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May 30, 1997


The opinion of the court was delivered by: DOLINGER



 Plaintiff Commonwealth Associates is an investment banking firm, and offers financial advisory services to other entities. It commenced this action against Palomar Medical Technologies, Inc. to seek redress for Palomar's alleged breach of a contract under which Palomar was to provide certain compensation to Commonwealth for the rendering of such advisory services.

 By Memorandum and Order dated January 22, 1997, the Hon. Harold Baer granted a motion by plaintiff for partial summary judgment. *fn1" In his decision Judge Baer held that defendant had breached the agreement and was therefore liable to Commonwealth for its damages. The parties thereafter consented to try the damage question before me pursuant to 28 U.S.C. ┬ž 636(c).

 We conducted a bench trial on April 14, 1997. Based on the evidence adduced at that trial, I conclude that Palomar is liable to plaintiff in the amount of $ 2,917,500.00 in contract damages. I further hold that Commonwealth is entitled to pre-judgment interest in the amount of $ 256,570.56.

 A. The Facts

 Commonwealth and Palomar entered into a written agreement dated January 17, 1995. Under its terms, Commonwealth pledged to provide advisory services to Palomar for a period of nine months in connection with anticipated merger or acquisition transactions. (SJ Dec. at second page; Tr. 13-14, 16; PX 1 at P 1).

 In return Palomar agreed to pay Commonwealth $ 50,000.00 upon execution of the contract and further bound itself to issue five-year non-callable warrants to Commonwealth for the purchase of 25,000 shares of common stock of Palomar at $ 3.00 per share. To effectuate this transaction, the contract provided that the warrants were to be issued within forty-five days after execution and that the "terms and conditions" of the warrants were to "include antidilution provisions, registration rights and other provisions customarily included in warrant agreements, all to be mutually agreed upon; . . . ." Finally, the contract provided for the issuance of additional warrants for 25,000 shares "upon the consummation of any Acquisition." (Tr. 14, 78-82; PX 1 at PP 3(b)-(c)).

 This contract was amended in part by a letter agreement dated March 9, 1995, which was executed by the chief executive officers of the two companies. (Tr. 14-15, 21-22; PX 2). Under its terms, the compensation to be provided to Commonwealth was increased in two respects. First, Palomar agreed to pay Commonwealth $ 12,500 upon execution of the amended agreement and to make monthly payments thereafter of $ 12,500.00, starting April 3, 1995 and continuing during the life of the contract. (Tr. 88-89; PX 2 at P 1). Second, the parties agreed that the warrants to be issued to Commonwealth, irrespective of whether any transactions were completed, would be increased to cover 250,000 rather than 25,000 shares. (PX 2 at P 2). In return, Commonwealth's chief executive officer, Michael Falk, apparently agreed informally that Commonwealth would devote still greater attention to the investment prospects of Palomar, although this promise was apparently not reduced to writing. (Tr. 25).

 It is not disputed that Palomar never made any of the $ 12,500.00 payments required by the contract. (SJ Dec. at third page; Tr. 62-63). It is also not disputed that Palomar never issued the warrants to Commonwealth, as also required by the agreement (SJ Dec. at third page; Tr. at 23-24) and declined as well to register the warrants with the Securities and Exchange Commission ("SEC"). (Tr. 32).

 Palomar never executed the warrant agreement or issued the warrants. (Tr. 97, 98-103). Indeed, it never took any action either to comply with this aspect of the parties' contract or to cancel the agreement, as it was permitted to do under the contract. It did, however, comply with other aspects of its contractual obligations, including payment of the out-of-pocket disbursements incurred by Commonwealth in rendering required services to Palomar. (Tr. 90-95; PXs 7-9).

 By its terms, the agreement was to lapse in October 1995 unless renewed by Palomar. (Tr. 25; PX 1 at P 1). The company did not take such a step, and thus the agreement lapsed on October 17, 1995. (Tr. 154).

 Subsequent to this date, Commonwealth took little or no action for approximately five months in seeking to obtain an executed warrant agreement or the issuance of the warrants. According to Mr. Falk, Commonwealth did not press the matter because it did not have any immediate intention to sell the shares represented by the warrants, and he believed that it was disadvantageous to seek registration of the warrants and the issuance of the shares because the registration could become "stale", that is, lose its legal effect. (Tr. 10, 56-57. See also Tr. 97-98).

 Finally, on March 5, 1996 Commonwealth transmitted a letter to Palomar, formally requesting the registration of the warrants with the SEC and the issuance of the 250,000 shares. (Tr. 27-29; PX 5). According to Mr. Falk, it undertook that step because it was prepared to arrange a fairly prompt sale of the shares. That decision resulted from the confluence of two factors. First, the market price of Palomar shares had risen to more than $ 12.00 per share, thus guaranteeing Commonwealth a substantial profit if it sold promptly. (Tr. 26; PX 12). Second, Commonwealth was facing a cash flow problem because it was required to repay two substantial obligations, one by June 30, 1996 and the other in September 1996. (Tr. 26-27).

 Palomar did not respond to this letter in any way. (Tr. 31). Accordingly, Bello sought to elicit a response by repeated telephone calls to the principal representatives of the company. He finally reached Georgiev, who indicated that the company was not prepared to honor the commitment to issue the warrants and assign the shares to Commonwealth at the specified price. (Tr. 99-102).

 Consistent with its refusal to honor this aspect of the agreement, Palomar failed to notify Commonwealth of registrations that it was filing with the SEC. (Tr. 32). Among these was a ...

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