and (ii) if ten days shall have
elapsed since any Purchaser shall have notified the Company of such Event of
Default or default and, (in the case of such default only) such default shall
not have been cured to such Purchaser's satisfaction during such ten-day period,
then the provisions of this Section 3.7 shall be null and void ab initio.
Notwithstanding anything to the contrary contained herein, the provisions of
this Section 3.7 shall have no effect on the Company's obligation to issue
shares of Common Stock to the Purchasers upon receipt or delivery of any
conversion or exercise notice.
3.8 Listing and Reservation of Underlying Shares. (a) The Company
shall (a) not later than the fifth Business Day following (i) the Tranche 1
Closing Date prepare and file with the American Stock Exchange (as well as any
other national securities exchange or market on which the Common Stock is then
listed or traded) an additional shares listing application covering at least the
sum of 1,065,000 Underlying Shares (comprised of 1,000,000 shares reserved for
issuance upon conversion of Tranche 1 Debentures and the payment of interest
thereon, subject to Section 2.1(d) herein, and 65,000 shares reserved for
issuance upon exercise of Tranche 1 Warrants); and (ii) the Tranche 2 Closing
Date prepare and file with the American Stock Exchange (as well as other
national securities exchange or market in which the Common Stock is then listed
or traded) an additional shares listing application covering at least the sum of
(1) 145% of the number of Underlying Shares as would be issuable upon a
conversion in all of the Tranche 2 Debentures including interest thereon (but
not penalty interest, for which the Company shall reserve additional shares),
assuming such conversion occurred on the Original Issue Date for the Tranche 2
Debentures and (2) the number of Underlying Shares issuable upon exercise in
full of the Tranche 2 Warrants; (b) take all steps necessary to cause such
shares to be approved for listing in the American Stock Exchange (as
13
well as on any other national securities exchange or market on which the Common
Stock is then listed) as soon as possible thereafter; and (c) provide to the
Purchasers evidence of such listing, and the Company shall maintain the listing
of its Common Stock on such exchange. If the Tranche 2 Warrants are issued and
delivered on or after the Tranche 2 Closing Expiration Date, the Company shall
(not later than five Business Days thereafter) prepare and file with the
American Stock Exchange (as well as any other national securities exchange or
market on which the Common Stock is then listed or traded) an additional shares
listing application covering the number of Underlying Shares issuable upon
exercise in full of the Tranche 2 Warrants, and take all steps necessary to
cause such shares to be approved for listing thereon as soon as possible
thereafter.
(b) The Company shall reserve for issuance upon conversion of
the Convertible Debentures, for payment of interest thereupon in shares of
Common Stock pursuant to the terms thereof, and upon exercise of the Warrants in
accordance with their terms the number of shares to be listed on the American
Stock Exchange (and such other national securities exchange or market on which
the Common Stock is then listed or traded) as set forth in Section 3.8(a).
Shares of Common Stock reserved for issuance upon the conversion of the
Convertible Debentures as set forth in Section 3.8(a)(i)(1) and Section
3.8(a)(ii)(1), as the case may be, shall be allocated pro rata to each of the
Purchasers in accordance with the principal amount of Convertible Debentures
issued and delivered to such Purchaser at the Tranche 1 Closing or the Trance 2
Closing, as applicable.
3.9 Conversion Procedures. Exhibit D attached hereto sets forth
the procedures with respect to the conversion of the Convertible Debentures,
including the forms of conversion notice to be provided upon conversion,
instructions as to the procedures for conversion, the form of legal opinion, if
necessary, that shall be rendered by or on behalf of the Company to the
Company's transfer agent and such other information and instructions as may be
reasonably necessary to enable the Purchasers to exercise their right of
conversion smoothly and expeditiously.
3.10 Purchasers' Rights if Trading in Common Stock Is Suspended or
Delisted. If at any time while any Purchaser (or any assignee thereof) owns any
Securities trading in the shares of the Common Stock is suspended on or delisted
from the American Stock Exchange or any other principal market or exchange for
such shares (other than as a result of the suspension of trading in securities
on such market or exchange generally or temporary suspensions pending the
release of material information) for more than three Trading Days, at the option
of any Purchaser exercisable by written notice to the Company delivered within
60 days of notice of such suspension or delisting, the Company shall repay in
cash the entire principal amount of then outstanding Convertible Debentures held
by such Purchaser and redeem all then outstanding Underlying Shares then held by
such Purchaser in cash, at an aggregate purchase price equal to the sum of (I)
the aggregate outstanding principal amount of Convertible Debentures then held
by such Purchaser multiplied by (1) the average Per Share Market Value for the
five (5) Trading Days immediately preceding (a) the day of such notice or (b)
the date of payment in full of the repurchase price calculated under this
Section, whichever is greater, divided by (2) the Conversion Price on the date
of the repurchase notice,
14
(II) the aggregate of all accrued but unpaid interest and other non-principal
amounts then payable in respect of all Convertible Debentures to be repaid,
(III) the number of Underlying Shares then held by such Purchaser multiplied by
the average Per Share Market Value for the five (5) Trading Days immediately
preceding (A) the date of the notice or (B) the date of payment in full by the
Company of the repurchase price calculated under this Section, whichever is
greater, and (IV) interest on the amounts set forth in I - III above accruing
from the 5th day after such notice until the repurchase price under this Section
is paid in full at the rate of 15% per annum. The Company shall provide written
notice of any prepayment demand made pursuant to this Section to each other
holder of Securities within 24 hours of its receipt thereof.
3.11 No Violation of Applicable Law. Notwithstanding any provision
of this Agreement to the contrary, if the repurchase of Convertible Debentures
and/or redemption of Underlying Shares otherwise required under this Agreement
would be prohibited by applicable law, such repurchase shall be effected as soon
as it is permitted under such law; provided, however, that interest payable by
the Company with respect to any such repurchase and/or redemption shall continue
to accrue in accordance with Section 3.10.
3.12 [INTENTIONALLY OMITTED]
3.13 Use of Proceeds. The Company shall use all of the net proceeds
from the placement of the Securities for working capital purposes and not for
the satisfaction of any portion of Company or Subsidiary debt, to redeem Company
equity or equity-equivalent securities or to pay down in excess of $1,000,000 of
trade accounts payable of the Company or any Subsidiary. Pending application of
the proceeds of this placement in the manner permitted hereby the Company will
invest such proceeds in interest bearing accounts and short-term, investment
grade interest bearing securities.
3.14 Notice of Breaches. (a) Each of the Company and each Purchaser
shall give prompt written notice to the other of any breach of any
representation, warranty or other agreement contained in this Agreement or in
the Registration Rights Agreement, as well as any events or occurrences arising
after the date hereof and prior to, with respect to the Tranche 1 Closing, the
Tranche 1 Closing Date with respect to the Tranche 2 Closing, the Tranche 2
Closing Date which would reasonably be likely to cause any representation or
warranty or other agreement of such party, as the case may be, contained herein
to be incorrect or breached as of such Closing Date. The Company shall give such
notice to each Purchaser. However, no disclosure by either party pursuant to
this Section shall be deemed to cure any breach of any representation, warranty
or other agreement contained herein or in the Registration Rights Agreement, and
no such disclosure by any Purchaser shall affect the rights of and obligations
owing to the nondisclosing Purchasers under the Transaction Documents.
(b) Notwithstanding the generality of Section 3.14(a), the
Company shall promptly notify each Purchaser of any notice or claim (written or
oral) that it receives from any lender of the Company to the effect that the
consummation of the transactions contemplated hereby and by the Registration
Rights Agreement violates or would violate any
15
written agreement or understanding between such lender and the Company, and the
Company shall promptly furnish by facsimile to the holders of the Convertible
Debentures a copy of any written statement in support of or relating to such
claim or notice.
(c) The default by any Purchaser of any of its obligations,
representations or warranties under any Transaction Document shall not be
imputed to, and shall have no effect upon, any other Purchaser or affect the
Company's obligations under the Transaction Documents to any non-defaulting
Purchaser.
3.15 Conversion Obligations of the Company. The Company covenants
to honor conversions of Convertible Debentures and exercise of Warrants and to
deliver Underlying Shares in accordance with the terms and conditions and time
period set forth in the respective Convertible Debentures and Warrants.
3.16 Right of First Refusal; Subsequent Registrations; Certain
Company Actions. (a) The Company shall not, directly or indirectly, without the
prior written consent of ▇▇▇▇▇ ▇▇▇▇▇▇▇, LLC ("▇▇▇▇▇ ▇▇▇▇▇▇▇"), offer, sell,
grant any option to purchase, or otherwise dispose (or announce any offer, sale,
grant or any option to purchase or other disposition) of any of its or its
Affiliates equity or equity-equivalent securities at a price which is on the
face thereof or implied therein, less than either the market price or fair
market value for such securities (a "Subsequent Financing") for a period of 100
days after the last to occur of the Tranche 1 Closing Date, Tranche 2 Closing
Date or Tranche 2 Closing Expiration Date, except (i) the granting of options to
employees, officers and directors, and the issuance of shares upon exercise of
options granted, under any stock option plan heretofore or hereinafter duly
adopted by the Company, (ii) shares issued upon exercise of any currently
outstanding options and to the extent disclosed in Schedule 2.1(a), (iii) shares
of Common Stock issued upon conversion of Convertible Debentures and exercise of
Warrants, (iv) shares issued or issuable in connection with any registered
primary public offering of the Company's securities, (v) any securities issued
or issuable to any entity acquired by the Company in a merger, stock or asset
acquisition or similar transaction, or (vi) any securities issued by the Company
in connection with any technology transfer or license agreement or marketing or
similar joint venture agreement, unless (A) the Company delivers to ▇▇▇▇▇
▇▇▇▇▇▇▇ a written notice (the "Subsequent Financing Notice") of its intention to
effect such Subsequent Financing, which Subsequent Financing Notice shall
describe in reasonable detail the proposed terms of such Subsequent Financing,
the amount of proceeds intended to be raised thereunder, the Person with whom
such Subsequent Financing shall be affected, and a term sheet or similar
document relating thereto (which shall be attached to such Subsequent Financing
Notice) and (B) ▇▇▇▇▇ ▇▇▇▇▇▇▇ shall not have notified the Company by 5:00 p.m.
(Eastern Time) on the fifth Business Day after its receipt of the Subsequent
Financing Notice of its willingness to provide (or to cause its sole designee to
provide) such Subsequent Financing, subject to completion and negotiation of
definitive documentation therefor, on substantially the terms set forth in the
Subsequent Financing Notice. If ▇▇▇▇▇ ▇▇▇▇▇▇▇ does not notify the Company of its
intention to provide such Subsequent Financing within such time period, the
Company may effect the Subsequent Financing substantially upon the terms and to
the Persons (or Affiliates of such Persons) set forth in the Subsequent
Financing Notice; provided, that the Company shall
16
provide ▇▇▇▇▇ ▇▇▇▇▇▇▇ with a second Subsequent Financing Notice, and ▇▇▇▇▇
▇▇▇▇▇▇▇ shall again have the right of first refusal set forth above in this
Section 3.16(a), if the Subsequent Financing subject to the initial Subsequent
Financing Notice shall not have been consummated for any reason on the terms set
forth in such Subsequent Financing Notice within 60 Business Days after the date
of the initial Subsequent Financing Notice with the Person (or an Affiliate of
such Person) identified in the Subsequent Financing Notice.
(b) Other than Underlying Shares and other "Registrable
Securities" (as defined in the Registration Rights Agreement) to be registered
in accordance with the Registration Rights Agreement, the Company shall, for a
period of not less than 90 Trading Days after the date that the Underlying
Shares Registration Statement relating to the securities issued at last to occur
of the Tranche 1 Closing Date, Tranche 2 Closing Date or Tranche 2 Closing
Expiration Date is declared effective by the Commission, not, without the prior
written consent of Purchasers, (i) issue or sell any of its or any of its
Affiliates' equity or equity-equivalent securities pursuant to Regulation S
promulgated under the Securities Act, or (ii) register for resale any securities
of the Company. Any days that any Purchaser is unable to sell Underlying Shares
under an Underlying Securities Registration Statement shall be added to such 90
Trading Day period for the purposes of (i) and (ii) above.
(c) As long as there are Convertible Debentures outstanding,
the Company shall not and shall cause the Subsidiaries not to, without the
consent of Purchasers, (i) amend its certificate of incorporation, bylaws or
other charter documents so as to adversely affect any rights of the Purchasers;
(ii) repay, repurchase or offer to repay, repurchase or otherwise acquire shares
of its Common Stock (except Underlying Shares and shares repurchased from
employees of the Company upon their termination of employment with the Company
not in excess of $1,000,000 in aggregate); or (iii) enter into any agreement
with respect to any of the foregoing. Any repurchase of Convertible Debentures
or Underlying Shares must be offered pro rata among the Purchasers in accordance
with their then held respective principal amount of Convertible Debentures.
3.17 The Warrants. (a) At the Tranche 1 Closing the Company shall issue
and deliver (i) to Southbrook, a Common Stock purchase warrant (the "Tranche 1
Southbrook Warrant") entitling Southbrook to purchase, on the terms and
conditions set forth therein, 32,500 shares of Common Stock at a price per share
equal to the Tranche 1 Warrant Exercise Price (as defined below); (ii) to HBK
Cayman, a Common Stock purchase warrant (the "Tranche 1 HBK Cayman Warrant")
entitling HBK Cayman to purchase, on the terms and conditions set forth therein,
16,250 shares of Common Stock at a price per share equal to the Tranche 1
Warrant Exercise Price; and (iii) to HBK Offshore, a Common Stock purchase
warrant (the "Tranche 1 HBK Offshore Warrant," and together with the Southbrook
Tranche 1 Warrant and the HBK Cayman Tranche 1 Warrant, the "Tranche 1
Warrants") entitling HBK Offshore to purchase, on the terms and conditions set
forth therein, 16,250 shares of Common Stock at an exercise price per share
equal to the Tranche 1 Warrant Exercise Price. The "Tranche 1 Warrant Exercise
Price" shall be equal to 125% of the Per Share Market Value on the Tranche 1
Closing Date.
17
(b) At the earlier to occur of the Tranche 2 Closing Date or
the Tranche 2 Closing Expiration Date, the Company shall issue and deliver (i)
to Southbrook, a Common Stock purchase warrant entitling Southbrook to purchase,
on the terms and conditions set forth therein, a number of shares of Common
Stock equal to (A) if the Tranche 2 Warrants are issued on the Tranche 2 Closing
Date, 7.5% of the purchase price to be paid by Southbrook for the Tranche 2
Debentures to be issued and sold to it at the Tranche 2 Closing (e.g., if it is
to pay $5,000,000 for Tranche 2 Debentures, then such number shall be 32,500
shares) or (B) if the Tranche 2 Warrants are to be issued and delivered on the
Tranche 2 Closing Expiration Date, the number of shares to which the ▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ entitled Southbrook to purchase, at a price per share equal
to the Tranche 2 Warrant Exercise Price (as defined below); (ii) to HBK Cayman,
a Common Stock purchase warrant entitling HBK Cayman to purchase, on the terms
and conditions set forth therein, a number of shares of Common Stock equal to
(A) if the Tranche 2 Warrants are issued and delivered on the Tranche 2 Closing
Date, 7.5% of the purchase price to be paid by HBK Cayman for the Tranche 2
Debentures to be issued and sold to it at the Tranche 2 Closing (e.g., if it is
to pay $2,500,000 for Tranche 2 Debentures, then such number shall be 16,250
shares) or (B) if the Tranche 2 Warrants are to be issued and delivered on the
Tranche 2 Closing Expiration Date, the number of Shares to which the Tranche 1
HBK Cayman Warrant entitled HBK Cayman to purchase, at a price per share equal
to the Tranche 2 Warrant Exercise Price; and (iii) to HBK Offshore, a Common
Stock purchase warrant entitling HBK Offshore to purchase, on the terms and
conditions set forth therein, a number of shares of Common Stock equal to (A) if
the Tranche 2 Warrants are issued on the Tranche 2 Closing Date, 7.5% of the
purchase price to be paid by HBK Offshore for the Tranche 2 Debentures to be
issued and sold to it at the Tranche 2 Closing (e.g., if it is to pay $2,500,000
for Tranche 2 Debentures, then such number shall be 16,250 shares) or (B) if the
Tranche 2 Warrants are to be issued and delivered on the Tranche 2 Closing
Expiration Date, the number to which the Tranche 1 HBK Offshore Warrant entitled
HBK Offshore to purchase, at a price per share equal to the Tranche 2 Warrant
Exercise Price. The "Tranche 2 Warrant Exercise Price" shall equal (a) if the
Tranche 2 Warrants are issued and delivered on the Tranche 2 Closing Date, 125%
of the Per Share Market Value on such date or (b) if the Tranche 2 Warrants are
to be issued and delivered on the Tranche 2 Closing Expiration Date, 125% of the
Per Share Market Value on such date. The Common stock purchase Warrants
described in this paragraph are collectively referred to herein as the "Tranche
2 Warrants, and the Tranche 1 Warrants and the Tranche 2 Warrants are
collectively referred to herein as the "Warrants."
(c) The Warrants shall be substantially in the form of Exhibit
D. The failure of a Tranche 2 Closing with respect to any Purchaser due to a
failure by the Company to timely deliver a Subsequent Tranche Notice or to
satisfy all of the conditions set forth in section 4.1 shall not affect the
Company's obligation to issue and deliver Tranche 2 Warrants on the Tranche 2
Closing Expiration Date.
3.18 Transactions in the Common Stock. The Purchasers will not
establish a short position in the Common Stock during the fifteen (15) Trading
Days after receipt of a Subsequent Funding Notice and prior to the Tranche 2
Closing Date. Any existing short position may be maintained.
18
3.19 Limiting Agreements. So long as Convertible Debentures are
outstanding, the Company will not enter into a contract, agreement or
understanding that would restrict the Company's ability to pay principal,
interest, liquidated damages or penalty interest pursuant to any Transaction
Documents.
ARTICLE IV
CONDITIONS
4.1 Conditions Precedent to the Obligation of the Purchasers to
Purchase the Tranche 2 Debentures. The obligation of each Purchaser hereunder to
acquire and pay for Tranche 2 Debentures is subject to the satisfaction or
waiver by such Purchaser at or before the Tranche 2 Closing of each of the
following conditions:
(a) Tranche 1 Closing. The Tranche 1 Closing shall have
occurred.
(b) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company contained herein shall be true
and correct in all material respects as of the date when made and as of the
Tranche 2 Closing Date as though made on and as of such date;
(c) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company at or prior to the Tranche 2 Closing
Date;
(d) Underlying Securities Registration Statements. The
Underlying Securities Registration Statement with respect to the Underlying
Shares issuable on conversion and exercise of all outstanding Tranche 1
Debentures and Tranche 1 Warrants shall have been declared effective under the
Securities Act by the Commission and such Underlying Registration Statement
shall have remained effective and shall not be subject to any stop order and no
stop order shall be pending or threatened as at the Tranche 2 Closing Date;
(e) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority which prohibits
the consummation of any of the transactions contemplated by this Agreement or
the Registration Rights Agreement relating to the issuance or conversion of any
of the Securities.
(f) Management. ▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ shall not have left the
Company or suffered a voluntary or involuntary material lessening of
responsibility as Chairman, the Purchasers acknowledging the Company's intention
to hire a President and/or Chief Executive Officer.
19
(g) No Suspensions of Trading in Common Stock. The trading in
the Common Stock shall not have been suspended by the Commission or on the
American Stock Exchange (except for any suspension of trading of limited
duration solely to permit dissemination of material information regarding the
Company and except if, at the time there is any suspension on the American Stock
Exchange, the Common Stock is then listed and approved for trading on the New
York Stock Exchange, Nasdaq National Market or Nasdaq SmallCap Market within one
(1) Trading Day thereof);
(h) Listing of Common Stock. The Common Stock shall have been
at all times between the Tranche 1 Closing Date and the Tranche 2 Closing Date,
and on the Tranche 2 Closing Date shall be, listed for trading on the American
Stock Exchange, New York Stock Exchange, Nasdaq National Market or Nasdaq
SmallCap Market.
(i) Change of Control. No Change of Control in the Company
shall have occurred since the Tranche 1 Closing Date. "Change of Control" means
the occurrence of any of (i) an acquisition after the date hereof by an
individual, group (as defined in Rule 13d-1 promulgated under the Exchange Act),
or legal entity of in excess of 30% of the voting securities of the Company,
(ii) a replacement of more than one-half of the members of the Company's board
of directors which is not approved by those individuals who are members of the
board of directors on the date hereof in one or a series of related
transactions, (iii) the merger of the Company with or into another entity,
consolidation or sale of all or substantially all of the assets of the Company
in one or a series of related transactions or (iv) the execution by the Company
of an agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth above in (i), (ii) or (iii).
(j) Legal Opinion. The Company shall have delivered to such
Purchaser an opinion of outside legal counsel to the Company in substantially
the forms attached hereto as Exhibit E and dated the Tranche 2 Closing Date;
(k) Required Approvals. All Required Approvals shall have been
obtained;
(l) Shares of Common Stock. On the Tranche 2 Closing Date the
Company shall have reserved for issuance to the Purchasers the number of shares
of Common Stock specified in Section 3.8(a)(ii);
(m) Delivery of Securities. The Company shall have delivered
to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (or such other Person acceptable to such Purchaser and the
Company) in escrow pending the Tranche 2 Closing the Convertible Debentures and
Tranche 2 Warrants being purchased at the Tranche 2 Closing by such Purchaser,
registered in the name of such Purchaser, each in form satisfactory to ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ (or such other Person);
(n) Performance of Conversion/Exercise Obligations. The
Company shall have (a) delivered Underlying Shares upon conversion of Tranche 1
Convertible Debentures and exercise of Tranche 1 Warrants and otherwise
performed its obligations in accordance with
20
the terms, conditions and timing requirements of the Tranche 1 Convertible
Debentures and Tranche 1 Warrants; and
(o) Market Price of Common Stock. The closing sale price of
the Common Stock as reported by the American Stock Exchange or any other
exchange or market on which the Common Stock is then listed shall be at least
$10 per share for each of the fifteen (15) Trading Days immediately preceding
each of the date of Subsequent Tranche Notice and the Tranche 2 Closing Date,
provided that all material information regarding the Company has been publicly
disseminated on a timely basis, whether or not the Company has a duty under
federal securities laws to disclose such information.
ARTICLE
MISCELLANEOUS
5.1 Fees and Expenses. Each party shall pay the fees and expenses of
its advisers, counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement, except as set forth in
the Registration Rights Agreement. The Company shall pay all stamp and other
taxes and duties levied in connection with the issuance of the Shares pursuant
hereto.
5.2 Entire Agreement; Amendments. This Agreement, together with the
Exhibits and Schedules hereto, the Registration Rights Agreement, the
Convertible Debentures, the Warrants and the document, if any, setting forth the
terms of the preferred stock into which the Convertible Debentures are
exchangeable as provided under the Convertible Debentures, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters.
5.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 4:30 p.m. (New York City
time) on a Business Day, (ii) the Business Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in the Purchase Agreement later than 4:30 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City time) on
such date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as follows:
If to the Company: PLC Systems Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
21
Attn: Chief Executive Officer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to: Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Southbrook: Southbrook International
Investments, Ltd.
c/o Trippoak Advisors, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
If to HBK Cayman: HBK Cayman L.P.
c/o HBK Investments L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇
If to HBK Offshore: HBK Offshore Fund Ltd.
c/o HBK Investments L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇
With copies
in the case of
Southbrook, HBK
Cayman, and HBK
Offshore to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Aronsohn & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
22
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
5.4 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by both the Company and each of the Purchasers; or, in the case of a waiver, by
the party against whom enforcement of any such waiver is sought. No waiver of
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
5.5 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
5.6 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each of the Purchasers. No Purchaser may
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Company, except that any Purchaser may assign its rights
hereunder and under the Transaction Documents without the consent of the Company
as long as such assignee demonstrates to the reasonable satisfaction of the
Company its satisfaction of the representations and warranties set forth in
Section 2.2. This provision shall not limit a Purchaser's right to transfer
securities or transfer or assign rights hereunder or under the Registration
Rights Agreement.
5.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and, other than with respect to Section 3.16, which is intended for the
benefit of and which may be enforced by ▇▇▇▇▇ ▇▇▇▇▇▇▇, LLC, and with respect to
permitted assignees under Section 5.6, is not for the benefit of, nor may any
provision hereof be enforced by, any other Person.
5.8 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York
without regard to the principles of conflicts of law thereof.
5.9 Survival. The agreements and covenants contained in Article III, IV
and this Article V shall survive the delivery and conversion of the Convertible
Debentures pursuant to this Agreement and the representations and warranties of
the Company and the Purchasers contained in Article II shall survive until a
date that is three years after the last Closing Date.
5.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event
23
that any signature is delivered by facsimile transmission, such signature shall
create a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if such
facsimile signature page were an original thereof.
5.11 Publicity. The Company shall consult with each Purchaser and each
Purchaser shall consult with the Company prior to issuing any press releases or
otherwise making public statements with respect to the transactions contemplated
hereby and the Company shall not issue any such press release or otherwise make
any such public statement without the prior written consent of each Purchaser
and the Purchasers shall not issue any such press release or otherwise make any
public statement without the prior written consent of the Company, which consent
shall not be unreasonably withheld or delayed, except that no prior consent
shall be required if such disclosure is required by law, in which such case the
disclosing parties shall provide the other parties with prior notice of such
public statement.
5.12 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision which shall be a reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.
5.13 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific performance of the obligations of the Company under
the Transaction Documents. Each of the Company and the Purchasers (severally and
not jointly) agree that monetary damages would not be adequate compensation for
any loss incurred by reason of any breach of its obligations described in the
foregoing sentence and hereby agrees to waive in any action for specific
performance of any such obligation the defense that a remedy at law would be
adequate.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
24
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first indicated above.
Company:
PLC SYSTEMS INC.
By:
Name:
Title:
Purchasers:
SOUTHBROOK INTERNATIONAL
INVESTMENTS, LTD.
By:
Name:
Title:
HBK CAYMAN L.P.
By:
Name:
Title:
HBK OFFSHORE FUND LTD.
By:
Name:
Title:
25
Schedule 2.1(a)
SUBSIDIARIES
--------------
==================================================== ============================== ================================
Name Jurisdiction Percentage
of of Equity
Organization Securities Owned
by the Company
==================================================== ============================== ================================
PLC Medical Systems, Inc. Delaware 100%
==================================================== ============================== ================================
PLC Sistemas Medicos Internacionais, Lda Portugal 100%
==================================================== ============================== ================================
PLC Sistemas Medicos GmbH Germany 100%
==================================================== ============================== ================================
PLC Medical Systems AG Switzerland 100%
==================================================== ============================== ================================
PLC Medical Systems Asia/Pacific Pte Ltd. Singapore 100%
==================================================== ============================== ================================
PLC Medical Systems France France 100%
==================================================== ============================== ================================