Document:

biol-ex105_258.htm

EXHIBIT 10.5

 

THIRD AMENDMENT TO 

CREDIT AGREEMENT 

 

THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this “Amendment”), dated as of November 6, 2019, is entered into by and among BIOLASE, INC., a Delaware corporation (“Borrower”), each of the undersigned financial institutions (individually each a “Lender” and collectively “Lenders”) and SWK FUNDING LLC, a Delaware limited liability company, in its capacity as administrative agent for the other Lenders (in such capacity, “Agent”).

RECITALS

WHEREAS, Borrower, Agent and Lenders entered into that certain Credit Agreement dated as of November 9, 2018 (as the same may be amended, modified or restated from time to time, being hereinafter referred to as the “Credit Agreement”); and

WHEREAS,  Borrower, Agent and Lenders have agreed to amend certain provisions of the Credit Agreement as more fully set forth herein. 

AGREEMENT

NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows:

ARTICLE I

Definitions

1.1Capitalized terms used in this Amendment are defined in the Credit Agreement, as amended hereby, unless otherwise stated.

ARTICLE II

Amendments to Credit Agreement

2.1Amendments to Section 7.13.  Effective as of the date hereof, Section 7.13 of the Credit Agreement is hereby amended and restated to read as follows:

7.13Financial Covenants.

7.13.1Consolidated Unencumbered Liquid Assets.

(a)Not permit the Consolidated Unencumbered Liquid Assets as of any date of determination to be less than $1,500,000.

(b)Not permit the Consolidated Unencumbered Liquid Assets as of the last day of any Fiscal Quarter to be less than the greater of (i) $1,500,000, or (ii) Operating Burn for such Fiscal Quarter.

 

 

7.13.2Minimum Aggregate Revenue.

Not permit the Aggregate Revenue for the consecutive month period ending on the last Business Day of any Fiscal Quarter set forth in the table below (designated by “Q” in the table below) to be less than the applicable amount set forth in the table below for such period. 

	
Minimum LTM Aggregate Revenue as of the end of:

	
Twelve (12) month period ending Q3 2019
	
$40,000,000

	
Twelve (12) month period ending Q4 2019
	
$40,000,000

	
Twelve (12) month period ending Q1 2020
	
$40,000,000

	
Twelve (12) month period ending Q2 2020
	
$41,000,000

	
Twelve (12) month period ending Q3 2020
	
$42,000,000

	
Twelve (12) month period ending Q4 2020
	
$43,000,000

	
Twelve (12) month period ending Q1 2021
	
$44,000,000

	
Twelve (12) month period ending Q2 2021
	
$44,000,000

	
Twelve (12) month period ending Q3 2021
	
$45,000,000

	
Twelve (12) month period ending Q4 2021 and each Fiscal Quarter thereafter
	
$46,000,000

 

7.13.3Minimum EBITDA.

Not permit the EBITDA of Borrower and its Subsidiaries for the consecutive month period ending on the last Business Day of any Fiscal Quarter set forth in the table below (designated by “Q” in the table below) to be less than the applicable amount set forth in the table below for such period. 

 

 

 

	
Minimum LTM EBITDA as of the end of:

	
Twelve (12) month period ending Q3 2019
	
-($12,000,000)

	
Twelve (12) month period ending Q4 2019
	
-($10,000,000)

	
Twelve (12) month period ending Q1 2020
	
-($8,000,000)

	
Twelve (12) month period ending Q2 2020
	
-($7,000,000)

	
Twelve (12) month period ending Q3 2020
	
-($6,000,000)

	
Twelve (12) month period ending Q4 2020
	
-($5,000,000)

	
Twelve (12) month period ending Q1 2021
	
-($3,000,000)

	
Twelve (12) month period ending Q2 2021
	
-($2,500,000)

	
Twelve (12) month period ending Q3 2021
	
-($2,000,000)

	
Twelve (12) month period ending Q4 2021 and each Fiscal Quarter thereafter
	
-($2,000,000)

 

ARTICLE III

Conditions Precedent 

3.1Conditions Precedent.  The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent in a manner satisfactory to Agent, unless specifically waived in writing by Agent in its sole discretion:

(A).Agent shall have received (i) this Amendment duly executed by Borrower and (ii) that certain Consolidated, Amended and Restated Warrant to Purchase Stock executed by Borrower in favor of Agent.

(B).The representations and warranties contained herein and in the Credit Agreement and the other Loan Documents, as each is amended hereby, shall be true and correct as of the date hereof, as if made on the date hereof, except for such representations and warranties as are by their express terms limited to a specific date.

(C).Agent shall have received payment, for the benefit of Lenders, of an amendment fee in the amount of $25,000, which shall be deemed fully-earned and non-refundable as of the date hereof.

(D).No Default or Event of Default (other than the Specified Non-Compliance Items) under the Credit Agreement, as amended hereby, shall have occurred and be continuing, unless such Default or Event of Default has been otherwise specifically waived in writing by Agent.

 

 

ARTICLE IV

Limited Waiver, Ratifications, Representations and Warranties

4.1Limited Waiver.  

(a)Borrower has been, and may continue to be in non-compliance, with the requirement of Section 7.13.1 of the Credit Agreement for certain periods ending on or prior to date hereof, which failures constitute Events of Default under Section 8.1.4 of the Credit Agreement (the “Specified Non-Compliance Items”).  Agent, on behalf of itself and the Lenders, hereby waives the Specified Non-Compliance Items effective as of the date hereof.

(b) Except as specifically set forth above in relation to the Specified Non-Compliance Items, nothing contained in this Amendment or any other communication between Agent, any Lender, Borrower or any other Loan Party shall be a waiver of any past, present or future non-compliance, violation, Default or Event of Default of Borrower under the Credit Agreement or any Loan Document.  Except as specifically set forth above in relation to the Specified Non-Compliance Items, Agent and each Lender hereby expressly reserves any rights, privileges and remedies under the Credit Agreement and each Loan Document that Lender may have with respect to any non-compliance, violation, Default or Event of Default, and any failure by Agent or any Lender to exercise any right, privilege or remedy as a result of the violations set forth above shall not directly or indirectly in any way whatsoever either (i) impair, prejudice or otherwise adversely affect the rights of Agent or any Lender, except as set forth herein, at any time to exercise any right, privilege or remedy in connection with the Credit Agreement or any Loan Document, (ii) amend or alter any provision of the Credit Agreement or any Loan Document or any other contract or instrument or (iii) constitute any course of dealing or other basis for altering any obligation of Borrower or any rights, privilege or remedy of Agent or any Lender under the Credit Agreement or any Loan Document or any other contract or instrument.  Nothing in this Amendment shall be construed to be a consent by Agent or any Lender to any prior, existing or future violations of the Credit Agreement or any Loan Document. 

4.2Ratifications.  The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Credit Agreement and the other Loan Documents, and, except as expressly modified and superseded by this Amendment, the terms and provisions of the Credit Agreement and the other Loan Documents are ratified and confirmed and shall continue in full force and effect.  Borrower, Lenders and Agent agree that the Credit Agreement and the other Loan Documents, as amended hereby, shall continue to be legal, valid, binding and enforceable in accordance with their respective terms.  Borrower agrees that this Amendment is not intended to and shall not cause a novation with respect to any or all of the Obligations.

 

 

4.3Representations and Warranties.  Borrower hereby represents and warrants to Agent and Lenders that (a) the execution, delivery and performance of this Amendment, any and all other Loan Documents executed and/or delivered in connection herewith have been authorized by all requisite action (as applicable) on the part of Borrower and will not violate the organizational documents of Borrower; (b) Borrower’s directors and/or managers have authorized the execution, delivery and performance of this Amendment any and all other Loan Documents executed and/or delivered in connection herewith; (c) the representations and warranties contained in the Credit Agreement, as amended hereby, and any other Loan Document are true and correct on and as of the date hereof and on and as of the date of execution hereof as though made on and as of each such date (except to the extent such representations and warranties expressly relate to an earlier date); (d) except as it relates to the Specified Non-Compliance Items, no Default or Event of Default under the Credit Agreement, as amended hereby, has occurred and is continuing; (e) Loan Parties are in full compliance in all material respects with all covenants and agreements contained in the Credit Agreement and the other Loan Documents, as amended hereby; and (f) except as disclosed to Agent, no Loan Party has amended its organizational documents since the date of the Credit Agreement. 

ARTICLE V

Miscellaneous Provisions

5.1Survival of Representations and Warranties.   All representations and warranties made in the Credit Agreement or any other Loan Document, including, without limitation, any document furnished in connection with this Amendment, shall survive the execution and delivery of this Amendment and the other Loan Documents, and no investigation by Agent or any Lender or any closing shall affect the representations and warranties or the right of Agent and each Lender to rely upon them.

5.2Reference to Credit Agreement.  Each of the Credit Agreement and the other Loan Documents, and any and all other Loan Documents, documents or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Credit Agreement, as amended hereby, are hereby amended so that any reference in the Credit Agreement and such other Loan Documents to the Credit Agreement shall mean a reference to the Credit Agreement, as amended hereby.

5.3Expenses of Agent.  As provided in the Credit Agreement, Borrower agrees to pay on demand all costs and expenses incurred by Agent, or its Affiliates, in connection with the preparation, negotiation, and execution of this Amendment and the other Loan Documents executed pursuant hereto and any and all amendments, modifications, and supplements thereto, including, without limitation, the reasonable fees and costs of legal counsel, and all costs and expenses incurred by Agent and each Lender in connection with the enforcement or preservation of any rights under the Credit Agreement, as amended hereby, or any other Loan Documents, including, without, limitation, the reasonable fees and costs of legal counsel.  

 

 

5.4Severability.  Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable.

5.5Successors and Assigns.  This Amendment is binding upon and shall inure to the benefit of Agent and each Lender and Borrower and their respective successors and assigns, except that no Loan Party may assign or transfer any of its rights or obligations hereunder without the prior written consent of Agent.

5.6Counterparts.  This Amendment may be executed in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same instrument.  This Amendment may be executed by facsimile or electronic (.pdf) transmission, which facsimile or electronic (.pdf) signatures shall be considered original executed counterparts for purposes of this Section 5.6, and each party to this Amendment agrees that it will be bound by its own facsimile or electronic (.pdf) signature and that it accepts the facsimile or electronic (.pdf) signature of each other party to this Amendment.

5.7Effect of Waiver.  No consent or waiver, express or implied, by Agent to or for any breach of or deviation from any covenant or condition by Borrower shall be deemed a consent to or waiver of any other breach of the same or any other covenant, condition or duty.

5.8Headings.  The headings, captions, and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment.

5.9Applicable Law.  THE TERMS AND PROVISIONS OF SECTIONS 10.17 (GOVERNING LAW) AND 10.18 (FORUM SELECTION; CONSENT TO JURISDICTION) OF THE CREDIT AGREEMENT ARE HEREBY INCORPORATED HEREIN BY REFERENCE, AND SHALL APPLY TO THIS AMENDMENT MUTATIS MUTANDIS AS IF FULLY SET FORTH HEREIN.  

5.10Final Agreement.  THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS, EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE EXPRESSION OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE THIS AMENDMENT IS EXECUTED.  THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AMENDED HEREBY, MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.  NO MODIFICATION, RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY PROVISION OF THIS AMENDMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY Borrower AND AGENT.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

 

IN WITNESS WHEREOF, this Amendment has been executed and is effective as of the date first written above.

 

			
	
BORROWER:

	
 

	
BIOLASE., INC.,

	
a Delaware corporation

	
 
	
 
	
 

	
 
	
 
	
 

	
By:
	
 
	
/s/John R. Beaver

	
Name:
	
 
	
John R. Beaver

	
Title:
	
 
	
Chief Financial Officer

 

 

 

 

	
AGENT AND LENDER:

	
 
	
 
	
 

	
SWK FUNDING LLC,

	
as Agent and a Lender

	
 
	
 
	
 

	
By:
	
 
	
SWK Holdings Corporation,

its sole Manager

	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
 
	
By:
	
/s/ Winston Black

	
 
	
 
	
Name:
	
Winston Black

	
 
	
 
	
Title:
	
Chief Executive Officer and Presidentbiol-ex48_276.htm

EXHIBIT 4.8

 

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES OR BLUE SKY LAWS OF ANY STATE AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES (SUBJECT TO THE PROVISIONS OF ARTICLE 5 BELOW), SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

 

CONSOLIDATED, AMENDED AND RESTATED
WARRANT TO PURCHASE STOCK

(Dated November 6, 2019)

 

	
Issuer:
	
BIOLASE, Inc., a Delaware corporation (the “Company”)

	
Warrant No.:
	
SWK-2

	
Number of Shares:
	
487,198 (as may be adjusted pursuant to Article 2)

	
Warrant Price:
	
$1.00

	
Issue Date:
	
November 9, 2018 and May 7, 2019 (as further described below)

	
Expiration Date:
	
November 9, 2026 and May 7, 2027 (as further described below)

 

THIS WARRANT CERTIFIES THAT, for good and valuable consideration, SWK Funding LLC, a Delaware limited liability company, or its assignees (“Holder”), is entitled to purchase the number of fully paid and non-assessable shares of the Company’s common stock, par value $0.001 per share (“Common Stock”), set forth above (the “Shares”), at the Warrant Price per Share set forth above, as the same may be adjusted from time to time pursuant to Article 2 of this Warrant (the “Warrant Price”), subject to the provisions and upon the terms and conditions set forth in this Warrant.  On November 9, 2018, Holder was issued warrants to purchase 372,023 of the Shares (the “Initial Warrants”), and on May 7, 2019, Holder was issued additional warrants to purchase 115,175 of the Shares (the “Additional Warrants”).  The parties hereto agree that each of the Initial Warrants and the Additional Warrants are hereby consolidated into this one certificate and amended and restated in their entirety in the form of this Warrant.  The originally issued certificates for the Initial Warrants and the Additional Warrants shall be of no further force or effect.

 

ARTICLE 1. 

EXERCISE.

 

1.1Method of Exercise.  This Warrant is exercisable, in whole or in part, at any time and from time to time on or before the November 9, 2026, with respect to the Initial Warrants, and May 7, 2027, with respect to the Additional Warrants.  Holder may exercise this Warrant by delivering the original of this Warrant together with a duly executed Notice of Exercise in substantially the form attached as Appendix 1 to the Company in accordance with Section 5.7 (or such other office or agency of the Company as it may designate by notice in writing to the Holder in accordance with Section 5.7).  Unless Holder is exercising the cashless exercise right set forth in Section 1.2, Holder shall also deliver to the Company a check, wire transfer (to an account 

 

 

designated by the Company), or other form of payment acceptable to the Company in an amount equal to the aggregate Warrant Price for the Shares being purchased.  Unless otherwise stated in the Notice of Exercise, upon any exercise of this Warrant for less than all of the Shares, such exercised Shares shall first be allocated to the Initial Warrants to the extent of any remaining Initial Warrants, and then to the Additional Warrants.

 

1.2Cashless Exercise.  In lieu of exercising this Warrant as specified in Section 1.1, Holder may from time to time exercise this Warrant, in whole or in part, by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of Shares determined in accordance with the following equation:

 

				
	
X
	
=
	
(A - B) x C
	
 

	
 
	
 
	
A
	
 

 

where

 

				
	
X
	
=
	
the number of Shares purchasable upon a “cashless exercise” of the Warrant pursuant to the provisions of this Section 1.2;

	
 
	
 
	
 
	
 

	
A
	
=
	
the Fair Market Value (defined below) per share of Common Stock on the date of the “cashless exercise”;

	
 
	
 
	
 
	
 

	
B
	
=
	
the Warrant Price for one Share under this Warrant; and

	
 
	
 
	
 
	
 

	
C
	
=
	
the number of Shares as to which this Warrant is being exercised pursuant to the provisions of this Article 1.

 

If the foregoing calculation results in a negative number or zero, then no Shares shall be issued upon a “cashless exercise” pursuant to this Section 1.2.  If the Holder does not agree with the Fair Market Value per share ultimately determined pursuant to Section 1.3(b) or Section 1.3(c), the Holder may, in its sole discretion (i) rescind the “cashless exercise”, (ii) pay the aggregate Warrant Price in the form of, at the Holder’s option, (1) a check payable to the Company or (2) a wire transfer of funds to an account designated by the Company, or (iii) proceed with the “cashless exercise” at the Fair Market Value per Share so determined.  In the event that, upon the applicable Expiration Date or other termination of this Warrant, the Fair Market Value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 is greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to this Section 1.2 as to all Shares (or such other securities) for which it shall not previously have been exercised and which are then expiring, and the Company shall promptly deliver a certificate representing the Shares (or such other securities) issued upon such exercise to Holder.

 

	
 
	
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1.3Fair Market Value.  For purposes of this Warrant, the “Fair Market Value” of a Share as of a particular date (the “Determination Date”) shall mean:

 

(a)If the Common Stock is then publicly listed or quoted on one or more securities exchanges, inter-dealer quotation systems or over-the-counter markets, the fair market value of a Share shall be the closing price per share of Common Stock reported on the principal such exchange, system or market for the business day immediately before Holder delivers this Warrant together with its Notice of Exercise to the Company.

 

(b)If the Determination Date is the date of a liquidation, dissolution or winding up, or any event deemed to be a liquidation, dissolution or winding up pursuant to the Company’s charter, then the fair market value of a Share shall be equal to all amounts to be payable per share to holders of the Common Stock pursuant to the charter in the event of such liquidation, dissolution or winding up, assuming for the purposes of this clause (b) that all of the shares of Common Stock then issuable upon exercise of all in-the-money options and warrants are outstanding at the Determination Date.

 

(c)If the Common Stock is not then publicly listed or quoted on one or more securities exchanges, inter-dealer quotation systems or over-the-counter markets, then the Board of Directors of the Company (the “Board”) shall determine the fair market value of a Share in its reasonable good faith judgment; provided, however, if Holder advises the Board in writing that Holder disagrees with such determination, then the Company and Holder shall promptly agree upon a reputable investment banking firm to undertake such valuation.  If the valuation of such investment banking firm results in a fair market value per Share that is more than 15% greater than that determined by the Board, then all fees and expenses of such investment banking firm shall be paid by the Company.  In all other circumstances, such fees and expenses of such investment banking firm shall be paid by Holder.

 

1.4Delivery of Certificate and New Warrant.  Promptly after Holder exercises this Warrant and, if applicable, the Company receives payment of the aggregate Warrant Price, the Company shall deliver to Holder certificates for the Shares acquired and, if this Warrant has not been fully exercised and has not fully expired, a new warrant of like tenor representing a warrant to purchase the Shares not yet acquired.

 

1.5Replacement of Warrants.  On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company shall execute and deliver a replacement Warrant.

 

1.6Sale, Merger, or Consolidation of the Company.  For the purpose of this Warrant, “Acquisition” means any sale or other disposition of all or substantially all of the assets of the Company, or any reorganization, consolidation, or merger of the Company where the holders of the Company’s securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity after the transaction.  Upon the closing of any 

 

	
 
	
3
	
 

 

 

Acquisition, the successor entity shall assume the obligations of this Warrant, and this Warrant shall be exercisable for the same securities, cash, and property as would be payable for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on the record date for the Acquisition and subsequent closing, and the Warrant Price shall be adjusted accordingly; provided, however, that if pursuant to such Acquisition the entire outstanding Shares issuable upon exercise of the unexercised portion of this Warrant are cancelled and the total consideration payable to the holders of such Shares consists entirely of cash, then, upon payment to the holder of this Warrant of an amount equal to the amount Holder would have received if Holder held Shares issuable upon exercise of the unexercised portion of this Warrant and such Shares were outstanding on the record date for the Acquisition less the aggregate Warrant Price of such Shares, this Warrant shall be cancelled.

ARTICLE 2. 

ADJUSTMENTS TO THE SHARES.

 

2.1Stock Dividends, Splits, Etc.   If the Company, at any time while this Warrant is outstanding: (a) pays a dividend on the Shares payable in Common Stock, (b) subdivides the outstanding Shares into a greater number of Shares, (c) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (d) issues by reclassification of shares of Common Stock any shares of capital stock of the Company, then in each such case (i) the Warrant Price will be adjusted by multiplying the Warrant Price then in effect by a fraction, the numerator of which equals the number of shares of Common Stock outstanding immediately prior to such event (excluding treasury shares, if any), and the denominator of which equals the number of shares of Common Stock outstanding immediately after such event (excluding treasury shares, if any), and (ii) the number of Shares issuable hereunder shall be concurrently adjusted by multiplying such number by the reciprocal of such fraction.  Such adjustments will take effect on the effective date of such dividend, subdivision, combination or issuance by reclassification, as the case may be. The provisions of this Section 2.1 shall similarly apply to successive reclassifications, exchanges, combinations, substitutions, recapitalizations and reorganizations.

2.2Reserved.

 

2.3Adjustments for Diluting Issuances.  In the event that the Company issues (a “Diluting Issuance”) any Additional Shares of Common Stock (as defined in the Company’s Certificate of Designations, Preferences and Rights of Series C Participating Convertible Preferred Stock (the “Certificate of Designations”), except that Sections 6(c)(ii)(C)(1) and 6(c)(ii)(C)(2) in such definition shall be deleted in their entirety) after the applicable Issue Date set forth above, at a price per Share less than the then Exercise Price, then the Exercise Price shall be adjusted in accordance with the provisions set forth in Section 6(c) of the Certificate of Designations (the “Provisions”).  For purposes of clarity, all references in such Section 6(c) to the “Initial Issue Date” shall mean the applicable Issue Date, and to the “Conversion Price” shall mean the Exercise Price.  The Company agrees that the Provisions, as in effect on the applicable Issue Date, shall be deemed to remain in full force and effect during the term of the Warrant notwithstanding any subsequent amendment, waiver or termination thereof by the Company’s shareholders.  Under no circumstances shall the aggregate Exercise Price payable by Holder upon exercise of the Warrant increase as a result of any adjustment arising from a Diluting Issuance. 

 

	
 
	
4
	
 

 

 

 

2.4No Impairment.  The Company shall not, by amendment of its Certificate of Incorporation or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under this Warrant by the Company, but shall at all times in good faith assist in carrying out of all the provisions of this Article 2 and in taking all such action as may be necessary or appropriate to protect Holder’s rights under this Article 2 against impairment.  If the Company takes any action, a purpose of which is to avoid the observance or performance of any of the terms to be observed or performed under this Warrant by the Company, the Warrant Price shall be adjusted downward and the number of Shares issuable upon the exercise of this Warrant shall be adjusted upward in such a manner that such action is offset and the aggregate Warrant Price of this Warrant is unchanged.

2.5Fractional Shares.  No fractional Shares shall be issuable upon exercise of the Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share.  If a fractional share interest arises upon any exercise of the Warrant, the Company shall eliminate such fractional share interest by paying Holder the amount computed by multiplying the fractional interest by the Fair Market Value of a full Share.  

 

2.6Certificate as to Adjustments.  Upon any adjustment pursuant to this Article 2, including any adjustments to the Warrant Price or number of Shares that are exercisable under this Warrant, the Company shall promptly notify Holder in writing, and, at the Company’s expense, promptly compute such adjustment, and furnish Holder with a certificate of its officer setting forth such adjustment and the facts upon which such adjustment is based.

 

ARTICLE 3. 

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.

 

3.1Representations and Warranties.  The Company represents and warrants to the Holder as follows:

 

(a)The Company is a corporation validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as now conducted.  

 

(b)This Warrant constitutes the Company’s valid and legally binding obligation, enforceable in accordance with its terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization, or similar laws relating to or affecting the enforcement of creditors’ rights and (ii) laws relating to the availability of specific performance, injunctive relief or other equitable remedies.  All corporate action has been taken on the part of the Company, its officers, directors, and stockholders necessary for the authorization, execution and delivery of this Warrant and the issuance of the Shares upon exercise of this Warrant.

 

 

	
 
	
5
	
 

 

 

(d)All Shares which may be issued upon the exercise of this Warrant shall at all times during the term hereof and prior to exercise in full hereof be duly reserved out of the Company’s authorized and unissued capital stock for issuance upon exercise hereof and shall, upon issuance, be duly and validly issued, fully paid and non-assessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws.

 

3.2No Shareholder Rights; Preemptive Rights.  Except as provided in this Warrant, Holder will not have any rights as a shareholder of the Company until the exercise of this Warrant.  The Shares for which this Warrant is exercisable shall at all times be free from preemptive rights and any other rights (or the Company shall have received a valid waiver from all such holders of any such rights) that would prevent the exercise of this Warrant in full by the Holder.

3.3Valid Issuance.  The Company shall take all steps necessary to ensure that all Shares which may be issued upon the exercise of this Warrant shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, free of any liens and encumbrances, and issued to the Holder without violation of any applicable law or governmental regulation or any requirements of any domestic securities exchange or similar quotation system upon which the Shares may be listed, except for restrictions on transfer provided for herein or under applicable federal and state securities laws.

3.4Notice of Certain Events.  If Company proposes at any time (a) to declare any dividend or distribution upon its capital stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) to offer for subscription pro rata to the holders of any class or series of its stock any additional shares of stock of any class or series or other rights; (c) to effect any reclassification or recapitalization of Common Stock; (d) to consummate any Acquisition, or to liquidate, dissolve or wind up the Company; or (e) offer holders of registration rights the opportunity to participate in an underwritten public offering of the company’s securities for cash, then, in connection with each such event, the Company shall give Holder (1) in the case of the matters referred to in  clauses (a) and (b) above at least 20 days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of Common Stock will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in clauses (c) and (d) above; (2) in the case of the matters referred to in (c) and (d) above at least 20 days prior written notice of the date when the same will take place (and specifying the date on which the holders of Common Stock will be entitled to exchange their Common Stock for securities or other property deliverable upon the occurrence of such event); and (3) in the case of the matter referred to in (e) above, the same notice as is given to the holders of such registration rights.

3.5Information Rights.  So long as Holder holds this Warrant and/or any of the Shares, the Company shall deliver to Holder (i) promptly, copies of all notices or other written communications to which Holder would be entitled if it held Shares as to which this Warrant was then exercisable, and (ii) within 45 days after the end of each of the first three quarters of each fiscal year, the Company’s quarterly, unaudited financial statements and within 90 days after the end of each fiscal year, the Company’s annual, audited financial statements; provided, however, that with regard to annual meeting proxy statements and clause (ii) of this Section 3.5, it is understood and agreed that there shall be no such delivery requirement with respect to any such proxy statements or financial statements if such documents are available on EDGAR.

 

	
 
	
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ARTICLE 4. 

REPRESENTATIONS AND WARRANTIES OF THE HOLDER.  

 

The Holder represents and warrants to the Company as follows:

 

4.1Purchase for Own Account.  This Warrant and the Shares to be acquired upon exercise of this Warrant by Holder are being acquired for investment for Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution in violation of applicable securities laws.  Holder also represents that it has not been formed for the specific purpose of acquiring this Warrant or the Shares.

 

4.2Disclosure of Information.  Holder has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to this Warrant and its underlying securities.  Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Holder or to which Holder has access.

 

4.3Investment Experience.  Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk.  Holder has experience as an investor in securities of companies in the development stage and acknowledges that Holder can bear the economic risk of such Holder’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such persons.

 

4.4Accredited Investor Status.  Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.

 

4.5The Act.  Holder understands that this Warrant and the Shares issuable upon exercise hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Holder’s investment intent as expressed herein.  Holder understands that this Warrant and the Shares issued upon any exercise hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available.  

 

	
 
	
7
	
 

 

 

 

ARTICLE 5. 

MISCELLANEOUS.

 

5.1Term.  This Warrant is exercisable in whole or in part at any time and from time to time on or before the applicable Expiration Date.  

 

5.2Legends.This Warrant and the Shares shall be imprinted with a legend in substantially the following form:

 

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

 

5.3Cash Dividends and Cash Distributions.  Subject to the other provisions of this Section 5.3, this Warrant shall at all times represent the Holder’s right to receive the same percentage of any cash dividends or cash distributions made by the Company that would have been received by the Holder if Holder had fully exercised this Warrant for the full amount of the unexercised Shares immediately prior to the close of business on the day immediately preceding the record date for such dividend.  To that end, if the Company at any time or from time to time after the date hereof declares, orders, pays or makes a cash dividend or other cash distribution on or with respect to its shares of Common Stock, then, and in each such case, the Company shall reserve for, and hold for the benefit of, the Holder, a dollar amount equal to the amount (without interest) that the Holder would have received if it had fully exercised this Warrant for the full amount of the unexercised Shares immediately prior to the close of business on the day immediately preceding the record date for such dividend or other cash distribution, and the Holder shall be entitled to receive such amount in full upon the exercise of this Warrant.  In lieu of receiving such cash payment, at its sole discretion, the Holder may choose to have the Warrant Price reduced by the amount of the cash, or value of the other securities or other property payable per share. 

 

5.4Compliance with Securities Laws on Transfer.  This Warrant and/or the Shares issuable upon exercise of this Warrant may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee, and in connection with any proposed transfer of this Warrant or the Shares to any Person other than an Affiliate of the Holder, the transferor shall, if reasonably requested by the Company, deliver a legal opinion of counsel to the transferor (at the transferor’s expense).  

 

	
 
	
8
	
 

 

 

 

5.5Registration Rights.  In the event that the Company, at any time prior to the Expiration Date for the Additional Warrants, proposes to file on behalf of any stockholder or warrantholder a registration statement under the Act on any form (other than a registration statement on Form S-4 or Form S-8) for shares or warrant shares held by any stockholder or warrantholder, the Company shall provide written notice to the Holder as soon as practicable of such proposed filing, but in no event shall such written notice be given to the Holder later than ten (10) days prior to the date that the Company intends to file such registration statement, and, subject to the receipt by the Company of any information of the Holder reasonably required to be included in the registration statement, the Holder shall have the right, in its discretion, to include the Shares of the Holder in such registration statement at the Company’s expense; provided, however, that the Holder shall have no such right with respect to any Shares that cannot be registered on such registration statement, as a result of the rules and regulations of the Securities and Exchange Commission.  All legal and other fees and expenses incurred by the Holder in connection with such registration shall be borne by the Holder.  The Holder shall not, in connection with any such registration, provide any information to the Company that contains any untrue statement of a material fact or fail to state a material fact required to be stated or necessary to make the statements provided to the Company not misleading, in light of the circumstances in which they were made.

 

5.6 Transfer Procedure.  Subject to the provisions of Section 5.4 and upon providing the Company with written notice, Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant to any transferee, provided, however, in connection with any such transfer, Holder will give the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable).

 

5.7Notices.  All notices and other communications from the Company to the Holder, or vice versa, shall be in writing and shall be deemed delivered and effective when given personally or mailed by first-class registered or certified mail or by overnight courier, postage prepaid (or on the first business day after transmission by facsimile), at such address as may have been furnished to the Company or Holder, as the case may be, in writing by the Company or such holder from time to time.  

 

All notices to Holder shall be addressed as follows until the Company receives notice of a change in address in accordance with this Section 5.7:   

 

SWK Funding LLC

Attn:  Chief Executive Officer

14755 Preston Road, Suite 105

Dallas, TX 75254

Telephone: 972-687-7250

Facsimile: 972- 687-7255

 

 

	
 
	
9
	
 

 

 

With a copy (which shall not constitute notice) to:

 

Holland & Knight LLP
200 Crescent Ct., Suite 1600
Dallas, TX 75201
Telephone:  214-964-9500
Facsimile:  214-964-9501
Attention:  Ryan Magee

Notice to the Company shall be addressed as follows until Holder receives notice of a change in address in accordance with this Section 5.7:

 

BIOLASE, Inc.

Attn:  Chief Executive Officer

4 Cromwell

Irvine, CA 92618

Telephone: 949-361-1200

Facsimile: 949-365-4913

 

With a copy (which shall not constitute notice) to:

 

Sidley Austin LLP
1 South Dearborn Street
Chicago, IL 60603
Telephone:  312-853-2217; 312-853-7443
Facsimile:  312-853-7036
Attention:  Michael A. Gordon
Beth E. Peev

 

5.8Waiver.  This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.  

 

5.9Attorney’s Fees.  In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.

 

5.10Counterparts.  This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement.

 

5.11Governing Law.  This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to its principles regarding conflicts of law.

 

	
 
	
10
	
 

 

 

 

5.12Provisions for the Benefit of the Lenders.  Notwithstanding anything herein to the contrary, nothing contained in this Warrant shall affect, limit or impair the rights and remedies of SWK in its capacity as a lender to the Company or any of the Company’s subsidiaries pursuant to the Credit Agreement among the Company, SWK, as Agent, Sole Lead Arranger and Sole Bookrunner, and the financial parties thereto from to time as lenders, dated as of the date hereof, or any other agreements or instruments entered into in connection therewith.  Without limiting the generality of the foregoing, SWK in exercising its rights as a lender will not have any duty to consider (a) its status as a direct or indirect stockholder of the Company and the Company’s subsidiaries, (b) the direct or indirect ownership of the Shares, or (c) any duty it may have to any other direct or indirect stockholder of the Company and the Company’s subsidiaries, except as may be required under the applicable loan documents.

 

[SIGNATURES APPEAR ON NEXT PAGE]

 

 

	
 
	
11
	
 

 

 

IN WITNESS WHEREOF, the undersigned have executed this Warrant as of the day and year first above written.

 

	
“COMPANY”
	
 

	
 
	
 
	
 
	
 

	
BIOLASE, INC.
	
 

	
 
	
 
	
 
	
 

	
By:
	
 
	
/s/ John R. Beaver
	
 

	
 
	
 
	
 
	
 

	
Name:
	
 
	
John R. Beaver
	
 

	
 
	
 
	
(Print)
	
 

	
 
	
 
	
 
	
 

	
Title:
	
 
	
Chief Financial Officer
	
 

 

 [Signature Page to Warrant]

 

 

	
 
	
SWK FUNDING LLC

	
 
	
 
	
 
	
 

	
 
	
By: SWK Holdings Corporation, 

	
 
	
its sole Manager

	
 
	
 
	
 
	
 

	
 
	
By:
	
 
	
/s/ Winston Black

	
 
	
Name:
	
 
	
Winston Black

	
 
	
Title:
	
 
	
Chief Executive Officer

 

 

 

[Signature Page to Warrant]

 

APPENDIX 1

 

NOTICE OF EXERCISE

 

The undersigned, pursuant to the provisions set forth in the attached Warrant (No.           ), hereby irrevocably elects to purchase (check applicable box):

                        Shares covered by such Warrant.

       The undersigned herewith makes payment of the full purchase price for such Shares at the price per share provided for in such Warrant, which is $                    .  Such payment takes the form of (check applicable box or boxes):

       $                 in lawful money of the United States; and/or 

       the cancellation of such number of Shares as is necessary, in accordance with the formula set forth in Section 1.2, to exercise this Warrant with respect to                  Shares (using a Fair Market Value of $               per Share for purposes of this calculation) purchasable pursuant to the cashless exercise procedure set forth in Section 1.2.

The undersigned requests that the certificates for such Shares be issued in the name of, and delivered to                                                                                                               whose address is 

 

	
	
 

 

By its execution below and for the benefit of the Company, Holder hereby restates each of the representations and warranties in Article 4 of the Warrant as of the date hereof.

 

	
 
	
HOLDER:

	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
By:
	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
Name:
	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
Title:
	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
(Date):
	
 
	
 

 

Appendix 1-1

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