Item 1.01. Entry into a Material Definitive Agreement.
On March
31, 2017, PhotoMedex, Inc. (the “
Company
”) and its newly-formed subsidiary FC Global Realty Operating Partnership,
LLC, a Delaware limited liability company (“
Acquiror
”) entered into an Interest Contribution Agreement (the
“Agreement”) with First Capital Real Estate Operating Partnership, L.P., a Delaware limited partnership (“
Contributor
”),
and First Capital Real Estate Trust Incorporated, a Maryland corporation, the “
Contributor Parent
” and, together
with Contributor, the “
Contributor Parties
”), under which the Contributor may contribute certain real estate
assets to the Company’s subsidiary in a series of three installments no later than December 31, 2017. In exchange, the Contributor
will receive shares of the Company’s Common Stock and newly designated Series A Convertible Preferred Stock as described
below.
First Contribution
In the first contribution installment, which has an initial closing on or before May 17, 2017, the Contributor
will transfer $10 million of assets to the Company, comprising four vacant land sites set for development into gas stations located
in northern California, and a single family residential development located in Los Lunas, New Mexico. Contributor Parent currently
has a 6% interest in the entity which owns the residential development, and expects to acquire an additional 11.9% interest prior
to the initial closing date. The proposed gas station sites are located in Atwater and Merced, California and have an appraised
value of $2.6 million. The residential development in New Mexico consists of 251, non-contiguous, single family residential lots
and a 10,000 square foot club house. 37 lots have been finished, and the remaining 214 are platted and engineered lots. The appraised
value of this property is approximately $7.4 million.
In return, the Company will issue to Contributor a number of duly
authorized, fully paid and non-assessable shares of the Company’s Common Stock and Series A Convertible Preferred Stock,
determined by dividing the $10 million value of that contribution by a specified per share value, which will represent a 7.5% premium
above the volume-weighted average price (“
VWAP
”) of all on-exchange transactions in the Company’s shares
executed on NASDAQ during the forty-three (43) NASDAQ trading days prior to the NASDAQ trading day immediately prior to the public
announcement of the transaction by the Company and Contributor Parent, as reported by Bloomberg L.P. (the “
Per Share Value
”).
Contributor shall receive a number of shares equal to up to 19.9% of the issued and outstanding Common Stock of the Company immediately
prior to the initial closing. The balance of the shares shall be paid in the Company’s newly designated Series A Convertible
Preferred Stock.
Also at this initial closing, the Acquiror shall assume the liabilities
associated with these initial contributed properties. On or before this initial closing, certain named officers and/or directors
of the Company – Dr. Dolev Rafaeli, Dennis McGrath, and Dr. Yoav Ben-Dror – will resign from their positions as officers
and/or directors of the Company. In addition, certain members of the Company’s board of directors will resign, or the board
will be expanded, so that the board will ultimately consist of seven (7) persons as set forth under “Special Meeting of Stockholders”
below.
Second Contribution
Contributor Parent is also required to contribute two additional
property interests valued at $20 million if certain conditions as set forth in the Agreement are satisfied by December 31, 2017.
This second installment is mandatory.
Contributor Parent must contribute to the Acquiror its 100% ownership
interest in a private hotel that is currently undergoing renovations to convert to a Wyndham Garden Hotel. This 265 room full service
hotel is located in Amarillo, Texas and has an appraised value of approximately $16 million. Before contributing the property to
the Acquiror, Contributor Parent must resolve a lawsuit concerning ownership of the property. Only when Contributor Parent has
confirmed that it is the full and undisputed owner of the property may it contribute that interest to the Acquiror.
In addition, Contributor Parent must contribute to the Acquiror
its interest in Dutchman’s Bay and Serenity Bay (referred to as the “
Antigua Resort Developments
”), two
planned full service resort hotel developments located in Antigua and Barbuda in which Contributor Parent owns a 75% interest in
coordination with the Antigua government. Serenity Bay is a planned five star resort comprised of five contiguous parcels (28.33
acres) zoned for hotel and residential use that are planned for 246 units and 80 one, two and three bedroom condo units. Dutchman’s
Bay, is a planned four star condo hotel with 180 guestrooms, 102 two bedroom condos, and 14 three bedroom villas. For the property
in Antigua, Contributor Parent must obtain an amendment to its agreement with the government to extend the time for development
of these properties and confirm that all development conditions in the original agreement with the government have been either
satisfied or waived.
In exchange for each of these properties, the Company will issue
to Contributor a number of duly authorized, fully paid and non-assessable shares of the Company’s Common Stock or Series
A Convertible Preferred Stock, determined by dividing the $20 million value of that contribution by the Per Share Value. The shares
shall be comprised entirely of shares of Common Stock if the issuance has been approved by the Company’s stockholders prior
to the issuance thereof and shall be comprised entirely of shares of Series A Convertible Preferred Stock if such approval has
not yet been obtained.
Optional Contribution
Contributor Parent has the option to contribute either or both of
two additional property interests valued at $66.5 million if certain conditions as set forth in the Agreement are satisfied by
December 31, 2017. This third installment is optional in Contributor Parent’s sole discretion.
The Contributor Parent may contribute to the Acquiror its
interest in a resort development project on an island just south of Hilton Head, South Carolina
(“
Melrose
”). Contributor Parent currently has the property under a Letter of Intent and expects to close
on the property by December 31, 2017. Melrose is valued by Contributor Parent at $22.5 million, based upon a senior lending
position that Contributor Parent holds under the Letter of Intent on this property.
Contributor Parent also may contribute to the Acquiror a golf and
surf club development project on the Baja Peninsula in Mexico (“
Punta Brava
”). Contributor Parent also has this
property under a Letter of Intent and expects to close by December 31, 2017. Punta Brava is valued by Contributor Parent at $44
million based on Contributor Parent’s commitment of $5 million upon closing on this property, plus a commitment for an additional
$5 million and a second commitment of $34 million for construction of the project.
In exchange for each of these properties, the Company will issue
to Contributor a number of duly authorized, fully paid and non-assessable shares of the Company’s Common Stock or Series
A Convertible Preferred Stock, determined by dividing $86,450,000 (130% of the value of that contribution) by the Per Share Value.
The shares shall be comprised entirely of shares of Common Stock if the issuance has been approved by the Company’s stockholders
prior to the issuance thereof and shall be comprised entirely of shares of Series A Convertible Preferred Stock if such approval
has not yet been obtained. In addition, the Company will issued to Contributor a five (5) year warrant (the “
Warrant
”)
to purchase up to 25,000,000 shares of the Company’s Common Stock at an exercise price of $3.00 per share that shall vest
with respect to the number of underlying shares upon the achievement of the milestone specified Agreement. The number of warrant
shares and the exercise price will be equitably adjusted in the event of a stock split, stock combination, recapitalization or
similar transaction.
General Conditions
In each case, the Company’s board of directors will determine
whether or not the pre-contribution conditions have been satisfied before accepting the property interests and issuing shares of
the Company’s stock to Contributor Parent.
The Agreement is subject to the usual pre- and post-closing representations,
warranties and covenants, and restricts the Company’s conduct to the conduct to that in the ordinary course of business between
the signing and December 31, 2017.
Under the Agreement, amounts due to Dr. Dolev Rafaeli and Dennis
McGrath under their employment agreements, as well as amounts due to Dr. Yoav Ben-Dror for his services as a board member and officer
of the Company’s foreign subsidiaries, will be converted to convertible secured notes (the “
Payout Notes
”)
after approval from the Company’s stockholders. The Payout Notes will be due one year after the stockholder approval and
carry a ten percent (10%) interest rate. The principal will convert to shares of the Company’s Common Stock at the lower
of (i) the Per Share Value or (ii) the VWAP with respect to on-exchange transactions in the Company’s Common Stock executed
on the NASDAQ during the thirty (30) trading days prior to the maturity date as reported by Bloomberg L.P.; provided, however,
that the value of the Company’s Common Stock shall in no event be less than $1.75 per share. The Payout Notes will be secured
by a security interest in all assets of the Company; provided, however, that such security interest will be subordinated to any
(i) claims or liens to the holders of any debt (including mortgage debt) being assumed by the Company as a result of the transaction
contemplated by the Agreement, and (ii) all post-closing indebtedness incurred by the Company or its subsidiaries. The holders
of the Payout Notes will have demand registration rights which requiring the filing of a re-sale registration statement on appropriate
form that registers for re-sale the shares of Common Stock underlying the Payout Notes within thirty (30) days of issuance with
best efforts to cause the same to become effective within one-hundred twenty (120) days of issuance.
Special Meeting of Stockholders
As promptly as possible following the initial closing, the Company
is required file a proxy statement and hold a special meeting of its stockholders to authorize and approve the following matters:
• an increase the number of authorized shares of common
stock, $.01 par value per share, of the Company from fifty million (50,000,00) shares to five hundred million (500,000,000) shares
and increase the number of authorized shares of preferred stock, $.01 par value per share, of the Company from five million (5,000,000)
shares to fifty million (50,000,000) shares;
• the issuance to the Contributor or its designee or designees
the Company’s shares in exchange for the contributed assets, and the issuance of the Warrant and, upon exercise of the Warrant,
the underlying shares of the Company’s Common Stock in exchange for the contribution of the optional property interests,
if any are made;
• the amendment and restatement of the Articles of Incorporation
of the Company;
• the amendment and restatement the Bylaws of the Company;
• the approval of the issuance of the Payout Notes and the
issuance of the Company’s Common Stock upon conversion thereof; and
• the election a new Board of Directors to consist of seven
(7) persons of whom (i) three (3) shall be designated by the Company, (ii) three (3) shall be designated by Contributor Parent;
and (iii) one (1) (the “
Nonaffiliated Director
”) shall be selected by the other six (6) directors; provided,
however, that at least four (4) of the members of the Board of Directors as so designated shall be independent directors as provided
by the rules of NASDAQ (each an “
Independent Director
”). Of the board designees of the parties, one (1) of the
Company’s designees shall be an Independent Director, two (2) of the Contributor Parent’s designees shall be Independent
Directors and the Nonaffiliated Director shall be an Independent Director. The compensation committee, nominations and corporate
governance committee and audit committee of the Company shall each consist of the Company’s designee who is an Independent
Director, one of Contributor Parent’s designees who is an Independent Director and the Nonaffiliated Director.
Board members, officers and certain insiders of the Company are
subject to a voting agreement under which they are obligated to vote in favor of the proposals at the stockholder meeting.
Registration Rights
Promptly following the execution of the Agreement, the Company is
required prepare and file with the Securities and Exchange Commission two registration statements on Form S-3 (or such other form
available for this purpose) (the “
Registration Statements
”) to register (a) the primary offering by the Company
(i) to the holders of the Payout Notes the Common Stock underlying the Payout Notes, and (ii) to the unaffiliated shareholders
of Contributor Parent the Common Stock distributed to such unaffiliated shareholders as a dividend by Contributor Parent and (b)
the secondary offering (i) by the Contributor Parties of all the shares of the Company’s Common Stock (including, without
limitation, the shares of Common Stock underlying the Warrant) retained by the Contributor Parties, (ii) by Maxim Group LLC of
the shares received by it as compensation for services rendered to Contributor Parent, and (ii) by certain affiliates of the Contributor
Parent who receive shares from Contributor Parent.
Termination Fee
Finally, the transaction is subject to a termination provision under
which, in the event of a material breach of the terms of the transaction, the breaching company must pay all out-of-pocket expenses
of the non-breaching company incurred up to the date of termination of the transaction.
The foregoing summary of the terms and conditions of the Agreement
does not purport to be complete and is qualified in its entirety by reference to the full text of the agreement attached hereto
as Exhibit 10.1, which is incorporated herein by reference.
Forward-Looking Statements
This Current Report on Form 8-K may contain "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainty.
Such statements are based on management's current expectations and are subject to a number of risks and uncertainties that could
cause actual results to differ materially from those described in the forward-looking statements. Investors are cautioned that
there can be no assurance actual results or business conditions will not differ materially from those projected or suggested in
such forward-looking statements as a result of various factors. Forward looking statements include, but are not limited to, statements
with respect to the plans, strategies and objectives of management for future operations; product development, extensions and marketing;
and expectations, beliefs or assumptions underlying any of the foregoing. The important factors that could cause actual results
to differ significantly from those expressed or implied by such forward-looking statements include, but are not limited to, changes
in consumers’ spending habits and the marketability of certain products. Please refer to the risks detailed from
time to time in the reports we file with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2015,
as well as other filings on Form 10-Q and periodic filings on Form 8-K, for additional factors that could cause actual results
to differ materially from those stated or implied by such forward-looking statements. We disclaim any intention or obligation to
update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, unless required
by law.