exv10w6



 





Exhibit 10.6




SUBORDINATED NOTE PURCHASE AGREEMENT




Among




ALMA LASERS LTD.




AND




TA SUBORDINATED DEBT FUND, L.P.

AND

TA INVESTORS II, L.P.




As Initial Noteholders




Dated as of March 23, 2006




 









 








Alma Lasers Ltd.




Subordinated Note Purchase Agreement




Dated as of March 23, 2006




TABLE OF CONTENTS




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	ARTICLE I — DEFINITIONS	 	 	1	 
	 	1.1.	 	 	Definitions

	 	 	1	 
	 	1.2.	 	 	Accounting Terms

	 	 	6	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE II — AUTHORIZATION, PURCHASE, SALE AND TERMS OF
NOTES; PAYMENTS	 	 	6	 
	 	2.1.	 	 	The Notes

	 	 	6	 
	 	2.2.	 	 	Purchase of the Notes

	 	 	6	 
	 	2.3.	 	 	Use of Proceeds

	 	 	7	 
	 	2.4.	 	 	Payments and Endorsements

	 	 	7	 
	 	2.5.	 	 	Redemptions and Mandatory Repurchase

	 	 	7	 
	 	2.6.	 	 	Default Rate

	 	 	9	 
	 	2.7.	 	 	Maximum Legal Rate of Interest

	 	 	9	 
	 	2.8.	 	 	Payment on Non-Business Days

	 	 	9	 
	 	2.9.	 	 	Transfer and Exchange of Notes

	 	 	9	 
	 	2.10.	 	 	Replacement of Notes

	 	 	10	 
	 	2.11.	 	 	Other Notices

	 	 	10	 
	 	2.12.	 	 	Liability

	 	 	10	 
	 	2.13.	 	 	Purchase of Ordinary Shares

	 	 	11	 
	 	2.14.	 	 	Obligations Subordinate to Senior Indebtedness

	 	 	11	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE III — CONDITIONS TO CLOSING	 	 	13	 
	 	3.1.	 	 	Loan Documents

	 	 	13	 
	 	3.2.	 	 	Subordinated Notes Documents

	 	 	13	 
	 	3.3.	 	 	Completion of Transaction

	 	 	13	 
	 	3.4.	 	 	Fees

	 	 	13	 
	 	3.5.	 	 	Delivery of Documents to Noteholders

	 	 	13	 
	 	3.6.	 	 	Delivery of Documents to Borrower

	 	 	14	 
	 	3.7.	 	 	Purchase and Issuance of Shares

	 	 	14	 
	 	3.8.	 	 	Representations and Warranties

	 	 	14	 
	 	3.9.	 	 	Use of Proceeds

	 	 	14	 
	 	3.10.	 	 	Compliance with this Agreement

	 	 	14	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE IV — REPRESENTATIONS AND WARRANTIES OF THE
NOTEHOLDERS	 	 	15	 
	 	4.1.	 	 	Authorization; Enforceability

	 	 	15	 
	 	4.2.	 	 	Own Account

	 	 	15	 






i 









 






	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 	4.3.	 	 	Investment Intent

	 	 	15	 
	 	4.4.	 	 	Securities Laws

	 	 	15	 
	 	4.5.	 	 	No Broker

	 	 	15	 
	 	4.6.	 	 	Restrictive Legend

	 	 	15	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE V — REPRESENTATIONS AND WARRANTIES OF THE
BORROWER	 	 	16	 
	 	5.1.	 	 	Organization and Existence

	 	 	16	 
	 	5.2.	 	 	Execution, Delivery and Performance

	 	 	16	 
	 	5.3.	 	 	Valid and Legal Obligation

	 	 	16	 
	 	5.4.	 	 	Non-Contravention

	 	 	16	 
	 	5.5.	 	 	No Default

	 	 	17	 
	 	5.6.	 	 	Consents and Approvals

	 	 	17	 
	 	5.7.	 	 	Litigation; Orders

	 	 	17	 
	 	5.8.	 	 	Registration Requirements, etc.

	 	 	17	 
	 	5.9.	 	 	Choice of Law

	 	 	17	 
	 	5.10.	 	 	Immunity

	 	 	17	 
	 	5.11.	 	 	Compliance with Laws

	 	 	17	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE VI — AFFIRMATIVE COVENANTS OF THE BORROWER	 	 	17	 
	 	6.1.	 	 	Financial Statements

	 	 	18	 
	 	6.2.	 	 	Inspection

	 	 	18	 
	 	6.3.	 	 	Notices

	 	 	18	 
	 	6.4.	 	 	Compliance with Laws

	 	 	18	 
	 	6.5.	 	 	Permits

	 	 	18	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE VII — NEGATIVE COVENANTS OF THE BORROWER	 	 	18	 
	 	7.1.	 	 	Restricted Payments

	 	 	19	 
	 	7.2.	 	 	Financial Covenants

	 	 	19	 
	 	7.3.	 	 	Indebtedness

	 	 	20	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE VIII — EVENTS OF DEFAULT; REMEDIES	 	 	20	 
	 	8.1.	 	 	Events of Default

	 	 	20	 
	 	8.2.	 	 	THE NOTEHOLDERS’ RIGHTS AND REMEDIES

	 	 	21	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE IX — MISCELLANEOUS	 	 	22	 
	 	9.1.	 	 	No Waiver; Cumulative Remedies

	 	 	22	 
	 	9.2.	 	 	Amendments, Waivers and Consents

	 	 	22	 
	 	9.3.	 	 	Addresses for Notices, Etc.

	 	 	22	 
	 	9.4.	 	 	Costs, Expenses and Taxes

	 	 	23	 
	 	9.5.	 	 	Assignability; Binding Agreement

	 	 	23	 
	 	9.6.	 	 	Payments in Respect of Notes

	 	 	24	 
	 	9.7.	 	 	Indemnification

	 	 	24	 
	 	9.8.	 	 	Survival of Representations and Warranties

	 	 	25	 
	 	9.9.	 	 	Prior Agreements

	 	 	25	 
	 	9.10.	 	 	Severability

	 	 	25	 
	 	9.11.	 	 	Governing Law

	 	 	25	 






ii 









 






	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 	9.12.	 	 	Jurisdiction
	 	 	25	 
	 	9.13.	 	 	Jury Waiver
	 	 	26	 
	 	9.14.	 	 	Counterparts
	 	 	26	 
	 	9.15.	 	 	Further Assurances
	 	 	26	 
	 	9.16.	 	 	Specific Performance
	 	 	26	 
	 	9.17.	 	 	Actions by Noteholders
	 	 	26	 
	 	9.18.	 	 	Limitation of Liability
	 	 	26	 
	 	9.19.	 	 	Confidentiality Agreement
	 	 	27	 






iii 









 






EXHIBITS 




Exhibits




	 	 	 
	Exhibit A

	 	Form of Joinder Agreement
	Exhibit 2.1

	 	Form of Note
	Exhibit 2.2

	 	Allocation of Note Purchase Amount
	Exhibit 2.13

	 	Allocation of Ordinary Shares
	Exhibit 6.1

	 	Compliance Certificate






iv 









 






SUBORDINATED NOTE PURCHASE AGREEMENT




     This Subordinated Note Purchase Agreement dated as of March 23, 2006 (as amended, restated or
otherwise modified and in effect from time to time, this “Agreement”) by and among Alma
Lasers Ltd., a corporation organized under the laws of Israel (the “Borrower”), TA
Subordinated Debt Fund, L.P., a Delaware limited partnership (“TA Debt Fund” or a
“Noteholder”), TA Investors II, L.P., a Delaware limited partnership (“TA
Investors” or a “Noteholder, the other holders of Notes party hereto from time to time
(together with TA Debt Fund, TA Investors and their successors and assigns, “Noteholders”).



     WHEREAS, Pursuant to the Share Purchase and Redemption Agreement dated as of February 15, 2006
among Aesthetic Acquisition B.V., as buyer (“Buyer”), the Shareholders identified therein,
the Non-Compete Parties identified therein and Sponsor (as defined below), Buyer has agreed to
acquire (the “Acquisition”) certain of the Series A-1 Preferred Shares (the “Preferred
Shares”) and Ordinary Shares of Borrower. Borrower has agreed to use the proceeds of the
issuance of the Notes (as defined herein) to redeem a portion of its currently outstanding Ordinary
Shares (together with the Acquisition, the “Transaction”);



     WHEREAS, Upon consummation of the Transaction, (i) the Buyer will hold a total of (A)
377,172,000 Preferred Shares of Borrower, which Preferred Shares will have an aggregate
liquidation/sale preference of $55,000,478 (subject to adjustment) and will be convertible into an
aggregate of 377,172,000 Ordinary Shares (subject to adjustment), and (B) upon receipt by Borrower
of 124,680 NIS, 12,468,000 Ordinary Shares, and (ii) the Shareholders will hold (A) 140,766,000
Ordinary Shares and (B) Shareholder warrants representing the right to purchase up to an additional
66,620,996 Ordinary Shares.



     In consideration of the mutual agreements herein contained, the parties hereto agree as
follows:



ARTICLE I — DEFINITIONS




     1.1. Definitions. As used herein, 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):



       “Acquisition” has the meaning specified therefor in the recitals of this Agreement.



       “Agreement” means this Agreement as amended, restated or otherwise modified and in
effect from time to time.



       “Audited Financial Statements” means the audited consolidated balance sheet of the
Borrower including its Subsidiaries for the fiscal year ended December 31, 2004, and the related
consolidated statements of income, retained earnings and cash flows for the fiscal year then ended
of the Borrower including its Subsidiaries, including any notes thereto.



       “Bank Event of Default” means an Event of Default (as such term is defined under the
Senior Credit Agreement).



 









 





       “Borrower” has the meaning specified therefor in the preamble of this
Agreement.



       “Business Day” means any day that is not a Saturday, Sunday, or other day on which
banks are authorized or required to close in the Commonwealth of Massachusetts.



       “Buyer” has the meaning specified therefor in the preamble of this Agreement.


       “Closing
Date” shall have the meaning assigned to that term in Section 2.2.



       “Compliance
Certificate” means a certificate substantially in the form of Exhibit 6.1,
as the same may be modified with the consent of the Borrower and the Required Noteholders.



       “Consolidated” or “consolidated” means with respect to any term defined herein
that term as applied to the accounts of Borrower and its Subsidiaries, consolidated in accordance
with GAAP.



       “Consolidated Leverage Ratio” means, as of any date of determination, the ratio of (a)
Consolidated Indebtedness as of such date to (b) Consolidated EBITDA for the period of the four
fiscal quarters then most recently ended.



       “Consolidated EBITDA” means, with respect to any fiscal period, (a) Borrower’s and its
Subsidiaries’ consolidated net earnings, minus (b) without duplication, the sum of the following
amounts of Borrower and its Subsidiaries for such period, to the extent included in determining
consolidated net earnings of Borrower and its Subsidiaries for such period, (i) extraordinary gains
(including gains realized on the sale of assets), (ii) non-cash income and (iii) interest income,
in the case of each of clauses (b)(i) through (b)(iii), as determined in accordance with GAAP, plus
(c) without duplication, the sum of the following amounts of Borrower and its Subsidiaries for such
period, to the extent deducted in determining consolidated net earnings of Borrower and its
Subsidiaries, (i) income taxes and franchise taxes accrued, (ii) interest expense, (iii)
depreciation and amortization, (iv) amortized debt discount for such period, (v) expenses
associated with payments made to the Borrower’s or any Subsidiary’s employee stock option pool,
(vi) the amount of any costs or expenses incurred by Borrower or its Subsidiaries in connection
with the Transaction and (vii) non-cash expenses agreed with the Noteholders.



       “Consolidated Indebtedness” means, as of any date of determination, without
duplication, for the Borrower and its Subsidiaries on a consolidated basis, the sum of (a) the
outstanding principal amount of all obligations, whether current or long-term, for borrowed money
(including Obligations hereunder) and all obligations evidenced by bonds, debentures, notes, loan
agreements or other similar instruments, (b) all purchase money indebtedness, (c) all direct
obligations arising under letters of credit (including standby and commercial), bankers’
acceptances, bank guaranties, surety bonds and similar instruments, (d) all obligations in respect
of the deferred purchase price of property or services (other than trade accounts payable and other
accrued expenses in the ordinary course of business), (e) all indebtedness due under capital or
synthetic leases, (g) all guarantees with respect to outstanding indebtedness of the types
specified in clauses (a) through (f) above of Persons other than the Borrower or any Subsidiary,
and (h) all indebtedness of the types referred to in clauses (a) through (g) above of any
partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in
which the Borrower or a Subsidiary is a general partner or joint venture,



2









 




except for any portion of such indebtedness that is expressly made non-recourse to the Borrower or
such Subsidiary.




       “Consolidated Interest Charges” means, for any period, for the Borrower and its
Subsidiaries on a consolidated basis, the sum of (a) all interest, premium payments, debt discount,
fees, charges and related expenses of the Borrower and its Subsidiaries in connection with
Consolidated Indebtedness, in each case to the extent treated as cash interest in accordance with
GAAP and (b) in the case of capitalized leases, without duplication, the portion of rent expense of
the Borrower and its Subsidiaries with respect to such period under such capitalized leases that is
treated as cash interest in accordance with GAAP.



       “Consolidated Interest Coverage Ratio” means, as of any date of determination, the
ratio of (a) Consolidated EBITDA to (b) Consolidated Interest Charges, in each case, of the
Borrower and its Subsidiaries for the period of four fiscal quarters then most recently ended.



       “Default” means an event, condition, or default that, with the giving of notice, the
passage of time, or both, would be an Event of Default.



       “Default Rate” shall have the meaning ascribed to such term in Section 2.6
hereof.


       “Dollars”
or “$” means United States dollars.


       “Equity Interests” means, with respect to any Person, all of the shares of capital
stock of (or other ownership or profit interests in) such Person, all of the warrants, options or
other rights for the purchase or acquisition from such Person of shares of capital stock of (or
other ownership or profit interests in) such Person, all of the securities convertible into or
exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person
or warrants, rights or options for the purchase or acquisition from such Person of such shares (or
such other interests), and all of the other ownership or profit interests in such Person
(including, without limitation, partnership, member or trust interests therein), whether voting or
nonvoting, and whether or not such shares, warrants, options, rights or other interests are
outstanding on any date of determination.



       “Event
of Default” has the meaning specified therefor in Section 8.1.



       “GAAP” means generally accepted accounting principles as in effect from time to time
in the United States, consistently applied.



       “Governmental Authority” means any federal, state, local, or other governmental or
administrative body, instrumentality, board, department, or agency or any court, tribunal,
administrative hearing body, arbitration panel, commission, or other similar governmental
dispute-resolving panel or body.



       “Initial Noteholders” means the purchasers of Notes under this Agreement at the
Closing held on the Closing Date.



       “Law” means all laws, statutes and rules and regulations thereunder and
interpretations thereof by any competent court or by any governmental or other regulatory body or
official



3









 




charged with the administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time heretofore or hereafter made upon or
otherwise issued to any Noteholder by any central bank or other fiscal, monetary or other
authority, whether or not having the force of law, including, without limitation, any change
according to a prescribed schedule of increasing requirements.




       “Loan Parties” means the Borrower and its direct and indirect subsidiaries.



       “Mandatory Repurchase Event” means the occurrence of any one of any of the following
events: (a) the Sponsor or its affiliates shall collectively cease to, directly or indirectly, own
and control at least 51% of the outstanding voting equity interests of Borrower; (b) any change in
equity ownership of the Borrower which would result in Sponsor or its affiliates ceasing at any
time to, directly or indirectly, have the power to elect the Preferred A-1 Directors (as such term
is defined in the Amended and Restated Articles of Association of the Company) of the Board of
Directors of the Borrower, or (c) there shall be consummated (i) any consolidation or merger of
Borrower where the equity interest holders of Borrower, immediately prior to the consolidation or
merger, would not, immediately after the consolidation or merger, beneficially own, directly or
indirectly, shares or other equity interests representing a majority of the voting power of the
corporation or other entity issuing cash or securities in the consolidation or merger (or of its
ultimate parent corporation or other entity, if any), (ii) any sale or transfer of all or
substantially all of the assets of Borrower and its Subsidiaries, taken as a whole, and (iii) any
plan or proposal for the liquidation, winding up or dissolution of Borrower or any material
Subsidiary (as the case may be).



       “Noteholder” and “Noteholders” means a Person or Persons who hold a Note or
Notes issued pursuant to this Agreement, including successors and assigns of such persons.



       “Notes” shall have the meaning assigned to that term in Section 2.1.



       “Obligations” means all now existing or hereafter arising debts, obligations,
covenants, and duties of payment or performance of every kind, matured or unmatured, direct or
contingent, owing, arising, due, or payable to the Noteholders, by or from the Borrower, whether
existing on the date of this Agreement or arising thereafter, whether arising out of this Agreement
or any other Subordinated Notes Document, and to pay interest, fees, costs, charges, expenses,
professional fees, and all sums chargeable to the Borrower, under the Subordinated Notes Documents,
whether or not evidenced by any note or other instrument.



       “Ordinary Shares” means the ordinary shares of the Borrower par value NIS 0.01 per
share.



       “Payment Blockage Period” has the meaning ascribed to such term in Section 2.14.1(c)
hereof.



       “Person” means natural persons, corporations, limited liability companies, limited
partnerships, general partnerships, limited liability partnerships, joint ventures, trusts, land
trusts, business trusts, or other organizations, irrespective of whether they are legal entities,
and governments and agencies and political subdivisions thereof.



4









 





       “Required Noteholders” means “Required Noteholders” as defined in Section
9.2.



       “Responsible Officer” means the chief executive officer, president, chief financial
officer, treasurer or assistant treasurer of a Loan Party. Any document delivered hereunder that is
signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been
authorized by all necessary corporate, partnership and/or other action on the part of such Loan
Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such
Loan Party.



       “Securities Act” means the Securities Exchange Act of 1934, as in effect from time to
time.



       “Senior Credit Agreement” means that certain Letter of Undertaking dated as of even
date herewith by and among Borrower and Bank Hapoalim B.M., as the “Bank” thereunder, as amended,
amended and restated, modified or replaced from time to time, and including any supplements and
appendices thereto.



       “Senior Default Notice” has the meaning ascribed to such term in Section 2.14.1(c)
hereof.



       “Senior Indebtedness” means all obligations of the Borrower now or hereafter existing
under the Senior Credit Agreement and the promissory notes issued to the Senior Lender thereunder,
in each case, whether created directly or acquired by assignment or otherwise and whether for
principal, interest (including, without limitation, interest accruing after, or which would have
accrued but for, the filing of a petition or the commencement of a case initiating any proceeding
referred to in Section 2.14.1, whether or not such interest is an allowed claim in such
proceeding), reimbursement obligations, indemnities, fees, expenses or otherwise.



       “Senior Lender” means the “Bank” as defined in the Senior Credit Agreement and shall
include each additional financial institution to which it assigns or transfers any of its interests
as Bank under the Senior Credit Agreement.



       “Senior Loan Documents” means the Senior Credit Agreement, the Application for Term
Loan, the Application for Revolving Loan, the Deed of Charge (or Debenture) and any Notices of
Drawing, in each case, as amended, amended and restated, modified or replaced from time to time,
and including any supplements and appendices thereto.



       “Senior Loans” means the Term Loan and Revolving Credit Line (each as defined in the
Senior Credit Agreement) under the Senior Loan Documents.



       “Sponsor” means, collectively, TA Associates, Inc. and its affiliates TA IX L.P.,
TA/Atlantic and Pacific IV L.P., TA Strategic Partners Fund A L.P., TA Strategic Partners Fund B
L.P. and TA Investors II L.P.



       “Share Purchase and Redemption Agreement” has the meaning specified therefor in the
recitals of the Agreement.



5









 





       “Subordinated Notes Documents” means this Agreement and the Notes and any other
document, instrument, or agreement delivered in connection therewith.



       “Subsidiary” means, with respect to the Borrower, as of the Closing Date, Alma Lasers,
Inc., and any time thereafter, a corporation, partnership, limited liability company, or other
entity in which the Borrower directly or indirectly owns or controls the shares of stock having
ordinary voting power to elect a majority of the board of directors (or appoint other comparable
managers) of such corporation, partnership, limited liability company, or other entity.



       “Transaction” has the meaning specified therefor in the recitals of this
Agreement.



       “Transaction Documents” means the Share Purchase and Redemption Agreement, the
Shareholders Agreement, the Escrow Agreement, any Shareholder Warrant Agreements and any other
documents, instruments and agreements executed and delivered in connection with the Transaction, or
otherwise relating thereto.



       “United States” means the United States of America.



     1.2. Accounting Terms. All accounting terms not specifically defined herein shall be
construed in accordance with GAAP. When used herein, the term “financial statements” shall include
the notes and schedules thereto. Whenever the term “Borrower” is used in respect of a financial
covenant or a related definition, it shall be understood to mean Borrower and its Subsidiaries, on
a consolidated basis unless the context clearly requires otherwise.



ARTICLE II — AUTHORIZATION, PURCHASE, SALE AND TERMS OF NOTES;

PAYMENTS




     2.1. The Notes. The Borrower has authorized the issuance of senior subordinated notes
due March 23, 2011 in the aggregate original principal amount of Fourteen Million Nine Hundred
Ninety-eight Thousand Thirty-seven Dollars ($14,998,037). The senior subordinated notes shall be in
the form set forth as Exhibit 2.1 attached hereto and are herein referred to individually
as a “Note” and collectively as the “Notes”, which terms shall also include any notes
delivered in exchange or replacement therefor. The Notes shall (a) be payable on March 23, 2011
(the “Maturity Date”), and (b) bear interest compounded quarterly (based on a 360-day year
of twelve 30-day months) on the unpaid principal amount thereof until paid in full at a net rate of
ten and one-half percent (10.5%) per annum (as of the Closing Date, the withholding obligation of
the Borrower with respect to such amounts is deemed to be 25% and the interest rate as of the
Closing Date, adjusted therefor, is fourteen percent (14%) per annum), payable in cash quarterly in
arrears on March 31, June 30, September 30 and December 31 in each year, commencing June 30, 2006,
and at maturity or prior prepayment of the Notes in full or in part; provided that, from
time to time upon the occurrence of a default under the Senior Credit Agreement or a payment
blockage event under Section 2.14 hereof, at the option of the Noteholders, accrued but unpaid
interest may be added to the outstanding principal balance of the Notes as of the date such accrued
interest otherwise would have been due and payable. The Borrower has authorized the issuance to the
Noteholders of the Notes.



     2.2. Purchase of the Notes.



6









 





     (a) Subject to and in reliance upon the representations, warranties, terms and conditions of
this Agreement, the Initial Noteholders agree to purchase Notes from the Borrower in the aggregate
principal amount of Fourteen Million Nine Hundred Ninety-eight Thousand Thirty-seven Dollars
($14,998,037), as set forth opposite each Initial Noteholder’s name on Exhibit 2.2 attached
hereto, at a closing (the “Closing”) to be held at the offices of Goodwin Procter LLP,
located at Exchange Place, 53 State Street, Boston, MA, at 10:00 a.m. Boston time, or at such other
time and place as the parties hereto agree, on the date on which this Agreement is executed and
delivered and upon satisfaction of the conditions described in Article III (the “Closing
Date”).



     (b) At the Closing, the Borrower will issue the Notes to the Noteholders, payable to the
Noteholders or their registered assigns, against receipt of immediately available funds by wire
transfer to an account or accounts designated by the Borrower prior to the Closing in the amount
set forth on Exhibit 2.2 (or in such other manner as is set forth on Exhibit 2.2).



     2.3. Use of Proceeds. The Borrower agrees to use the full proceeds of the Notes to
consummate the transactions contemplated by the Transaction Documents.



     2.4. Payments and Endorsements.



     (a) Payments of principal, interest and premium, if any, on the Notes shall be made without
set off or counterclaim, directly by wire transfer to an account designated in writing by each
Noteholder, without any presentment or notation of payment, except that prior to any transfer of
any Note, the holder thereof 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. All payments and prepayments
of principal of, and interest on, the Notes shall be applied (to the extent thereof) to all of the
Notes pro rata based on the principal amount outstanding and held by each holder thereof.



     (b) Anything herein to the contrary notwithstanding, if, after the date hereof, any change in
applicable Law shall impose on the Borrower any obligation with respect to any amount of interest,
principal or prepayment premium (for any optional or mandatory prepayment or redemption of the
Notes) payable by it hereunder or under any of the other Transaction Documents to withhold or
deduct any taxes, levies, imposts, duties, charges, fees, deductions or withholdings, the Borrower
will pay to the Noteholders, on the date on which such amount is due and payable under the
Subordinated Notes Documents, such additional amount in United States Dollars as would be necessary
to enable a lender not party to a tax treaty to receive the same amount which the Noteholders would
have received on such due date if no such obligation had been imposed upon the Borrower.



     (c) The obligations of the Borrower under this Section 2.4 shall survive the payment in full
of all amounts due hereunder or under the Notes or the redemption of the Notes.



     2.5. Redemptions and Mandatory Repurchase.



          2.5.1. Required Redemption. Subject to the subordination provisions contained in
Section 2.14 hereof and the restrictions contained in the Senior Loan Documents on the
Maturity Date or accelerated maturity of the Notes (upon the acceleration of the Notes in





7









 







accordance with Section 8.2 hereof), the Borrower will pay the principal amount of the Notes then
outstanding together with all accrued and unpaid interest thereon. No redemption of less than all
of the Notes shall affect the obligation of the Borrower to make the redemption required by this
sub-section.




          2.5.2. Optional Redemptions. In addition to the redemption of the Notes required under
sub-section 2.5.1, the Borrower may, subject to the subordination provisions contained in
Section 2.14 hereof and the restrictions contained in the Senior Credit Agreement, at any
time voluntarily redeem the Notes, in whole or in part (in integral multiples of Five Hundred
Thousand Dollars ($500,000)), together with all accrued and unpaid interest on the amount so
redeemed through the date of redemption, at a redemption price equal to:




     (a) if such voluntary redemption occurs on or prior to the first (1st) anniversary
of this Agreement, one hundred six percent (106%) of the sum of the principal amount to be redeemed
plus any accrued but unpaid interest thereon;



     (b) if such voluntary redemption occurs after the first (1st) anniversary of this
Agreement but on or prior to the second (2nd) anniversary of this Agreement, one hundred
five percent (105%) of the sum of the principal amount to be redeemed plus any accrued but unpaid
interest thereon;



     (c) if such voluntary redemption occurs after the second (2nd) anniversary of this
Agreement but on or prior to the third (3rd) anniversary of this Agreement, one hundred
two and one-half percent (102.5%) of the sum of the principal amount to be redeemed plus any
accrued but unpaid interest thereon;



     (d) if such voluntary redemption occurs after the third (3rd) anniversary of this
Agreement but on or prior to the fourth (4th) anniversary of this Agreement, one hundred
one percent (101%) of the sum of the principal amount to be redeemed plus any accrued but unpaid
interest thereon; or



     (e) if such voluntary redemption occurs after the fourth (4th) anniversary of this
Agreement, one hundred percent (100%) of the sum of the principal amount to be redeemed plus any
accrued but unpaid interest thereon;



          2.5.3. Notice of Redemptions; Pro Rata Redemptions. Written notice of any redemption
pursuant to sub-section 2.5.1 or sub-section 2.5.2 shall be given to all holders of
the Notes at least thirty (30) Business Days prior to the date of any such redemption. Each
redemption of the Notes pursuant to sub-sections 2.5.1 and 2.5.2 shall be made so that the
Notes then held by each holder shall be redeemed in a principal amount which shall bear the same
ratio to the total unpaid principal amount being redeemed on all the Notes as the unpaid principal
amount of the Notes then held by such holder bears to the aggregate unpaid principal amount of the
Notes then outstanding.




          2.5.4. Mandatory Repurchase of Notes. In accordance with Section 2.11 and
subject to the subordination provisions contained in Section 2.14 hereof and the
restrictions contained in the Senior Loan Documents, the Borrower shall furnish to each Noteholder
written notice setting forth in reasonable detail the facts and circumstances underlying such
Mandatory





8









 







Repurchase Event. The occurrence of any such Mandatory Repurchase Event shall constitute an
irrevocable offer by the Borrower to purchase all of the Notes held by such Noteholder at the one
hundred one percent (101%) of the sum of the principal amount to be redeemed, together with all
accrued and unpaid interest on the amount so purchased through the date of purchase. Following
receipt of any offer to purchase the Notes hereunder, each Noteholder shall advise the Borrower, by
written notice, within ten (10) Business Days after receipt of such offer, as to whether it desires
to sell all or any of the Notes, as applicable, held by it (in integral multiples of Five Hundred
Thousand Dollars ($500,000)), specifying the principal amount of the Notes to be sold by it. If a
Noteholder accepts such offer but does not specify an amount it wishes to receive, it will be
deemed to have elected to sell all of the Notes held by it. If a Noteholder fails to respond to
such offer by the Borrower within the ten (10) Business Day acceptance period, such offer shall
expire in accordance with its terms.




     2.6. Default Rate. If an Event of Default has occurred and is continuing, from and
after the date such Event of Default has occurred the entire outstanding unpaid principal balance
of the Notes and any unpaid interest from time to time in default shall, subject to the provisions
of Section 2.4 hereof, bear interest, payable on demand in cash, at the net rate of twelve and
one-half percent (12.5%) per annum (as of the Closing Date, the withholding obligation of the
Borrower with respect to such amounts is deemed to be 25% and as of the Closing Date, the interest
rate under this Section 2.6, adjusted therefor, is sixteen and two-thirds percent (16.667%) per
annum), compounded quarterly, or such lower rate as then may be the maximum rate permitted by
applicable Law (the “Default Rate”); provided, however, that upon the cessation or cure of such
Event of Default, if no other Event of Default is then continuing, the Notes shall again bear
interest at the rate set forth in Section 2.1.



     2.7. Maximum Legal Rate of Interest. Nothing in this Agreement or in the Notes shall
require the Borrower to pay interest at a rate in excess of the maximum rate permitted by
applicable Law.



     2.8. Payment on Non-Business Days. Whenever any payment to be made shall be due on a
day which is not a Business Day, 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.



     2.9. Transfer and Exchange of Notes.



     The holder of any Note, as applicable, may, prior to maturity or prepayment thereof, surrender
such Note at the principal office of the Borrower for transfer or exchange. Any holder desiring to
transfer or exchange any Note shall first notify the Borrower in writing at least five (5) days in
advance of such transfer or exchange. Within a reasonable time after such notice to the Borrower
from a holder of its intention to make such exchange and without expense (other than transfer
taxes, if any) to such holder, the Borrower shall issue in exchange therefor another Note in
denominations of One Hundred Thousand Dollars ($100,000) and multiples thereof, except in the case
of a Note for the balance of the aggregate amount of the Note, or Notes so transferred which shall
be in a minimum denomination of One Hundred Thousand Dollars ($100,000), all as requested by the holder, for the same aggregate principal amount, as of the date
of such issuance, as the unpaid principal amount of the Note or Notes so surrendered and



9









 




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 (provided that no minimum shall apply
to a liquidating distribution of Notes to investors in a Noteholder and any Notes so distributed
may be subsequently transferred by such investor and its successors in the original denomination
thereof without restriction under this sentence). Each new Note shall be made payable to such
Person or Persons, or assigns, as the holder of such surrendered Note 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. The Borrower shall have no obligation hereunder or under any Note to any
person other than the registered holder of each such Note.

Notwithstanding anything to the contrary contained herein, no Noteholder shall be permitted to
transfer any of its Notes unless such Noteholder’s transferee has agreed in writing to be bound by
the terms of this Agreement and the other Subordinated Notes Documents (and such transferee has
expressly agreed in writing to assume such Noteholder’s obligations thereunder by executing a
joinder substantially in the form of Exhibit A hereto) to which such Noteholder is a party,
including the representations and warranties set forth in Article IV hereof.




     2.10. Replacement of Notes. Upon receipt of evidence satisfactory to the Borrower 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 Borrower, or, in the case of any such mutilation, upon surrender and
cancellation of such Note, the Borrower 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 Noteholder, its nominee, or any of its partners is
the holder is lost, stolen or destroyed, the affidavit of an authorized partner or officer of the
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 Borrower of a new Note in replacement
of such lost, stolen or destroyed Note other than the holders written agreement to indemnify the
Borrower.



     2.11. Other Notices. So long as any Notes are outstanding, the Borrower shall provide
written notice to each Noteholder as soon as possible and at least thirty (30) Business Days prior
to the occurrence or closing of a Mandatory Repurchase Event or a public offering of securities by
the Borrower setting forth in reasonable detail the facts and circumstances underlying such
Mandatory Repurchase Event or public offering.



     2.12. Liability. The Borrower hereby agrees that it is liable for the full and prompt
payment (whether at stated maturity, by acceleration or otherwise) and performance of, all
Obligations owed by it or hereafter owing by it to any Noteholder. The Borrower agrees that its
obligation hereunder shall not be discharged until payment and performance, in full, of the
Obligations has occurred, and that its obligations under this Section 2.12 shall be
absolute and unconditional, irrespective of, and unaffected by:



          2.12.1. the genuineness, validity, regularity, enforceability or any future amendment of, or
change in, this Agreement, any other Subordinated Notes Document or any other agreement, document or instrument to which such Borrower is or may
become a party;




10









 








          2.12.2. the absence of any action to enforce this Agreement (including this Section
2.12) or any other Subordinated Notes Document or the waiver or consent with respect to any of
the provisions thereof;




          2.12.3. the existence, value or condition of, or failure to perfect its Lien against, any
security for the Obligations or any action, or the absence of any action, by any Noteholder in
respect thereof (including the release of any such security);




          2.12.4. the insolvency of any Noteholder; or




          2.12.5. any other action or circumstances that might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor.




     2.13. Purchase of Ordinary Shares. In connection with the purchase of the Notes
hereunder, the Borrower shall issue and the Noteholders shall purchase at par value that certain
number of shares of Ordinary Shares set forth opposite the name of such Noteholder on Exhibit 2.13
attached hereto and the Ordinary Shares will be held by the Buyer for the benefit of the
Noteholders.



     2.14. Obligations Subordinate to Senior Indebtedness. The Borrower agrees, and each
Noteholder, by its acceptance of this Agreement and any Note, also agrees, that the Obligations are
and shall be subordinate, to the extent and in the manner hereinafter set forth, to the prior
payment in full in cash of all Senior Indebtedness. The Borrower further agrees to make only
payments of interest and any fees and expenses due under the Subordinated Notes Documents, and not
make any principal payments due thereunder, so long as the Senior Indebtedness remains outstanding;
provided, however, that such payments of interest and any fees and expenses are subject to the
restrictions set forth in Section 2.14.1 below.



          2.14.1. Events of Subordination.




     (a) In the event of any dissolution, winding up, liquidation, arrangement, reorganization,
adjustment, protection, relief or composition of the Borrower, whether voluntary or involuntary, in
any bankruptcy, insolvency, arrangement, reorganization, receivership, relief or other similar case
or proceeding under any Israeli bankruptcy or similar law of any jurisdiction or upon an assignment
generally for the benefit of creditors or any other marshalling of all or substantially all of the
assets of the Borrower, Senior Indebtedness shall first be paid in full in cash before the
Noteholders shall be entitled to receive any payment of or distribution on all or any of the
Obligations, and any payment or distribution of any kind (whether in cash, property or securities)
that otherwise would be payable or deliverable upon or with respect to the Obligations in any such
case, proceeding, assignment, marshalling or otherwise (including any payment that may be payable
by reason of any other indebtedness of the Borrower being subordinated to payment of Obligations)
shall be paid or delivered directly to the Senior Lender, so long as any Senior Indebtedness under
the Senior Loan Documents is outstanding, for application (in the case of cash) to, or as
collateral (in the case of non-cash property or securities) for, the payment or prepayment of the
Senior Indebtedness until the Senior Indebtedness shall have been paid in full in cash.



11









 





     (b) In the event that any Bank Event of Default described in Section 14(d) or 14(j) of the
Senior Credit Agreement (a “Payment Blockage Default”) shall have occurred and be
continuing, then no payment (including any payment that may be payable by reason of any other
indebtedness of the Borrower being subordinated to payment of the Obligations) shall be made by or
on behalf of the Borrower for or on account of any of the Obligations, and neither any
representative for nor any Noteholder shall take or receive from or on behalf of the Borrower,
directly or indirectly, in cash or other property or by set-off or in any other manner, including,
without limitation, from or by way of collateral, payment of all or any of the Obligations. The
Bank shall notify the Noteholders in writing of the occurrence of any such Payment Blockage Default
and written notice of the cure or waiver of the same.



     (c) In the event that any Bank Event of Default (other than a Payment Blockage Default) or
event which with the giving of notice or the lapse of time, or both, would become a Bank Event of
Default shall have occurred and be continuing and the Senior Lender, so long as any obligations are
outstanding under the Senior Credit Agreement, gives written notice thereof to any Noteholder or
any representative for any Noteholder (a “Senior Default Notice”), then no payment
(including any payment that may be payable by reason of any other indebtedness of the Borrower
being subordinated to payment of the Obligations) shall be made by or on behalf of the Borrower for
or on account of any of the Obligations, and neither any representative for nor any Noteholder
shall take or receive from or on behalf of the Borrower, directly or indirectly, in cash or other
property or by set-off or in any other manner (other than the accrual of default or paid-in-kind
interest), including, without limitation, from or by way of collateral, payment of all or any of
the Obligations, during a period (the “Payment Blockage Period”) commencing on the date of
receipt of such notice and ending on the earlier of (i) the date such Bank Event of Default or
event shall have been cured or waived, in each case confirmed in writing signed by the Senior
Lender and (ii) the date 360 days from the date of receipt of such notice; provided, however, that
no more than one Senior Default Notice may be delivered in any 18 month period with respect to any
specified Bank Event of Default.



     (d) While any Senior Indebtedness is outstanding under the Senior Credit Agreement, the
Noteholders may not declare the Obligations due and payable prior to the maturity thereof.



          2.14.2. In Furtherance of Subordination. All payments or distributions upon or with
respect to the Obligations which are received by any Noteholder or any representative therefor
contrary to the provisions of this Section 2.14 shall be received in trust for the benefit of the
Senior Lender, shall be segregated from other funds and property held by such Noteholder or any
representative therefor and shall be forthwith paid over to the Senior Lender, so long as Senior
Indebtedness is outstanding to the Senior Lender under the Senior Credit Agreement, in the same
form as so received (with any necessary endorsement) to be applied (in the case of cash) to, or
held as collateral (in the case of non-cash property or securities) for, the payment or prepayment
of the Senior Indebtedness in accordance with the terms of the Senior Credit Agreement, so long as
Senior Indebtedness is outstanding to the Senior Lender under the Senior Credit Agreement.




          2.14.3. No Commencement of Any Proceeding. So long as payments or distributions for or
on account of the Notes are not permitted pursuant to Section 2.14.1, neither any
Noteholder nor any representative therefor will, sue for, ask or demand from the Borrower,




12









 







or take any action to enforce against the Borrower any judgment for, payment of all or any of the
Obligations, including as a result of any failure to pay any of the Obligations when due, other
than suits or proceedings by any Noteholder for specific performance of the Borrower’s obligations
under Sections 6.1, 6.2 and 6.3 hereof, or commence, or join with any creditor in commencing,
directly or indirectly, or cause the Borrower to commence, or assist the Borrower in commencing,
any proceeding referred to in Section 2.14.1(a).




          2.14.4. Agreements in Respect of Subordinated Debt. No amendment, waiver or other
modification of this Agreement, and no agreement supplemental or relating to this Agreement, may
(i) modify or otherwise affect any of the provisions of this Section 2.14 or (ii) adversely affect
any other of the rights or interests of the Senior Lender hereunder in any material respect.




          2.14.5. Agreement by the Borrower. The Borrower agrees that it will not make any
payment of any of the Subordinated Debt, or take any other action, in contravention of the
provisions of this Section.




          2.14.6. Continuing Agreement; Assignments Under the Senior Credit Agreement. The
provisions of this Section 2.14 constitute a continuing agreement and shall (a) remain in
full force and effect until the payment in full of the Senior Indebtedness, (b) be binding upon the
Noteholders, any representative therefor, the Borrower and their respective successors and assigns,
and (c) inure to the benefit of, and be enforceable by, the Senior Lender and its respective
successors, transferees and assigns.




ARTICLE III — CONDITIONS TO CLOSING




     The obligation of each Noteholder to purchase its Notes hereunder and the obligation of the
Borrower to issue such Notes hereunder are subject to the following conditions precedent, all or
any of which may be waived by the unanimous written agreement of the Noteholders or, if the
Noteholders have not satisfied their obligations under Sections 3.2, 3.6, 3.7, 3.8 or 3.10, by the
Buyer:



     3.1. Loan Documents. The Borrower has executed and delivered, as appropriate, the
Senior Loan Documents.



     3.2. Subordinated Notes Documents. The Borrower and any other party thereto shall have
executed and delivered, as appropriate, the Subordinated Notes Documents.



     3.3. Completion of Transaction. The Transaction shall be completed contemporaneously
herewith substantially in accordance with the terms of the Transaction Documents (without any
amendment thereto or waiver thereunder unless consented to by the Noteholders).



     3.4. Fees. The Borrower shall have paid any fees, costs and expenses of the
Noteholders due and payable on the Closing Date.



     3.5. Delivery of Documents to Noteholders. The Borrower shall have delivered the
following documents in form and substance reasonably satisfactory to the Noteholders (and, as



13









 




applicable, duly executed and dated the Closing Date or an earlier date satisfactory to
Noteholders):




          3.5.1. Agreement. This Agreement.




          3.5.2. Notes. Notes for each Noteholder purchasing a Note hereunder.




          3.5.3. Letter of Direction. A letter of direction containing funds flow
information, with respect to the proceeds of the Notes on the Closing Date.




          3.5.4. Authorization Documents. The Borrower’s (i) Amended and Restated Articles of
Association, (ii) resolutions of its board of directors (or similar governing body) approving and
authorizing the Borrower’s execution, delivery and performance of the Subordinated Notes Documents
to which it is party and the transactions contemplated thereby, and (iii) signature and incumbency
certificates of its officers executing any of the Subordinated Notes Documents, all certified by
its chief financial officer (or similar officer) as being in full force and effect without
modification.




          3.5.5. Financials. The Noteholders shall have received the Audited Consolidated
Financial Statements.




          3.5.6. Consents. Evidence that all necessary consents, permits and approvals
(governmental or otherwise) required for the execution, delivery and performance by Borrower of the
Subordinated Notes Documents and the Transaction Documents have been duly obtained and are in full
force and effect.




          3.5.7. Other Documents. Such other certificates, documents and agreements as the
Noteholders may reasonably request.




     3.6. Delivery of Documents to Borrower. The Noteholders shall have delivered a duly
executed copy of this Agreement to the Borrower.



     3.7. Purchase and Issuance of Shares. The Borrower shall issue the number of Ordinary
Shares set forth on Exhibit 2.13 hereto and the Noteholders shall pay 124,680 NIS to the Borrower
therefore.



     3.8. Representations and Warranties. Each of the representations and warranties of (i)
the Borrower and its Subsidiaries set forth in Article V hereof and (ii) the Noteholders set forth
in Article IV hereof shall be true and correct in all respects at the time of, and immediately
after giving effect to, the purchase of the Notes.



     3.9. Use of Proceeds. The Borrower shall have used, or simultaneously with the Closing
shall use, funds from the sale of the Notes for the purposes described in Section 2.3.



     3.10. Compliance with this Agreement. The Borrower and the Noteholders shall have
performed and complied with all of its agreements and satisfied the conditions set forth or
contemplated herein that are required to be performed or complied with or satisfied by it on or
before the Closing Date.




14











 





  ARTICLE IV — REPRESENTATIONS AND WARRANTIES OF THE NOTEHOLDERS



     Each Noteholder, for itself only, hereby represents and warrants, which representations and
warranties shall survive the closing, that:



     4.1. Authorization; Enforceability. Such Noteholder has duly authorized, executed and
delivered this Agreement and such of the Transaction Documents as require execution by such
Noteholder, and each constitutes the valid and binding obligation of such Noteholder enforceable in
accordance with its terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or affecting generally the
enforcement of creditors’ rights and except to the extent that availability of the remedy of
specific performance or injunctive relief is subject to the discretion of the court before which
any proceeding therefor may be brought.



     4.2. Own Account. Such Noteholder is acquiring the Notes for its own account, and not
as nominee or agent.



     4.3. Investment Intent. The Notes are being and will be acquired for the purpose of
investment and not with a view to distribution or resale thereof; subject, nevertheless, to the
condition that, except as otherwise provided herein and subject to compliance with applicable
securities laws, the disposition of the property of such Noteholder shall at all times be within
its control. Such Noteholder was not formed solely for the purpose of making an investment in the
Borrower or their Subsidiaries.



     4.4. Securities Laws. Such Noteholder understands that it must bear the economic risk
of its investment for an indefinite period of time because the Notes are not, and will not be,
registered under the Securities Act or any applicable state securities laws, except as may be
provided in this Agreement, and may not be resold unless subsequently registered under the
Securities Act and such other laws or unless an exemption from such registration is available. Such
Noteholder acknowledges that, in issuing the Notes, the Borrower are relying on the representations
and warranties of such Noteholder in this Article IV.



     4.5. No Broker. No Person has or will have, as a result of the transactions
contemplated by this Agreement, any rights, interest or valid claim against or upon the Borrower or
any of their Subsidiaries for any commission, fee or other compensation as a finder or broker
because of any act or omission by such Noteholder or any agent of such Noteholder.



     4.6. Restrictive Legend. Such Noteholder hereby acknowledges that the Notes (unless no
longer required in the opinion of counsel, which opinion and counsel shall be reasonably
satisfactory to the Borrower) shall bear a legend substantially in the following form (in addition
to any other legend required by the Subordinated Notes Documents):




THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “ACT”), OR ANY STATE
SECURITIES OR BLUE SKY LAWS AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED, HYPOTHECATED OR
OTHERWISE ASSIGNED EXCEPT (1) PURSUANT TO A



15









 








REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES WHICH IS EFFECTIVE UNDER THE ACT OR
(2) PURSUANT TO AN AVAILABLE EXEMPTION FROM
REGISTRATION UNDER THE ACT RELATING TO THE
DISPOSITION OF SECURITIES AND (3) IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES AND BLUE SKY
LAWS.



     The acquisition by such Noteholder of the Notes shall constitute a confirmation by it of the
foregoing representations.



ARTICLE V — REPRESENTATIONS AND WARRANTIES OF THE BORROWER



     To induce the Noteholders to enter into this Agreement, the Borrower represents and warrants
to the Noteholders as of the Closing Date that, both before and after giving effect to the
Transaction:



     5.1. Organization and Existence. The Borrower is a company duly organized and validly
existing under the laws of the state of Israel and has the power and authority to carry on and
conduct its business as currently conducted and to own its property and other assets.



     5.2. Execution, Delivery and Performance. The Borrower has the power to execute,
deliver and perform its obligations under this Agreement and the other Subordinated Notes Documents
and to issue the Notes; all necessary action has been taken to authorize the execution, delivery
and performance of Agreement, the other Subordinated Notes Documents and all other documents to be
executed and delivered by Borrower in connection with same or pursuant thereto.



     5.3. Valid and Legal Obligation. This Agreement constitutes Borrower’s valid and
legally binding obligations, enforceable in accordance with its terms, subject to the effect of
applicable bankruptcy, insolvency, reorganization, receivership, moratorium and other similar laws
relating to or affecting creditors’ rights generally, and the effect of general principles of
equity, whether applied by a court of law or equity.



     5.4. Non-Contravention. The execution and delivery of, the performance of Borrower’s
obligations under, and the compliance with the provisions of this Agreement and the other
Subordinated Notes Documents by the Borrower, will not (i) contravene any existing applicable law,
statute, rule or regulation or any judgment, decree or permit to which the Borrower is subject and
which, if contravened, could reasonably be expected to result in a material adverse effect against
the Borrower, (ii) conflict with, or result in any breach of, any of the terms of, or constitute a
default under, any agreement or other instrument to which the Borrower is a party or subject or by
which the Borrower or any of its property is bound, which could reasonably be expected to result in
a material adverse effect against the Borrower, (iii) contravene or conflict with any provisions of
the instruments constituting or defining Borrower’s constitution.



16









 






     5.5. No Default. No event has occurred and is continuing that constitutes, or that
with the giving of notice or the lapse of time or both, would constitute an Event of Default
specified in Section 8.1 hereof or would constitute a default under any agreement or instrument
evidencing any indebtedness in excess of $2,000,000 of the Borrower, and no such event will occur
upon the issuance or purchase of the Notes hereunder.



     5.6. Consents and Approvals. No consent or approval of or notice to any creditor for
borrowed money of the Borrower is required by the terms of any agreement or instrument evidencing
any indebtedness of the Borrower, for the execution or delivery of, or the performance of the
obligations under this Agreement or any other Subordinated Notes Document.



     5.7. Litigation; Orders. There are no actions, proceedings or claims pending, or to
Borrower’s knowledge, threatened, (i) the adverse determination of which might have a materially
adverse effect on Borrower’s financial condition, (ii) materially impair Borrower’s ability to
perform its obligations under (iii) affect the validity or enforceability of this Agreement or (iv)
arising out of the transactions contemplated by or effected in connection with the Subordinated
Notes Documents, the Transaction Documents or the Senior Loan Documents. There is no injunction,
writ or restraining order restraining or prohibiting the transactions contemplated by the
Subordinated Notes Documents, the Transaction Documents, or the consummation of the financing
arrangements contemplated under the Senior Loan Documents.



     5.8.
Registration Requirements, etc.. It is not necessary to ensure the legality,
validity, enforceability or admissibility in evidence of this Agreement that it or any other
instrument be notarized, filed, recorded, registered or enrolled in any court, public office or
elsewhere in Israel or that any stamp, registration or similar tax or charge be paid in Israel on
or in relation to this Agreement and this Agreement is in proper form for its enforcement in the
courts of Israel.



     5.9. Choice of Law. The choice of the law of the Commonwealth of Massachusetts to
govern this Agreement and the other Subordinated Notes Documents and the Borrower’s submission to
the jurisdiction of the courts of Massachusetts are valid and binding under the laws of Israel.



     5.10. Immunity. Neither the Borrower nor any of its assets are entitled to immunity on
the grounds of sovereignty or otherwise from any legal action or proceedings (which include,
without limitation, suit, attachment before or after judgment, execution or other enforcement).



     5.11. Compliance with Laws. Each of the Borrower and its Subsidiary are in compliance,
in all material respects, with all Laws applicable to it, except to the extent failure to comply
could not reasonably be expect to have a material adverse effect upon the Borrower.




ARTICLE VI — AFFIRMATIVE COVENANTS OF THE BORROWER



     The Borrower covenants and agrees, individually and collectively, that from and after the
Closing Date and so long as any of the Notes are outstanding or the Obligations remain unpaid or
outstanding, Borrower shall, and shall cause each of its Subsidiaries to do all of the following:



17









 





     6.1. Financial Statements. The Borrower shall furnish the Noteholders (a) with audited
consolidated financial statements for the Borrower and its Subsidiaries for each fiscal year by
April 30 of each year, with a report of the independent auditors preparing the same, (b) with
unaudited consolidated financial statements for the Borrower and its Subsidiaries for each fiscal
quarter, within 60 days after the end of each such fiscal quarter and (c) together with the
financial statements to be delivered under clauses (a) and (b) above, a Compliance Certificate,
evidencing compliance with the financial covenants set forth in Section 7.2 hereof.



     6.2. Inspection. From time to time, as required by the Noteholders, the Borrower shall
allow the Noteholders to peruse during usual working hours and with advance notice (provided that
during an Event of Default, no advance notice shall be required), all balances sheets, financial
statements, books of account, card indexes, ledgers and other authorities and materials in relation
to the state of Borrower’s financial condition.



     6.3. Notices


The Borrower hereby undertakes to notify the Noteholders immediately: 




(a) Of the occurrence of any Event of Default.




(b) Of any change of address.




(c) Of any application for winding-up of Borrower’s affairs which is filed against the
Borrower or by the Borrower as well as the adoption by the Borrower of a resolution for
voluntary winding-up and/or merger and/or stay of proceedings.




(d) Of any application to have the Borrower declared bankrupt or to appoint a receiver
over the Borrower’s property or any part thereof.




(e) Of any notice or correspondence with any Governmental Authority notifying the Borrower
or any of its Subsidiaries of any breach of any applicable Law or investigation or
proceeding being commenced or threatened against the Borrower or any of its Subsidiaries by
any Governmental Authority.



     6.4. Compliance with Laws. Each of the Borrower and each of its Subsidiaries shall
comply with all Laws applicable to it, except to the extent failure to comply would not reasonably
be expected to result in a material adverse effect upon the Borrower.



     6.5. Permits. Each of the Borrower and each of its Subsidiaries shall maintain and
acquire all permits, approvals and consents necessary for the conduct of its business.




ARTICLE VII — NEGATIVE COVENANTS OF THE BORROWER



     Borrower covenants and agrees, that from and after the Closing Date and so long as any of the
Notes are outstanding or the Obligations remain unpaid or outstanding, it will not and will not
permit any of its Subsidiaries to do any of the following:



18









 





     7.1. Restricted Payments. Any future obligation, commitment and/or payment of the
Borrower of any sum to any of its Shareholders and/or future shareholders or affiliates (including
payment of dividends) shall be made only subject to prior written consent of the Noteholders and
only to the extent that such obligation, commitment and/or payment of the Borrower is in compliance
with the financial and other covenants and undertakings of the Borrower herein.



     (b) Subject to clause (a) above, the Borrower shall not make any future obligation, commitment
and/or payment, other than at the ordinary course of business, of any sum exceeding the aggregate
annual sum of $7,500,000 (Seven Million Five Hundred Thousand Dollars) to any third party, without
the prior written consent of the Noteholders.



     (c) Notwithstanding the above, the Contingent Payment is permitted subject to the compliance
with the financial and other covenants and undertakings of the Borrower herein.



     7.2. Financial Covenants.



     (a) Consolidated Leverage Ratio. The Borrower shall not permit the Consolidated Leverage Ratio
at any time during any period set forth below to be greater than the ratio set forth below opposite
such period:




	 	 	 	 	 
	 	 	Maximum
	Four Fiscal Quarters Ending during or	 	Consolidated
	nearest to the periods set forth below	 	Leverage Ratio
	March 31, 2006 through December 31, 2006
	 	 	3.00	 
	March 31, 2007 through December 31, 2007
	 	 	2.50	 
	March 31, 2008 through December 31, 2008
	 	 	1.75	 
	March 31, 2009 through December 31, 2009
	 	 	1.25	 
	March 31, 2010 and the last day of each
Fiscal Quarter thereafter
	 	 	1.00	 






     (b) Consolidated Interest Coverage Ratio. The Borrower shall not permit the Consolidated
Interest Coverage Ratio at any time during any period set forth below to be less than the ratio set
forth below opposite such period:



	 	 	 	 	 
	 	 	Minimum
	Four Fiscal Quarters Ending during or	 	Consolidated Interest
	nearest to the periods set forth below	 	Coverage Ratio
	March 31, 2006 through December 31, 
2006
	 	 	3.5	 
	March 31, 2007 through December 31, 
2007
	 	 	4.5	 
	March 31, 2008 and the last day of each Fiscal Quarter thereafter
	 	 	5.0	 






19









 






     7.3. Indebtedness. The Borrower shall not, and shall not permit, its Subsidiaries to
create, incur, assume or suffer to exist any indebtedness, except indebtedness referred to in any
of clauses (a) — (c) below, provided and to the extent
that such indebtedness is permitted under the Senior Credit Agreement and, after incurrence
thereof, would not cause the Borrower to be in default of its covenants under Section 33 of the
Senior Credit Agreement;



     (a) Indebtedness under the Senior Loan Documents, in an aggregate principal amount not to
exceed $25,000,000, as replaced, refunded or refinanced; provided, that no such replacement,
refunding or refinancing shall extend the final maturity date of such indebtedness;



     (b) Indebtedness in respect of leases required to be capitalized in accordance with GAAP and
purchase money obligations for fixed or capital assets; the aggregate amount of all such
indebtedness at any one time outstanding shall not exceed $2,000,000; and



     (c) Unsecured indebtedness in an aggregate principal amount not to exceed $5,000,000 any time
outstanding, incurred at a time when no Default has occurred and is continuing.



ARTICLE VIII — EVENTS OF DEFAULT; REMEDIES




     8.1. Events of Default. Any of the following, after written notice thereof from the
Required Noteholders, shall constitute an Event of Default:



     (a) If the Borrower commits a breach of or fails to perform any of the terms and conditions
herein contained or of any other obligation which Borrower has incurred or may incur towards the
Noteholders in connection herewith and does not cure such breach or failure within 10 Business Days
of such event, or if it transpires that any declaration or representation made by the Borrower in
relation to the purchase of the Notes by the Noteholders of the Notes pursuant hereto is false or
inaccurate in any material respect.



     (b) If the Borrower is in breach of any of the covenants set forth in Article 7 hereof.



     (c) If the Borrower or any Subsidiary adopts a resolution to restructure, or any intention to
do so, either as an absorbing, transferor or spin-off company or a voluntary winding up resolution
or if an order for winding up or for freeze of proceedings is made against the Borrower or any
Subsidiary or if Borrower’s or any Subsidiary’s name is struck out or is about to be struck out
from any official register kept by law.



     (d) If a receiver is appointed over any substantial portion or all of Borrower’s or any
Subsidiary’s assets, or if an order is made against the Borrower or any Subsidiary for receivership
or an interim liquidator or special manager is appointed over the Borrower or any Subsidiary or any
bankruptcy or insolvency proceeding is commenced with respect to the Borrower or any Subsidiary.
Assets the value of which equals or exceeds $500,000 shall be deemed a “substantial portion” of
Borrower’s or any Subsidiary’s assets for the purposes hereof.



20









 





     (e) If an attachment or similar process of execution is levied against any substantial portion
of Borrower’s or any Subsidiary’s assets and not removed within 15 (fifteen) days of its
attachment. Assets the value of which equals or exceeds $500,000 shall be deemed a “substantial
portion” of Borrower’s or any Subsidiary’s assets for the purposes hereof.



     (f) If any Mandatory Repurchase Event occurs.



     (g) If Borrower or any Subsidiary ceases to pay its debts generally or to conduct its
business.



     (h) If work at Borrower’s or any Subsidiary’s business ceases or is substantially curtailed
for two months or more.



     (i) If an occurrence has taken place which has a material adverse effect upon the Borrower’s
financial ability to repay the outstanding amounts due under the Note Purchase Agreement.



     (j) If the Borrower falls behind in the payment of any amount that the Borrower owes to the
Noteholders under, pursuant to and/or in connection with Agreement or any Subordinated Notes
Document for more than 7 (seven) days.



     (k) If the Borrower does not furnish the Noteholders with periodic financial statements, books
of account and other authorities and materials in relation to the financial state of the Borrower,
as provided in Section 6.1 hereof, or if the Borrower is required so to do and it does not comply
with any such requirement.



     (l) If the Borrower or any Subsidiary shall be required to make early repayment of the debts
which it owes to other creditors for borrowed money.



     8.2.
THE NOTEHOLDERS’ RIGHTS AND REMEDIES.



          8.2.1. Rights and Remedies. Upon the occurrence, and during the continuation, of an
Event of Default, the Noteholders (at their election but without notice of their election and
without demand) may, subject to the subordination provisions contained in Section 2.14
hereof and the restrictions contained in the Senior Loan Documents do any one or more of the
following (all of which are authorized by Borrower):




     (a) Declare all or any portion of the Obligations, whether evidenced by this Agreement, by any
of the other Subordinated Notes Documents, or otherwise, immediately due and payable;



     (b) Any date on which the Obligations are declared due and payable pursuant to this Section
8.2 shall become and be the Maturity Date for all Notes for purposes of this Agreement; and



     (c) The Noteholders shall have all other rights and remedies available at law or in equity or
pursuant to any other Subordinated Notes Document.



21









 




The foregoing to the contrary notwithstanding, upon the occurrence of any Event of Default
described in Section 8.1(d), in addition to the remedies set forth above, without any
notice to Borrower or any other Person or any act by the Noteholders, the Obligations then
outstanding, together with all accrued and unpaid interest thereon and all fees and all other
amounts due under this Agreement and the other Subordinated Notes Documents, shall automatically
and immediately become due and payable, without presentment, demand, protest, or notice of any
kind, all of which are expressly waived by Borrower.




          8.2.2. Remedies Cumulative. The rights and remedies of the Noteholders under this
Agreement, the other Subordinated Notes Documents, and all other agreements shall be cumulative.
The Noteholders shall have all other rights and remedies not inconsistent herewith as provided by
law, or in equity. No exercise by the Noteholders of one right or remedy shall be deemed an
election, and no waiver by the Noteholders of any Event of Default shall be deemed a continuing
waiver. No delay by the Noteholders shall constitute a waiver, election, or acquiescence by it.




ARTICLE IX — MISCELLANEOUS




     9.1. No Waiver; Cumulative Remedies. No failure or delay on the part of any
Noteholder, 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.



     9.2. Amendments, Waivers and Consents. Any provision in this Agreement or the Notes or
the other Subordinated Notes Documents to the contrary notwithstanding, changes in or additions to
this Agreement may be made, and compliance with any covenant or provision herein set forth may be
omitted or waived, if the Borrower shall, as long as any Notes are outstanding, obtain consent
thereto in writing from the holder or holders of at least greater than fifty percent (50%), voting
together as a single class, in principal amount of all Notes then outstanding (the “Required
Noteholders”), and shall, in any case, deliver copies of such consent in writing to all other
holders of Notes; provided that no such consent shall be effective to reduce or to postpone the
date fixed 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 alter or amend any provisions relating
to prepayments, redemptions, mandatory repurchase or the terms of subordination, or to alter or
amend the consent mechanism provided for under this Section 9.2.



     9.3. Addresses for Notices, Etc. All notices, requests, demands and other
communications provided for hereunder shall be in writing and mailed (by first class registered or
certified mail, postage prepaid), sent by express overnight courier service or electronic facsimile
transmission with a copy by mail, or delivered to the applicable party at the addresses indicated
below:


If to the Borrower:



Alma Lasers Ltd.

7 Haeshel Street P.O.B 3021




22









 







Caesarea Industrial Park

Caesarea, Israel 38900

Facsimile: 972-4-627-5368

Attention: Chief Executive Officer



If to the Noteholders:



TA Subordinated Debt Fund, L.P.

High Street Tower, Suite 2500

125 High Street

Boston, MA 02110

Attention: Mr. Ajit Nedungadi

Fax:



TA Investors II, L.P.

High Street Tower, Suite 2500

125 High Street

Boston, MA 02110

Attention: Mr. Ajit Nedungadi

Fax:



If to any other holder of the Notes:



As set forth in either (i) a joinder agreement or (ii) in the transfer
 records of the Borrower



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. All such
notices, requests, demands and other communications shall, when mailed or sent, respectively, be
effective four Business Days after being deposited with the express overnight courier service or
one Business Day after being sent by electronic facsimile transmission (with receipt confirmed),
respectively, addressed as aforesaid.




     9.4. Costs, Expenses and Taxes. The Borrower agrees to pay on demand all reasonable
costs, expenses and taxes of Noteholders in connection with the preparation, execution and delivery
of this Agreement, the Notes, the other Subordinated Notes Documents and other instruments and
documents to be delivered hereunder, and in connection with the consummation of the transactions
contemplated hereby and thereby, as well as all reasonable costs, expenses and taxes of the
Noteholders in connection with the amendment, waiver (whether or not such amendment or waiver
becomes effective) or enforcement of this Agreement, the Notes, the other Subordinated Notes
Documents, and other instruments and documents to be delivered hereunder and thereunder.



     9.5. Assignability; Binding Agreement. This Agreement may not be assigned by any party
hereto without the prior written consent of each other party hereto; provided, however, that any
Noteholder may assign this Agreement freely without consent to any transferee permitted under, but
subject to the terms of, Section 2.9 and Section 2.14. Subject to the



23









 




provisions of Section 2.14.6, this Agreement shall be binding upon and enforceable by, and shall
inure to the benefit of, the parties hereto and their respective successors and permitted assigns,
and no others. Notwithstanding the foregoing, nothing in this Agreement is intended to give any
Person not named herein the benefit of any legal or equitable right, remedy or claim under this
Agreement. Any transferee shall agree, in writing, to be bound by the provisions of Section
2.14 hereof.




     9.6. Payments in Respect of Notes. Each Noteholder and any successor holder of the
Notes, by their acceptance thereof, agree that, with respect to all sums received by them
applicable to the payment of principal of or interest on the Notes, equitable adjustment will be
made among them so that, in effect, all such sums shall be shared ratably by all of the holders of
the Notes, whether received by voluntary payment, by the exercise of the right of set off, by
counterclaim or cross-action or by the enforcement of any or all of the Notes. If any holder of the
Notes receives any payment on its Notes in excess of its pro rata portion, then such holder
receiving such excess payment shall purchase for cash from the other holders an interest in their
Notes in such amounts as shall result in a ratable participation by all of the holders in the
aggregate unpaid amount of Notes then outstanding. The Borrower shall not have any obligation to
any Person under this Section 9.6.



     9.7. Indemnification. In addition to the payment of expenses otherwise pursuant to
this Agreement, whether or not the transactions contemplated hereby shall be consummated, the
Borrower agrees to indemnify, pay and hold each Noteholder and the partners, members, officers,
directors, employees and agents of each Noteholder (collectively, the
“Indemnitees”) harmless from
and against, any and all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including,
without limitation, the reasonable fees and disbursements of counsel for such Indemnitees in
connection with any investigative, administrative or judicial proceedings, whether or not such
Indemnitees shall be designated a party thereto), which may be imposed on, incurred by, or asserted
against such Indemnitee, in any manner relating to or arising out of (i) this Agreement, the Notes,
and the other Subordinated Notes Documents and all other matters related thereto in connection
therewith, (ii) the Noteholders’ agreement to purchase the Notes, or the use or intended use of the
proceeds of the Notes hereunder, (iii) the violation of any securities law by the Borrower or any
of its Subsidiaries, or (iv) the failure of any of the parties (other than the Noteholders) to the
Subordinated Notes Documents to comply with any law, rule or regulation applicable to the
transactions contemplated thereby (the “Indemnified
Liabilities”); provided that the Borrower shall
have no obligation to an Indemnitee hereunder with respect to Indemnified Liabilities which are
determined by a final court decision to have resulted from the gross negligence or willful
misconduct of that Indemnitee or from the breach in bad faith of the obligations of such Indemnitee
hereunder. To the extent that the undertaking to indemnify, pay and hold harmless set forth in the
preceding sentence may be unenforceable because it is violative of any law or public policy, the
Borrower shall contribute the maximum portion which it is permitted to pay and satisfy under
applicable Law, to the payment and satisfaction of all Indemnified Liabilities incurred by the
Indemnitees or any of them.


The Borrower agrees to indemnify the Noteholders against any loss incurred by the Noteholders as a
result of any judgment or order being given or made for the payment of any of the Obligations and
such judgment or order being expressed in a currency other than U.S. Dollars.




24









 







The foregoing indemnity shall constitute a separate and independent obligation of the Borrower and
shall apply irrespective of any indulgence granted to the Borrower from time to time and shall
continue in full force and effect notwithstanding any such judgment or order.




     9.8. Survival of Representations and Warranties. All representations and warranties
made to the Noteholders in this Agreement, the Notes, the Subordinated Notes Documents or any other
instrument or document delivered in connection herewith or therewith, shall survive the execution
and delivery hereof and thereof, regardless of any investigation made by the Noteholders or on
behalf of the Noteholders.



     9.9. Prior Agreements. This Agreement and the other Subordinated Notes Documents
constitute the entire agreement between the parties and supersedes any prior understandings or
agreements concerning the subject matter hereof or thereof.



     9.10. Severability. The invalidity or unenforceability of any provision hereof shall
in no way affect the validity or enforceability of any other provision.



     9.11. Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts applied to contracts to be performed wholly
within the Commonwealth of Massachusetts.



     9.12.
Jurisdiction. Any judicial proceeding brought by or against the Borrower with
respect to any of the Obligations, this Agreement, the other Subordinated Note Documents or any
related agreement may be brought in any court of competent jurisdiction in the Commonwealth of
Massachusetts, United States of America, and, by execution and delivery of this Agreement, the
Borrower accepts for itself and in connection with its properties, generally and unconditionally,
the non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by any
judgment rendered thereby in connection with this Agreement. The Borrower hereby waives personal
service of any and all process upon it and consents that all such service of process may be made by
registered mail (return receipt requested) directed to such Borrower at its address set forth in
Section 9.3 and service so made shall be deemed completed five (5) days after the same
shall have been so deposited in the mails of the United States of America. Nothing herein shall
affect the right to serve process in any manner permitted by law or shall limit the right of any
Noteholder to bring proceedings against the Borrower in the courts of any other jurisdiction. The
Borrower waives any objection to jurisdiction and venue of any action instituted hereunder and
shall not assert any defense based on lack of jurisdiction or venue or based upon forum non
conveniens. The Borrower waives the right to remove any judicial proceeding brought against such
Borrower in any state court to any federal court. Any judicial proceeding by Borrower against any
Noteholder involving, directly or indirectly, any matter or claim in any way arising out of,
related to or connected with this Agreement or any related agreement, shall be brought only in a
federal or state court located in the Suffolk County, Commonwealth of Massachusetts.


Notwithstanding anything to the contrary in this Section 9.12, any suit brought by the Senior
Lender, solely with respect to any breach by the Borrower or Noteholders of the provisions of
Section 2.14 hereof, may be initiated in any competent court of law situated in Israel.




25









 








     9.13. Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT OR
ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH
RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY
HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO
THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.



     9.14. Counterparts. This Agreement may be executed simultaneously in any number of
counterparts, each of which when so executed and delivered shall be taken to be an original; but
such counterparts shall together constitute but one and the same document.



     9.15. Further Assurances. From and after the date of this Agreement, upon the request
of the Noteholders, the Borrower and its Subsidiaries shall execute and deliver such instruments,
documents and other writings as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of the Subordinated Notes Documents.



     9.16. Specific Performance. Upon breach or default by the Borrower with respect to any
obligation hereunder or under the Notes, each Noteholder shall be entitled to protect and enforce
its rights at law, or in equity or by other appropriate proceedings for specific performance of
such obligation, or for an injunction against such breach or default, or in aid of the exercise of
any power or remedy granted hereby or thereby or by law.



     9.17. Actions by Noteholders. Except as provided in Section 9.2, wherever in
this Agreement action is required or permitted to be taken by, or consent is required of, or a
matter requires the satisfaction of, the Noteholders, such action may be taken by, and/or such
consent may be obtained from, and/or such satisfaction may be expressed by, the holders of greater
than fifty percent (50%), voting together as a single class, of the principal amount of all Notes
then outstanding.



     9.18. Limitation of Liability. No Noteholder shall have any liability to Borrower or
Borrower’s Subsidiaries (whether sounding in tort, contract, or otherwise) for consequential
damages suffered by Borrower and its Subsidiaries in connection with, arising out of, or in any way
related to the transactions or relationships contemplated by the Subordinated Notes Documents, or
any act, omission or event occurring in connection therewith, or for any special exemplary or
punitive damages, and Borrower and its Subsidiaries hereby waive, to the



26









 




maximum extent not prohibited by law, any right they may have to claim or recover any of the
foregoing.




     9.19. Confidentiality Agreement. Each Noteholder shall hold all financial information
of the Borrower and their Subsidiaries and other non-public information obtained from the Borrower
pursuant to the requirements of this Agreement in accordance with such Noteholder’s customary
procedures for handling confidential information of this nature; provided, however, any Noteholder
may disclose such confidential information (a) to its examiners, affiliates, outside auditors,
counsel and other professional advisors, (b) or to any prospective transferees and assignees, (c)
in connection with any proceeding or action to enforce such Noteholder’s rights hereunder or in
connection herewith or with the Transaction, and (d) as required or requested by any Governmental
Authority or representative thereof or pursuant to legal process; provided, further that in no
event shall any Noteholder be obligated to return any materials furnished by the Borrower or any
Subsidiary.



27









 





     IN WITNESS WHEREOF, the parties hereto have executed this Note Purchase Agreement as of
the date first above written.



	 	 	 	 	 	 	 
	BORROWER:	 	ALMA LASERS LTD.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Ziv Karni	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Ziv Karni	 	 
	 

	 	 	 	Title: CEO	 	 
	 
	 	 	 	 	 	 
	NOTEHOLDER:	 	TA INVESTORS II, L.P.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	TA Associates, Inc., its General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Thomas P. Alber	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Thomas P. Alber	 	 
	 

	 	 	 	Title: Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	NOTEHOLDER:	 	TA SUBORDINATED DEBT FUND, L.P.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	TA Associates SDF LLC, its General

Partner	 	 
	 

	 	 	 	By: TA Associates, Inc., its Manager	 	 
	 

	 	By:	 	/s/ Thomas P. Alber	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Thomas P. Alber	 	 
	 

	 	 	 	Title: Chief Financial Officer	 	 





Alna Subordinated Note Purchase Agreement


 









 





Exhibit A




Form of Joinder Agreement




     The undersigned hereby agrees, effective as of the date hereof, to become a party to that
certain Subordinated Note Purchase Agreement (the “Agreement”) dated as of March 23, 2006, by and
among Alma Lasers Ltd., a corporation organized under the laws of Israel (“Borrower”), TA
Subordinated Debt Fund, L.P., a Delaware limited partnership (“TA Debt Fund” or a
“Noteholder”), TA Investors II, L.P., a Delaware limited partnership (“TA
Investors” or a “Noteholder”), and the other holders of Notes party hereto from time to
time (together with TA Debt Fund and TA Investors their successors and assigns,
“Noteholders”), as a Noteholder. The undersigned agrees to be bound by the terms and
conditions of the Agreement, and hereby represents and warrants that each of the representations
and warranties set forth in Article IV thereof are true and correct as of the date hereof.



     The address and facsimile number to which notices may be sent to the undersigned is as
follows:


[Name]

[Address]

Facsimile No.:                                        

Attention:                                        




	 	 	 
	 

	 	 
	 

	 	[NAME OF UNDERSIGNED]







2









 








EXHIBIT 2.1




Form of Note



THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”), OR ANY STATE SECURITIES OR BLUE SKY LAWS AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED, HYPOTHECATED OR OTHERWISE ASSIGNED EXCEPT (1) PURSUANT TO A REGISTRATION STATEMENT
WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER THE ACT OR (2) PURSUANT TO AN AVAILABLE
EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES AND (3) IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES AND BLUE SKY LAWS.



NOTWITHSTANDING ANYTHING IN ANY SUBORDINATED NOTES DOCUMENT TO THE CONTRARY, FOR SO LONG AS THE
SENIOR INDEBTEDNESS IS OUTSTANDING, THIS AGREEMENT AND THE RIGHTS EVIDENCED HEREBY ARE SUBORDINATE
IN RIGHT OF PAYMENT TO THE LENDERS UNDER THE SENIOR LOAN DOCUMENTS. THIS NOTE IS SUBJECT TO ALL OF
THE SUBORDINATION PROVISIONS CONTAINED IN SECTION 2.14 OF THE NOTE PURCHASE AGREEMENT.




SUBORDINATED NOTE




			
	$                     
	 	                    , 200___






     FOR VALUE RECEIVED, ALMA LASERS LTD., a corporation organized under the laws of Israel,
(“Borrower”), HEREBY PROMISES TO PAY to the order of [INSERT NAME
OF NOTEHOLDER] (the “Noteholder”) the principal sum of $                     , together with
interest on the unpaid principal amount from time to time outstanding at the rate or rates and
computed and payable at the times as described in the Note Purchase Agreement (as hereinafter
defined). Payments of the principal hereof shall be made as provided in the Note Purchase
Agreement. Notwithstanding any other provision of this note, the entire balance of principal and
accrued and unpaid interest shall be paid in full on March ___, 2011.



     This note is one of the Notes referred to in the Subordinated Note Purchase Agreement
dated as of March     , 2006 (as the same may be amended, modified or supplemented from time
to time, the “Note Purchase Agreement”) by and among the Borrower and the Noteholders party thereto
from time to time. Capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Note Purchase Agreement.



     Subject to, and at all times in accordance with, the provisions of the Note Purchase Agreement
(i) the Borrower shall have the right, at any time, to voluntarily prepay all or any part of the
outstanding principal amount of this note, and (ii) the Noteholder shall have the right to require
the Borrower to repurchase this note upon the occurrence of a Mandatory Repurchase Event.



3









 





     In addition to the payment of interest as provided above, the Borrower shall, on demand, pay
interest on any overdue installments of principal and, to the extent permitted by Law, on overdue
installments of interest at the rate set forth in, and in accordance with the provisions of, the
Note Purchase Agreement.



     The holder of this note is entitled to all the benefits and rights of a Noteholder under the
Note Purchase Agreement to which reference is hereby made for a statement of the terms and
conditions under which the entire unpaid balance of this note, or any portion thereof, shall become
immediately due and payable. Notwithstanding anything in this note to the contrary, the terms and
provisions of this note shall at all times be governed by and subject to all of the terms and
provisions of the Note Purchase Agreement. To the extent that there is any conflict with, or
inconsistency between, the terms and provisions of this note and the terms and provisions of the
Note Purchase Agreement, the terms and provisions of the Note Purchase Agreement shall at all times
govern and control.



     The Borrower hereby waives presentment, demand, notice, protest and other demands and notices
in connection with the delivery, acceptance or enforcement of this note.



     No delay or omission on the part of the holder of this note in exercising any right hereunder
shall operate as a waiver of such right or of any other right under this note, and a waiver, delay
or omission on any one occasion shall not be construed as a bar to or waiver of any such right on
any future occasion.



     The terms and provisions of this note are subject to the terms and provisions of the Note
Purchase Agreement, including, without limitation, its dispute resolution provisions.



[SIGNATURE PAGE FOLLOWS]




4









 





     This note shall be deemed to be under seal, and all rights and obligations hereunder shall be
governed by the laws of the State of Massachusetts (without giving effect to any conflicts of law
provisions contained therein).



	 	 	 	 	 	 	 
	 	 	ALMA LASERS LTD	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 






5









 





EXHIBIT 2.2




Allocation of Note Purchase Amount




	 	 	 
	Noteholder
	 	Note Purchase Amount
	TA Subordinated Debt Fund, L.P.
	 	$14,703,957.84
	TA Investors II, L.P.
	 	$294,079.16
	Total
	 	$14,998,037.00






6









 





EXHIBIT 2.13




Ordinary Shares Allocation Amounts




	 	 	 	 	 
	Noteholder
	 	Ordinary Shares

Purchased
	 	Aggregate Purchase

Price
	TA Subordinated Debt Fund, L.P.
	 	12,223,529
	 	122,235.29 NIS
	TA Investors II, L.P.
	 	244,471
	 	2,444.71 NIS
	Total
	 	12,468,000
	 	124,680.00 NIS







7