Document:

exh10-2.htm

  

  

 

  

AMENDED AND RESTATED

CHANGE IN CONTROL AND SEVERANCE AGREEMENT

THIS AGREEMENT dated as of __________, is made by and between Terex Corporation, a Delaware corporation (the “Company”), and ____________ (the “Executive”).

WHEREAS the Company considers it essential to the best interests of its stockholders to foster the continued employment of key management personnel;

WHEREAS the Board of Directors of the Company (the “Board”) recognizes that, as is the case with many publicly-held corporations, the possibility of a Change in Control (as defined in the Section 18 below) exists and that such possibility, and the uncertainty which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders;

WHEREAS the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's management, including the Executive, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control;

 

WHEREAS, the Company and the Executive entered into a Change in Control and Severance Agreement dated as of April 1, 2008 (the “Original Agreement”); and

WHEREAS, the Company and Executive desire to amend and restate the Original Agreement as set forth below.

NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Company and the Executive hereby agree as follows:

	
1.

	
Defined Terms.  The definitions of capitalized terms used in this Agreement are provided in Section 18 hereof.

	
2.

	
Term of Agreement.

	
  

	
2.1.

	
(a)   This Agreement shall be for an initial term of one year commencing on the date hereof. This Agreement shall automatically renew for an additional term of one year commencing on the first anniversary of the date hereof and for succeeding additional terms each of one year on each succeeding anniversary thereof until and unless either party sends written notice of non-renewal to the other party at least six months prior to a renewal date; provided, however, that if a Change in Control shall occur during the initial or renewed term of this Agreement, then this Agreement shall remain in effect until the third anniversary of the date of the Change in Control.

(b)   Notwithstanding Section 2.1(a) to the contrary, this Agreement shall terminate upon the earliest of (i) the termination of the Executive’s employment with the Company prior to a Change in Control (other than a termination of the Executive’s employment in

  

  

  

anticipation of a Change in Control) for any of the following: by the Company for Cause, by the Executive for any reason other than Good Reason or by reason of the Executive’s death or Permanent Disability; (ii) the termination of the Executive’s employment with the Company following a Change in Control, by reason of death or Permanent Disability, by the Company for Cause or by the Executive for any reason other than for a Good Reason; or (iii) three (3) years after the date of a Change in Control.

(c)   Notwithstanding Section 2.1(a) and 2.1(b) to the contrary, the Executive shall be entitled to the benefits provided by this Agreement in the event that (i) a Change in Control occurs during the six (6) month period following termination of this Agreement due to a notice of non-renewal sent by the Company to the Executive and (ii) the Executive is employed with the Company at the time such Change in Control occurs or the Executive’s employment with the Company was terminated by the Company without Cause or the Executive terminated his or her employment with the Company for Good Reason prior to the time of such Change in Control.

(d)     All obligations of the Company and/or the Executive outstanding on the date of termination of this Agreement or resulting from the Executive’s employment termination during the term of this Agreement shall survive the termination of this Agreement.  All rights and obligations of the Company and/or the Executive in this Section 2(d) or in Sections 9 or 12 of this Agreement shall also survive the termination of this Agreement.

	
3.

	
Section 409A.

	
  

	
3.1.

	
Notwithstanding anything to the contrary contained herein, in the event that the Executive is deemed to be a Key Employee, distribution of any amounts that constitute “deferred compensation” payable to a Key Employee on account of termination of employment, shall not be made before six months after the Date of Termination or the Key Employee’s death, if earlier (the “Six Month Limitation”).  At the end of such six-month period, payments that would have been made but for the Six Month Limitation shall be paid in a lump sum, without interest, on the first day of the seventh month following the Key Employee’s Date of Termination.  Notwithstanding the Six Month Limitation, if any amounts of “deferred compensation” payable to a Key Employee due to his “separation from service” constitute “separation pay only upon an involuntary separation from service” within the meaning of Section 409A of the Code (“Separation Pay”), then all or a portion of such Separation Pay, up to two times the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which the termination of employment occurs (i.e., $490,000 in the event of a termination during 2011), whether paid under this Agreement or otherwise, may be paid to the Key Employee during the six-month period following the Date of Termination.  To the extent that any payments of Separation Pay above the Six Month Limitation constitute insurance premiums (other than medical) or similar payments or Other Benefits, the Key Employee shall pay such amounts during such six month period and the Company shall reimburse the Key Employee for such payments, without interest, on the first day of the seventh month following the Date of Termination.

  

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3.2.

	
The parties hereto intend that this Agreement shall be in compliance with Section 409A of the Code and this Agreement shall be interpreted consistent therewith.  Notwithstanding the foregoing, the Company shall not be liable for any taxes, penalties, interest or other costs that may arise under Section 409A or otherwise.

	
  

	
3.3.

	
In the event that payments are made under Sections 4 and 5 of this Agreement and such payments would not satisfy the requirements under Section  409A (a)(2)(A)(v) of the Code, then all payments made under Sections 4 and 5 of this Agreement shall be treated as payments made as a result of a separation from service within the meaning of Section 409A of the Code.  For purposes of Section 409A of the Code each payment shall be treated as a separate payment.

	
4.

	
Change in Control.   If the Executive's employment shall be terminated within six (6) months of a Change in Control in anticipation of such Change in Control or within twenty-four (24) months following a Change in Control, unless such termination is (i) by the Company for Cause, (ii) by reason of the Executive’s death or Permanent Disability, or (iii) by the Executive without Good Reason, the Company shall pay to the Executive an amount equal to the sum of (a) the Executive’s annual salary in effect at the time written notice of termination is given; (b) the Executive’s last paid annual bonus for a calendar year preceding the calendar year in which the Date of Termination occurs; and (c) the product of (i) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365 and (ii) the annual bonus for the calendar year preceding the Date of Termination that has most recently been paid to the Executive (the sum of the amounts described in clauses (a), (b) and (c) shall be hereinafter referred to as the “Severance”). Subject to the Six Month Limitation, the Company shall pay to the Executive any Severance in a cash lump sum payment simultaneously with the termination of the Executive’s employment following any Change in Control. In addition, simultaneously with the termination of the Executive’s employment following any Change in Control, (x) all unvested stock options and stock grants previously awarded to the Executive shall immediately and unconditionally vest and the Executive shall have the right to exercise any stock options held by him in accordance with their terms but to the extent any option would expire by its terms within six (6) months following the Date of Termination, then the Executive may exercise said option until the earliest of (i) six (6) months following the Date of Termination, (ii) ten (10) years following the date of grant or (iii) the end of the original term of the option grant had the Executive continued employment with the Company; and (y) any accrued and unpaid vacation pay through the Date of Termination shall be paid in a lump sum within 30 days following the Date of Termination.  The Executive shall be entitled to continuing coverage by the Company under the life, disability, accident and health insurance programs for employees (and their spouses and dependents) of the Company generally and under any supplemental programs covering executives of the Company, as from time to time in effect, for the twelve (12) month period from such termination or until the Executive becomes eligible for substantially similar coverage under the employee welfare plans of a new employer, whichever occurs earlier, provided that the Executive’s right to elect continued medical coverage after termination of employment under Part 6 of Title I of the Employee Retirement Income Security Act of 1974, as amended, shall be deemed satisfied

  

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by the coverage provided in this sentence. The Executive shall also be entitled to a continuation of all other benefits and reimbursements (“Other Benefits”) in effect at the time of termination for the twelve (12) month period following such termination or until the Executive becomes eligible for substantially similar benefits from a new employer, whichever is earlier.  Any part of the foregoing benefits that are attributable to participation in a plan in which the Executive can no longer participate under applicable law, shall be paid by the Company from other sources such that the Executive receives substantially similar benefits to those provided under the plan. All amounts payable hereunder shall be paid monthly during such twelve (12) month period.

	
5.

	
Termination without Cause or For Good Reason.  In the event the Executive’s employment with the Company is terminated by the Company without Cause or by the Executive for Good Reason, at any time, and, provided no Change in Control shall have occurred, the Company shall pay the Executive, in cash, aggregate severance payments equal to (a) his then base salary for up to twelve (12) months from the Date of Termination or the date upon which Executive obtains alternative employment, whichever is earlier and (b) the product of (i) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365 and (ii) the annual bonus for the calendar year preceding the Date of Termination that has most recently been paid to the Executive.  The Company shall pay to the Executive any severance payments due hereunder in twelve (12) equal monthly payments on the first day of each month following such termination.  Notwithstanding the foregoing, if the Executive obtains alternative employment for base salary and bonus compensation of less than his then annual base salary, then Executive shall continue to receive monthly severance payments for the remaining balance of the 12 month period in an amount equal to the difference between one-twelfth (1/12) of  the sum of (a) and (b) in this section above and one-twelfth (1/12) of the annual base salary and bonus compensation received from such alternative employer.  In addition, (a) the Executive shall have the right to exercise any stock options, long-term incentive awards or other similar awards held by him in accordance with the relevant plan documents or grant letter; provided, however, that to the extent any option  or award would expire by its terms within six (6) months following the date of termination, then the Executive may exercise said option or award until the earliest of (i) six (6) months following the Date of Termination or (ii) ten (10) years following the date of grant or (iii) the end of the original term of the option grant had the Executive continued employment with the Company; and (b) the Company shall provide the Executive with continuing coverage under the life, disability, accident and health insurance programs for employees of the Company generally and under any supplemental programs covering executives of the Company, as from time to time in effect, for the twelve (12) month period from such termination or until the Executive becomes eligible for substantially similar coverage under the employee plans of a new employer, whichever occurs earlier, provided that Executive’s right to elect continued medical coverage after termination of employment under Part 6 of Title I of the Employee Retirement Income Security Act of 1974, as amended, shall be deemed satisfied by the coverage provided in this clause (b). The Executive shall also be entitled to a continuation of all other benefits and reimbursements in effect at the time of termination for the twelve (12) month period following such termination or until the Executive becomes eligible for substantially similar benefits from a new employer, whichever is earlier.  In addition, all stock options and

  

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	 	restricted stock held by Executive on the date of termination under any of the Company’s equity plans that would become exercisable within the twelve (12) months following such termination of employment had the Executive stayed in the employ of the Company shall become immediately exercisable. Any part of the foregoing benefits that are attributable to participation in a plan in which the Executive can no longer participate under applicable law, shall be paid by the Company from other sources such that the Executive receives substantially similar benefits to those provided for under the plan.  All amounts payable hereunder shall be paid monthly during such twelve (12) month period and any amounts payable hereunder are in lieu of, not in addition to, amounts payable under Section 4.

 

	
 6. 

	
Payment for Past Service.  If the Executive’s employment is terminated without Cause or by the Executive for Good Reason, the Company shall pay the Executive (a) an annual bonus, in respect of the year prior to the year in which the Executive’s employment terminates, earned (determined without the application of negative discretion by the Company’s Compensation Committee or reference by the Company’s Compensation Committee to performance or any act or omission occurring, or any state of facts existing, subsequent to the year with respect to which said bonus was earned) but not yet paid to him as of the Date of Termination, payable at the same time bonuses are paid for the year prior to the year in which the Executive’s employment terminates; (b) any accrued vacation pay, to the extent not theretofore paid to the Executive; and (c) any other amounts earned by the Executive prior to the Date of Termination but not previously paid.  Such amounts under (b) and (c) above shall be paid on or before the fifteenth (15th) day of the third (3rd) month following the close of the calendar year in which such termination occurred.

 

	
7.

	
Noncompete and Confidentiality.

7.1           In consideration of the agreements and payments of the Company herein, the Executive agrees that for a period of twelve (12) months from the Date of Termination, he will not, without the prior written permission of the Company, directly or indirectly, (i) enter into the employ of or render any services to any person, firm, or corporation engaged in the manufacture or sale of products currently manufactured or distributed by the Company, or if the Executive does not have Company wide responsibility, the divisions and subsidiaries for which the Executive has management responsibility, which directly or indirectly compete with the business of the Company or such divisions and subsidiaries, as the case may be (a “Competitive Business”); (ii) engage in any Competitive Business for his own account; (iii) become associated with or interested in any Competitive Business as an individual, partner, shareholder, creditor, director, officer, principal, agent, employee, trustee, consultant, advisor or in any other relationship or capacity; or (iv) solicit, induce or entice, or cause any other person or entity to solicit, induce or entice to leave the employ of the Company any person who was employed or retained by the Company on the Date of Termination.  However, nothing in this Agreement shall preclude the Executive from investing his personal assets in the securities of any corporation or other business entity which is engaged in a business competitive with that of the Company if such securities are traded on a national stock exchange or in the over-the-counter market and if such investment does not result in his beneficially owning, at any time, more than five percent (5%) of the publicly-traded equity securities of such competitor.  Nothing in this Agreement shall

  

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preclude the Executive from retaining his position or membership in trade associations and professional organizations. The restrictions imposed on the Executive pursuant to this Section 7.1 shall terminate and be of no further force and effect in the event of a breach by the Company of its obligations to make or provide benefits to the Executive.

7.2           In consideration of the agreements and payments of the Company herein, the Executive shall keep confidential and not disclose to any person any information relating to the Company’s business and/or finances, which information was obtained during and/or as incident to or in connection with the Executive’s employment with the Company and which otherwise is not public information. Provided, that the foregoing shall not prevent the Executive from giving required information to proper legal authorities.  The Executive agrees he will conduct himself in a professional manner and not make any disparaging, negative or other statements regarding the Company, its affiliates or any of the officers, directors or employees of the Company or its affiliates which could in any way have an adverse affect on the business or affairs of the Company or its affiliates or otherwise be injurious to or not be in the best interests of the Company, its affiliates or any such other persons.

7.3           The Executive agrees that this non-competition and non-solicitation covenant is reasonable under the circumstances, and the Executive further agrees that his services for and on behalf of the Company are unique and irreplaceable.  The Executive further agrees that any breach of the covenants contained in Section 7.1 and 7.2 above would irreparably injure the Company and/or its affiliates or subsidiaries.  Accordingly, the Executive agrees that the Company may, in addition to pursuing any other remedies it may have at law or in equity, obtain an injunction against the Executive from any court having jurisdiction over the matter restraining any further violation of the covenants contained in Section 7.1 and 7.2 above.

7.4           Upon termination of the Executive’s employment with the Company, the Company shall have the right to designate a reasonable amount of the Severance to be allocated to this covenant not to compete and confidentiality.

	
8.

	
Outplacement Services.  In the event of the termination of the Executive’s employment after a Change in Control, Without Cause or for Good Reason as provided for in Sections 4 or 5 hereof, the Company agrees, at its sole cost and expense, to provide the Executive with reasonable outplacement services for a period of at least twelve (12) months following the Date of Termination; provided that the outplacement services will not be provided beyond the last day of the second year following the year in which the Date of Termination occurs.  The Company and the Executive shall use their good faith efforts to locate a provider and determine the scope of outplacement services which is reasonably acceptable to both parties taking into account the status of the Executive as a senior executive officer.

	
9.

	
Legal Expenses.  The Company agrees to pay all reasonable out-of-pocket costs and expenses, including all reasonable attorneys’ fees and disbursements, actually incurred by the Executive in collecting or enforcing payments to which he is ultimately determined to be entitled (whether by agreement among the parties, court order or otherwise) pursuant to this Agreement in accordance with its terms; provided, however, that the Executive submit a request for reimbursement no later than thirty (30) days following the end of the calendar

  

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year in which the expenses are incurred and reimbursement must be made within forty-five (45) days thereafter, but in no event later than the end of the year in which it is finally determined which payments the Executive is ultimately determined to be entitled to receive. In the case of a Key Employee, the Executive will not be entitled to reimbursement prior to the first day of the seventh month following the Date of Termination.  The parties intend that the timing of the payment of such fees and reimbursements shall be in compliance with Section 409A of the Code and the treasury regulations thereunder.

	
10.

	
Notice of Termination.  Any purported termination of the Executive's employment (other than by reason of death) shall be communicated by written notice from one party hereto to the other party hereto in accordance with Section 13 hereof.  For purposes of this Agreement, a notice of termination shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment.

	
11.

	
No Other Compensation; Employee at Will.  Except as provided in Sections 4, 5, 6, 8 and 9 hereof, no amount or benefit shall be payable to the Executive under this Agreement or otherwise except as required by law.  This Agreement shall not be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between the Executive and the Company, the Executive is and shall remain “an employee at will” and shall not have any right to be retained in the employ of the Company.

	
12.

	
Successors; Binding Agreement.

	
  

	
12.1.

	
In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive's employment for Good Reason after a Change in Control, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination.

	
  

	
12.2.

	
This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.  If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate.

  

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13. Notices.  For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt:

 

	 	To the Company:	
Terex Corporation

	  	  	
200 Nyala Farm Road

	  	  	
Westport, Connecticut 06880

	  	  	
Attention:  General Counsel

	  	  	  

	 	To the Executive:	 	  
	  	  	 	  
	  	  	 	  
	  	  	  
	  	  	  

 

14.           Miscellaneous.  No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board.  No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement.  The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Connecticut without regard to the principles of conflicts of law which might otherwise apply.  All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections.  Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. In the event that either party hereto shall institute proceedings for the enforcement of this Agreement, the succeeding party shall be entitled to recover the reasonable fees and expenses incurred by such succeeding party in connection therewith, including reasonable attorneys fees.

15.           Partial Validity.  The invalidity or unenforceability or any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

 

16.           Counterparts.   This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

  

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17.      Mitigation.  The Company agrees that if the Executive’s employment with the Company terminates as a result of a Change In Control pursuant to Section 4 of this Agreement, Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to him due under this Agreement.  Further, the amount of any payment shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise.

 

18.      Definitions.   For purposes of this Agreement, the following terms shall have the meanings indicated below:

 

(A)           “Beneficial Owner” shall have the meaning defined in Rule 13d-3 under the Exchange Act.

(B)           “Cause” for termination by the Company of the Executive's employment shall mean (i) the willful, substantial and continued failure by the Executive to substantially perform the Executive's duties with the Company (other than any such failure resulting from the Executive's incapacity due to physical or mental illness) in a manner reasonably satisfactory to the Chief Executive Officer of the Company after written notice detailing the reasons for such failure, (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise, or (iii) the entry by a court of competent jurisdiction of an order, or the entering into by the Executive of a consent decree, barring the Executive from serving as an officer or director of a public company.  For purposes of clauses (i) and (ii) of this definition, no act, or failure to act, on the Executive's part shall be deemed “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive's act, or failure to act, was in the best interest of the Company.

(C)           A “Change in Control” shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs shall have been satisfied:

(i)           any person or group (as described in regulations under Section 409A of the Code) is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company) representing

(A) more than 50% or more of the combined voting power of the Company's then outstanding securities, excluding any person or group who becomes such a Beneficial Owner in connection with transactions described in clauses (x), (y) or (z) of paragraph (iii) below and excluding the acquisition by a Person or group holding more than 50 percent of such voting power or

(B) 30 percent or more of the combined voting power of Terex’s then outstanding securities during any twelve-month period;

  

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(ii)           there is a change in the composition of the Board of Directors of the Company occurring during any twelve month period, as a result of which fewer than a majority of the directors are Incumbent Directors (“Incumbent Directors” shall mean directors who either (x) are members of the Board as of the date of this Agreement or (y) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination); or

(iii)           there is consummated, in any transaction or series of transactions during a twelve-month period, of a complete liquidation or dissolution of the Company or a merger, consolidation or sale of all or substantially all of the Company’s assets (collectively, a “Business Combination”) other than a Business Combination after which (x)  the stockholders of the Company own more than 50 percent of the common stock or combined voting power of the voting securities of the company resulting from the Business Combination, (y) at least a majority of the board of directors of the resulting corporation were Incumbent Directors and (z) no individual, entity or group (excluding any corporation resulting from the Business Combination or any employee benefit plan of such corporation or of the Company) becomes the Beneficial Owner of 35 percent or more of the combined voting power of the securities of the resulting corporation, who did not own such securities immediately before the Business Combination; or

(iv)           the Company is liquidated or dissolved or there is consummated a sale or disposition by the Company of all or substantially all the Company's assets.

This definition of “Change in Control” is intended to comply with the definition of “Change in Control” under Code Section 409A.

(D)           “Code,” shall mean the Internal Revenue Code of 1986, as amended.

(E)           “Date of Termination,” with respect to any purported termination of the Executive's employment shall mean the later of (i) date specified in the notice or (ii)  thirty (30) days from the date of the notice unless such notice is for a termination of Executive for Cause.

(F)           “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.

(G)           “Good Reason” for termination by the Executive of the Executive's employment shall mean the occurrence (without the Executive's express written consent) of any one of the following acts by the Company, or failures by the Company to act, unless, in the case of any act or failure to act as described below, such act or failure to act is corrected prior to the Date of Termination specified in the notice of termination given in respect thereof:

  

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(i)           the assignment to the Executive of any duties inconsistent with the Executive's status as a senior executive officer of the Company or a substantial adverse alteration in the nature of the Executive’s authority, duties or responsibilities, or any other action by the Company which, in any case, results in a material diminution in such status, authority, duties or responsibilities (it being understood that a mere change in authority, duties or responsibilities, or any other action by the Company will not constitute Good Reason in and of itself unless it results in a substantial adverse alteration or material diminution of the Executive’s authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;

(ii)           a material reduction by the Company in the Executive's base salary and/or annual bonus as in effect on the date hereof or as the same may be increased from time to time, except for across-the-board reductions similarly affecting all senior executives of the Company, provided, however, that such across-the-board reductions are not made as a result of, or in contemplation of, a Change in Control;

(iii)           the failure by the Company to pay to the Executive any material portion of the Executive's current compensation such that the failure results in a material negative change; except pursuant to an across-the-board compensation deferral similarly affecting all senior executives of the Company, provided, however, that such across-the-board compensation deferrals are not made as a result of, or in contemplation of, a Change in Control;

(iv)           the failure by the Company to continue in effect any compensation plan or other benefit in which the Executive participates which is material to the Executive's total compensation, except pursuant to an across-the-board compensation or benefit deferral or reduction similarly affecting all senior executives of the Company, provided, however, that such across-the-board compensation or benefit deferrals are not made as a result of, or in contemplation of, a Change in Control;

(v)           the failure by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company's benefit plans and reimbursements to which the Executive was entitled at the time, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is then entitled;

(vi)           the relocation of the Company’s principal executive offices to a location more than fifty (50)  miles from the location of such offices on the date of this Agreement or a requirement that the Executive be based anywhere other

  

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than at the Company’s principal executive offices except for necessary travel on the Company’s business to an extent substantially consistent with the Executive’s business travel obligations on the date of this Agreement; or

(vii)           The Executive must give notice to the Company no more than ninety (90) days after the act giving rise to the termination and the termination shall occur within the two (2) year period following the initial occurrence.

(H)           “Key Employee” shall mean an employee who is treated as a “specified employee” under Code section 409A(a)(2)(B)(i), i.e., a key employee of the Company (as defined in Code section 416(i) without regard to paragraph (5) thereof).  The Company shall determine which employees shall be deemed Key Employees using December 31st as an identification date.

(I)           “Permanent Disability.”  The Executive shall be considered to have incurred a permanent disability if he (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of at least twelve (12) months; or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for at least twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Company.

 

  

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19.

	
Tax Withholding.  The Company shall have the right to deduct from all payments made under this Agreement any federal, state or local taxes required by law to be withheld with respect to such payments.

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

 

	 	 	TEREX CORPORATION
	 	  	  	  
	 	
By:

	 	  
	 	
Name:

	
 

	 	
Title:

	
 

	  	  
	  	
 

	  	  	 
	  	

EXECUTIVE

	  	  

 

  

13ex4-17.htm

EXHIBIT 4.17

 

EXECUTION COPY

 

ADDITIONAL SECURED CONVERTIBLE PROMISSORY NOTE

 

THE SECURITIES REPRESENTED BY THIS CONVERTIBLE NOTE HAVE BEEN ACQUIRED BY THE HOLDER FOR ITS OWN ACCOUNT, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO THE DISTRIBUTION OF SUCH SECURITIES. NEITHER THE SECURITIES REPRESENTED BY THIS CONVERTIBLE NOTE NOR THE SECURITIES THAT ARE ISSUABLE UPON CONVERSION OF THIS CONVERTIBLE NOTE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND COMPLIANCE WITH SUCH STATE SECURITIES LAWS, IN COMPLIANCE WITH RULE 144 UNDER THE SECURITIES ACT, OR AN OPINION OF COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION AND/OR COMPLIANCE IS NOT REQUIRED.

 

FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), THIS CONVERTIBLE NOTE IS ISSUED WITH ORIGINAL ISSUE DISCOUNT.  BEGINNING NO LATER THAN 10 DAYS AFTER THE ISSUE DATE OF THIS CONVERTIBLE NOTE, THE CHIEF FINANCIAL OFFICER OF THE ISSUER, LOCATED AT 147 KEYSTONE DRIVE, MONTGOMERYVILLE, PA 18936, WILL PROMPTLY MAKE AVAILABLE TO HOLDER UPON REQUEST THE ISSUE PRICE, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT AND THE YIELD TO MATURITY OF THIS CONVERTIBLE NOTE.

 

PHOTOMEDEX, INC.

 

ADDITIONAL SECURED CONVERTIBLE PROMISSORY NOTE

 

	
$150,716.43 (the “Principal Amount”)

	
                                 Date: October 28, 2010

As set forth in Section 1 hereof, the Date of Issuance shall be September 1, 2010

	  	  

FOR VALUE RECEIVED, PHOTOMEDEX, INC., a Delaware corporation (the “Company”), promises to pay to the order of Perseus Partners VII, L.P., or its registered assigns (the “Holder”), the Principal Amount, or such lesser amount as shall then equal the outstanding Principal Amount, together with interest thereon at a rate equal to 10.0% per annum, and computed on the basis of a year consisting of 360 days in accordance with the terms set forth in Section 2 of this Additional Secured Convertible Promissory Note (this “Convertible Note”).

 

This Convertible Note is issued as an Additional Note pursuant to Section 2(c) of that certain Amended and Restated Secured Convertible Promissory Note, dated March 19, 2010 and as adjusted effective May 7, 2010, in the original principal amount of $16,746,270 (such note being hereinafter referred to as the “Series B-2 Note”).  This Convertible Note represents payment of interest on the Series B-2 Note equal to two percentage points of the stated interest of

 

  

  

  

10% that accrued against the Series B-2 Note over the period March 19, 2010 to August 31, 2010.  The Series B-2 Note was issued at the same time as the issuance by the Company of an Amended and Restated Secured Convertible Promissory Note, dated March 19, 2010, in the original principal amount of $2,800,406 (such note being hereinafter referred to as the “Series B-1 Note”).  Both the Series B-1 Note and the Series B-2 Note were issued pursuant to the Securities Purchase Agreement, dated as of August 4, 2008 (as amended by Amendment No. 1 thereto, dated as of February 27, 2009, and Amendment No. 2, consent of waiver thereto, dated as of March 19, 2010, and as the same may be further amended, modified, or supplemented from time to time, the “Purchase Agreement”), by and between the Company and Perseus Partners VII, L.P.

 

The following is a statement of the rights of the Holder and the conditions to which this Convertible Note is subject, and to which the Holder hereof, by the acceptance of this Convertible Note, agrees:

 

1. Definitions.  Capitalized terms defined in the Purchase Agreement and used herein without definition have the same meaning herein as in the Purchase Agreement.  In addition, as used in this Convertible Note, the following capitalized terms have the following meanings:

 

“Additional Note” shall have the meaning set forth in Section 2(a) of this Convertible Note.

 

“Conversion Price” means, initially, $18.39172, as adjusted from time to time pursuant to the terms of this Convertible Note.

 

“Date of Issuance” means September 1, 2010, notwithstanding that the date set forth on the first page hereof is a different date.

 

“Default Interest Rate” means the lesser of 16% or the maximum rate allowed by applicable Law.

 

“Event of Default” shall have the meaning set forth in Section 4 of this Convertible Note.

 

“Maturity Date” means February 27, 2014 (or, if such day is not a Business Day, on the next succeeding Business Day).

 

“Obligations” means the principal, interest and other amounts payable under this Convertible Note, the Series B-2 Note, and any other Additional Notes issued pursuant to any such notes.

 

2. Maturity Date; Interest.

 

All unpaid principal, together with any accrued but unpaid interest and other amounts payable under this Convertible Note, shall be due and payable on (i) the Maturity Date, or (ii) when such amounts are declared due and payable by the Holder or made automatically due and payable upon or after (A) the occurrence of an Event of Default, (B) the liquidation or dissolution of the Company, or (C) any Change of Control.

  

  

  

(a) Interest on this Convertible Note shall be payable (and if not paid when due, shall be compounded) semi-annually in arrears on each September 1 and March 1 (or, if any such day is not a Business Day, on the next succeeding Business Day) after the Date of Issuance and, except to the extent provided in paragraph (c) below, shall be payable in lawful money of the United States of America.

 

(b) The Company, at its option, may elect to pay all or a portion of any interest due under this Convertible Note by the issuance of an additional Note (an “Additional Note”) identical in all respects to this Convertible Note except that it shall have (x) a principal amount equal to the portion of such interest payment so paid, (y) an initial Conversion Price equal to the conversion price in effect under this Convertible Note at the date of issuance of such Additional Note and (z) a different date of issuance; provided, that unless and until the Company shall have obtained the affirmative vote of a majority of the outstanding shares of Common Stock present in person or represented by proxy at a duly called and held meeting of the Company’s stockholders in favor of resolutions approving (i) the issuance of this Convertible Note and (ii) the issuance of Additional Notes with respect to the full amount of interest payable hereunder, the Company may not pay more than four fifths (i.e., eight percentage points out of the total ten percentage points of interest) of any interest required to be paid hereunder in the form of Additional Notes.

 

(c) If the Company elects to pay interest by issuing an Additional Note, it shall give notice to the Holder two Business Days prior to the day such payment is due and deliver such Additional Note to the Holder within three Business Days after such date.

 

(d) Interest shall be calculated based on the average principal outstanding under this Convertible Note for such period.  The first payment of interest shall be on March 1, 2011 (or, if such day is not a Business Day, on the next succeeding Business Day), and shall be calculated from the Date of Issuance (notwithstanding that the date set forth on the first page hereof is a different date).

 

(e) Notwithstanding anything to the contrary contained in this Convertible Note, in addition to the rights of the Holder specified in Section 5 of this Convertible Note, for any period during which an Event of Default has occurred and is continuing, the interest rate on this Convertible Note shall increase to the Default Interest Rate and interest on this Convertible Note shall be payable solely in lawful money of the United States of America.

 

3. Secured Obligations; Collateral. In order to secure the Company’s payment and performance of the Obligations and the principal, interest and other amounts payable under the Series B-1 Note and all additional notes issued pursuant thereto (collectively, the “Note Obligations”) and to secure the Company’s prompt, full and faithful performance and observance of all of the provisions under this Convertible Note, the Series B-1 Note, the Series B-2 Note, any and all additional notes issued pursuant to any of the foregoing, and the other Transaction Documents, the Company has delivered to the Holder a certain Pledge and Security Agreement, dated as of February 27, 2009, and amended and restated as of March 19, 2010, (as the same may be further amended, modified or supplemented from time to time, the “Pledge Agreement”) among the Company, the other Grantors (as defined therein) and the Holder, individually and in its capacity as Collateral Agent (the “Collateral Agent”), pursuant to which

 

  

  

  

the Company has granted to the Collateral Agent as security and collateral for the payment and performance of the Note Obligations, a security interest in the Collateral (as defined therein), whether now existing or hereafter arising, and all as more specifically described, and on the terms and conditions set forth in the Pledge Agreement.  The security interest granted by the Company under the Pledge Agreement, securing the indebtedness evidenced by this Convertible Note, the Series B-1 Note, the Series B-2 Note, and any and all additional notes issued pursuant to any of the foregoing, including all Note Obligations, is senior to all other liens, security interests or encumbrances securing any other indebtedness of the Company, except that the liens on any collateral pledged by the Company to Clutterbuck Funds LLC (“Clutterbuck”) are subject to the Intercreditor Agreement dated as of March 19, 2010 between the Holder and Clutterbuck.

 

4. Events of Default.  The occurrence of any of the following shall constitute an “Event of Default” under this Convertible Note:

 

(a) Failure to Pay this Convertible Note or other Notes.

 

(i) The Company shall fail to pay when due any principal payment on this Convertible Note or any other Note, and such failure continues for three Business Days thereafter; or

 

(ii) The Company shall fail to pay when due any or any interest or other payment (other than principal) required under the terms of this Convertible Note or any other Note, and such failure continues for ten Business Days thereafter;

 

(b) Breaches of Representations and Warranties.  Any representation or warranty made by the Company or any Subsidiary in this Convertible Note or in any other Transaction Document shall not have been true and correct in any material respect when made; provided, that if the facts or events making such representation or warranty untrue are capable of correction or cure, then the Company or any Subsidiary shall have ten Business Days after notice of the breach is delivered to the Company to correct or cure such breach.  For purposes of this Section 4(b) only, breaches of the representations and warranties contained in the Purchase Agreement and made as of the First Tranche Closing Date shall be disregarded unless such breaches would, individually or in the aggregate, have given rise to a failure of the condition precedent set forth in Section 6.2(a) of the Purchase Agreement and the Company delivers the certificates required by Section 6.2(d) of the Purchase Agreement.

 

(c) Breaches of Other Covenants.  The Company or any Subsidiary shall fail to observe or to perform any covenant, obligation, condition or agreement contained in this Convertible Note or any other Transaction Document (other than those specified in Section 4(a) of this Convertible Note) in any material respect; provided, that if such breach is capable of correction or cure, then the Company or any Subsidiary shall have ten Business Days after notice of the breach is delivered to the Company to correct or cure such breach;

 

(d) Cross-Defaults.  (i)  The Company shall default under any Series B-1 Note or (ii) the Company or any of its Subsidiaries shall default under any other agreement, bond, debenture, note or other evidence of indebtedness for money borrowed (other than a Note), under any guaranty or under any mortgage, or indenture pursuant to which there shall be issued or by which there shall be secured or evidenced any indebtedness for money borrowed by the Company or any of its Subsidiaries, whether such indebtedness now exists or shall hereafter be created, which default shall have resulted in indebtedness of at least $250,000 being due and payable prior to the date on which it would otherwise become due and payable;

  

  

  

 

(e) Undischarged Judgment. One or more judgments for the payment of money in an amount in excess of $250,000 in the aggregate shall be rendered against the Company or any of its Subsidiaries (or any combination thereof) and shall remain undischarged for a period of ten consecutive Business Days during which execution shall not be effectively stayed, or any action is legally taken by a judgment creditor to levy upon any such judgment;

 

(f) Voluntary Bankruptcy or Insolvency Proceedings.  The Company or any of its Subsidiaries shall: (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property; (ii) be unable, or admit in writing its inability, to pay its debts generally as they mature; (iii) make a general assignment for the benefit of its or any of its creditors; (iv) be dissolved or liquidated in full or in part; (v) become insolvent (as such term may be defined or interpreted under any applicable statute); (vi) commence a voluntary case or other Proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar Law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other Proceeding commenced against it; or (vii) take any action for the purpose of effecting any of the foregoing; or

 

(g) Involuntary Bankruptcy or Insolvency Proceedings.  Any Proceeding for the appointment of a receiver, trustee, liquidator or custodian of the Company or any of its Subsidiaries or of all or a substantial part of the property thereof, or an involuntary case or other Proceeding seeking liquidation, reorganization or other relief with respect to the Company or any of its Subsidiaries or the debts thereof under any bankruptcy, insolvency or other similar Law now or hereafter in effect shall be commenced and an order for relief entered, or such case or Proceeding shall not be dismissed or discharged within 30 days of commencement.

 

5. Rights of Holder upon Default.  Upon the occurrence or existence of any Event of Default (other than an Event of Default referred to in Section 4(f) or Section 4(g) of this Convertible Note) and at any time thereafter during the continuance of such Event of Default, holders of a majority of the outstanding principal amount of the Note(s) may declare all outstanding Obligations payable by the Company under this Convertible Note to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained in this Convertible Note or in any other Transaction Document to the contrary notwithstanding.  Upon the occurrence or existence of any Event of Default described in Sections 4(f) or Section 4(g) of this Convertible Note, immediately and without notice, all outstanding Obligations payable by the Company hereunder shall automatically become immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained in this Convertible Note or in any other Transaction Document to the contrary notwithstanding.  In addition to the foregoing remedies, upon the occurrence or existence of any Event of Default, the Holder may exercise any other right, power or remedy granted to it pursuant to any Transaction Document or otherwise permitted to it by Law, either by suit in equity or by action at Law, or both.

 

6. Covenants.  The Company hereby covenants and agrees for the benefit of the Holder as follows:

 

  

  

  

(a) Additional Notes.  Any Additional Notes issued pursuant to Section 2(a) of this Convertible Note will be, when issued, duly authorized, validly issued, fully paid and nonassessable, free and clear of all Liens other than restrictions on transfer provided for in the Transaction Documents and applicable federal and state securities laws.

 

(b) Conversion Shares.  All Conversion Shares that may be issued upon the conversion of this Convertible Note and any Additional Notes will be, when issued, duly authorized, validly issued, fully paid and nonassessable, and free from all preemptive rights and Liens other than restrictions on transfer provided for in the Transaction Documents and applicable federal and state securities laws and charges with respect to the issuance thereof.  The Company will at all times have authorized and reserved and kept available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of this Convertible Note and any Additional Notes, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of this Convertible Note and all Additional Notes.  If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of this Convertible Note and all Additional Notes, the Company will take all such corporate actions as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes.

 

(c) Charges, Taxes and Expenses.  Issuance and delivery of the Conversion Shares shall be made without charge to the Holder for any issue or transfer tax, withholding tax (other than related to the income of the Holder), transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Conversion Shares in a name other than that of the Holder.  The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Convertible Note or receiving Conversion Shares.

 

7. Prepayment.

 

(a) Except as provided in this Section 7, the Company shall have no right to prepay the principal amount of this Convertible Note prior to the Maturity Date, or any interest accruing under this Convertible Note prior to the scheduled date for payment of such interest.

 

(b) If the Market Price as of the fourth anniversary of the First Tranche Closing Date shall be no less than 200% of the conversion price then in effect under the First Tranche Note, then the Company shall have the one-time option to prepay up to one half of the aggregate outstanding principal amount of the Notes, together with accrued but unpaid interest thereon, on the terms and subject to the conditions set forth in Section 5.25 of the Purchase Agreement.

 

8. Conversion.

 

(a) Optional Conversion.  At any time, or from time to time, prior to the Maturity Date, the Holder shall have the option to convert up to the entire amount outstanding under this Convertible Note (including accrued but unpaid interest) into a number of shares of

 

  

  

  

Common Stock equal to the quotient obtained by dividing (i) the amount to be converted by (ii) the Conversion Price then in effect.

 

(b) Mandatory Conversion.  If on any date occurring at least 31 Trading Days following the Date of Issuance, the Market Price as of such date exceeds 300% of the then-effective Conversion Price, then the entire amount outstanding under this Convertible Note (including accrued but unpaid interest) shall be automatically converted into a number of shares of Common Stock equal to the quotient obtained by dividing (i) the amount outstanding under this Convertible Note (including accrued but unpaid interest) by (ii) the Conversion Price then in effect.  The Company shall notify the Holder promptly (and in any event not later than three Business Days) following any mandatory conversion of this Convertible Note pursuant to this Section 8(b).

 

(c) Mechanics and Effect of Conversion.  No fractional shares of Common Stock shall be issued upon conversion of this Convertible Note.  Upon the conversion of all of the principal and accrued interest outstanding under this Convertible Note, in lieu of the Company issuing any fractional shares to the Holder, the Company shall pay to the Holder the amount of outstanding principal and accrued interest that is not so converted.  Upon any partial conversion of this Convertible Note, the Company shall issue to the Holder (i) the shares of Common Stock into which the applicable portion of the principal and accrued interest under this Convertible Note is converted and (ii) a new Note identical in all respects to this Convertible Note except that it shall have a principal amount equal to the difference between (1) the outstanding principal amount of this Convertible Note immediately prior to such conversion minus (2) the portion of such outstanding principal amount converted into shares of Common Stock.  Upon any conversion of this Convertible Note pursuant to this Section 8, the Holder shall surrender this Convertible Note, duly endorsed, at the principal office of the Company.  At the Company’s expense, the Company shall, as soon as practicable thereafter, and in any event within three (3) Business Days of such surrender, issue and deliver to the Holder at such principal office a certificate or certificates for the number of shares of Common Stock to which the Holder shall be entitled upon such conversion (bearing such legends as are required by the Purchase Agreement and applicable securities Laws), together with any other securities and property to which the Holder is entitled upon such conversion under the terms of this Convertible Note.  Issuance of this Convertible Note shall constitute full authority to the Company’s officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock issuable upon the conversion of this Convertible Note.

 

(d) Payment of Taxes.  The Company will pay all transfer taxes or charges that may be imposed with respect to the issue or delivery of shares of Common Stock upon conversion of this Convertible Note, except for any tax or other charge imposed in connection with any transfer involved in the issue and delivery of Conversion Shares in a name other than that in which this Convertible Note was registered.

 

(e) Withholding Taxes.  Notwithstanding any other provision of this Convertible Note, the Company shall: (i) not be obliged to reimburse, indemnify, make whole or otherwise pay to the Holder, and (ii) be entitled to deduct and withhold from all amounts payable pursuant to this Convertible Note, any amounts required by applicable Law to be deducted or withheld for any and all taxes, so long as the Company promptly pays the full amount deducted or withheld to the applicable Governmental Entity in accordance with applicable Law.  Any such amounts deducted and not owed or paid to the applicable Governmental Entity in accordance with applicable Law shall be returned to the Holder promptly.  The Holder shall provide any

 

  

  

  

 information reasonably requested by the Company to enable it to determine whether taxes must be withheld or deducted and the amount of such withholding or deduction.

 

9. Conversion Price Adjustments.

 

(a) Adjustments for Splits and Combinations.  If the Company shall at any time or from time to time after the Date of Issuance effect a stock split of the outstanding shares of Common Stock, the Conversion Price in effect immediately before that stock split shall be proportionately decreased, and, conversely, if the Company shall at any time or from time to time after the Date of Issuance combine the outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately before the combination shall be proportionately increased.  In each such case, the Conversion Price shall be adjusted by multiplying such Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such subdivision, combination or reclassification and the denominator of which shall be the number of shares of Common Stock outstanding immediately after giving effect to such subdivision or combination.  Any adjustment under this Section 9(a) shall become effective immediately after the opening of business on the date the stock split or combination becomes effective.

 

(b) Adjustment for Dividends and Distributions of Common Stock.  If the Company at any time or from time to time after the Date of Issuance issues, or fixes a record date for the determination of holders of shares of Common Stock entitled to receive, a dividend or other distribution payable solely in additional shares of Common Stock, in each such event the Conversion Price that is then in effect shall be decreased as of the time of such issuance or, in the event such record date is fixed, as of the close of business on such record date, by multiplying the Conversion Price then in effect by a fraction (i) the numerator of which is the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and (ii) the denominator of which is the sum of the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price shall be adjusted pursuant to this Section 9(b) to reflect the actual payment of such dividend or distribution.

 

(c) Adjustments for Other Dividends and Distributions.  If the Company at any time or from time to time after the Date of Issuance issues, or fixes a record date for the determination of holders of shares of Common Stock entitled to receive, a dividend or other distribution payable in any securities of the Company (other than shares of Common Stock) or in other property, in each such event provision shall be made so that the Holder of this Convertible Note shall receive upon conversion of this Convertible Note, in addition to the number of shares of Common Stock receivable hereupon, the amount of securities of the Company or other property that such Holder would have received had this Convertible Note been converted into shares of Common Stock immediately prior to the date of such event and had such Holder thereafter, during the period from the date of such event to and including the conversion date, retained such securities or other property receivable by them as aforesaid during such period, subject to all other adjustments called for during such period under this Section 9 with respect to the rights of the Holder or with respect to such other securities or other property by their terms.

 

  

  

  

(d) Adjustment upon Issuances for Consideration Below Conversion Price.  If at any time or from time to time, on or after the Date of Issuance the Company issues or sells, or in accordance with this Section is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of the Company) for a consideration per share less than the Conversion Price in effect as of immediately prior to such issuance or sale (the “Former Conversion Price”) (such an issuance, a “Dilutive Issuance”), then immediately after such Dilutive Issuance, the Conversion Price then in effect shall be reduced (but in no event increased) to an amount equal to a fraction, the numerator of which equals (A) the sum of (1) the product derived by multiplying the Former Conversion Price by the number of shares of Common Stock outstanding on a fully-diluted basis (accounting for Convertible Securities and Options using the treasury stock method) immediately prior to such Dilutive Issuance plus (2) the consideration, if any, received by the Company in such Dilutive Issuance, and the denominator of which equals (B) the number of shares of Common Stock outstanding on a fully-diluted basis (accounting for Convertible Securities and Options using the treasury stock method) immediately after such Dilutive Issuance.  For purposes of this Section 9(d):

 

(i) If any Convertible Securities are issued by the Company after the Date of Issuance, the shares of Common Stock into which such Convertible Securities are convertible shall be deemed to be issued and sold by the Company as of the date the Convertible Securities are issued, for consideration per share equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock (A) upon the issuance or sale of the Convertible Security, and (B) upon the conversion or exchange or exercise of such Convertible Security.

 

(ii) If any Options are issued by the Company after the Date of Issuance, the shares of Common Stock issuable upon exercise of such Option (or upon conversion of the Convertible Securities issuable upon exercise of such Option) shall be deemed to be issued and sold by the Company as of the date the Options are issued for consideration per share equal to the sum of the of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one share of Common Stock (A) upon granting or sale of the Option, (B) upon exercise of the Option and (C) in the case of an Option to acquire a Convertible Security, upon conversion or exchange or exercise of such Convertible Security.

 

(iii) If the purchase price provided for in any Option is reduced after the date of issuance, the additional consideration, if any, payable upon the issue, conversion,  exchange or exercise of any Convertible Security is reduced after the date of issuance, or the rate at which any Convertible Security is convertible into or exchangeable or exercisable for shares of Common Stock is increased at any time on or after the Date of Issuance, the shares of Common Stock issuable upon exercise of such Option (or upon conversion of the Convertible Securities issuable upon exercise of such Option) or issuable upon exercise of such Convertible Security shall be deemed to be issued and sold by the Company as of the date of such modification.

 

(iv) If any Options are issued in connection with the issuance of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties to such 

 

  

  

  

 

transaction, such Options will be deemed to have been issued for the difference between (A) the aggregate fair market value of such Options and other securities of the Company issued in such integrated transaction, less, (B) the fair market value of the securities other than such Option, issued in such transaction, and the other securities issued or sold in such integrated transaction will be deemed to have been issued for the balance of the consideration received by the Company.  If any Common Stock, Options or Convertible Securities are issued or sold for a consideration consisting as a whole or in part of consideration other than cash, the amount of the consideration other than cash received by the Company will be the fair market value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Company will be the closing price of such securities on the date of receipt by the Company.

 

(v) For purposes of this Section 9(d), the fair market value of any non-cash consideration received by the Company upon the issuance of any shares of Common Stock, Options or Convertible Securities will be as determined in good faith by the Board.

 

(e) Adjustment for Reclassification, Exchange and Substitution.  If at any time or from time to time after the Date of Issuance, the shares of Common Stock issuable upon the conversion of this Convertible Note are changed into the same or a different number of shares of any class or series of stock of the Company, whether by recapitalization, reclassification or otherwise (other than a subdivision or combination of shares or stock dividend or a reorganization, merger, consolidation or sale of assets provided for elsewhere in this Section 9), then in any such event the Holder shall have the right thereafter to convert this Convertible Note into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification or other change by the holder of the number of shares of Common Stock into which this Convertible Note could have been converted immediately prior to such recapitalization, reclassification or change, all subject to further adjustment as provided in this Convertible Note or with respect to such other securities or property by the terms thereof.

 

(f) Fundamental Transactions.  If at any time or from time to time after the Date of Issuance (i) the Company effects any merger or consolidation of the Company with or into (whether or not the Company is the surviving corporation) another Person, (ii) the Company effects any sale, assignment, transfer, conveyance or other disposition of all or substantially all its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of more than 50% of the outstanding shares of Common Stock are permitted to tender or exchange their shares of Common Stock for other securities, cash or property, (iv) the Company consummates a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or other Persons or (v) the Company effects a capital reorganization of the shares of Common Stock (other than a recapitalization, subdivision, combination, reclassification, exchange or substitution of shares provided for elsewhere in this Section 9) pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (each of the foregoing, a “Fundamental Transaction”), then as a part of such Fundamental Transaction provision shall be made so that the Holder shall thereafter be entitled to receive upon conversion of this Convertible Note the same amount and kind of securities, cash or other property as it would have been entitled to receive if it had been, immediately prior to such Fundamental Transaction, the holder of the number of shares of Common Stock then deliverable upon the

 

  

  

  

conversion in full of this Convertible Note, subject to adjustment in respect of such securities by their terms (the “Alternate Consideration”).  In any such case, (i) the aggregate Conversion Price under this Convertible Note will not be affected, but the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration, (ii) if holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Convertible Note following such Fundamental Transaction, and (iii) appropriate adjustment shall be made in the application of the provisions of this Section 9 with respect to the rights of the Holder after such Fundamental Transaction to the end that the provisions of this Section 9 (including adjustment of the Conversion Price then in effect and the number of shares of common stock, securities or other property issuable upon conversion of this Convertible Note) shall be applicable after that event and be as nearly equivalent as practicable.  At the Holder’s request, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new secured convertible note consistent with the foregoing provisions and evidencing the Holder’s right to convert such secured convertible note into Alternate Consideration.  The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 9(f) and insuring that this Convertible Note (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

 

(g) Certificate of Adjustment.  In each case of an adjustment or readjustment of the Conversion Price for the number of shares of Common Stock or other securities or property issuable upon conversion of this Convertible Note, the Company, at its own expense, shall cause its Chief Financial Officer to compute such adjustment or readjustment in accordance with the provisions of this Convertible Note and prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid, to the Holder at the Holder’s address as shown in the Company’s books.  The certificate shall set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment or readjustment is based.  No adjustment in the Conversion Price shall be required to be made unless it would result in an increase or decrease of at least one cent, but any adjustments not made because of this sentence shall be carried forward and taken into account in any subsequent adjustment otherwise required hereunder.

 

(h) Notices of Record Date.  Upon (i) the establishment by the Company of a record of the holders of any class of securities for the purpose of determining the holders of such securities who are entitled to receive any dividend or other distribution, or (ii) any capital reorganization of the Company, any reclassification or recapitalization of the shares of the Company, any merger or consolidation of the Company with or into any other Company, or any transfer of all or substantially all the assets of the Company to any other Person or any voluntary or involuntary dissolution, liquidation or winding up of the Company, the Company shall mail to the Holder at least 20 Business Days prior to the record date specified therein a notice specifying (A) the date on which any such record is to be taken for the purpose of such dividend or distribution and a description of such dividend or distribution, (B) the date on which any such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding up is expected to become effective, and (C) the date, if any, that is to be fixed as to when the holders of record of shares of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities or other property  deliverable upon such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding up.

 

  

  

  

 

(i) Certain Issues Excepted.  Notwithstanding anything herein to the contrary set forth herein, the following issuances of securities will not trigger an adjustment to the Conversion Price: (i) securities issued pursuant to the conversion or exercise of convertible or exercisable securities issued or outstanding on or prior to the First Tranche Closing Date, and (ii) Common Stock issued or options to purchase Common Stock granted or issued pursuant to the Company’s equity compensation plans and employee stock purchase plans as they now exist or are hereafter approved by the Company’s Board of Directors.

 

(j) No Impairment.  The Company shall not amend its Certificate of Incorporation or Bylaws or participate in any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action for the purpose of avoiding or seeking to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but shall at all times in good faith assist in carrying out all such action as may be reasonably necessary or appropriate in order to protect the conversion rights of the Holder of this Convertible Note against dilution or other impairment as provided herein. If the Company takes any action in breach of this Convertible Note, the Holder shall be entitled to any and all remedies available at Law or in equity.

 

(k) Fractional Share.  No fractional share of Common Stock shall be issuable upon conversion of this Convertible Note and the number of Conversion Shares to be issued shall be rounded down to the nearest whole share. If the conversion of this Convertible Note shall result in the issuance of any fractional Conversion share, the Company shall eliminate such fractional share by paying the Holder an amount computed by multiplying such fraction by the fair market value of a full share.

 

(l) Other Adjustments.  If and whenever the Company shall take any action affecting or relating to the shares of Common Stock, other than any action described in this Section 9, which in the opinion of the Board would prejudicially affect the rights of the Holder, the Conversion Price and, if required, the number of shares of Common Stock or other securities or property to be issued upon conversion of this Convertible Note will be adjusted by the Board in such manner, and at such time, as the Board may, subject to the approval of any stock exchange(s) on which the shares of Common Stock are listed and posted for trading, reasonably determine to be equitable in the circumstances to such Holder.

 

10. Priority of Obligations.  The Obligations shall not be junior or subordinate to any other Indebtedness of the Company, except for such de facto subordination as may result from Permitted Liens or Liens in existence as of the date hereof that secure Permitted Indebtedness.  The Company shall not issue any Indebtedness that by its terms is subordinate or junior in any respect to any other Indebtedness of the Company, unless such Indebtedness provides that it is subordinate and junior on the same terms to the Obligations.

 

11. Waiver and Amendment.  Any provision of this Convertible Note may be amended, waived or modified upon the written consent of both the Company and the holders of a majority of the outstanding principal amount of the Note(s).

 

12. Transfer of this Convertible Note or Securities Issuable on Conversion or Payment Hereunder.  This Convertible Note may not be transferred in violation of any restrictive legend set forth hereon. Each new Note issued upon transfer of this Convertible Note or securities issuable on conversion of this Convertible Note shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with the Securities Act, unless in the opinion of counsel for the Company such

 

  

  

  

legend is not required in order to ensure compliance with the Securities Act. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions. Subject to the foregoing, transfers of this Convertible Note shall be registered upon registration books maintained for such purpose by or on behalf of the Company.  Prior to presentation of this Convertible Note for registration of transfer, the Company shall treat the registered holder hereof as the owner and holder of this Convertible Note for the purpose of receiving all payments of principal and interest hereon and for all other purposes whatsoever, whether or not this Convertible Note shall be overdue and the Company shall not be affected by notice to the contrary.

 

13. Assignment. Neither this Convertible Note nor any of the rights, interests or obligations hereunder may be assigned, by operation of law or otherwise, as a whole or in part, by the Company without the prior written consent of the Holder.  The Holder may assign the rights, interests or obligations under this Convertible Note, as a whole or in part, at any time, subject to compliance with Section 12 of this Convertible Note, upon written notice to the Company of such assignment.  Upon request, the Company shall, as soon as practicable (and in any event within three Business Days) following such request, provide any assignee of all or a portion of this Convertible Note a new Note having terms and conditions identical in all respects to this Convertible Note except that it shall identify the assignee as the payee, and it shall have (x) a principal amount equal to principal amount of this Convertible Note that was assigned, (y) an initial Conversion Price equal to the conversion price in effect under this Convertible Note as of the date of assignment and (z) a different date of issuance.  Notwithstanding the foregoing, until the Company receives notice in accordance with Section 14, the Company shall treat the registered holder hereof as the owner and holder of this Convertible Note for the purpose of receiving all payments of principal and interest on this Convertible Note and for all other purposes whatsoever, whether or not this Convertible Note shall be overdue.

 

14. Notices.  Any notice, request or other communication required or permitted hereunder shall be in writing and shall be deemed to have been duly given if personally delivered or mailed by registered or certified mail, postage prepaid, or by recognized overnight courier, personal delivery or facsimile transmission at the respective addresses or facsimile number of the parties as set forth in or otherwise designated by either party pursuant to the Purchase Agreement or on the register maintained by the Company.  Any party hereto may by notice so given change its address or facsimile number for future notice hereunder.  Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile or email at the facsimile number or email address specified in this Section prior to 6:30 p.m. (Eastern time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile or email at the facsimile number or email address specified in this Section on a day that is not a Trading Day or later than 6:30 p.m. (Eastern time) on any Trading Day, (c) the Trading Day following the date of deposit with a nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given.

 

15. Successors and Assigns. Subject to the restrictions on transfer described in Section 12 of this Convertible Note, the rights and obligations of the Company and the Holder of this Convertible Note shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties.

 

  

  

  

 

 

16. Expenses; Waivers.  If action is instituted to collect this Convertible Note, the Company shall pay all costs and expenses, including, without limitation, reasonable attorneys’ fees and costs, incurred in connection with such action. The Company hereby waives notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor and all other notices or demands relative to this instrument.

 

17. Governing Law; Venue; Waiver of Jury Trial.  ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES OF SUCH STATE. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY THE COMPANY HEREUNDER, IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. THE COMPANY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO THE COMPANY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THE PURCHASE AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE COMPANY HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY.

 

  

  

  

ISSUED as of the date first above written.

 

 

	 	PHOTOMEDEX, INC.	 
	 	 	 	 
	
 

	
By: 

	/s/ Dennis M. McGrath	 
	 	 	Name:  Dennis M. McGrath 	 
	 	 	Title :   Chief Executive Officer	 
	 	 	 	 

 

 

 

 

 

[Signature Page to Additional Note (“Subject Interest Note”)]

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