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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: February 24, 1999
ROBOTIC VISION SYSTEMS, INC.
(Exact name of Registrant as specified in charter)
Delaware 000-8623 11-2400145
(State or other (Commission File No.) (IRS Employer
jurisdiction of Identification
incorporation) Number)
5 Shawmut Road, Canton, Massachusetts 02021
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 821-0830
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ITEM 5. Other Events
On February 22, 1999, Registrant completed an $11.0 million private
equity placement consisting of (i) five-year prepaid common stock purchase
warrants ("Prepaid Warrants") entitling the holders to acquire such number of
shares of Registrant's common stock as shall be equal to $11.0 million divided
by an exercise price equal to the lesser of (x) $4.02 or (y) 95% of the average
of the three lowest closing bid prices of Registrant's common stock during the
20 consecutive trading day period prior to the exercise date, and (ii)
five-year incentive common stock purchase warrants("Incentive Warrants")
entitling the holders to acquire approximately 592,307 shares of Registrant's
common stock at an exercise price of $4.02 per share. Both the Prepaid Warrants
and the Incentive Warrants contain provisions to protect the respective holders
against dilution, including any future sales of Registrant's equity securities
at below then prevailing market prices (subject to enumerated exceptions).
The Prepaid Warrants bear an annual premium of 7% per annum, payable
in cash or, at Registrant's option, in shares of its common stock, and are
initially exercisable, to the extent of 25% of the total number of shares
issuable, commencing on the 180th day following their issuance, increasing by
increments of 25% every 90 days thereafter so that after the passage of 450
days following the date of original issuance, the Prepaid Warrants will have
become fully exercisable.
The Prepaid Warrants are subject to call at Registrant's option if
(x), during the 20-day trading day period immediately preceding the date of
Registrant's notice of redemption the average closing bid price, and (y) on the
date of Registrant's notice of redemption the closing bid price, of
Registrant's common stock is less than $4.02 per share (subject to
anti-dilution adjustment),at a cash price equal to 120% of the exercise amount
of the Prepaid Warrants (inclusive of earned premium) called for redemption.
Such call right may be exercised up to four times during the term of the
Prepaid Warrants. The Prepaid Warrants are also subject to redemption by
Registrant, at its option, if their exercise price, calculated in the manner
set forth in the first paragraph hereof, falls below $2.50 per share.
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The Zanett Securities Corporation acted as placement agent and
received placement fees and a non-accountable expense allowance totaling 8.9%
of the gross proceeds of the offering, and five-year Incentive Warrants to
acquire 629,915 shares of Registrant's common stock at an exercise price of
$4.02 per share.
Registrant has agreed that it will file with the Securities and
Exchange Commission a registration statement to effect a registration of its
shares of common stock issuable upon exercise of the Prepaid Warrants and the
Incentive Warrants.
Registrant intends to use the net proceeds of this private equity
placement for working capital purposes.
ITEM 7. Financial Statements and Exhibits
(a) Financial Statements:
None
(b) Exhibits:
Exhibit No. Description
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7.1 Securities Purchase Agreement dated as of February
18, 1999 among Robotic Vision Systems, Inc. and the
purchasers parties thereto.
7.2.1 Form of Prepaid Warrant.
7.2.2 Alternative Form of Prepaid Warrant.
7.3 Registration Rights Agreement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: February 24, 1999 ROBOTIC VISION SYSTEMS, INC.
(registrant)
By: /s/Ira Roxland
---------------------------
Ira Roxland
Assistant Secretary
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of February
18, 1999, by and among ROBOTIC VISION SYSTEMS, INC., a corporation organized
under the laws of the State of Delaware (the "COMPANY"), and each of the
purchasers (the "PURCHASERS") set forth on the execution pages hereof (the
"EXECUTION PAGES").
WHEREAS:
A. The Company and each Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("REGULATION D"), as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "SECURITIES ACT").
B. The Company desires to sell, and the Purchasers collectively desire
to purchase, upon the terms and conditions stated in this Agreement, 11,000
units (the "UNITS"), each Unit consisting of (i) a Prepaid Common Stock Purchase
Warrant, in the form attached hereto as Exhibit A (the "PREPAID WARRANTS"),
which entitles the holder thereof to acquire such number of shares of the
Company's common stock, par value $.01 per share (the "COMMON STOCK"), as is
equal to One Thousand Dollars ($1,000) divided by the Exercise Price set forth
in the Prepaid Warrants, and (ii) an additional warrant, in the form attached
hereto as Exhibit B, to acquire 53.8461 shares of Common Stock (the "INCENTIVE
WARRANTS"). The shares of Common Stock issuable upon exercise of or otherwise
pursuant to the Prepaid Warrants and the Incentive Warrants are referred to
herein as the "WARRANT SHARES." The Prepaid Warrants, the Incentive Warrants and
the Warrant Shares are collectively referred to herein as the "SECURITIES" and
each of them may individually be referred to herein as a "SECURITY."
C. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
in the form attached hereto as Exhibit C (the "REGISTRATION RIGHTS AGREEMENT"),
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated thereunder,
and applicable state securities laws.
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NOW, THEREFORE, the Company and the Purchasers hereby agree as follows:
1. PURCHASE AND SALE OF UNITS.
a. Purchase of Units. The issuance, sale and purchase of the Units
shall take place in a closing (the "CLOSING"). The purchase price (the "PURCHASE
PRICE") per Unit shall be equal to One Thousand Dollars ($1,000.00). Each
Purchaser's obligation to purchase Units hereunder is distinct and separate from
each other Purchaser's obligation to purchase Units and no Purchaser shall be
required to purchase hereunder more than the number of Units set forth on such
Purchaser's Execution Page hereto notwithstanding any failure by any other
Purchaser to purchase Units hereunder. On the date of the Closing, subject to
the satisfaction (or waiver) of the conditions set forth in Section 6 and
Section 7 below, the Company shall issue and sell to each Purchaser, and each
Purchaser severally agrees to purchase from the Company, such number of Units as
is set forth on such Purchaser's Execution Page as being purchasable by such
Purchaser at the FIRST CLOSING.
b. Form of Payment. At the Closing hereunder, each Purchaser shall pay
the aggregate Purchase Price for the Units being purchased by such Purchaser at
such closing hereunder by wire transfer to the Company, in accordance with the
Company's written wiring instructions, against delivery of the duly executed
Prepaid Warrants and Incentive Warrants being purchased by such Purchaser at
such closing hereunder and the Company shall deliver such Prepaid Warrants and
Incentive Warrants against delivery of such aggregate Purchase Price.
c. Closing Date. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Units pursuant to this Agreement shall be 12:00
noon, New York City time, on February 19, 1999, or such other time as may be
mutually agreed upon by the Company and the Purchasers purchasing Units. The
Closing shall occur at the offices of Klehr, Harrison, Harvey, Branzburg &
Ellers, LLP, 1401 Walnut Street, Philadelphia, Pennsylvania 19102.
2. PURCHASERS' REPRESENTATIONS AND WARRANTIES
Each Purchaser severally represents and warrants to the Company as
follows:
a. Investment Purpose. Purchaser is purchasing the Units for
Purchaser's own account for investment purposes only and not with a present view
towards the public sale or distribution thereof, except pursuant to sales that
are exempt from the registration requirements of the Securities Act and/or sales
registered under the Securities Act. Purchaser understands that Purchaser must
bear the economic risk of this investment indefinitely, unless the Securities
are registered pursuant to the Securities Act and any applicable state
securities or blue sky laws or an exemption from such registration is available,
and that the Company has no present intention of registering the resale of any
such Securities other than as contemplated by the Registration Rights Agreement.
Notwithstanding anything in this Section 2(a) to the contrary, by making the
representations herein,
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the Purchaser does not agree to hold the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time in
accordance with or pursuant to a registration statement or an exemption from the
registration requirements under the Securities Act.
b. Accredited Investor Status. Purchaser is an "ACCREDITED INVESTOR" as
that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. Purchaser understands that the Units are
being offered and sold to Purchaser in reliance upon specific exemptions from
the registration requirements of United States federal and state securities laws
and that the Company is relying upon the truth and accuracy of, and Purchaser's
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of Purchaser to acquire the
Units.
d. Information. Purchaser and its counsel, if any, have been furnished
all materials relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Securities which have been
specifically requested by Purchaser or its counsel (including the SEC Documents
(as defined in Section 3(f) hereof)). Purchaser and its counsel have been
afforded the opportunity to ask questions of the Company and have received what
Purchaser believes to be satisfactory answers to any such inquiries. Neither
such inquiries nor any other investigation conducted by Purchaser or its counsel
or any of its representatives shall modify, amend or affect Purchaser's right to
rely on the Company's representations and warranties contained in Section 3
below. Purchaser understands that Purchaser's investment in the Securities
involves a high degree of risk.
e. Governmental Review. Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities.
f. Transfer or Resale. Purchaser understands that (i) except as
provided in the Registration Rights Agreement, the sale or resale of the
Securities have not been and are not being registered under the Securities Act
or any state securities laws, and the Securities may not be transferred unless
(a) the resale of the Securities has been registered thereunder; or (b)
Purchaser shall have delivered to the Company an opinion of counsel (which
opinion shall be in form, substance and scope customary for opinions of counsel
in comparable transactions) to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; or (c) the Securities are sold under Rule 144 promulgated under
the Securities Act (or a successor rule) ("RULE 144"); or (d) the Securities are
sold or transferred to an affiliate of Purchaser who agrees to sell or otherwise
transfer the Securities only in accordance with the provisions of this Section
2(f) and who is an Accredited Investor; and (ii) neither the Company nor any
other person is under any obligation to register such Securities under the
Securities Act or any state securities laws (other than pursuant to the
Registration Rights Agreement). Notwithstanding
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the foregoing or anything else contained herein to the contrary, the Securities
may be pledged as collateral in connection with a bona fide margin account or
other lending arrangement.
g. Legends. Purchaser understands that the Prepaid Warrants and
Incentive Warrants and, until such time as the Warrant Shares have been
registered under the Securities Act as contemplated by the Registration Rights
Agreement or otherwise may be sold by Purchaser under Rule 144, the certificates
for the Warrant Shares may bear a restrictive legend in substantially the
following form:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or the securities laws of
any state of the United States. The securities represented hereby may
not be offered, sold, transferred or assigned in the absence of an
effective registration statement for the securities under applicable
securities laws unless offered, sold, transferred or assigned under an
available exemption from the registration requirements of those laws.
The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by state securities laws, (a) the sale of
such Security is registered under the Securities Act as contemplated by the
Registration Rights Agreement; (b) such holder provides the Company with an
opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that a public sale or transfer
of such Security may be made without registration under the Securities Act; or
(c) such holder provides the Company with reasonable assurances that such
Security can be sold under Rule 144. Purchaser agrees to sell all Securities,
including those represented by a certificate(s) from which the legend has been
removed, pursuant to an effective registration statement or under an exemption
from the registration requirements of the Securities Act. In the event the above
legend is removed from any Security and thereafter the effectiveness of a
registration statement covering such Security is suspended or the Company
determines that a supplement or amendment thereto is required by applicable
securities laws, then upon reasonable advance notice to Purchaser the Company
may require that the above legend be placed on any such Security that cannot
then be sold pursuant to an effective registration statement or under Rule 144
and Purchaser shall cooperate in the replacement of such legend. Such legend
shall thereafter be removed when such Security may again be sold pursuant to an
effective registration statement or under Rule 144.
h. Authorization; Enforcement. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of Purchaser and are valid and binding agreements of Purchaser
enforceable in accordance with their terms.
i. Residency. Purchaser is a resident of the jurisdiction set forth
under such Purchaser's name on the Execution Page hereto executed by such
Purchaser.
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Purchaser as follows:
a. Organization and Qualification. The Company and each of its
subsidiaries is a corporation or limited liability company duly organized and
existing in good standing under the laws of the jurisdiction in which it is
incorporated or formed, as the case may be, and has the requisite corporate or
limited liability company power, as applicable, to own its properties and to
carry on its business as now being conducted. The Company and each of its
subsidiaries is duly qualified as a foreign corporation or limited liability
company, as applicable, to do business and is in good standing in every
jurisdiction in which the nature of the business conducted by it makes such
qualification necessary and where the failure so to qualify would have a
Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any material adverse
effect on (i) the Securities, (ii) the ability of the Company to perform its
obligations hereunder or under the Prepaid Warrants, the Incentive Warrants or
the Registration Rights Agreement or (iii) the business, operations, properties,
prospects or financial condition of the Company and its subsidiaries, taken as a
whole.
b. Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement, the Prepaid Warrants, the Incentive Warrants and the
Registration Rights Agreement, to issue and sell the Units in accordance with
the terms hereof, and to issue the Warrant Shares upon exercise of the Prepaid
Warrants and the Incentive Warrants, as applicable, in accordance with the terms
of such Warrants; (ii) the execution, delivery and performance of this
Agreement, the Prepaid Warrants, the Incentive Warrants and the Registration
Rights Agreement by the Company and the consummation by it of the transactions
contemplated hereby and thereby (including, without limitation, the issuance of
the Prepaid Warrants and the Incentive Warrants and the issuance and reservation
for issuance of the Warrant Shares) have been duly authorized by the Company's
Board of Directors and no further consent or authorization of the Company, its
Board of Directors, any committee of the Board of Directors, or the Company's
stockholders is required (under Rules 4310(c)(25)(H) or 4460(i) promulgated by
the National Association of Securities Dealers ("NASD") (assuming for such
purposes that the Variable Exercise Price (as defined in the Prepaid Warrant) is
the Variable Exercise Price in effect as of the date hereof) or otherwise);
(iii) this Agreement has been duly executed and delivered by the Company; and
(iv) this Agreement constitutes, and, upon execution and delivery by the Company
of the Prepaid Warrants, the Incentive Warrants and the Registration Rights
Agreement, such agreements will constitute, valid and binding obligations of the
Company enforceable against the Company in accordance with their terms.
c. Capitalization. The capitalization of the Company as of the date
hereof, including the authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant to
the Company's stock option plans, the number of shares issuable and reserved for
issuance pursuant to securities (other than the Prepaid Warrants and the
Incentive Warrants) exercisable or exchangeable for, or convertible into, any
shares of capital stock and the number of shares to be reserved for issuance
upon exercise of the Prepaid Warrants
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and the Incentive Warrants is set forth on Schedule 3(c). All of such
outstanding shares of capital stock have been, or upon issuance in accordance
with the terms of any such warrants or options, will be, validly issued, fully
paid and non-assessable. None of the authorized but unissued shares of capital
stock of the Company (including the Warrant Shares) are subject to preemptive
rights or any other similar rights of the stockholders of the Company or any
liens or encumbrances created by the Company. Except for the Securities and as
set forth on Schedule 3(c), as of the date of this Agreement, (i) there are no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exercisable or exchangeable for, any shares of capital stock
of the Company or any of its subsidiaries, or arrangements by which the Company
or any of its subsidiaries is or may become bound to issue additional shares of
capital stock of the Company or any of its subsidiaries, and (ii) there are no
agreements or arrangements under which the Company or any of its subsidiaries is
obligated to register the sale of any of its or their securities under the
Securities Act (except the Registration Rights Agreement). Except as set forth
on Schedule 3(c), there are no securities or instruments containing antidilution
or similar provisions that will be triggered by the issuance of the Securities
in accordance with the terms of this Agreement, the Prepaid Warrants or the
Incentive Warrants. The Company has furnished to the Purchasers true and correct
copies of the Company's Certificate of Incorporation as in effect on the date
hereof ("CERTIFICATE OF INCORPORATION"), the Company's By-laws as in effect on
the date hereof (the "BY-LAWS"), and all other forms of instruments and
agreements governing securities convertible into or exercisable or exchangeable
for capital stock of the Company.
d. Issuance of Warrant Shares. The Warrant Shares are duly authorized
and reserved for issuance, and, upon exercise of the Prepaid Warrants and the
Incentive Warrants, as applicable, in accordance with the terms thereof, will be
validly issued, fully paid and non-assessable, and free from all taxes, liens,
claims and encumbrances and will not be subject to preemptive rights or other
similar rights of stockholders of the Company and will not impose personal
liability upon the holder thereof.
e. No Conflicts. The execution, delivery and performance of this
Agreement, the Warrants and the Registration Rights Agreement by the Company and
the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the issuance and reservation for
issuance of the Warrant Shares) will not (i) result in a violation of the
Certificate of Incorporation or By-laws or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment
(including, without limitation, the triggering of any anti-dilution provisions),
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, or result in a violation of
any law, rule, regulation, order, judgment or decree (including U.S. federal and
state securities laws and regulations and rules or regulations of any
self-regulatory organizations to which either the Company or its securities are
subject) applicable to the Company or any of its subsidiaries or by which any
property or asset of the Company or any of its subsidiaries is bound or affected
(except, with respect to clause (ii), for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as
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would not, individually or in the aggregate, have a Material Adverse Effect).
Neither the Company nor any of its subsidiaries is in violation of its
Certificate of Incorporation, By-laws or other organizational documents and
neither the Company nor any of its subsidiaries is in default (and no event has
occurred which, with notice or lapse of time or both, would put the Company or
any of its subsidiaries in default) under, nor has there occurred any event
giving others (with notice or lapse of time or both) any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its subsidiaries is a party, except
for (i) actual or possible violations, defaults or rights as would not,
individually or in the aggregate, have a Material Adverse Effect and (ii) as set
forth in Schedule 3(e) hereto. The businesses of the Company and its
subsidiaries are not being conducted, and shall not be conducted so long as a
Purchaser owns any of the Securities, in violation of any law, ordinance or
regulation of any governmental entity, except for possible violations the
sanctions for which either singly or in the aggregate would not have a Material
Adverse Effect. Except as specifically contemplated by this Agreement and the
Registration Rights Agreement, the Company is not required to obtain any
consent, approval, authorization or order of, or make any filing or registration
with, any court or governmental agency or any regulatory or self regulatory
agency or any other person or entity in order for it to execute, deliver or
perform any of its obligations under this Agreement, the Prepaid Warrants, the
Incentive Warrants or the Registration Rights Agreement, in each case in
accordance with the terms hereof or thereof. The Company is not in violation of
the listing requirements of the Nasdaq National Market (the "NATIONAL MARKET")
and does not reasonably anticipate that the Common Stock will be delisted by the
National Market for the foreseeable future.
f. SEC Documents, Financial Statements. Except as set forth in Schedule
3(f) hereof, since September 30, 1995, the Company has filed (within applicable
extension periods) all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") (all of
the foregoing and all exhibits included therein and financial statements and
schedules thereto and documents incorporated by reference therein, being
hereinafter referred to herein as the "SEC DOCUMENTS"). The Company has
delivered to the Purchasers true and complete copies of the SEC Documents. As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of the Exchange Act or the Securities Act, as the case may be,
and the rules and regulations of the SEC promulgated thereunder applicable to
the SEC Documents, and none of the SEC Documents, at the time they were filed
with the SEC, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. None of the statements made in any such SEC Documents is,
or has been, required to be amended or updated under applicable law (except for
such statements as have been amended or updated in subsequent filings made prior
to the date hereof). As of their respective dates, the financial statements of
the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC applicable with respect thereto. Such financial
statements have been prepared in accordance with U.S. generally accepted
accounting principles, consistently applied, during the periods involved (except
(i) as may be otherwise indicated in such financial statements or the notes
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thereto, or (ii) in the case of unaudited interim statements, to the extent they
may not include footnotes or may be condensed or summary statements) and fairly
present in all material respects the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to immaterial year-end
audit adjustments). Except as set forth in the financial statements of the
Company included in the SEC Documents filed prior to the date hereof or on
Schedule 3(f) hereto, the Company has no liabilities, contingent or otherwise,
other than (i) liabilities incurred in the ordinary course of business
subsequent to the date of such financial statements, (ii) liabilities not
required by generally accepted accounting principles ("GAAP") to be disclosed on
a balance sheet prepared in accordance with GAAP, and (iii) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under generally accepted accounting principles to be reflected in such
financial statements, which liabilities and obligations referred to in clauses
(i), (ii) and (iii), individually or in the aggregate, are not material to the
financial condition or operating results of the Company.
g. Absence of Certain Changes. Since September 30, 1998, there has been
no material adverse change and no material adverse development in the business,
properties, operations, prospects, financial condition or results of operations
of the Company and its subsidiaries, taken as a whole, except as disclosed in
Schedule 3(g) or in the SEC Documents filed with the SEC prior to the date
hereof.
h. Absence of Litigation. Except as disclosed in the SEC Documents
filed with the SEC prior to the date hereof, there is no action, suit,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its subsidiaries, threatened against or
affecting the Company, any of its subsidiaries, or any of their respective
directors or officers in their capacities as such, which could reasonably be
expected to have a Material Adverse Effect. To the Company's knowledge, there
are no facts which, if known by a potential claimant or governmental authority,
could give rise to a claim or proceeding which, if asserted or conducted with
results unfavorable to the Company or any of its subsidiaries, could reasonably
be expected to have a Material Adverse Effect.
i. Intellectual Property. Each of the Company and its subsidiaries owns
or is licensed to use all patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights, copyright applications,
licenses, permits, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures) and
other similar rights and proprietary knowledge (collectively, "INTANGIBLES")
necessary for the conduct of its business as now being conducted and as
described in the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1998. To the best knowledge of the Company, neither the Company
nor any subsidiary of the Company infringes or is in conflict with any right of
any other person with respect to any Intangibles which, individually or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
have a Material Adverse Effect. Neither the Company nor any of its subsidiaries
has received notice of any pending conflict with or
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infringement upon such third party Intangibles, which alleged pending conflict
or alleged infringement, if adversely determined, would result in a Material
Adverse Effect. Except as disclosed in the SEC Documents, the termination of the
Company's ownership of, or right to use, any single Intangible would not result
in a Material Adverse Effect on the Company. Neither the Company nor any of its
subsidiaries has entered into any consent agreement, indemnification agreement,
forbearance to sue or settlement agreement with respect to the validity of the
Company's or its subsidiaries' ownership or right to use its Intangibles and, to
the best knowledge of the Company, there is no reasonable basis for any such
claim to be successful. The Intangibles are valid and enforceable and no
registration relating thereto has lapsed, expired or been abandoned or canceled
or is the subject of cancellation or other adversarial proceedings, and all
applications therefor are pending and in good standing. The Company and its
subsidiaries have complied, in all material respects, with their respective
contractual obligations relating to the protection of the Intangibles used
pursuant to licenses. To the best knowledge of the Company, no person is
infringing on or violating the Intangibles owned or used by the Company or its
subsidiaries.
j. Foreign Corrupt Practices. Neither the Company, nor any of its
subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any subsidiary has, in the course of his actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977;
or made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.
k. Disclosure. All information relating to or concerning the Company
set forth in this Agreement or provided to the Purchasers pursuant to Section
2(d) hereof and otherwise in connection with the transactions contemplated
hereby is true and correct in all material respects and the Company has not
omitted to state any material fact necessary in order to make the statements
made herein or therein, in light of the circumstances under which they were
made, not misleading. No event or circumstance has occurred or exists with
respect to the Company or its subsidiaries or their respective businesses,
properties, prospects, operations or financial conditions, which has not been
publicly disclosed but, under applicable law, rule or regulation, would be
required to be disclosed by the Company in a registration statement filed on the
date hereof by the Company under the Securities Act with respect to the primary
issuance of the Company's securities.
l. Acknowledgment Regarding Purchasers' Purchase of the Units. The
Company acknowledges and agrees that none of the Purchasers or the Placement
Agent is acting as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to this Agreement or the transactions
contemplated hereby, the relationship between the Company and the Purchasers and
the Placement Agent is "arms-length" and any statement made by any Purchaser or
the Placement Agent or any of their respective representatives or agents in
connection with this Agreement and the transactions contemplated hereby is not
advice or a recommendation and is merely incidental to such Purchaser's purchase
of Securities or such Placement Agent's role as a placement agent and has not
-9-
<PAGE> 10
been relied upon by the Company, its officers or directors in any way. The
Company further acknowledges that the Company's decision to enter into this
Agreement has been based solely on an independent evaluation by the Company and
its representatives.
m. Absence of Form S-3 Eligibility. The Company is not currently
eligible to register the resale of its Common Stock on a registration statement
on Form S-3 under the Securities Act.
n. No General Solicitation. Neither the Company nor any distributor
participating on the Company's behalf in the transactions contemplated hereby
(if any) nor any person acting for the Company, or any such distributor, has
conducted any "general solicitation," as such term is defined in Regulation D,
with respect to any of the Securities being offered hereby.
o. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause this offering of
Securities to be integrated with any prior offering of securities of the Company
for purposes of the Securities Act or for purposes of any applicable stockholder
approval provisions, and, neither the Company, nor any of its affiliates, nor
any person acting on its or their behalf, has directly or indirectly made any
offers or sales of any security or solicited any offers to buy any security
under circumstances that would require registration of the Securities being
offered hereby under the Securities Act.
p. Acknowledgment of Dilution. The number of Warrant Shares issuable
upon exercise of the Prepaid Warrants may increase in certain circumstances,
including the circumstance wherein the trading price of the Common Stock
declines. The Company's executive officers have studied and fully understand the
nature of the Securities being sold hereunder. The Company acknowledges that its
obligation to issue Warrant Shares upon exercise of the Warrants in accordance
with the terms thereof is absolute and unconditional, regardless of the dilution
that such issuance may have on the ownership interests of other stockholders.
Taking the foregoing into account, the Company's Board of Directors has
determined in its good faith business judgment that the issuance of the Prepaid
Warrants hereunder and the consummation of the other transactions contemplated
hereby are in the best interests of the Company and its stockholders.
q. Title. The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in Schedule 3(q) or such as do not
materially affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the Company and
its subsidiaries. Any real property and facilities held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
materially interfere with the use made and proposed to be made of such property
and buildings by the Company and its subsidiaries.
-10-
<PAGE> 11
r. Tax Status. Except as set forth on Schedule 3(r) and except to the
extent that the failure to do so would not have a Material Adverse Effect, the
Company and each of its subsidiaries has made or filed all foreign, federal,
state and local income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject (unless and only to the
extent that the Company and each of its subsidiaries has set aside on its books
provisions reasonably adequate for the payment of all unpaid and unreported
taxes) and has paid all taxes and other governmental assessments and charges
that are material in amount, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith and has set
aside on its books provisions reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns, reports or
declarations apply. Except as set forth on Schedule 3(r), there are no unpaid
taxes in any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any such
claim. The Company has not executed a waiver with respect to any statute of
limitations relating to the assessment or collection of any federal, state or
local tax. Except as set forth on Schedule 3(r), none of the Company's tax
returns is presently being audited by any taxing authority.
s. No other Agreements. The Company has not, directly or indirectly,
made any agreements with the Purchasers relating to the terms or conditions of
the transactions contemplated hereby except as set forth in this Agreement, the
Warrants and the Registration Rights Agreement.
4. COVENANTS.
a. Best Efforts. The parties shall use their best efforts timely to
satisfy each of the conditions described in Section 6 and Section 7 of this
Agreement.
b. Form D: Blue Sky Laws. The Company agrees to file a Form D with
respect to the Securities as required under Regulation D and to provide a copy
thereof to each Purchaser promptly after such filing. The Company shall, on or
before the date of the Closing, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for sale to the Purchasers
pursuant to this Agreement under applicable securities or "blue sky" laws of the
states of the United States or obtain exemption therefrom, and shall provide
evidence of any such action so taken to the Purchasers on or prior to the date
of the Closing.
c. Reporting Status. So long as any Purchaser beneficially owns any of
the Securities, the Company shall timely file all reports required to be filed
with the SEC pursuant to the Exchange Act, and the Company shall not terminate
its status as an issuer required to file reports under the Exchange Act even if
the Exchange Act or the rules and regulations thereunder would permit such
termination. In addition, the Company shall take all actions necessary to be
eligible to register the resale of its Common Stock on a registration statement
on Form S-3 under the Securities Act.
d. Use of Proceeds. The Company shall use the proceeds from the sale of
the Securities as set forth in Schedule 4(d).
-11-
<PAGE> 12
e. Expenses. Except as otherwise provided herein and in Section 5 of
the Registration Rights Agreement, each party hereto shall be responsible for
its own expenses incurred in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement and the other agreements
to be executed in connection herewith.
f. Financial Information. The Company agrees to send the following
reports to each Purchaser until such Purchaser transfers, assigns or sells all
of its Securities: (i) within ten (10) days after the filing with the SEC, a
copy of its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, its
proxy statements and any Current Reports on Form 8-K; and (ii) within one (1)
day after release, copies of all press releases issued by the Company or any of
its subsidiaries.
g. Reservation of Shares. The Company shall at all times have
authorized and reserved for the purpose of issuance 165% (and on and after the
date the Stockholder Approvals are received, 200%) of the number of shares of
Common Stock issuable upon exercise of the Prepaid Warrants and 100% of the
number of shares of Common Stock issuable upon exercise of the Incentive
Warrants (without regard to any limitations on the exercise of the Warrants), to
provide for the full exercise of the Prepaid Warrants and the Incentive Warrants
and the issuance of the Warrant Shares in connection therewith, subject to and
as otherwise required by the Prepaid Warrants and the Incentive Warrants.
h. Listing. The Company shall promptly secure the listing of the
Warrant Shares upon each national securities exchange or automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to
official notice of issuance) and shall maintain, so long as any Purchaser (or
any of their affiliates) own any Securities, such listing of all Warrant Shares
from time to time issuable upon exercise of the Prepaid Warrants and the
Incentive Warrants. The Company will use its best efforts to continue the
listing and trading of its Common Stock on the National Market and will comply
in all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the NASD and such exchanges, as applicable. The Company
shall promptly provide to each holder of Prepaid Warrants and/or Incentive
Warrants copies of any notices it receives regarding the continued eligibility
of the Common Stock for trading on the National Market or, if applicable, any
securities exchange or automated quotation system on which securities of the
same class or series issued by the Company are then listed or quoted, if any,
provided that the Company shall publicly disclose any material information
contained in such notice prior to or concurrently with the giving of such notice
to the Purchasers.
i. Corporate Existence. So long as a Purchaser beneficially owns any
Securities, the Company shall maintain its corporate existence, and in the event
of a merger, consolidation or sale of all or substantially all of the Company's
assets, the Company shall ensure that the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the
Prepaid Warrants and Incentive Warrants and the agreements and instruments
entered into in connection herewith regardless of whether or not the Company
would have had a sufficient number of shares of Common Stock authorized and
available for issuance in order to effect the exercise in full of all Prepaid
Warrants and all Incentive Warrants outstanding as of the date of such
transaction
-12-
<PAGE> 13
and (ii) is a publicly traded corporation whose common stock is listed for
trading on the National Market, the New York Stock Exchange ("NYSE") or the
American Stock Exchange ("AMEX").
j. No Integrated Offerings. The Company shall not make any offers or
sales of any security (other than the Securities) under circumstances that would
require registration of the Securities being offered or sold hereunder under the
Securities Act or cause this offering of Securities to be integrated with any
other offering of securities by the Company for purposes of any stockholder
approval provision applicable to the Company or its securities.
k. Legal Compliance. The Company shall conduct its business and the
business of its subsidiaries in compliance with all laws, ordinances or
regulations of governmental entities applicable to such businesses, except where
the failure to do so would not have a Material Adverse Effect.
l. Stockholder Approval. The Company shall hold an annual or special
meeting of its stockholders at the earliest practicable date hereafter, but not
later than June 30, 1999 and use its best efforts to obtain at such meeting such
approvals of the Company's stockholders as may be required to (i) issue all of
the shares of Common Stock issuable upon exercise of, or otherwise with respect
to, the Prepaid Warrants, the Incentive Warrants and any warrants issuable to
the Placement Agent in connection with the transactions contemplated by this
Agreement without violating NASD Rules 4310(c)(25)(H) or 4460(i) (or any
successor rules thereto which may then be in effect) and (ii) increase its
authorized shares of Common Stock to not less than 75,000,000 shares (the
"STOCKHOLDER APPROVALS"). The Company shall comply with the filing and
disclosure requirements of Section 14 promulgated under the Exchange Act in
connection with the solicitation, acquisition and disclosure of such Stockholder
Approvals. The Company represents and warrants that its Board of Directors has
unanimously recommended that the Company's stockholders approve the proposals
contemplated by this Section 4(l) and shall so indicate such recommendation in
the proxy statement used to solicit such Stockholder Approvals.
m. Filing of Form 8-K. On or before the 2nd business day following the
Closing Date, the Company shall file a Form 8-K with the SEC describing the
terms of the transactions contemplated hereby.
5. TRANSFER AGENT INSTRUCTIONS.
a. The Company shall instruct its transfer agent to issue certificates,
registered in the name of each Purchaser or its nominee, for the Warrant Shares
in such amounts as specified from time to time by such Purchaser to the Company
upon exercise of the Prepaid Warrants and the Incentive Warrants, as applicable.
To the extent and during the periods provided in Section 2(f) and 2(g) of this
Agreement, all such certificates shall bear the restrictive legend specified in
Section 2(g) of this Agreement.
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<PAGE> 14
b. The Company warrants that no instruction other than such
instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof in the case of the transfer of the Warrant
Shares prior to registration of the Warrant Shares under the Securities Act or
without an exemption therefrom, will be given by the Company to its transfer
agent and that the Securities shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in this Agreement
and the Registration Rights Agreement. Nothing in this Section shall affect in
any way each Purchaser's obligations and agreement set forth in Section 2(g)
hereof to resell the Securities pursuant to an effective registration statement
or under an exemption from the registration requirements of applicable
securities law.
c. If a Purchaser provides the Company and the transfer agent with an
opinion of counsel, which opinion of counsel shall be in form, substance and
scope customary for opinions of counsel in comparable transactions, to the
effect that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from registration, or a Purchaser provides the Company
with reasonable assurances that such Securities may be sold under Rule 144, the
Company shall permit the transfer, and, in the case of the Warrant Shares,
promptly instruct its transfer agent to issue one or more certificates in such
name and in such denominations as specified by such Purchaser.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Units to
a Purchaser at the Closing hereunder is subject to the satisfaction, at or
before the Closing, of each of the following conditions thereto, provided that
these conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion by providing written notice of such
waiver to each Purchaser. The obligation of the Company to issue and sell the
Units to any Purchaser hereunder is distinct and separate from its obligation to
issue and sell Units to any other Purchaser hereunder and any failure by one or
more Purchasers to fulfill the conditions set forth herein or to consummate the
purchase of Units hereunder will not relieve the Company of its obligations with
respect to any other Purchaser.
a. The applicable Purchaser shall have executed the signature page to
this Agreement and the Registration Rights Agreement, and delivered the same to
the Company.
b. The applicable Purchaser shall have delivered the Purchase Price for
the Units purchased at the Closing in accordance with Section 1(b) above.
c. The representations and warranties of the applicable Purchaser shall
be true and correct as of the date when made and as of the date and time of the
Closing as though made at that time (except for representations and warranties
that speak as of a specific date, which representations and warranties shall be
true and correct as of such date), and the applicable Purchaser shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and
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<PAGE> 15
conditions required by this Agreement to be performed, satisfied or complied
with by the applicable Purchaser at or prior to the date of the Closing.
d. No litigation, statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions contemplated
by this Agreement.
7. CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE.
The obligation of each Purchaser hereunder to purchase the Units to be
purchased by it at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for such Purchaser's sole benefit and may be waived by such
Purchaser at any time in the Purchaser's sole discretion:
a. The Company shall have executed this Agreement and the Registration
Rights Agreement, and delivered the same to such Purchaser.
b. The Company shall have delivered to such Purchaser the duly executed
Prepaid Warrants and Incentive Warrants (each in such denominations as such
Purchaser shall request) being so purchased by such Purchaser at the Closing in
accordance with Section 1(b) above.
c. The Common Stock shall be authorized for quotation and listed on the
National Market and trading in the Common Stock (or the National Market
generally) shall not have been suspended by the SEC or the National Market.
d. The representations and warranties of the Company shall be true and
correct as of the date when made and as of the date of the Closing as though
made at that time (except for representations and warranties that speak as of a
specific date, which representations and warranties shall be true and correct as
of such date) and the Company shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by the Company at or
prior to the date of the Closing. Such Purchaser shall have received a
certificate, executed by the Chief Executive Officer of the Company, dated as of
the date of the Closing to the foregoing effect and as to such other matters as
may be reasonably requested by such Purchaser.
e. No litigation, statute, rule, regulation, executive order, decree,
ruling, injunction, action or proceeding shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority over the
matters contemplated hereby which questions the validity of, or challenges or
prohibits the consummation of any of the transactions contemplated by this
Agreement.
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<PAGE> 16
f. Such Purchaser shall have received an opinion of the Company's
counsel, dated as of the date of the Closing, in form, scope and substance
reasonably satisfactory to the Purchaser and in substantially the form of
Exhibit D attached hereto.
g. The Company shall have delivered evidence reasonably satisfactory to
the Purchasers that the Company's transfer agent has agreed to act in accordance
with irrevocable instructions in the form attached hereto as Exhibit E.
h. There shall have been no material adverse changes and no material
adverse developments in the business, properties, operations, prospects,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, since the date hereof, and no information, of
which the Purchasers are not currently aware, shall come to the attention of the
Purchasers that is materially adverse to the Company.
i. The aggregate number of Units being purchased hereunder by all
Purchasers at the Closing hereunder shall be 11,000.
j. Such Purchaser shall have received from the Company, certified by
the Secretary of the Company, a true and complete copy of each of (i) the
Company's articles of incorporation, (ii) the Company's bylaws and (iii)
resolutions of the Company's Board of Directors approving the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby.
k. Such Purchaser shall have received from the Company a copy of the
Company's articles of incorporation certified by the Office of the Secretary of
State of the State of Delaware and a Certificate of Good Standing from the State
of Delaware and the State of Massachusetts.
8 GOVERNING LAW; MISCELLANEOUS.
a. Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed in the State of New York. The Company
irrevocably consents to the jurisdiction of the United States federal courts and
the state courts located in the City of New York in the State of New York in any
suit or proceeding based on or arising under this Agreement and irrevocably
agrees that all claims in respect of such suit or proceeding may be determined
in such courts. The Company irrevocably waives the defense of an inconvenient
forum to the maintenance of such suit or proceeding. The Company further agrees
that service of process mailed by first class mail shall be deemed in every
respect effective service of process in any such suit or proceeding. Nothing
herein shall affect the right of any Purchaser to serve process in any other
manner permitted by law. The Company agrees that a final non-appealable judgment
in any such suit or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on such judgment or in any other lawful manner.
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<PAGE> 17
b. Waiver of Jury Trial. IN ANY LITIGATION ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY OTHER OBLIGATIONS IN WHICH THE PARTIES TO THIS
AGREEMENT ARE ADVERSE PARTIES, THE COMPANY AND THE PURCHASERS HEREBY WAIVE TRIAL
BY JURY.
c. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. This Agreement, once executed by a party, may be
delivered to the other parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
d. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
e. Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
f. Entire Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein. No provision of this Agreement may be
waived other than by an instrument in writing signed by the party to be charged
with enforcement and no provision of this Agreement may be amended other than by
an instrument in writing signed by the Company and each Purchaser.
g. Notices. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier or by confirmed
telecopy or by facsimile, and shall be effective five days after being placed in
the mail, if mailed, or upon receipt or refusal of receipt, if delivered
personally or by courier or confirmed telecopy, in each case addressed to a
party. The addresses for such communications shall be:
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<PAGE> 18
If to the Company:
Robotic Vision Systems, Inc.
5 Shawmut Road
Canton, MA 02021
Telecopy: (781) 828-9852
Attn: Pat V. Costa, Chairman and Chief Executive Officer
with a copy to:
Cooperman Levitt Winikoff Lester & Newman, P.C.
800 Third Avenue
New York, NY 10022
Telecopy: (212) 755-2839
Attn: Ira Roxland, Esq.
If to any Purchaser, to such address set forth under such Purchaser's
name on the Execution Page hereto executed by such Purchaser.
Each party shall provide notice to the other parties of any change in
address.
h. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Except as
provided herein or therein, neither the Company nor any Purchaser shall assign
this Agreement, the Registration Rights Agreement, the Prepaid Warrants or the
Incentive Warrants or any rights or obligations hereunder or thereunder.
Notwithstanding the foregoing, any Purchaser may assign its rights hereunder to
any of its "affiliates" (as that term is defined under the Exchange Act) who are
Accredited Investors without the consent of the Company (provided such assignees
agree to be bound by all of the terms and conditions hereof), or to any other
person or entity with the consent of the Company, which consent shall not be
unreasonably withheld. This provision shall not limit a Purchaser's right to
transfer the Securities pursuant to the terms of the Prepaid Warrants, the
Incentive Warrants and this Agreement or to assign such Purchaser's rights
hereunder and/or thereunder to any such transferee.
i. Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person, except for the provisions of Section 3(l) which are in
part for the benefit of, and may be enforced by, the Placement Agent.
j. Survival. The representations, warranties, agreements and covenants
of the Company set forth in Sections 3, 4, 5 and 8 hereof shall survive the
closings hereunder notwithstanding any investigation conducted by or on behalf
of any Purchasers and the representations, warranties, covenants and agreements
of the Purchasers set forth in Section 2 hereof
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<PAGE> 19
shall survive the closings hereunder notwithstanding any investigation conducted
by or on behalf of the Company. Moreover, none of the representations and
warranties made by the Company herein shall act as a waiver of any rights or
remedies a Purchaser may have under applicable federal or state securities laws.
The Company agrees to indemnify and hold harmless each Purchaser and each of
such Purchaser's officers, directors, employees, partners, members, agents and
affiliates for expense, loss or damage arising as a result of or related to any
breach or alleged breach by the Company of any of its representations or
covenants set forth herein, including advancement of reasonable expenses as they
are incurred.
k. Publicity. The Company and each Purchaser shall have the right to
review before issuance any press releases, SEC or NASD filings, or any other
public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior review
of the Purchasers, to make any press release or SEC or NASD filings with respect
to such transactions as is required by applicable law and regulations (although
the Purchasers shall be consulted by the Company in connection with any such
press release and filing prior to its release and shall be provided with a copy
thereof) and such press release shall not name the Purchasers.
l. Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
m. Termination. In the event that the Closing shall not have occurred
on or before that date which is five days after the date hereof, unless the
parties agree otherwise, this Agreement shall terminate at the close of business
on such date. Notwithstanding any termination of this Agreement, any party not
in breach of this Agreement shall preserve all rights and remedies it may have
against another party hereto for a breach of this Agreement prior to or relating
to the termination hereof.
n. Joint Participation. Each party to this Agreement has participated
in the negotiation of this Agreement, the Prepaid Warrants, the Incentive
Warrants and the Registration Rights Agreement. As such, the language used
herein and therein shall be deemed to be the language chosen by the parties
hereto to express their mutual intent, and no rule of strict construction will
be applied against any party to this Agreement.
o. Equitable Relief. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to a Purchaser by
vitiating the intent and purpose of the transactions contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations hereunder (including, but not limited to, its obligations pursuant
to Section 5 hereof) will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement (including,
but not limited to, its obligations pursuant to Section 5 hereof), that a
Purchaser shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate compliance by the
Company, including
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<PAGE> 20
the issuance and transfer of the Securities, without the necessity of showing
economic loss and without any bond or other security being required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 21
IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Agreement to be duly executed as of the date first above written.
ROBOTIC VISION SYSTEMS, INC.
By:
----------------------
Name:
----------------------
Title:
----------------------
PURCHASER:
OMICRON PARTNERS, L.P.
BY: OMICRON CAPITAL, L.P.
By:
----------------------
Olivier Morali
Principal
RESIDENCE: Bahamas
ADDRESS: c/o Omicron Capital, L.P.
712 Fifth Avenue
11th Floor
New York, NY 10019
Telecopy: (212) 974-0170
SUBSCRIPTION AMOUNT
Number of Units: 1,000
Purchase Price ($1,000 per Unit): $1,000,000
<PAGE> 22
IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Agreement to be duly executed as of the date first above written.
ROBOTIC VISION SYSTEMS, INC.
By:
----------------------
Name:
----------------------
Title:
----------------------
PURCHASER:
ZANETT LOMBARDIER, LTD.
By:
----------------------
Name:
Title:
RESIDENCE: Cayman Islands
ADDRESS: c/o Bank Julius Baer Trust Co.
Kirk House, P.O. Box 1100
Grand Cayman, Cayman Islands
British West Indies
Telecopy: (345) 949-0993
with copies to:
The Zanett Securities Corporation
Tower 49, 31st Floor
12 East 49th Street
New York, NY 10017
Attention: Claudio Guazzoni
Telecopy: (212) 759-3301
SUBSCRIPTION AMOUNT
Number of Units: 3,000
Purchase Price ($1,000 per Unit): $3,000,000
<PAGE> 23
IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Agreement to be duly executed as of the date first above written.
ROBOTIC VISION SYSTEMS, INC.
By:
----------------------
Name:
----------------------
Title:
----------------------
PURCHASER:
FISHER CAPITAL LTD.
BY: CITADEL INVESTMENT GROUP, L.L.C.
By:
----------------------
Name:
Title:
RESIDENCE: Cayman Islands
ADDRESS: c/o Citadel Investment Group, L.L.C.
225 West Washington Street
Chicago, IL 60606
Attention: Michael J. Hughes
Telecopy: (312) 338-0780
with copies to:
Katten Muchin & Zavis
525 W. Monroe Street
Chicago, IL 60661-3693
Attention: Robert J. Brantman, Esq.
Telecopy: (312) 902-1061
SUBSCRIPTION AMOUNT
Number of Units: 4,550
Purchase Price ($1,000 per Unit): $4,550,000
<PAGE> 24
IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Agreement to be duly executed as of the date first above written.
ROBOTIC VISION SYSTEMS, INC.
By:
----------------------
Name:
----------------------
Title:
----------------------
PURCHASER:
WINGATE CAPITAL LTD.
BY: CITADEL INVESTMENT GROUP, L.L.C.
By:
----------------------
Name:
Title:
RESIDENCE: Cayman Islands
ADDRESS: c/o Citadel Investment Group, L.L.C.
225 West Washington Street
Chicago, IL 60606
Attention: Michael J. Hughes
Telecopy: (312) 338-0780
with copies to:
Katten Muchin & Zavis
525 W. Monroe Street
Chicago, IL 60661-3693
Attention: Robert J. Brantman, Esq.
Telecopy: (312) 902-1061
SUBSCRIPTION AMOUNT
Number of Units: 2,450
Purchase Price ($1,000 per Unit): $2,450,000
<PAGE> 1
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES
REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES
LAWS UNLESS OFFERED, SOLD OR TRANSFERRED UNDER AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
PREPAID COMMON STOCK PURCHASE WARRANT
February 19, 1999 Right to Purchase $1,000,000 of
Common Stock, par value $.01 per share
FOR VALUE RECEIVED, ROBOTIC VISION SYSTEMS, INC., a corporation
organized under the laws of the State of Delaware (hereinafter called the
"CORPORATION"), hereby promises to issue to OMICRON PARTNERS, L.P. or its
registered assigns (the "HOLDER"), at any time or from time to time upon its
receipt of a Notice of Exercise (as defined in Article I.C below), up to One
Million Dollars ($1,000,000) (the "PREPAID AMOUNT") of the Corporation's common
stock, par value $.01 per share (the "COMMON STOCK"), in the manner provided in
Article II hereof. This Warrant is being issued by the Corporation along with
similar prepaid common stock purchase warrants (the "OTHER PREPAID WARRANTS"
and, together with this Warrant, the "PREPAID WARRANTS") pursuant to that
certain Securities Purchase Agreement, dated as of February 18, 1999, by and
among the Corporation, the Holder and the other parties named therein (the
"SECURITIES PURCHASE AGREEMENT").
<PAGE> 2
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES
REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES
LAWS UNLESS OFFERED, SOLD OR TRANSFERRED UNDER AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
PREPAID COMMON STOCK PURCHASE WARRANT
February 19, 1999 Right to Purchase $3,000,000 of
Common Stock, par value $.01 per share
FOR VALUE RECEIVED, ROBOTIC VISION SYSTEMS, INC., a corporation
organized under the laws of the State of Delaware (hereinafter called the
"CORPORATION"), hereby promises to issue to ZANETT LOMBARDIER, LTD. or its
registered assigns (the "HOLDER"), at any time or from time to time upon its
receipt of a Notice of Exercise (as defined in Article I.C below), up to Three
Million Dollars ($3,000,000) (the "PREPAID AMOUNT") of the Corporation's common
stock, par value $.01 per share (the "COMMON STOCK"), in the manner provided in
Article II hereof. This Warrant is being issued by the Corporation along with
similar prepaid common stock purchase warrants (the "OTHER PREPAID WARRANTS"
and, together with this Warrant, the "PREPAID WARRANTS") pursuant to that
certain Securities Purchase Agreement, dated as of February 18, 1999, by and
among the Corporation, the Holder and the other parties named therein (the
"SECURITIES PURCHASE AGREEMENT").
<PAGE> 3
ARTICLE I
CERTAIN DEFINITIONS
For purposes hereof, the following terms shall have the following
meanings:
A. "CLOSING BID PRICE" means, for any security as of any date, the
closing bid price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg
Financial Markets or a comparable reporting service of national reputation
selected by the Corporation and reasonably acceptable to holders of a majority
of the aggregate Prepaid Amount represented by the then outstanding Prepaid
Warrants ("MAJORITY HOLDERS") if Bloomberg Financial Markets is not then
reporting closing bid prices of such security (collectively, "BLOOMBERG"), or if
the foregoing does not apply, the last reported sale price of such security in
the over-the-counter market on the electronic bulletin board for such security
as reported by Bloomberg, or, if no sale price is reported for such security by
Bloomberg, the average of the bid prices of any market makers for such security
as reported in the "pink sheets" by the National Quotation Bureau, Inc., in each
case for such date or, if such date was not a trading date for such security, on
the next preceding date which was a trading date. If the Closing Bid Price
cannot be calculated for such security as of either of such dates on any of the
foregoing bases, the Closing Bid Price of such security on such date shall be
the fair market value as reasonably determined by an investment banking firm
selected by the Corporation and reasonably acceptable to the Majority Holders,
with the costs of such appraisal to be borne by the Corporation.
B. "EXERCISE AMOUNT" means the portion of the Prepaid Amount and
Premium of this Warrant being exercised and any Exercise Default Payments
payable with respect thereto, each as specified in the notice of exercise in the
form attached hereto (the "NOTICE OF EXERCISE").
C. "EXERCISE DATE" means, for any Exercise (as defined below), the date
specified in the Notice of Exercise so long as the copy of the Notice of
Exercise is faxed (or delivered by other means resulting in notice) to the
Corporation at or before 11:59 p.m., New York City time, on the Exercise Date
indicated in the Notice of Exercise; provided, however, that if the Notice of
Exercise is not so faxed or otherwise delivered before such time, then the
Exercise Date shall be the date the holder faxes or otherwise delivers the
Notice of Exercise to the Corporation.
D. "EXERCISE PRICE" means the lower of the Fixed Exercise Price and the
Variable Exercise Price, each in effect as of such date and subject to
adjustment as provided herein.
E. "FIRST EXERCISE DATE" means the earliest of (i) the 181st day
following the Issuance Date, (ii) the date the Corporation makes a public
announcement that it intends to merge or consolidate with any other entity
(other than a merger in which the Corporation is the surviving or continuing
entity and the voting capital stock of the Corporation immediately prior to such
merger represents at least 50% of the voting power of the capital stock of the
Corporation after the merger) or to sell or transfer all or
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<PAGE> 4
substantially all of the assets of the Corporation, (iii) the date any person,
group or entity (including the Corporation) publicly announces a tender offer,
exchange offer or another transaction to purchase 50% or more of the
Corporation's outstanding Common Stock or otherwise publicly announces an
intention to replace a majority of the Corporation's Board of Directors by
waging a proxy battle or otherwise, or (iv) the date on which an Event of
Default described in Article VI.A occurs.
F. "CLOSING DATE" means the date of the Closing under the Securities
Purchase Agreement.
G. "FIXED EXERCISE PRICE" means $4.02, and shall be subject to
adjustment as provided herein.
H. "VARIABLE EXERCISE PRICE" means, as of any date of determination,
the amount obtained by multiplying (i) .95 (the "Exercise Percentage") and (ii)
the average of the three (3) lowest Closing Bid Prices for the Common Stock
during the twenty (20) consecutive trading day period ending on the trading day
immediately preceding such date of determination (subject to equitable
adjustment for any stock splits, stock dividends, reclassifications or similar
events during such twenty (20) trading day period), and shall be subject to
adjustment as provided herein; provided that beginning on that day which is one
hundred eighty days after the Issuance Date such twenty day period shall be
increased by one (1) additional trading day for each thirty (30) day period
thereafter.
I. "BUSINESS DAY" and "TRADING DAY" means any day on which the New York
Stock Exchange is open for trading.
J. "PREMIUM" means an amount equal to (.07) x (N/365) x the Prepaid
Amount, where N equals the number of days from (i) the Issuance Date until the
date the Premium is redeemed in accordance with Article II.A. (the "PREMIUM
DATE") or (ii) the immediately preceding Premium Date until the current Premium
Date.
K. "FLOOR PRICE" means $2.50 and shall be subject to adjustment as
provided herein.
L. "ISSUANCE DATE" means the date of issuance of this Warrant.
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<PAGE> 5
ARTICLE II
EXERCISE
A. Exercise by the Holder. (i) Subject to the limitations on exercise
contained in Paragraph C of this Article II, the Holder may, at any time and
from time to time on or after that date which is the earlier of (a) the first
date after the Issuance Date on which an Event of Default (as defined in Article
VI) occurs or there is a public announcement of a pending or consummated
corporate change (as defined in Article VII) and (b) one-hundred eighty (180)
days after the Issuance Date, exercise all or any part of the outstanding
Prepaid Amount of this Warrant in accordance with the procedures set forth in
Paragraph B of this Article II for a number of fully paid and nonassessable
shares of Common Stock determined in accordance with the following formula if
the Corporation timely redeems the Premium thereon in cash in accordance with
subparagraph (ii) below:
EXERCISE AMOUNT
---------------
EXERCISE PRICE
or in accordance with the following formula if the Corporation does not timely
redeem the Premium thereon in accordance with subparagraph (ii) below:
EXERCISE AMOUNT + THE PREMIUM
-----------------------------
EXERCISE PRICE
(ii) (a) Subject to subparagraph (b) of this Article II.A(ii), the
Corporation shall have the right, in its sole discretion, upon receipt of a
Notice of Exercise, to redeem the Premium subject to such conversion for a sum
of cash equal to the amount of the Premium being so redeemed. All cash
redemption payments hereunder shall be paid in lawful money of the United States
of America at such address for the holder as appears on the record books of the
Corporation (or at such other address as such holder shall hereafter give to the
Corporation by written notice). In the event the Corporation so elects to redeem
the Premium in cash and fails to pay such holder the applicable redemption
amount to which such holder is entitled within four (4) business days of receipt
by the Corporation of a Notice of Exercise (in the case of a redemption in
connection with an Optional Conversion), the Corporation shall thereafter
forfeit its right to redeem such Premium in cash and such Premium shall
thereafter be converted into shares of Common Stock in accordance with Article
II.A(i).
(b) The Corporation shall provide not less than two (2)
business days advance notice, in writing, to the holders stating that it will
elect to redeem the Premium, relating to any Exercise Amount covered by a Notice
of Exercise received by the Corporation after such second business day, in cash
pursuant to the Corporation's redemption rights discussed in subparagraph (a) of
this Article II.A(ii) in connection with an exercise pursuant to a Notice of
Exercise delivered over the ten (10) business day period beginning on the third
business day after the holder's receipt of such notice, which election shall be
binding and irrevocable for such period.
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<PAGE> 6
If the Corporation does not provide such notice, the Corporation shall forfeit
its right to redeem such Premium in accordance with subparagraph (a) of this
Article II.A(ii) for any such period and shall be required to issue shares of
Common Stock as payment of Premium.
B. Mechanics of Exercise. In order to exercise this Warrant, Holder
shall: (x) fax (or otherwise deliver) a copy of the fully executed Notice of
Exercise to the Corporation and (y) surrender or cause to be surrendered this
Warrant as soon as practicable thereafter to the Corporation. Upon receipt by
the Corporation of a facsimile copy of a Notice of Exercise from Holder, the
Corporation shall immediately send (or the next business day, if the Notice of
Exercise is received after normal business hours), via facsimile, a confirmation
to Holder stating that the Notice of Exercise has been received, the date upon
which the Corporation expects to deliver the Common Stock issuable upon such
exercise and the name and telephone number of a contact person at the
Corporation regarding the exercise. The Corporation shall not be obligated to
issue shares of Common Stock upon an exercise hereof unless either this Warrant
is delivered to the Corporation as provided above, or Holder notifies the
Corporation that this Warrant has been lost, stolen or destroyed (subject to the
requirements of Article IX.G).
(i) Delivery of Common Stock Upon Exercise. The Corporation shall,
on or before the later of (a) the third (3rd) business day following the
Exercise Date and (b) the business day following the date of the Corporation's
receipt of this Warrant (or, if this Warrant is lost, stolen or destroyed, the
date on which indemnity pursuant to Article VIII.G is provided) (the "DELIVERY
PERIOD"), issue and deliver to the Holder or its nominee (x) that number of
shares of Common Stock issuable upon exercise of the portion of this Warrant
being exercised and (y) a new Warrant in the form hereof representing the
balance of the Prepaid Amount hereof not being exercised, if any. If the
Corporation's transfer agent is participating in the Depository Trust Company
("DTC") Fast Automated Securities Transfer program, and so long as the
certificates therefor are not required to bear a legend, the Corporation shall
cause its transfer agent to electronically transmit the Common Stock issuable
upon exercise to the Holder by crediting the account of Holder or its nominee
with DTC through its Deposit Withdrawal Agent Commission system ("DTC
TRANSFER"). If the aforementioned conditions to a DTC Transfer are not
satisfied, the Corporation shall deliver to Holder physical certificates
representing the Common Stock issuable upon such exercise. Further, Holder may
instruct the Corporation to deliver to Holder physical certificates representing
the Common Stock issuable upon such exercise in lieu of delivering such shares
by way of DTC Transfer.
(ii) Taxes. The Corporation shall pay any and all taxes which may
be imposed upon it with respect to the issuance and delivery of the shares of
Common Stock upon the exercise of this Warrant.
(iii) No Fractional Shares. If any exercise of this Warrant would
result in the issuance of a fractional share of Common Stock, such fractional
share shall be disregarded and the number of shares of Common Stock issuable
upon exercise of this Warrant shall be the nearest whole number of shares.
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<PAGE> 7
(iv) Exercise Disputes. In the case of any dispute with respect to
an exercise of this Warrant, the Corporation shall promptly issue such number of
shares of Common Stock as are not disputed in accordance with subparagraph (i)
above. The Corporation and the Holder shall seek to resolve any such dispute in
good faith. If such dispute involves the calculation of the Exercise Price, the
Corporation shall immediately submit the disputed calculations to Deloitte &
Touche LLP or such other independent outside accountant of national reputation
selected by the Corporation and reasonably acceptable to the Holder, via
facsimile within two (2) business days of receipt of the Notice of Exercise. The
accountant, at the Corporation's sole expense (except that if the Corporation's
calculation is correct, the Holder shall bear such expense), shall audit the
calculations and notify the Corporation and Holder of the results no later than
two (2) business days from the date it receives the disputed calculations. The
accountant's calculation shall be deemed conclusive, absent manifest error. The
Corporation shall then issue the appropriate number of shares of Common Stock in
accordance with subparagraph (i) above.
C. Limitations on Exercise. The exercise of this Warrant shall be
subject to the following limitations (each of which limitations shall be applied
independently):
(i) Cap Amount. Unless permitted by the applicable rules and
regulations of the principal securities market on which the Common Stock is
listed or traded, in no event shall the total number of shares of Common Stock
issued upon exercise of the Prepaid Warrants exceed the maximum number of shares
of Common Stock that the Corporation can so issue pursuant to Rules
4310(c)(25)(H) or 4460(i) of the National Association of Securities Dealers
("NASD") (or any successor rules) (the "CAP AMOUNT") which, as of the Closing
Date, shall be 4,972,695 shares (19.99% of the total shares outstanding on the
Closing Date. The Cap Amount shall be allocated pro-rata to the holders of the
Prepaid Warrants as provided in Article IX.H. In the event the Corporation is
prohibited from issuing shares of Common Stock as a result of the operation of
this subparagraph (i), the Corporation shall comply with Article V and Article
VII.
(ii) No Five Percent Holders. In no event shall Holder be entitled
to receive shares of Common Stock upon an exercise of this Warrant to the extent
that the sum of (x) the number of shares of Common Stock beneficially owned by
Holder and its affiliates (exclusive of shares issuable upon exercise of the
unexercised portion of any Prepaid Warrants or the unexercised or unconverted
portion of any other securities of the Corporation (including, without
limitation, the Incentive Warrants (as defined in the Securities Purchase
Agreement) issued by the Corporation pursuant to the Securities Purchase
Agreement) subject to a limitation on conversion or exercise analogous to the
limitations contained herein) and (y) the number of shares of Common Stock
issuable upon the exercise of the portion of this Warrant with respect to which
the determination of this subparagraph is being made, would result in beneficial
ownership by Holder and its affiliates of more than 4.99% of the then
outstanding shares of Common Stock. For purposes of this subparagraph,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and Regulation
13 D-G thereunder, except as otherwise provided in clause (x) above. The
restriction contained in this subparagraph (ii) shall not be altered, amended,
deleted or changed in any manner whatsoever unless
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<PAGE> 8
the Corporation, the holders of a majority of the outstanding shares of Common
Stock and Holder shall approve such alteration, amendment, deletion or change.
(iii) Time Limitations. (a) So long as no Event of Default (as
defined in Article VI hereof) has occurred and is then continuing, and except as
otherwise provided below, a holder of Prepaid Warrants may not exercise Prepaid
Warrants to the extent the Prepaid Amount of Prepaid Warrants previously
exercised by such holder (excluding for purposes of this calculation any Prepaid
Amount of Prepaid Warrants exercised by such holder following the occurrence and
during the continuation of an Event of Default) together with the Prepaid Amount
of Prepaid Warrants which such holder is attempting to exercise exceeds the
Maximum Conversion Percentage (as defined herein) multiplied by the Prepaid
Amount of Prepaid Warrants purchased by such holder pursuant to the Securities
Purchase Agreement. "MAXIMUM CONVERSION PERCENTAGE" means:
<TABLE>
<CAPTION>
If the Exercise Date is: then the Maximum Conversion Percentage is:
<S> <C>
Before the 90th day
following the First Exercise Date 25%
On or after the 90th day
following the First Exercise Date
and before the 180th day
following the First Exercise Date 50%
On or after the 180th day
following the First Exercise Date
and before the 270th day
following the First Exercise Date 75%
On or after the 270th day
following the First Exercise Date 100%
</TABLE>
(b) Notwithstanding the foregoing, the restrictions on conversion
set forth in this Article II.C. (iii) shall terminate on or after the date
either of the events described in Article I.E(ii) or (iii) occurs.
D. Required Exercise at Maturity. Subject to the limitations set forth
in Paragraph C(i) of this Article II and provided all shares of Common Stock
issuable upon exercise of all outstanding Prepaid Warrants are then (i)
authorized and reserved for issuance, (ii) registered under the Securities Act
of 1933, as amended, for resale by the holders of Prepaid Warrants and (iii)
eligible to be traded on either the National Market, the New York Stock
Exchange, the American Stock Exchange or the Nasdaq SmallCap Market, each
Prepaid Warrant issued and outstanding on the fifth anniversary of the Issuance
Date thereof (the "MATURITY DATE"), automatically shall be exercised into shares
of
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<PAGE> 9
Common Stock on such date in accordance with the exercise formulas set forth in
Paragraph A of this Article II (the "REQUIRED EXERCISE AT MATURITY"); provided,
however, the Maturity Date shall be extended for a period equal to the number of
days any Event of Default or Trading Market Trigger Event is in existence. If
the Required Exercise at Maturity occurs, the Corporation and the holders of
Prepaid Warrants shall follow the applicable exercise procedures set forth in
Paragraph B of this Article II; provided, however, that the holders of Prepaid
Warrants are not required to deliver a Notice of Exercise to the Corporation or
its transfer agent.
ARTICLE III
RESERVATION OF SHARES OF COMMON STOCK
A. Reserved Amount. On the Closing Date, the Corporation shall have
reserved 5,967,125 shares (and on and after the date on which the Stockholder
Approvals (as defined in the Securities Purchase Agreement) are received that
number of shares which is 200% of the number of shares which would be issuable
if all Prepaid Warrants issued or issuable pursuant to the Securities Purchase
Agreement are exercised in their entirety on the Closing Date) of the authorized
but unissued shares of Common Stock for issuance upon the full exercise of all
Prepaid Warrants issued or issuable pursuant to the Securities Purchase
Agreement (the "RESERVED AMOUNT") and thereafter the number of authorized but
unissued shares of Common Stock so reserved shall not be decreased and shall at
all times be sufficient to provide for the full exercise of all Prepaid Warrants
issued or issuable pursuant to the Securities Purchase Agreement at the then
current Exercise Price. The Reserved Amount shall be allocated to the holders of
Prepaid Warrants as provided in Article IX.H.
B. Increases to Reserved Amount. If, at any time after the date hereof,
the Reserved Amount for any three (3) consecutive trading days (the last of such
three (3) trading days being the "AUTHORIZATION TRIGGER DATE") shall be less
than 135% of the number of shares of Common Stock issuable upon the full
exercise of all Prepaid Warrants issued or issuable pursuant to the Securities
Purchase Agreement, the Corporation shall immediately notify the holders of
Prepaid Warrants of such occurrence and shall take immediate action (including,
if necessary, seeking stockholder approval to authorize the issuance of
additional shares of Common Stock) to increase the Reserved Amount to 165% of
the number of shares of Common Stock then issuable upon the full exercise of all
Prepaid Warrants issued or issuable pursuant to the Securities Purchase
Agreement. In the event the Corporation fails to so increase the Reserved Amount
within ninety (90) days after an Authorization Trigger Date, and thereafter
Holder is unable to exercise all or any portion of the outstanding Prepaid
Amount of this Warrant because the Corporation does not have a sufficient number
of shares of Common Stock authorized and reserved for issuance upon exercise
hereof, Holder shall thereafter have the option, exercisable at any time by
delivery of a Default Notice (as defined in Article VI.C) to the Corporation, to
require the Corporation to pay to Holder an amount
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<PAGE> 10
in cash equal to the Default Amount (as defined in Article VI.B). Upon payment
by the Corporation of the Default Amount, this Warrant shall be null and void.
If the Corporation fails to deliver the Default Amount to Holder within five (5)
business days after its receipt of such Default Notice, then Holder shall be
entitled to the remedies provided in Article VI.C.
ARTICLE IV
FAILURE TO SATISFY EXERCISES
A. Exercise Default Payments. If, at any time, (x) Holder submits a
Notice of Exercise and the Corporation fails for any reason (other than because
such issuance would exceed Holder's allocated portion of the Reserved Amount or
Cap Amount, for which failures Holder shall have the remedies set forth in
Articles III and V, respectively) to deliver, on or prior to the seventh
business day following the expiration of the Delivery Period for such exercise,
such number of freely tradeable shares of Common Stock to which Holder is
entitled upon such exercise, or (y) the Corporation publicly announces or
provides notice to any holder of Prepaid Warrants (together with all other
holders of Prepaid Warrants and the Holder referred to herein, the "HOLDERS") at
any time of its intention not to issue freely tradeable shares of Common Stock
upon the exercise by any Holder of a Prepaid Warrant in accordance with the
terms of the Prepaid Warrants (other than because such issuance would exceed
such Holder's allocated portion of the Reserved Amount or Cap Amount) (each of
(x) and (y) being an "EXERCISE DEFAULT"), then the Corporation shall pay to
Holder, in the case of an Exercise Default described in clause (x) above, and to
all Holders, in the case of a Exercise Default described in clause (y) above, an
amount equal to:
(.24) x (D/365) x (Exercise Default Amount)
where:
"D" means the number of days after the expiration of the Delivery
Period through and including the Default Cure Date;
"EXERCISE DEFAULT AMOUNT" means the Prepaid Amount of all Warrants held
by Holder plus all accrued and unpaid Premium thereon; and
"DEFAULT CURE DATE" means (i) with respect to an Exercise Default
described in clause (x) of its definition, the date the Corporation effects the
exercise of the portion of this Warrant submitted for exercise, and (ii) with
respect to an Exercise Default described in clause (y) of its definition, the
date the Corporation begins to issue freely tradeable shares of Common Stock in
satisfaction of all exercises of Prepaid Warrants in accordance with their terms
and (iii) with respect to either type of Exercise Default, the date on which the
Corporation pays to Holder the Default Amount (as defined in Article VI.B)
pursuant to Paragraph D of this Article IV.
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<PAGE> 11
The payments to which Holder shall be entitled pursuant to this
Paragraph A are referred to herein as "EXERCISE DEFAULT PAYMENTS." Holder may
elect to receive accrued Exercise Default Payments in cash or to convert all or
any portion of such accrued Exercise Default Payments, at any time, into Common
Stock at the lowest Exercise Price in effect during the period beginning on the
date of the Exercise Default through the Default Cure Date for such exercise. In
the event Holder elects to receive any Exercise Default Payments in shares of
Common Stock, it shall so notify the Corporation in writing. Such payment shall
be made in accordance with and be subject to the provisions of Article IX.J. In
the event Holder elects to convert all or any portion of the Exercise Default
Payments into Common Stock, Holder shall indicate on a Notice of Exercise such
portion of the Exercise Default Payments which Holder elects to so convert and
such exercise shall otherwise be effected in accordance with the provisions of
Article II.
B. Adjustment to Exercise Price. If Holder has not received
certificates for all shares of Common Stock prior to the tenth (10th) business
day after the expiration of the Delivery Period with respect to an exercise of
any portion of any of Holder's Prepaid Warrants for any reason (other than
because such issuance would exceed Holder's allocated portion of the Reserved
Amount or Cap Amount, for which failures Holder shall have the remedies set
forth in Articles III and V, respectively), then the Fixed Exercise Price in
respect of all Prepaid Warrants held by Holder (including any Prepaid Warrants
or portions thereof submitted to the Corporation for exercise, but for which
shares of Common Stock have not been issued to Holder) shall thereafter be the
lesser of (i) the Fixed Exercise Price on the Exercise Date specified in the
Notice of Exercise which resulted in the Exercise Default and (ii) the lowest
Exercise Price in effect during the period beginning on, and including, such
Exercise Date through and including the day such shares of Common Stock are
delivered to the Holder. If there shall occur an Exercise Default of the type
described in clause (y) of Article IV.A., then the Fixed Exercise Price with
respect to any exercise thereafter shall be the lowest Exercise Price in effect
at any time during the period beginning on, and including, the date of the
occurrence of such Exercise Default through and including the Default Cure Date.
The Fixed Exercise Price shall thereafter be subject to further adjustment for
any events described in Article VII.
C. Buy-In Cure. Unless the Corporation has notified Holder in writing
prior to the delivery by Holder of a Notice of Exercise that the Corporation is
unable to honor exercises, if (i) (a) the Corporation fails for any reason to
deliver during the Delivery Period shares of Common Stock to Holder upon an
exercise of this Warrant or (b) there shall occur a Legend Removal Failure (as
defined in Article VI.A(iii) below) and (ii) thereafter, Holder purchases (in an
open market transaction or otherwise) shares of Common Stock to make delivery in
satisfaction of a sale by Holder of the unlegended shares of Common Stock (the
"SOLD SHARES") which Holder anticipated receiving upon such exercise (a
"BUY-IN"), the Corporation shall pay Holder (in addition to any other remedies
available to Holder) the amount by which (x) Holder's total purchase price
(including brokerage commissions, if any) for the unlegended shares of Common
Stock so purchased exceeds (y) the net proceeds received by Holder from the sale
of the Sold Shares. For example, if Holder purchases unlegended shares of Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
shares of Common Stock it sold for $10,000, the Corporation will be
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<PAGE> 12
required to pay Holder $1,000. Holder shall provide the Corporation written
notification indicating any amounts payable to Holder pursuant to this Paragraph
C, together with evidence supporting such calculation. The Corporation shall
make any payments required pursuant to this Paragraph C in accordance with and
subject to the provisions of Article IX.
D. Right to Require Payment of Default Amount. If the Corporation
fails, and such failure continues uncured for five (5) business days after the
Corporation has been notified thereof in writing by Holder, for any reason
(other than because such issuance would exceed Holder's allocable portion of the
Reserved Amount or Cap Amount, for which failures Holder shall have the remedies
set forth in Articles III and V, respectively) to issue shares of Common Stock
within ten (10) business days after the expiration of the Delivery Period with
respect to any exercise of this Warrant, then Holder may elect at any time prior
to the Default Cure Date for such Exercise Default, by delivery of a Default
Notice (as defined in Article VI.C.) to the Corporation, to require the
Corporation to pay to Holder an amount in cash equal to the Default Amount (as
defined in Article VI.B). Upon payment by the Corporation of the Default Amount,
this Warrant shall be null and void. If the Corporation fails to pay such
Default Amount within five (5) business days after its receipt of a Default
Notice, then Holder shall be entitled to the remedies provided in Article VI.C.
ARTICLE V
INABILITY TO EXERCISE DUE TO CAP AMOUNT
A. Obligation to Cure. If at any time the then unissued portion of any
Holder's Cap Amount is less than 135% of the number of shares of Common Stock
then issuable upon the full exercise of all Prepaid Warrants owned by such
Holder (a "TRADING MARKET TRIGGER EVENT"), the Corporation shall immediately
notify the Holders of Prepaid Warrants of such occurrence and shall take
immediate action (including, if necessary, seeking the approval of its
stockholders to authorize the issuance of the full number of shares of Common
Stock which would be issuable upon the full exercise of all Prepaid Warrants
issued or issuable pursuant to the Securities Purchase Agreement but for the Cap
Amount) to eliminate any prohibitions under applicable law or the rules or
regulations of any stock exchange, interdealer quotation system or other
self-regulatory organization with jurisdiction over the Corporation or any of
its securities on the Corporation's ability to issue shares of Common Stock in
excess of the Cap Amount. In the event the Corporation fails to eliminate all
such prohibitions within ninety (90) days after the Trading Market Trigger Event
and thereafter Holder is unable to exercise all or any portion of the
outstanding Prepaid Amount of this Warrant as a result of the operation of
Article II.C.(i), then Holder shall thereafter have the option, exercisable at
any time until such date that all such prohibitions are eliminated, by delivery
of a Default Notice (as defined in Article VI.C.) to the Corporation, to require
the Corporation to pay to Holder an amount in cash equal to the Default Amount
(as defined in Article VI.B). Upon payment by the Corporation of the Default
Amount, this Warrant shall be null and void. If the Corporation fails to deliver
the Default Amount within five (5) business days after its receipt of such
Default Notice, then such holder shall be entitled to the remedies provided in
Articles V.B.
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<PAGE> 13
B. Remedies. If the Corporation fails to pay the Default Amount
pursuant to Article V.A. within five (5) business days after its receipt of such
Default Notice, Holder may elect either or both of the following additional
remedies:
(i) to require, with the consent of the Majority Holders, the
Corporation to terminate the listing of its Common Stock on the Nasdaq National
Market (or any other stock exchange, interdealer quotation system or trading
market) and to cause its Common Stock to be eligible for trading on the
over-the-counter electronic bulletin board; or
(ii) to require the Corporation to issue shares of Common Stock in
accordance with Holder's Notice of Exercise at an Exercise Price equal to the
average of the Closing Bid Prices for the Common Stock during the five (5)
consecutive trading days ending on the trading day immediately preceding the
date of Holder's written notice to the Corporation of its election to receive
shares of Common Stock pursuant to this subparagraph (ii) (subject to equitable
adjustment for any stock splits, stock dividends, reclassifications or similar
events during such five (5) trading day period).
ARTICLE VI
EVENTS OF DEFAULT
A. Events of Default. If any of the following events of default (each,
an "EVENT OF DEFAULT") shall occur:
(i) the Common Stock (including any of the shares of Common Stock
issuable upon exercise of this Warrant) is suspended from trading on any of, or
is not listed (and authorized) for trading on at least one of, the New York
Stock Exchange, the American Stock Exchange, the Nasdaq National Market or the
Nasdaq SmallCap Market for an aggregate of ten (10) trading days in any nine (9)
month period;
(ii) any Registration Statement required to be filed by the
Corporation pursuant to Sections 2(a) or 3(b) of that certain Registration
Rights Agreement by and among the Corporation and the other signatories thereto
entered into in connection with the Securities Purchase Agreement (the
"REGISTRATION RIGHTS AGREEMENT") has not been declared effective by the
thirtieth (30th) day following the date on which such Registration Statement is
required to be declared effective pursuant to the Registration Rights Agreement,
or any such Registration Statement, after being declared effective, cannot be
utilized by Holders for the resale of all of its Registrable Securities (as
defined in the Registration Rights Agreement) for an aggregate of more than
thirty (30) days;
(iii) the Corporation fails to remove any restrictive legend on any
certificate or any shares of Common Stock issued to Holder upon exercise of any
Prepaid Warrant owned by Holder as and when required by the Prepaid Warrants,
the Securities Purchase Agreement or the Registration Rights Agreement (a
"LEGEND REMOVAL FAILURE"), and any such failure continues
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<PAGE> 14
uncured for five (5) business days after the Corporation has been notified
thereof in writing by the holder;
(iv) the Corporation provides notice to any of the Holders of
Prepaid Warrants, including by way of public announcement, at any time, of its
intention not to issue shares of Common Stock to any of the Holders of Prepaid
Warrants upon exercise in accordance with the terms of the Prepaid Warrants
(other than due to the circumstances contemplated by Articles III or V for which
the Holders shall have the remedies set forth in such Articles);
(v) the Corporation shall:
(a) sell, convey or dispose of all or substantially all of its
assets;
(b) merge, consolidate or engage in any other business
combination with any other entity (other than pursuant to a migratory merger
effected solely for the purpose of changing the jurisdiction of incorporation of
the Corporation, other than pursuant to a merger in which the Corporation is the
surviving or continuing entity and its authorized capital stock is unchanged and
other than pursuant to a merger in which the surviving or continuing entity (if
other than the Corporation) assumes the Corporation's obligations under the
Securities Purchase Agreement, the Prepaid Warrants, the Incentive Warrants and
the Registration Rights Agreement and is a publicly-traded corporation whose
common stock is listed for trading on the New York Stock Exchange, the American
Stock Exchange, the Nasdaq National Market or the Nasdaq SmallCap Market); or
(c) have fifty percent (50%) or more of the voting power of
its capital stock owned beneficially by one person, entity or "group" (as such
term is used under Section 13(d) of the Exchange Act) other than Purchasers (as
defined in the Securities Purchase Agreement) and their affiliates;
(vi) the Corporation otherwise shall breach any material term
hereunder (other than as specifically provided in subparagraphs (i)-(v) of this
Paragraph A) or under the Securities Purchase Agreement or the Registration
Rights Agreement and such breach continues uncured for ten (10) business days
after the occurrence of such event;
(vii) any representation or warranty of the Corporation made herein
or in any agreement, statement or certificate given in writing pursuant hereto
or in connection herewith (including, without limitation, the Securities
Purchase Agreement and the Registration Rights Agreement), shall be false or
misleading in any material respect when made and the breach of which would have
a Material Adverse Effect (as defined in the Securities Purchase Agreement);
(viii) the Corporation or any material subsidiary of the Corporation
shall make an assignment for the benefit of creditors, or apply for or consent
to the appointment of a receiver or trustee for it or for a substantial part of
its property or business; or such a receiver or trustee shall otherwise be
appointed and such appointment shall continue undismissed for 45 days;
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<PAGE> 15
(ix) bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Corporation or
any material subsidiary of the Corporation and shall continue undismissed for 45
days in the case of proceedings initiated against the Corporation or its
material subsidiaries; or
(x) the Corporation shall issue to a Holder a number of shares of
Common Stock equal to such Holder's Cap Amount and such Holder delivers a Notice
of Exercise for additional shares;
then, upon the occurrence and during the continuation of any Event of Default
specified in subparagraphs (i)-(vii) and (x) of this Paragraph A, at the option
of Holder exercisable through the delivery of a Default Notice (as defined in
Paragraph C below), and upon the occurrence of an Event of Default specified in
subparagraphs (viii) or (ix) of this Paragraph A, the Corporation shall pay
Holder, in satisfaction of its obligation to issue shares of Common Stock upon
exercise of this Warrant, an amount equal to the Default Amount and such Default
Amount, together with all other ancillary amounts payable hereunder, shall
immediately become due and payable, all without demand, presentment or notice,
all of which hereby are expressly waived, together with all costs, including,
without limitation, legal fees and expenses of collection, and Holder shall be
entitled to exercise all other rights and remedies available at law or in
equity. For the avoidance of doubt, the occurrence of any event described in
clauses (i), (ii), (iv), (v), (vii), (viii), (ix) or (x) above shall immediately
constitute an Event of Default and there shall be no cure period.
B. Definition of Default Amount. The "DEFAULT AMOUNT" with respect to
this Warrant means an amount equal to the greater of:
(i) A
-------------------- X M
EP
and
(ii) The sum of (x) the product of (I) one hundred percent (100%)
divided by the Exercise Percentage, times (II) the outstanding Prepaid Amount
hereof on the date on which the Corporation receives the Default Notices plus
all accrued and unpaid Premium thereon through the date of payment of the
Default Amount, plus (y) all unpaid Exercise Default Payments owing (if any)
with respect thereto through the date of payment of the Default Amount.
where:
"A" means the outstanding Prepaid Amount of this Warrant on the date on
which the Corporation receives the Default Notice plus all unpaid Exercise
Default Payments owing (if any) and any accrued and unpaid Premium with respect
thereto through the date of payment of the Default Amount;
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"EP" means the Exercise Price in effect on the date on which the
Corporation receives the Default Notice; and
"M" means (i) with respect to all Events of Default other than an Event
of Default specified in Article VI.A(v) hereof, the highest Closing Bid Price of
the Corporation's Common Stock during the period beginning on the date on which
the Corporation receives the Default Notice and ending on the date immediately
preceding the date of payment of the Default Amount and (ii) with respect to an
Event of Default specified in Article VI.A(v) hereof, the greater of (a) the
amount determined pursuant to clause (i) of this definition or (b) the fair
market value, as of the date on which the Corporation receives the Default
Notice, of the consideration payable to the holder of a share of Common Stock
pursuant to the transaction which triggers the Event of Default. For purposes of
this definition, "fair market value" shall be determined by an investment
banking firm selected by the Corporation and reasonably acceptable to the
Majority Holders, with the costs of such appraisal to be borne by the
Corporation.
C. Failure to Pay Default Amount. If the Corporation fails to pay the
Default Amount within five (5) business days of its receipt of a notice
requiring such payment (a "DEFAULT NOTICE"), then the Holder (i) shall be
entitled to interest on the Default Amount at a per annum rate equal to the
lower of twenty-four percent (24%) and the highest interest rate permitted by
applicable law from the date on which the Corporation receives the Default
Notice until the date of payment of the Default Amount hereunder, and (ii) shall
have the right, at any time and from time to time, to require the Corporation,
upon written notice, to immediately convert (in accordance with the terms of
Paragraph A of Article II) all or any portion of the Default Amount, plus
interest as aforesaid, into shares of Common Stock at the lowest Exercise Price
in effect during the period beginning on the date on which the Corporation
receives the Default Notice and ending on the Exercise Date with respect to the
conversion of such Default Amount. In the event the Corporation is not able to
pay all amounts due and payable with respect to all Prepaid Warrants subject to
Default Notices, the Corporation shall pay the Holders of such Prepaid Warrants
which are the subject of Default Notices such amounts pro rata, based on the
total amounts payable to each such Holder relative to the total amounts payable
to all such Holders.
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<PAGE> 17
ARTICLE VII
ADJUSTMENTS TO THE EXERCISE PRICE
The Exercise Price shall be subject to adjustment from time to time as
follows:
A. Stock Splits, Stock Dividends, Etc. If, at any time on or after the
Closing Date, the number of outstanding shares of Common Stock is increased by a
stock split, stock dividend, combination, reclassification or other similar
event, the Fixed Exercise Price shall be proportionately reduced, or if the
number of outstanding shares of Common Stock is decreased by a reverse stock
split, combination or reclassification of shares, or other similar event, the
Fixed Exercise Price shall be proportionately increased. In such event, the
Corporation shall notify the Corporation's transfer agent of such change on or
before the effective date thereof.
B. Adjustment Due to Merger, Consolidation, Etc. If, at any time after
the Closing Date, there shall be (i) any reclassification or change of the
outstanding shares of Common Stock (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a result of
a subdivision or combination), (ii) any consolidation or merger of the
Corporation with any other entity (other than a migratory merger effected solely
for the purpose of changing the jurisdiction of incorporation of the Corporation
and other than a merger in which the Corporation is the surviving or continuing
entity and its authorized capital stock is unchanged), (iii) any sale or
transfer of all or substantially all of the assets of the Corporation or (iv)
any share exchange pursuant to which all of the outstanding shares of Common
Stock are converted into other securities or property (each of (i) - (iv) above
being a "CORPORATE CHANGE"), then the Holders shall thereafter have the right to
receive upon exercise hereof, in lieu of the shares of Common Stock otherwise
issuable, such shares of stock, securities and/or other property as would have
been issued or payable in such Corporate Change with respect to or in exchange
for the number of shares of Common Stock which would have been issuable upon
exercise hereof (without giving effect to the limitations contained in Article
II.C.) had such Corporate Change not taken place, and in any such case,
appropriate provisions shall be made with respect to the rights and interests of
Holder to the end that the provisions hereof (including, without limitation,
provisions for adjustment of the Exercise Price and of the number of shares of
Common Stock issuable upon exercise of this Warrant) shall thereafter be
applicable, as nearly as may be practicable in relation to any shares of stock
or securities thereafter deliverable upon the exercise thereof. The Corporation
shall not effect any Corporate Change unless (i) Holder has received written
notice of such transaction at least seventy-five (75) days prior thereto, but,
in no event prior to the public disclosure thereof and not later than twenty
(20) days prior to the record date for the determination of stockholders
entitled to vote with respect thereto, and (ii) the resulting successor or
acquiring entity (if not the Corporation) assumes by written instrument the
obligations of the Corporation under this Warrant. The above provisions shall
apply regardless of whether or not there would have been a sufficient number of
shares of Common Stock authorized and available for issuance upon exercise of
the Prepaid Warrants outstanding as of the date of such transaction, and shall
similarly apply to successive reclassifications, consolidations, mergers, sales,
transfers or share exchanges.
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<PAGE> 18
C. Adjustment Due to Major Announcement. In the event the Corporation
at any time after the Closing Date (i) makes a public announcement that it
intends to consolidate or merge with any other entity (other than a migratory
merger effected solely for the purpose of changing the jurisdiction of
incorporation of the Corporation and other than a merger in which the
Corporation is the surviving or continuing entity and its capital stock is
unchanged) or to sell or transfer all or substantially all of the assets of the
Corporation or (ii) any person, group or entity (including the Corporation)
publicly announces a tender offer, exchange offer or another transaction to
purchase 50% or more of the Corporation's Common Stock or otherwise publicly
announces an intention to replace a majority of the Corporation's Board of
Directors by waging a proxy battle or otherwise (the date of the announcement
referred to in clause (i) or (ii) of this Paragraph C is hereinafter referred to
as the "ANNOUNCEMENT DATE"), then the Exercise Price shall, effective upon the
Announcement Date and continuing through the sixth (6th) trading day following
the earlier of the consummation of the proposed transaction or tender offer,
exchange offer or another transaction or the Abandonment Date (as defined
below), be equal to the lower of (x) the Exercise Price which would have been
applicable for an exercise occurring on the Announcement Date and (y) the
Exercise Price determined in accordance with Article I.D. on the Exercise Date
set forth in the applicable Notice of Exercise. From and after the sixth (6th)
trading day following the Abandonment Date, the Exercise Price shall be
determined as set forth in Article I.D. "ABANDONMENT DATE" means with respect to
any proposed transaction or tender offer, exchange offer or another transaction
for which a public announcement as contemplated by this Paragraph C has been
made, the date upon which the Corporation (in the case of clause (i) above) or
the person, group or entity (in the case of clause (ii) above) publicly
announces the termination or abandonment of the proposed transaction or tender
offer, exchange offer or another transaction which caused this Paragraph C to
become operative.
D. Adjustment Due to Distribution. If, at any time after the Closing
Date, the Corporation shall declare or make any distribution of its assets (or
rights to acquire its assets) to holders of Common Stock as a partial
liquidating dividend, by way of return of capital or otherwise (including any
dividend or distribution to the Corporation's shareholders in cash or shares (or
rights to acquire shares) of capital stock of a subsidiary (i.e. a spin-off)) (a
"DISTRIBUTION"), then Holder shall be entitled, upon any exercise of this
Warrant after the date of record for determining stockholders entitled to such
Distribution, to receive the amount of such assets which would have been payable
to Holder with respect to the shares of Common Stock issuable upon such exercise
(without giving effect to the limitations contained in Article II.C.) had Holder
been the holder of such shares of Common Stock on the record date for the
determination of stockholders entitled to such Distribution.
E. Issuance of Other Securities With Variable Conversion Price. If, at
any time after the Closing Date, the Corporation shall issue any securities
which are convertible into or exchangeable for Common Stock ("CONVERTIBLE
SECURITIES") at a conversion or exchange rate based on a discount to the market
price of the Common Stock at the time of conversion or exercise, then the
Exercise Percentage in respect of any exercise of any portion of this Warrant
after such issuance shall be the lesser of (i) one minus the greatest discount
applicable to any such Convertible Securities and (ii) the Exercise Percentage
then in effect.
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<PAGE> 19
F. Purchase Rights. If, at any time after the Closing Date, the
Corporation issues any Convertible Securities or rights to purchase stock,
warrants, securities or other property (the "PURCHASE RIGHTS") pro rata to the
record holders of any class of Common Stock, then Holder will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which Holder could have acquired if Holder had held the number
of shares of Common Stock acquirable upon complete exercise of this Warrant
(without giving effect to the limitations contained in Article II.C.)
immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights.
G. Adjustment of Exercise Price. Except as otherwise provided herein,
if and whenever during the Exercise Period the Corporation issues or sells, or
in accordance with Article VII.G(b) hereof is deemed to have issued or sold, any
shares of Common Stock for no consideration or for a consideration per share
less than the Market Price (as hereinafter defined) on the date of issuance (a
"DILUTIVE ISSUANCE"), then effective immediately upon the Dilutive Issuance, the
Fixed Exercise Price will be adjusted in accordance with the following formula:
FE' = FE x O + P/M
----------------
CSDO
where:
FE' = the adjusted Fixed Exercise Price;
FE = the then current Fixed Exercise Price;
M = the then current Market Price (as defined below);
O = the number of shares of Common Stock outstanding
immediately prior to the Dilutive Issuance;
P = the aggregate consideration, calculated as set forth below,
received by the Corporation upon such Dilutive Issuance;
and
CSDO = the total number of shares of Common Stock Deemed
Outstanding (as defined below) immediately after the
Dilutive Issuance.
(i) Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Fixed Exercise Price, the following will be applicable:
(a) Issuance of Rights or Options. If the Corporation in any manner
issues or grants any warrants, rights or options, whether or not immediately
exercisable, to subscribe for or to purchase Common Stock or Convertible
Securities (such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as "OPTIONS") and the price
per share for which Common Stock is issuable upon the exercise of such Options
is less than the Market Price in effect on the date of issuance of such Options
("BELOW MARKET OPTIONS"), then the maximum total number of shares of Common
Stock issuable upon the exercise of all such Below Market Options (assuming full
exercise, conversion or exchange of Convertible Securities, if
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<PAGE> 20
applicable) will, as of the date of the issuance or grant of such Below Market
Options, be deemed to be outstanding and to have been issued and sold by the
Corporation for such price per share. For purposes of the preceding sentence,
the "price per share for which Common Stock is issuable upon the exercise of
such Below Market Options" is determined by dividing (i) the total amount, if
any, received or receivable by the Corporation as consideration for the issuance
or granting of all such Below Market Options, plus the minimum aggregate amount
of additional consideration, if any, payable to the Corporation upon the
exercise of all such Below Market Options, plus, in the case of Convertible
Securities issuable upon the exercise of such Below Market Options, the minimum
aggregate amount of additional consideration payable upon the exercise,
conversion or exchange thereof at the time such Convertible Securities first
become exercisable, convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the exercise of all such Below
Market Options (assuming full conversion of Convertible Securities, if
applicable). No further adjustment to the Exercise Price will be made upon the
actual issuance of such Common Stock upon the exercise of such Below Market
Options or upon the exercise, conversion or exchange of Convertible Securities
issuable upon exercise of such Below Market Options.
(b) Issuance of Convertible Securities.
(A) If the Corporation in any manner issues or sells any
Convertible Securities, whether or not immediately convertible (other than where
the same are issuable upon the exercise of Options) and the price per share for
which Common Stock is issuable upon such exercise, conversion or exchange (as
determined below, if applicable) is less than the Market Price in effect on the
date of issuance of such Convertible Securities, then the maximum total number
of shares of Common Stock issuable upon the exercise, conversion or exchange of
all such Convertible Securities will, as of the date of the issuance of such
Convertible Securities, be deemed to be outstanding and to have been issued and
sold by the Corporation for such price per share. For the purposes of the
preceding sentence, the "price per share for which Common Stock is issuable upon
such exercise, conversion or exchange" is determined by dividing (i) the total
amount, if any, received or receivable by the Corporation as consideration for
the issuance or sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the Corporation
upon the exercise, conversion or exchange thereof at the time such Convertible
Securities first become exercisable, convertible or exchangeable, by (ii) the
maximum total number of shares of Common Stock issuable upon the exercise,
conversion or exchange of all such Convertible Securities. No further adjustment
to the Exercise Price will be made upon the actual issuance of such Common Stock
upon exercise, conversion or exchange of such Convertible Securities.
(B) If the Corporation in any manner issues or sells any
Convertible Securities with a fluctuating conversion or exercise price or
exchange ratio (a "VARIABLE RATE CONVERTIBLE SECURITY"), then the "price per
share for which Common Stock is issuable upon such exercise, conversion or
exchange" for purposes of the calculation contemplated hereby shall be deemed to
be the lowest price per share which would be applicable (assuming all holding
period and other conditions to any discounts contained in such Convertible
Security have been satisfied) if the Market Price on the date of issuance of
such Convertible Security was 75% of the Market Price on
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<PAGE> 21
such date (the "ASSUMED VARIABLE MARKET PRICE"). Further, if the Market Price at
any time or times thereafter is less than or equal to the Assumed Variable
Market Price last used for making any adjustment hereunder with respect to any
Variable Rate Convertible Security, the Exercise Price in effect at such time
shall be readjusted to equal the Exercise Price which would have resulted if the
Assumed Variable Market Price at the time of issuance of the Variable Rate
Convertible Security had been 75% of the Market Price existing at the time of
the adjustment required by this sentence.
(c) Change in Option Price or Conversion Rate. If there is a change
at any time in (i) the amount of additional consideration payable to the
Corporation upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Corporation upon the exercise, conversion
or exchange of any Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock (in
each such case, other than under or by reason of provisions designed to protect
against dilution), the Exercise Price in effect at the time of such change will
be readjusted to the Exercise Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding provided for such
changed additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold.
(d) Treatment of Expired Options and Unexercised Convertible
Securities. If, in any case, the total number of shares of Common Stock issuable
upon exercise of any Option or upon exercise, conversion or exchange of any
Convertible Securities is not, in fact, issued and the rights to exercise such
Option or to exercise, convert or exchange such Convertible Securities shall
have expired or terminated, the Fixed Exercise Price then in effect will be
readjusted to the Fixed Exercise Price which would have been in effect at the
time of such expiration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such expiration or
termination (other than in respect of the actual number of shares of Common
Stock issued upon exercise or conversion thereof), never been issued.
(e) Calculation of Consideration Received. If any Common Stock,
Options or Convertible Securities are issued, granted or sold for cash, the
consideration received therefor for purposes of this Warrant will be the amount
received by the Corporation therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Corporation in connection with such issuance, grant or
sale. In case any Common Stock, Options or Convertible Securities are issued or
sold for a consideration part or all of which shall be other than cash, the
amount of the consideration other than cash received by the Corporation 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 Corporation will be the Market Price thereof as of the date of receipt. In
case any Common Stock, Options or Convertible Securities are issued in
connection with any merger or consolidation in which the Corporation is the
surviving corporation, the amount of consideration therefor will be deemed to be
the fair market value of such portion of the net assets and business of the
non-surviving corporation as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair market value of any
consideration other than cash or securities will be determined in good faith by
an investment banker
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<PAGE> 22
or other appropriate expert of national reputation selected by the Corporation
and reasonably acceptable to the holder hereof, with the costs of such appraisal
to be borne by the Corporation.
(f) Exceptions to Adjustment of Exercise Price. No adjustment to
the Exercise Price will be made (i) upon the exercise of any warrants, options
or convertible securities issued and outstanding on the Issue Date and set
forth on Schedule 3(c) of the Securities Purchase Agreement in accordance with
the terms of such securities as of such date; (ii) upon the grant or exercise
of any stock or options which may hereafter be granted or exercised under any
employee benefit plan of the Corporation now existing or to be implemented in
the future, so long as the issuance of such stock or options is approved by a
majority of the non-employee members of the Board of Directors of the
Corporation or a majority of the members of a committee of non-employee
directors established for such purpose; (iii) upon the issuance of any Prepaid
Warrants or Incentive Warrants (as such term is defined in the Securities
Purchase Agreement) issued or issuable in accordance with the terms of the
Securities Purchase Agreement; (iv) upon exercise of the Prepaid Warrants and
the Incentive Warrants; (v) upon the issuance of Common Stock in a firm
commitment underwritten public offering; or (vi) upon the issuance of
securities to an investor listed on Schedule 1 hereto.
(ii) Certain Definitions.
(a) "COMMON STOCK DEEMED OUTSTANDING" shall mean the number of
shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Corporation), plus (x) in the case of any
adjustment required resulting from the issuance of any Options, the maximum
total number of shares of Common Stock issuable upon the exercise of the Options
for which the adjustment is required (including any Common Stock issuable upon
the conversion of Convertible Securities issuable upon the exercise of such
Options), and (y) in the case of any adjustment required resulting from the
issuance of any Convertible Securities, the maximum total number of shares of
Common Stock issuable upon the exercise, conversion or exchange of the
Convertible Securities for which the adjustment is required, as of the date of
issuance of such Convertible Securities, if any.
(b) "MARKET PRICE," as of any date, (i) means the average of the
closing bid prices for the shares of Common Stock as reported on the Nasdaq
National Market by Bloomberg Financial Markets ("BLOOMBERG") for the five (5)
consecutive trading days immediately preceding such date, or (ii) if the Nasdaq
National Market is not the principal trading market for the shares of Common
Stock, the average of the last sale prices reported by Bloomberg on the
principal trading market for the Common Stock during the same period, or, if
there is no sale price for such period, the last bid price reported by Bloomberg
for such period, or (iii) if the foregoing do not apply, the last sale price of
such security in the over-the-counter market on the pink sheets or bulletin
board for such security as reported by Bloomberg, or if no sale price is so
reported for such security, the last bid price of such security as reported by
Bloomberg, or (iv) if market value cannot be calculated as of such date on any
of the foregoing bases, the Market Price shall be the average fair market value
as reasonably determined by an investment banking firm selected by the
Corporation and reasonably acceptable to the Majority Holders, with the costs of
the appraisal to be borne by the Corporation. The manner
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<PAGE> 23
of determining the Market Price of the Common Stock set forth in the foregoing
definition shall apply with respect to any other security in respect of which a
determination as to market value must be made hereunder.
(c) "COMMON STOCK," for purposes of this Article VII.G, includes
the Common Stock and any additional class of stock of the Corporation having no
preference as to dividends or distributions on liquidation, provided that the
shares purchasable pursuant to this Warrant shall include only Common Stock in
respect of which this Warrant is exercisable, or shares resulting from any
subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to above, the stock or other securities or property provided
for.
H. Notice of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Exercise Price pursuant to this Article VII, the
Corporation, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to Holder a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, provided that such notice shall not contain
any material nonpublic information. The Corporation shall, upon the written
request at any time of Holder, furnish to Holder a like certificate setting
forth (i) such adjustment or readjustment, (ii) the Exercise Price at the time
in effect and (iii) the number of shares of Common Stock and the amount, if any,
of other securities or property which at the time would be received upon
exercise of this Warrant.
ARTICLE VIII
REDEMPTION AND CALL
A. Subject to the conditions set forth below, the Corporation shall
have the right, at any time at which a Notice of Exercise is delivered and the
Exercise Price is less than the Floor Price and provided the Corporation is not
in material violation of any of its obligations under this Prepaid Warrant, the
Securities Purchase Agreement or the Registration Rights Agreement and so long
as no Event of Default shall have occurred and be continuing (and the Holder
doesn't waive such violation or Event of Default), to redeem (an "OPTIONAL
REDEMPTION") all of the Exercise Amount subject to such Notice of Exercise for
cash, at an amount per share equal to the Optional Redemption Amount (as defined
below). For purposes hereof, the "OPTIONAL REDEMPTION AMOUNT" means:
V
---------- X M
EP
where:
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<PAGE> 24
"V" means the Prepaid Amount being redeemed plus the accrued Premium
thereon and all unpaid Default Payments owing (if any) with respect thereto
through the Effective Date of Redemption;
"EP" means the Exercise Price in effect on the date of the Optional
Redemption Notice; and
"M" means the Closing Bid Price of the Corporation's Common Stock on
the date of the Optional Redemption Notice.
The Corporation shall exercise its Optional Redemption by (i)
delivering written notice by facsimile and overnight courier (an "OPTIONAL
REDEMPTION NOTICE") to the holders of Prepaid Warrants not less than five (5)
business days prior to the beginning of the period during which the Corporation
shall exercise its Optional Redemption rights in connection with any Notice of
Exercise delivered in the period set forth in such notice by the Corporation
(the "OPTIONAL REDEMPTION PERIOD") and (ii) on or prior to the date of delivery
of such Optional Redemption Notice, the Corporation shall have deposited with an
escrow agent reasonably acceptable to holders of a majority of the then Prepaid
Warrants, as a trust fund, cash sufficient in amount to pay all amounts to which
the holders of Prepaid Warrants are entitled upon such redemption pursuant to
this Paragraph A, with irrevocable instructions and authority to such escrow
agent to complete the redemption thereof in accordance with this Paragraph A.
Any Optional Redemption Notice delivered in accordance with the immediately
preceding sentence shall be accompanied by a statement executed by a duly
authorized officer of its escrow agent, certifying the amount of funds which
have been deposited with such escrow agent and that the escrow agent has been
instructed and agrees to act as redemption agent hereunder. The Optional
Redemption Period shall terminate effective on the date indicated in the
Corporation's Optional Redemption Notice. The Corporation may terminate an
Optional Redemption Period prior to the date indicated in the applicable
Optional Redemption Notice with respect to Exercise Amounts which are not
delivered for exercise prior to the effective date of such termination notice by
providing each holder of Prepaid Warrants with written notice of such
termination at least five business days prior to the effective date of such
termination.
The Optional Redemption Notice shall be delivered to (i) the holders of
Prepaid Warrants at the address and facsimile number of each holder appearing in
the Corporation's register and (ii) the transfer agent for the Common Stock,
which Optional Redemption Notice shall be deemed to have been delivered on the
business day after the Corporation's fax (with a copy sent by overnight courier
to the holders of Prepaid Warrants) of such notice to the holders of Prepaid
Warrants. Notwithstanding anything to the contrary in this Article VIII, the
Corporation shall exercise any Exercise Amount pursuant to Article II if such
Exercise Amount is submitted for exercise (i) before the beginning, or after the
effective date of the termination, of the Optional Redemption Period, (ii) for
an Exercise Price greater than the Floor Price or (iii) in an amount in excess
of such holder's pro rata allocation of the maximum Exercise Amount the
Corporation indicated that it would redeem in its Optional Redemption Notice as
described below.
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<PAGE> 25
B. (a) The Optional Redemption Amount shall be paid to the holders of
Prepaid Warrants being redeemed within three (3) business days of the applicable
Exercise Date; provided, however, that the Corporation shall not be obligated to
deliver any portion of the Optional Redemption Amount until either the
certificates evidencing the Prepaid Warrants being redeemed are delivered to the
office of the Corporation or the escrow agent or the holder notifies the
Corporation or the escrow agent that such certificates have been lost, stolen or
destroyed and delivers the documentation in accordance with Article IX.G hereof.
Notwithstanding anything herein to the contrary, in the event that the
certificates evidencing the Prepaid Warrants being redeemed are not delivered to
the Corporation or the escrow agent prior to the third business day following
the Effective Date of Redemption, the redemption of the Prepaid Warrants
pursuant to this Article VIII shall still be deemed effective as of the
Effective Date of Redemption and the Optional Redemption Amount shall be paid to
the holder of Prepaid Warrants being redeemed within five (5) business days of
the date the certificates evidencing the Prepaid Warrants being redeemed are
actually delivered to the Corporation or the escrow agent.
(b) In the event that any Optional Redemption Notice delivered by
the Corporation pursuant to this Article VIII relates to less than all of the
Prepaid Warrants then outstanding, the Corporation shall redeem Prepaid Warrants
from each holder pro rata, based on the total Prepaid Amount outstanding on the
date of the Corporation's delivery of an Optional Redemption Notice held by each
holder of Prepaid Warrants relative to the total number of shares of Prepaid
Warrants outstanding on the Effective Date of Redemption held by all holders of
Prepaid Warrants as specified in the Optional Redemption Notice.
(c) If the Corporation fails to pay, when due and owing, any
Optional Redemption Amount, then the holder of Prepaid Warrants entitled to
receive such Optional Redemption Amount shall have the right, at any time and
from time to time during the twenty (20) trading day period following the
Effective Date of Redemption (the "Optional Redemption Amount Exercise Period"),
to require the Corporation, upon written notice, to immediately exercise (in
accordance with the terms of paragraph A of Article IV) any or all of the
Prepaid Amount which is the subject of such redemption, into shares of Common
Stock at the lowest Exercise Price in effect during the period beginning on the
date the Corporation elected to redeem such Prepaid Warrants and ending on
expiration of the Optional Redemption Amount Exercise Period. From and after the
expiration of the Optional Redemption Amount Exercise Period, the holders may
convert Prepaid Warrants at the Exercise Price then in effect and in accordance
with Article IV.
C. (a) At any time or times on or after the date hereof, the
Corporation shall have the right, in its sole discretion, to redeem any or all
of the Exercise Amounts of outstanding Prepaid Warrants which Exercise Amounts
at such time are exercisable on the date the Corporation delivers a Notice of
Call ("ELIGIBLE EXERCISE AMOUNTS") pursuant to Article II.C(iii)(a "CALL");
provided that the Conditions to a Call (as set forth below) are satisfied. The
Corporation shall exercise its right to Call by providing each holder of Prepaid
Warrants written notice ("NOTICE OF CALL") at least 30 days prior to the date
selected by the Corporation for a Call (the "CALL DATE"). On the Call Date the
Corporation shall pay the Call Amount (as defined below) to each Holder in
accordance with Article
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<PAGE> 26
VII.C(b). If the Corporation elects to so Call some, but not all, of the
Eligible Exercise Amounts, the Corporation shall Call a pro rata amount of the
Eligible Exercise Amounts from each holder of Prepaid Warrants (based on the
dollar amount of the Eligible Exercise Amounts of Prepaid Warrants held by such
holder relative to the total dollar amount of Prepaid Warrants outstanding on
the date of the Corporation's delivery of the Notice of Call). The Notice of
Call shall indicate (x) the dollar amount of the Eligible Exercise Amounts of
Prepaid Warrants the Corporation has selected for Call, (y) the Call Date, which
date shall not be less than 30 or more than 40 days after each holder's receipt
of such notice, and (z) each holder's pro rata share of the Eligible Exercise
Amounts of outstanding Prepaid Warrants which the Corporation elects to Call.
All holders of Prepaid Warrants shall thereupon and within two business days
after the Call Date surrender all of the Eligible Exercise Amounts of Prepaid
Warrants selected for call to the Corporation provided the Corporation has paid
the Call Amount. "CONDITIONS TO CALL" means the following conditions: (i) on
each day during the period beginning 20 trading days prior to the Notice of Call
and ending on and including the date of the Call Date, the Registration
Statement shall be effective and available for the sale of no less than 150% of
the sum of (A) the number of shares of Common Stock then issuable upon the
exercise of all outstanding Prepaid Warrants (without regard to any limitations
on exercise herein or elsewhere) and (B) the number of shares of Common Stock
issued upon exercise of Prepaid Warrants that are then held by the holders of
the Prepaid Warrants, (ii) on each day during the period beginning 20 trading
days prior to the date of the Notice of Call and ending on and including the
Call Date, the Common Stock is designated for quotation on the National Market
or listed on NYSE or AMEX and is not suspended from trading; (iii) the average
of the Closing Bid Price of the Common Stock during the 20 consecutive trading
days immediately preceding the date of the Notice of Call is less than the Fixed
Exercise Price on such date, (iv) the Closing Bid Price of the Common Stock on
the date of the Notice of Call is less than the Fixed Exercise Price; (v) no
more than three (3) Calls shall previously have occurred; (vi) the Shareholder
Approvals (as defined in the Securities Purchase Agreement) shall have been
obtained on or prior to the date of the Corporation's Notice of Call at
Corporation's Election in accordance with Section 4(l) of the Securities
Purchase Agreement; (vii) during the period beginning on the Issuance Date and
ending on and including the Call Date, the Corporation shall have delivered
shares upon exercise of the Prepaid Warrants to the Investors on a timely basis
as set forth in Article II of the Prepaid Warrants; (viii) none of an Event of
Default, an Exercise Default, a Trading Market Triggering Event or any event
that with the passage of time would constitute an Event of Default or a Trading
Market Triggering Event (assuming it was not cured) shall have occurred; (ix)
the Corporation otherwise has satisfied its obligations and is not in default
under this Certificate of Designations, the Securities Purchase Agreement and
the Registration Rights Agreement; and (x) the Corporation has sufficient funds
immediately available to satisfy its obligations to pay the Call Amount as set
forth herein. Notwithstanding the above, any holder of Prepaid Warrants may
exercise such Prepaid Warrants for Common Stock pursuant to Article II on or
prior to the Corporation's Election Call Date.
(b) In the event of a Call, the Call Amount (as defined below) in
immediately available funds shall be paid to the holders of Prepaid Warrants
being called on the applicable Call Date; provided, however, that the
Corporation shall not be obligated to deliver any portion of the Call Amount
until either the certificates evidencing the Prepaid Warrants being redeemed are
delivered to the office of
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<PAGE> 27
the Corporation or the escrow agent or the holder notifies the Corporation or
the escrow agent that such certificates have been lost, stolen or destroyed and
delivers the documentation in accordance with Article IX.G hereof.
Notwithstanding anything herein to the contrary, in the event that the
certificates evidencing the Prepaid Warrants being redeemed are not delivered to
the Corporation or the escrow agent prior to the third business day following
the Call Date, the call of the Prepaid Warrants pursuant to this Article VIII
shall still be deemed effective as of the Call Date and the Call Amount shall be
paid to the holder of Prepaid Warrants being called within five (5) business
days of the date the certificates evidencing the Prepaid Warrants being called
actually delivered to the Corporation or the escrow agent. "CALL AMOUNT" shall
mean and amount equal to the product of 1.2 and the Eligible Exercise Amount of
all Prepaid Warrants being called plus all outstanding and unpaid premium and
any Exercise Default Payments payable with respect thereto.
(c) If the Corporation fails to pay, when due and owing, any Call
Amount, then the holder of Prepaid Warrants entitled to receive such Call Amount
shall have the right, at any time and from time to time during the twenty (20)
trading day period following the Call Date to require the Corporation, upon
written notice, to immediately exercise (in accordance with the terms of
paragraph A of Article II) any or all of the Prepaid Amount which is the subject
of such call, into shares of Common Stock at the lowest Exercise Price in effect
during the period beginning on the date the Corporation elected to call such
Prepaid Warrants and ending on expiration of such twenty trading day period.
From and after the expiration of such twenty trading day period, the holders may
exercise Prepaid Warrants at the Exercise Price then in effect and in accordance
with Article II.
ARTICLE IX
MISCELLANEOUS
A. Failure or Indulgency Not Waiver. No failure or delay on the part of
the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.
B. Notices. Any notice herein required or permitted to be given shall
be in writing and may be personally served or delivered by courier and shall be
deemed to have been given upon receipt (which shall include telephone line
facsimile transmission). The addresses for such communications shall be:
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<PAGE> 28
If to the Corporation:
Robotic Vision Systems, Inc.
5 Shawmut Road
Canton, MA 02021
Telecopy: (781) 828-9852
Attn: Pat V. Costa, Chairman and Chief Executive Officer
with a copy to:
Cooperman Levitt Winikoff Lester & Newman, P.C.
800 Third Avenue
New York, NY 10022
Telecopy: (212) 755-2839
Attn: Ira Roxland, Esq.
If to the Holder, at such address as such Holder shall have provided
in writing to the Corporation.
C. Amendment Provision. Except as otherwise provided herein, this
Warrant and any provision hereof may only be amended by an instrument in writing
signed by the Corporation and the Majority Holders. The term "WARRANT" and all
references thereto, as used throughout this instrument, shall mean this
instrument as originally executed, or if later amended or supplemented, then as
so amended or supplemented.
D. Assignability. This Warrant shall be binding upon the Corporation
and its successors and assigns and shall inure to the benefit of the Holder and
its successors and assigns.
E. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed in the State of New York. The Corporation irrevocably
consents to the jurisdiction of the United States federal courts and state
courts located in the City of New York in the State of New York in any suit or
proceeding based on or arising under this Warrant and irrevocably agrees that
all claims in respect of such suit or proceeding may be determined in such
courts. The Corporation irrevocably waives the defense of an inconvenient forum
to the maintenance of such suit or proceeding. The Corporation further agrees
that service of process upon the Corporation mailed by first class mail shall be
deemed in every respect effective service of process upon the Corporation in any
such suit or proceeding. Nothing herein shall affect Holder's right to serve
process in any other manner permitted by law. The Corporation agrees that a
final non-appealable judgment in any such suit or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on such judgment or in any
other lawful manner.
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<PAGE> 29
F. Denominations. At the request of Holder, upon surrender of this
Warrant, the Corporation shall promptly issue new Warrants in the aggregate
outstanding Prepaid Amount hereof, in the form hereof, in such denominations as
Holder shall request.
G. Lost or Stolen Warrants. Upon receipt by the Corporation of (i)
evidence of the loss, theft, destruction or mutilation of this Warrant and (ii)
(y) in the case of loss, theft or destruction, of indemnity and affidavit
reasonably satisfactory to the Corporation, or (z) in the case of mutilation,
upon surrender and cancellation of this Warrant, the Corporation shall execute
and deliver new Warrants, in the form hereof, in such denominations as Holder
may request. However, the Corporation shall not be obligated to reissue such
lost or stolen Warrants if Holder contemporaneously requests the Corporation to
exercise this Warrant.
H. Allocation of Cap Amount and Reserved Amount. The initial Cap Amount
and Reserved Amount shall be allocated pro rata among the Holders of Prepaid
Warrants based on the aggregate Prepaid Amount of the Prepaid Warrants issued to
each Holder. Each increase to the Cap Amount and the Reserved Amount shall be
allocated pro rata among the Holders of Prepaid Warrants based on the aggregate
Prepaid Amount of the Prepaid Warrants held by each Holder at the time of the
increase in the Cap Amount or Reserved Amount. In the event a Holder shall sell
or otherwise transfer any of such Holder's Prepaid Warrants, each transferee
shall be allocated a pro rata portion of such transferor's Cap Amount and
Reserved Amount. Any portion of the Cap Amount or Reserved Amount which remains
allocated to any person or entity which does not hold any Prepaid Warrants shall
be allocated to the remaining Holders of Prepaid Warrants pro rata based on the
aggregate Prepaid Amount of the Prepaid Warrants then held by such Holders.
I. Quarterly Statements of Available Shares. The Corporation shall
deliver (or cause its transfer agent to deliver) to Holder a written report
notifying Holder of any occurrence which prohibits the Corporation from issuing
Common Stock upon any exercise of Prepaid Warrants. The Corporation (or its
transfer agent) shall also provide, within fifteen (15) days after delivery to
the Corporation of a written request by any Holder, any of the following
information as of the date of such request: (i) the total outstanding Prepaid
Amount of all Prepaid Warrants, (ii) the total number of shares of Common Stock
issued upon all exercises of all Prepaid Warrants prior to such date, (iii) the
total number of shares of Common Stock which are reserved for issuance upon
exercise of the Prepaid Warrants which are then outstanding, and (iv) the total
number of shares of Common Stock which may thereafter be issued by the
Corporation upon exercise of the Prepaid Warrants before the Corporation would
exceed the Reserved Amount and the Cap Amount.
J. Payment of Cash; Defaults. Except as otherwise provided herein,
whenever the Corporation is required to make any cash payment to Holder under
this Warrant (as an Exercise Default Payment or otherwise), such cash payment
shall be made to Holder within five (5) business days after delivery by Holder
of a notice specifying that Holder elects to receive such payment in cash and
the method (e.g., by check, wire transfer) in which such payment should be made.
If such payment is not delivered within such five (5) business day period,
Holder shall thereafter be entitled
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<PAGE> 30
to interest on the unpaid amount at a per annum rate equal to the lower of
twenty-four percent (24%) and the highest interest rate permitted by applicable
law until such amount is paid in full to Holder.
K. Restrictions on Shares. The shares of Common Stock issuable upon
exercise of this Warrant may not be sold or transferred unless (i) they first
shall have been registered under the Securities Act and applicable state
securities laws, (ii) the Corporation shall have been furnished with an opinion
of legal counsel (in form, substance and scope customary for opinions in such
circumstances) to the effect that such sale or transfer is exempt from the
registration requirements of the Securities Act or (iii) they are sold under
Rule 144 under the Act. Except as otherwise provided in the Securities Purchase
Agreement, each certificate for shares of Common Stock issuable upon exercise of
this Warrant that have not been so registered and that have not been sold under
an exemption that permits removal of the legend, shall bear a legend
substantially in the following form, as appropriate:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY
MAY NOT BE OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER APPLICABLE SECURITIES LAWS UNLESS
OFFERED, SOLD OR TRANSFERRED UNDER AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THOSE LAWS.
Upon the request of a holder of a certificate representing any shares of Common
Stock issuable upon exercise of this Warrant, the Corporation shall remove the
foregoing legend from the certificate and issue to such holder a new certificate
therefor free of any transfer legend, if (i) with such request, the Corporation
shall have received either (A) an opinion of counsel, in form, substance and
scope customary for opinions in such circumstances, to the effect that any such
legend may be removed from such certificate, or (B) satisfactory representations
from Holder that Holder is eligible to sell such security under Rule 144 or (ii)
a registration statement under the Securities Act covering the resale of such
securities is in effect. Nothing in this Warrant shall (i) limit the
Corporation's obligation under the Registration Rights Agreement, or (ii) affect
in any way Holder's obligations to comply with applicable securities laws upon
the resale of the securities referred to herein.
L. Status as Warrantholder. Upon submission of a Notice of Exercise by
Holder, the Prepaid Amount of this Warrant (other than any portion of this
Warrant, if any, which cannot be exercised because the exercise thereof would
exceed Holder's allocated portion of the Reserved Amount or Cap Amount) shall be
deemed exercised for shares of Common Stock as of the Exercise Date and Holder's
rights as a holder of this Warrant shall cease and terminate, excepting only the
right to receive certificates for such shares of Common Stock and to any
remedies provided herein or otherwise available at law or in equity to Holder
because of a failure by the Corporation to comply with the terms of this
Warrant.
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<PAGE> 31
Notwithstanding the foregoing, if Holder has not received certificates for all
shares of Common Stock prior to the tenth (10th) business day after the
expiration of the Delivery Period with respect to an exercise for any reason,
then (unless Holder otherwise elects to retain its status as a holder of Common
Stock by so notifying the Corporation) the portion of the Prepaid Amount subject
to such exercise shall be deemed outstanding under this Warrant and the
Corporation shall, as soon as practicable, return this Warrant to Holder. In all
cases, Holder shall retain all of its rights and remedies (including, without
limitation, (i) the right to receive Exercise Default Payments pursuant to
Article IV.A to the extent required thereby for such Exercise Default and any
subsequent Exercise Default and (ii) the right to have the Exercise Price with
respect to subsequent exercises determined in accordance with Article IV.B) for
the Corporation's failure to honor the exercise of this Warrant.
M. Remedies Cumulative. The remedies provided in this Warrant shall be
cumulative and in addition to all other remedies available under this Warrant,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), no remedy contained herein shall be deemed a waiver of
compliance giving rise to such remedy and nothing herein shall limit Holder's
right to pursue actual damages for any failure by the Corporation to comply with
the terms of this Warrant. The Corporation acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Corporation therefore
agrees, in the event of any such breach or threatened breach, the Holder shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
N. Payment in Stock in Lieu of Cash Payments. In lieu of making any
cash payment required hereunder (other than pursuant to Article VIII and except
as prohibited by Article II(c)(ii)), the Corporation may, at its option, if and
only if such cash payment would result in a breach or violation of the
Corporation's existing bank credit facility or any new or replacement facility,
deliver to holders entitled to receive such payment a number of shares of Common
Stock equal to the amount of the required cash payment divided by the Exercise
Price then in effect provided such delivery of shares is in compliance with all
applicable securities laws and regulations. Notwithstanding the foregoing, as of
the date of delivery of such shares (i) no Event of Default, Exercise Default or
Trading Market Triggering Event shall have occurred or any event that with the
passage of time would constitute an Event of Default or a Trading Market
Triggering Event (assuming it was not cured) shall have occurred, (ii) the
resale of such shares shall be covered by an effective registration statement
and such shares shall be available for sale thereunder and otherwise shall be
freely tradeable, (iii) such shares shall be listed and authorized for trading
on the National Market, the New York Stock Exchange or the American Stock
Exchange, and (iv) the Corporation shall have received the Stockholder
Approvals. In the event that after the date of delivery of such shares and
before such shares are sold by the holder thereof, the registration statement
covering such shares is not effective for any reason for more than one business
day, the Corporation shall immediately pay to such holder the cash amount such
holder was otherwise entitled to receive plus interest thereon at a per annum
rate of 24.0% and upon such payment, such holder shall redeliver all unsold
shares to the Corporation. The operation of this Article IX.N shall not affect
the ability of the Corporation to make payments of Premium in cash in accordance
with Article II.A(ii) hereof.
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<PAGE> 32
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be
signed by its duly authorized officer.
ROBOTIC VISION SYSTEMS, INC.
By:________________________________
Name:
Title:
<PAGE> 33
EXHIBIT 1
NOTICE OF EXERCISE
To: Robotic Vision Systems, Inc.
5 Shawmut Road
Canton, MA 02021
Telecopy: (781) 828-9852
Attn: Pat V. Costa, Chairman and Chief Executive Officer
The undersigned hereby irrevocably elects to exercise $____________ of the
Prepaid Amount of this Warrant (the "EXERCISE") into shares of common stock
("COMMON STOCK") of Robotic Vision Systems, Inc. (the "CORPORATION") according
to the conditions of the Prepaid Common Stock Purchase Warrant dated February
18, 1999 (the "WARRANT"), as of the date written below. If securities are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto. No fee will be charged to
the holder for any Exercise, except for transfer taxes, if any.
If the Corporation's transfer agent is participating in the Depository Trust
Company ("DTC") Fast Automated Securities Transfer program, the Corporation
shall electronically transmit the Common Stock issuable pursuant to this Notice
of Exercise to the account of the undersigned or its nominee (which is
________________) with DTC through its Deposit Withdrawal Agent Commission
System ("DTC TRANSFER"). If the Corporation's transfer agent does not
participate in the DTC program as aforementioned, or if Holder checks the box
set forth below, the Corporation shall deliver to Holder physical certificates
representing the Common Stock issuable upon exercise of the Warrant.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable to the undersigned upon exercise of this
Warrant shall be made pursuant to registration of the Common Stock under the
Securities Act or pursuant to an exemption from registration under the Act.
In the event of partial exercise, please reissue an appropriate Warrant(s) for
the portion of the Prepaid Amount which shall not have been exercised.
Check Box if Applicable:
/ / In lieu of receiving the shares of Common Stock issuable pursuant to
this Notice of Exercise by way of DTC Transfer, the undersigned hereby
requests that the Corporation issue and deliver to the undersigned
physical certificates representing such shares of Common Stock.
Date of Exercise:____________________________________________
Applicable Exercise Price:___________________________________
Portion of Prepaid Amount to be exercised:___________________
Amount of Exercise Default
Payments to be exercised, if any:____________________________
Number of Shares of
Common Stock to be Issued:___________________________________
Signature:___________________________________________________
Name:________________________________________________________
Address:_____________________________________________________
<PAGE> 1
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES
REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES
LAWS UNLESS OFFERED, SOLD OR TRANSFERRED UNDER AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
PREPAID COMMON STOCK PURCHASE WARRANT
February 19, 1999 Right to Purchase $4,550,000 of
Common Stock, par value $.01 per share
FOR VALUE RECEIVED, ROBOTIC VISION SYSTEMS, INC., a corporation
organized under the laws of the State of Delaware (hereinafter called the
"CORPORATION"), hereby promises to issue to FISHER CAPITAL LTD. or its
registered assigns (the "HOLDER"), at any time or from time to time upon its
receipt of a Notice of Exercise (as defined in Article I.C below), up to Four
Million Five Hundred Fifty Thousand Dollars ($4,550,000) (the "PREPAID AMOUNT")
of the Corporation's common stock, par value $.01 per share (the "COMMON
STOCK"), in the manner provided in Article II hereof. This Warrant is being
issued by the Corporation along with similar prepaid common stock purchase
warrants (the "OTHER PREPAID WARRANTS" and, together with this Warrant, the
"PREPAID WARRANTS") pursuant to that certain Securities Purchase Agreement,
dated as of February 18, 1999, by and among the Corporation, the Holder and the
other parties named therein (the "SECURITIES PURCHASE AGREEMENT").
<PAGE> 2
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES
REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES
LAWS UNLESS OFFERED, SOLD OR TRANSFERRED UNDER AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
PREPAID COMMON STOCK PURCHASE WARRANT
February 19, 1999 Right to Purchase $2,450,000 of
Common Stock, par value $.01 per share
FOR VALUE RECEIVED, ROBOTIC VISION SYSTEMS, INC., a corporation
organized under the laws of the State of Delaware (hereinafter called the
"CORPORATION"), hereby promises to issue to WINGATE CAPITAL LTD. or its
registered assigns (the "HOLDER"), at any time or from time to time upon its
receipt of a Notice of Exercise (as defined in Article I.C below), up to Two
Million Four Hundred Fifty Thousand Dollars ($2,450,000) (the "PREPAID AMOUNT")
of the Corporation's common stock, par value $.01 per share (the "COMMON
STOCK"), in the manner provided in Article II hereof. This Warrant is being
issued by the Corporation along with similar prepaid common stock purchase
warrants (the "OTHER PREPAID WARRANTS" and, together with this Warrant, the
"PREPAID WARRANTS") pursuant to that certain Securities Purchase Agreement,
dated as of February 18, 1999, by and among the Corporation, the Holder and the
other parties named therein (the "SECURITIES PURCHASE AGREEMENT").
<PAGE> 3
ARTICLE I
CERTAIN DEFINITIONS
For purposes hereof, the following terms shall have the following
meanings:
A. "CLOSING BID PRICE" means, for any security as of any date, the
closing bid price of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg
Financial Markets or a comparable reporting service of national reputation
selected by the Corporation and reasonably acceptable to holders of a majority
of the aggregate Prepaid Amount represented by the then outstanding Prepaid
Warrants ("MAJORITY HOLDERS") if Bloomberg Financial Markets is not then
reporting closing bid prices of such security (collectively, "BLOOMBERG"), or if
the foregoing does not apply, the last reported sale price of such security in
the over-the-counter market on the electronic bulletin board for such security
as reported by Bloomberg, or, if no sale price is reported for such security by
Bloomberg, the average of the bid prices of any market makers for such security
as reported in the "pink sheets" by the National Quotation Bureau, Inc., in each
case for such date or, if such date was not a trading date for such security, on
the next preceding date which was a trading date. If the Closing Bid Price
cannot be calculated for such security as of either of such dates on any of the
foregoing bases, the Closing Bid Price of such security on such date shall be
the fair market value as reasonably determined by an investment banking firm
selected by the Corporation and reasonably acceptable to the Majority Holders,
with the costs of such appraisal to be borne by the Corporation.
B. "EXERCISE AMOUNT" means the portion of the Prepaid Amount and Premium
of this Warrant being exercised and any Exercise Default Payments payable with
respect thereto, each as specified in the notice of exercise in the form
attached hereto (the "NOTICE OF EXERCISE").
C. "EXERCISE DATE" means, for any Exercise (as defined below), the date
specified in the Notice of Exercise so long as the copy of the Notice of
Exercise is faxed (or delivered by other means resulting in notice) to the
Corporation at or before 11:59 p.m., New York City time, on the Exercise Date
indicated in the Notice of Exercise; provided, however, that if the Notice of
Exercise is not so faxed or otherwise delivered before such time, then the
Exercise Date shall be the date the holder faxes or otherwise delivers the
Notice of Exercise to the Corporation.
D. "EXERCISE PRICE" means the lower of the Fixed Exercise Price and the
Variable Exercise Price, each in effect as of such date and subject to
adjustment as provided herein.
E. "FIRST EXERCISE DATE" means the earliest of (i) the 181st day
following the Issuance Date, (ii) the date the Corporation makes a public
announcement that it intends to merge or consolidate with any other entity
(other than a merger in which the Corporation is the surviving or continuing
entity and the voting capital stock of the Corporation immediately prior to such
merger represents at least 50% of the voting power of the capital stock of the
Corporation after the merger) or to sell or transfer all or
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<PAGE> 4
substantially all of the assets of the Corporation, (iii) the date any person,
group or entity (including the Corporation) publicly announces a tender offer,
exchange offer or another transaction to purchase 50% or more of the
Corporation's outstanding Common Stock or otherwise publicly announces an
intention to replace a majority of the Corporation's Board of Directors by
waging a proxy battle or otherwise, or (iv) the date on which an Event of
Default described in Article VI.A occurs.
F. "CLOSING DATE" means the date of the Closing under the Securities
Purchase Agreement.
G. "FIXED EXERCISE PRICE" means $4.02, and shall be subject to
adjustment as provided herein.
H. "VARIABLE EXERCISE PRICE" means, as of any date of determination, the
amount obtained by multiplying (i) .95 (the "Exercise Percentage") and (ii) the
average of the three (3) lowest Closing Bid Prices for the Common Stock during
the twenty (20) consecutive trading day period ending on the trading day
immediately preceding such date of determination (subject to equitable
adjustment for any stock splits, stock dividends, reclassifications or similar
events during such twenty (20) trading day period), and shall be subject to
adjustment as provided herein; provided that beginning on that day which is one
hundred eighty days after the Issuance Date such twenty day period shall be
increased by one (1) additional trading day for each thirty (30) day period
thereafter.
I. "BUSINESS DAY" and "TRADING DAY" means any day on which the New York
Stock Exchange is open for trading.
J. "PREMIUM" means an amount equal to (.07) x (N/365) x the Prepaid
Amount, where N equals the number of days from (i) the Issuance Date until the
date the Premium is redeemed in accordance with Article II.A. (the "PREMIUM
DATE") or (ii) the immediately preceding Premium Date until the current Premium
Date.
K. "FLOOR PRICE" means $2.50 and shall be subject to adjustment as
provided herein.
L. "ISSUANCE DATE" means the date of issuance of this Warrant.
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<PAGE> 5
ARTICLE II
EXERCISE
A. Exercise by the Holder. (i) Subject to the limitations on exercise
contained in Paragraph C of this Article II, the Holder may, at any time and
from time to time on or after that date which is the earlier of (a) the first
date after the Issuance Date on which an Event of Default (as defined in Article
VI) occurs or there is a public announcement of a pending or consummated
corporate change (as defined in Article VII) and (b) one-hundred eighty (180)
days after the Issuance Date, exercise all or any part of the outstanding
Prepaid Amount of this Warrant in accordance with the procedures set forth in
Paragraph B of this Article II for a number of fully paid and nonassessable
shares of Common Stock determined in accordance with the following formula if
the Corporation timely redeems the Premium thereon in cash in accordance with
subparagraph (ii) below:
EXERCISE AMOUNT
---------------
EXERCISE PRICE
or in accordance with the following formula if the Corporation does not timely
redeem the Premium thereon in accordance with subparagraph (ii) below:
EXERCISE AMOUNT + THE PREMIUM
-----------------------------
EXERCISE PRICE
(ii) (a) Subject to subparagraph (b) of this Article II.A(ii), the
Corporation shall have the right, in its sole discretion, upon receipt of a
Notice of Exercise, to redeem the Premium subject to such conversion for a sum
of cash equal to the amount of the Premium being so redeemed. All cash
redemption payments hereunder shall be paid in lawful money of the United States
of America at such address for the holder as appears on the record books of the
Corporation (or at such other address as such holder shall hereafter give to the
Corporation by written notice). In the event the Corporation so elects to redeem
the Premium in cash and fails to pay such holder the applicable redemption
amount to which such holder is entitled within four (4) business days of receipt
by the Corporation of a Notice of Exercise (in the case of a redemption in
connection with an Optional Conversion), the Corporation shall thereafter
forfeit its right to redeem such Premium in cash and such Premium shall
thereafter be converted into shares of Common Stock in accordance with Article
II.A(i).
(b) The Corporation shall provide not less than two (2)
business days advance notice, in writing, to the holders stating that it will
elect to redeem the Premium, relating to any Exercise Amount covered by a Notice
of Exercise received by the Corporation after such second business day, in cash
pursuant to the Corporation's redemption rights discussed in subparagraph (a) of
this Article II.A(ii) in connection with an exercise pursuant to a Notice of
Exercise delivered over the ten (10) business day period beginning on the third
business day after the holder's receipt of such notice, which election shall be
binding and irrevocable for such period.
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<PAGE> 6
If the Corporation does not provide such notice, the Corporation shall forfeit
its right to redeem such Premium in accordance with subparagraph (a) of this
Article II.A(ii) for any such period and shall be required to issue shares of
Common Stock as payment of Premium.
B. Mechanics of Exercise. In order to exercise this Warrant, Holder
shall: (x) fax (or otherwise deliver) a copy of the fully executed Notice of
Exercise to the Corporation and (y) surrender or cause to be surrendered this
Warrant as soon as practicable thereafter to the Corporation. Upon receipt by
the Corporation of a facsimile copy of a Notice of Exercise from Holder, the
Corporation shall immediately send (or the next business day, if the Notice of
Exercise is received after normal business hours), via facsimile, a confirmation
to Holder stating that the Notice of Exercise has been received, the date upon
which the Corporation expects to deliver the Common Stock issuable upon such
exercise and the name and telephone number of a contact person at the
Corporation regarding the exercise. The Corporation shall not be obligated to
issue shares of Common Stock upon an exercise hereof unless either this Warrant
is delivered to the Corporation as provided above, or Holder notifies the
Corporation that this Warrant has been lost, stolen or destroyed (subject to the
requirements of Article IX.G).
(i) Delivery of Common Stock Upon Exercise. The Corporation shall, on
or before the later of (a) the third (3rd) business day following the Exercise
Date and (b) the business day following the date of the Corporation's receipt of
this Warrant (or, if this Warrant is lost, stolen or destroyed, the date on
which indemnity pursuant to Article VIII.G is provided) (the "DELIVERY PERIOD"),
issue and deliver to the Holder or its nominee (x) that number of shares of
Common Stock issuable upon exercise of the portion of this Warrant being
exercised and (y) a new Warrant in the form hereof representing the balance of
the Prepaid Amount hereof not being exercised, if any. If the Corporation's
transfer agent is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer program, and so long as the certificates therefor
are not required to bear a legend, the Corporation shall cause its transfer
agent to electronically transmit the Common Stock issuable upon exercise to the
Holder by crediting the account of Holder or its nominee with DTC through its
Deposit Withdrawal Agent Commission system ("DTC TRANSFER"). If the
aforementioned conditions to a DTC Transfer are not satisfied, the Corporation
shall deliver to Holder physical certificates representing the Common Stock
issuable upon such exercise. Further, Holder may instruct the Corporation to
deliver to Holder physical certificates representing the Common Stock issuable
upon such exercise in lieu of delivering such shares by way of DTC Transfer.
(ii) Taxes. The Corporation shall pay any and all taxes which may be
imposed upon it with respect to the issuance and delivery of the shares of
Common Stock upon the exercise of this Warrant.
(iii) No Fractional Shares. If any exercise of this Warrant would
result in the issuance of a fractional share of Common Stock, such fractional
share shall be disregarded and the number of shares of Common Stock issuable
upon exercise of this Warrant shall be the nearest whole number of shares.
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<PAGE> 7
(iv) Exercise Disputes. In the case of any dispute with respect to an
exercise of this Warrant, the Corporation shall promptly issue such number of
shares of Common Stock as are not disputed in accordance with subparagraph (i)
above. The Corporation and the Holder shall seek to resolve any such dispute in
good faith. If such dispute involves the calculation of the Exercise Price, the
Corporation shall immediately submit the disputed calculations to Deloitte &
Touche LLP or such other independent outside accountant of national reputation
selected by the Corporation and reasonably acceptable to the Holder, via
facsimile within two (2) business days of receipt of the Notice of Exercise. The
accountant, at the Corporation's sole expense (except that if the Corporation's
calculation is correct, the Holder shall bear such expense), shall audit the
calculations and notify the Corporation and Holder of the results no later than
two (2) business days from the date it receives the disputed calculations. The
accountant's calculation shall be deemed conclusive, absent manifest error. The
Corporation shall then issue the appropriate number of shares of Common Stock in
accordance with subparagraph (i) above.
C. Limitations on Exercise. The exercise of this Warrant shall be
subject to the following limitations (each of which limitations shall be applied
independently):
(i) Cap Amount. Unless permitted by the applicable rules and
regulations of the principal securities market on which the Common Stock is
listed or traded, in no event shall the total number of shares of Common Stock
issued upon exercise of the Prepaid Warrants exceed the maximum number of shares
of Common Stock that the Corporation can so issue pursuant to Rules
4310(c)(25)(H) or 4460(i) of the National Association of Securities Dealers
("NASD") (or any successor rules) (the "CAP AMOUNT") which, as of the Closing
Date, shall be 4,972,695 shares (19.99% of the total shares outstanding on the
Closing Date. The Cap Amount shall be allocated pro-rata to the holders of the
Prepaid Warrants as provided in Article IX.H. In the event the Corporation is
prohibited from issuing shares of Common Stock as a result of the operation of
this subparagraph (i), the Corporation shall comply with Article V and Article
VII.
(ii) No Ten Percent Holders. In no event shall Holder be entitled to
exercise any Exercise Amount for shares of Common Stock to the extent that,
after giving effect to such exercise, such Holder, through exercises of this
Warrant or otherwise, would have acquired beneficial ownership of a number
shares of Common Stock during the 60-day period ending on and including such
Exercise Date which, when added to the number of shares of Common Stock
beneficially owned at the beginning of the 60-day period ending on and including
such Exercise Date, is in excess of 10.00% of the shares of the Common Stock
outstanding immediately after giving effect to such exercise. For purposes of
the foregoing sentence, the number of shares of Common Stock beneficially owned
by a Holder shall include the number of shares of Common Stock issuable upon
exercise of this Warrant with respect to which the determination of such
sentence is being made, but shall exclude the number of shares of Common Stock
which would be issuable (i) upon exercise of the remaining, nonexercised portion
of this Warrant beneficially owned by such Holder and (ii) upon conversion or
exercise of the unconverted or unexercised portion of any other securities of
the Corporation beneficially owned by such Holder subject to a limitation on
conversion or exercise analogous to the limitation contained in this paragraph.
Except as set forth in the preceding
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<PAGE> 8
sentence, for purposes of this paragraph, beneficial ownership shall be
calculated in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"). For purposes of this paragraph, in
determining the number of outstanding shares of Common Stock Holder may rely on
the number of outstanding shares of Common Stock as reflected in (a) the
Corporation's most recent Form 10-Q or Form 10-K, as the case may be, (2) a more
recent public announcement by the Corporation or (3) any other notice by the
Corporation or its transfer agent setting forth the number of shares of Common
Stock outstanding. For any reason at any time, upon the written or oral request
of Holder, the Corporation shall immediately confirm orally and in writing to
Holder the number of shares Common Stock then outstanding. In any case, the
number of outstanding shares Common Stock shall be determined after giving
effect to exercise of this Warrant by Holder since the date as of which such
number of outstanding shares of Common Stock was reported.
(iii) Time Limitations. (a) So long as no Event of Default (as
defined in Article VI hereof) has occurred and is then continuing, and except as
otherwise provided below, a holder of Prepaid Warrants may not exercise Prepaid
Warrants to the extent the Prepaid Amount of Prepaid Warrants previously
exercised by such holder (excluding for purposes of this calculation any Prepaid
Amount of Prepaid Warrants exercised by such holder following the occurrence and
during the continuation of an Event of Default) together with the Prepaid Amount
of Prepaid Warrants which such holder is attempting to exercise exceeds the
Maximum Conversion Percentage (as defined herein) multiplied by the Prepaid
Amount of Prepaid Warrants purchased by such holder pursuant to the Securities
Purchase Agreement. "MAXIMUM CONVERSION PERCENTAGE" means:
<TABLE>
<CAPTION>
If the Exercise Date is: then the Maximum Conversion Percentage is:
<S> <C>
Before the 90th day
following the First Exercise Date 25%
On or after the 90th day
following the First Exercise Date
and before the 180th day
following the First Exercise Date 50%
On or after the 180th day
following the First Exercise Date
and before the 270th day
following the First Exercise Date 75%
On or after the 270th day
following the First Exercise Date 100%
</TABLE>
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<PAGE> 9
(b) Notwithstanding the foregoing, the restrictions on
conversion set forth in this Article II.C. (iii) shall terminate on or after the
date either of the events described in Article I.E(ii) or (iii) occurs.
D. Required Exercise at Maturity. Subject to the limitations set forth
in Paragraph C(i) of this Article II and provided all shares of Common Stock
issuable upon exercise of all outstanding Prepaid Warrants are then (i)
authorized and reserved for issuance, (ii) registered under the Securities Act
of 1933, as amended, for resale by the holders of Prepaid Warrants and (iii)
eligible to be traded on either the National Market, the New York Stock
Exchange, the American Stock Exchange or the Nasdaq SmallCap Market, each
Prepaid Warrant issued and outstanding on the fifth anniversary of the Issuance
Date thereof (the "MATURITY DATE"), automatically shall be exercised into shares
of Common Stock on such date in accordance with the exercise formulas set forth
in Paragraph A of this Article II (the "REQUIRED EXERCISE AT MATURITY");
provided, however, the Maturity Date shall be extended for a period equal to the
number of days any Event of Default or Trading Market Trigger Event is in
existence. If the Required Exercise at Maturity occurs, the Corporation and the
holders of Prepaid Warrants shall follow the applicable exercise procedures set
forth in Paragraph B of this Article II; provided, however, that the holders of
Prepaid Warrants are not required to deliver a Notice of Exercise to the
Corporation or its transfer agent.
ARTICLE III
RESERVATION OF SHARES OF COMMON STOCK
A. Reserved Amount. On the Closing Date, the Corporation shall have
reserved 5,967,125 shares (and on and after the date on which the Stockholder
Approvals (as defined in the Securities Purchase Agreement) are received that
number of shares which is 200% of the number of shares which would be issuable
if all Prepaid Warrants issued or issuable pursuant to the Securities Purchase
Agreement are exercised in their entirety on the Closing Date) of the authorized
but unissued shares of Common Stock for issuance upon the full exercise of all
Prepaid Warrants issued or issuable pursuant to the Securities Purchase
Agreement (the "RESERVED AMOUNT") and thereafter the number of authorized but
unissued shares of Common Stock so reserved shall not be decreased and shall at
all times be sufficient to provide for the full exercise of all Prepaid Warrants
issued or issuable pursuant to the Securities Purchase Agreement at the then
current Exercise Price. The Reserved Amount shall be allocated to the holders of
Prepaid Warrants as provided in Article IX.H.
B. Increases to Reserved Amount. If, at any time after the date hereof,
the Reserved Amount for any three (3) consecutive trading days (the last of such
three (3) trading days being the "AUTHORIZATION TRIGGER DATE") shall be less
than 135% of the number of shares of Common Stock issuable upon the full
exercise of all Prepaid Warrants issued or issuable pursuant to the Securities
Purchase Agreement, the Corporation shall immediately notify the holders of
Prepaid Warrants of
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<PAGE> 10
such occurrence and shall take immediate action (including, if necessary,
seeking stockholder approval to authorize the issuance of additional shares of
Common Stock) to increase the Reserved Amount to 165% of the number of shares of
Common Stock then issuable upon the full exercise of all Prepaid Warrants issued
or issuable pursuant to the Securities Purchase Agreement. In the event the
Corporation fails to so increase the Reserved Amount within ninety (90) days
after an Authorization Trigger Date, and thereafter Holder is unable to exercise
all or any portion of the outstanding Prepaid Amount of this Warrant because the
Corporation does not have a sufficient number of shares of Common Stock
authorized and reserved for issuance upon exercise hereof, Holder shall
thereafter have the option, exercisable at any time by delivery of a Default
Notice (as defined in Article VI.C) to the Corporation, to require the
Corporation to pay to Holder an amount in cash equal to the Default Amount (as
defined in Article VI.B). Upon payment by the Corporation of the Default Amount,
this Warrant shall be null and void. If the Corporation fails to deliver the
Default Amount to Holder within five (5) business days after its receipt of such
Default Notice, then Holder shall be entitled to the remedies provided in
Article VI.C.
ARTICLE IV
FAILURE TO SATISFY EXERCISES
A. Exercise Default Payments. If, at any time, (x) Holder submits a
Notice of Exercise and the Corporation fails for any reason (other than because
such issuance would exceed Holder's allocated portion of the Reserved Amount or
Cap Amount, for which failures Holder shall have the remedies set forth in
Articles III and V, respectively) to deliver, on or prior to the seventh
business day following the expiration of the Delivery Period for such exercise,
such number of freely tradeable shares of Common Stock to which Holder is
entitled upon such exercise, or (y) the Corporation publicly announces or
provides notice to any holder of Prepaid Warrants (together with all other
holders of Prepaid Warrants and the Holder referred to herein, the "HOLDERS") at
any time of its intention not to issue freely tradeable shares of Common Stock
upon the exercise by any Holder of a Prepaid Warrant in accordance with the
terms of the Prepaid Warrants (other than because such issuance would exceed
such Holder's allocated portion of the Reserved Amount or Cap Amount) (each of
(x) and (y) being an "EXERCISE DEFAULT"), then the Corporation shall pay to
Holder, in the case of an Exercise Default described in clause (x) above, and to
all Holders, in the case of a Exercise Default described in clause (y) above, an
amount equal to:
(.24) x (D/365) x (Exercise Default Amount)
where:
"D" means the number of days after the expiration of the Delivery Period
through and including the Default Cure Date;
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<PAGE> 11
"EXERCISE DEFAULT AMOUNT" means the Prepaid Amount of all Warrants held
by Holder plus all accrued and unpaid Premium thereon; and
"DEFAULT CURE DATE" means (i) with respect to an Exercise Default
described in clause (x) of its definition, the date the Corporation effects the
exercise of the portion of this Warrant submitted for exercise, and (ii) with
respect to an Exercise Default described in clause (y) of its definition, the
date the Corporation begins to issue freely tradeable shares of Common Stock in
satisfaction of all exercises of Prepaid Warrants in accordance with their terms
and (iii) with respect to either type of Exercise Default, the date on which the
Corporation pays to Holder the Default Amount (as defined in Article VI.B)
pursuant to Paragraph D of this Article IV.
The payments to which Holder shall be entitled pursuant to this Paragraph
A are referred to herein as "EXERCISE DEFAULT PAYMENTS." Holder may elect to
receive accrued Exercise Default Payments in cash or to convert all or any
portion of such accrued Exercise Default Payments, at any time, into Common
Stock at the lowest Exercise Price in effect during the period beginning on the
date of the Exercise Default through the Default Cure Date for such exercise. In
the event Holder elects to receive any Exercise Default Payments in shares of
Common Stock, it shall so notify the Corporation in writing. Such payment shall
be made in accordance with and be subject to the provisions of Article IX.J. In
the event Holder elects to convert all or any portion of the Exercise Default
Payments into Common Stock, Holder shall indicate on a Notice of Exercise such
portion of the Exercise Default Payments which Holder elects to so convert and
such exercise shall otherwise be effected in accordance with the provisions of
Article II.
B. Adjustment to Exercise Price. If Holder has not received certificates
for all shares of Common Stock prior to the tenth (10th) business day after the
expiration of the Delivery Period with respect to an exercise of any portion of
any of Holder's Prepaid Warrants for any reason (other than because such
issuance would exceed Holder's allocated portion of the Reserved Amount or Cap
Amount, for which failures Holder shall have the remedies set forth in Articles
III and V, respectively), then the Fixed Exercise Price in respect of all
Prepaid Warrants held by Holder (including any Prepaid Warrants or portions
thereof submitted to the Corporation for exercise, but for which shares of
Common Stock have not been issued to Holder) shall thereafter be the lesser of
(i) the Fixed Exercise Price on the Exercise Date specified in the Notice of
Exercise which resulted in the Exercise Default and (ii) the lowest Exercise
Price in effect during the period beginning on, and including, such Exercise
Date through and including the day such shares of Common Stock are delivered to
the Holder. If there shall occur an Exercise Default of the type described in
clause (y) of Article IV.A., then the Fixed Exercise Price with respect to any
exercise thereafter shall be the lowest Exercise Price in effect at any time
during the period beginning on, and including, the date of the occurrence of
such Exercise Default through and including the Default Cure Date. The Fixed
Exercise Price shall thereafter be subject to further adjustment for any events
described in Article VII.
C. Buy-In Cure. Unless the Corporation has notified Holder in writing
prior to the delivery by Holder of a Notice of Exercise that the Corporation is
unable to honor exercises, if (i)
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<PAGE> 12
(a) the Corporation fails for any reason to deliver during the Delivery Period
shares of Common Stock to Holder upon an exercise of this Warrant or (b) there
shall occur a Legend Removal Failure (as defined in Article VI.A(iii) below) and
(ii) thereafter, Holder purchases (in an open market transaction or otherwise)
shares of Common Stock to make delivery in satisfaction of a sale by Holder of
the unlegended shares of Common Stock (the "SOLD SHARES") which Holder
anticipated receiving upon such exercise (a "BUY-IN"), the Corporation shall pay
Holder (in addition to any other remedies available to Holder) the amount by
which (x) Holder's total purchase price (including brokerage commissions, if
any) for the unlegended shares of Common Stock so purchased exceeds (y) the net
proceeds received by Holder from the sale of the Sold Shares. For example, if
Holder purchases unlegended shares of Common Stock having a total purchase price
of $11,000 to cover a Buy-In with respect to shares of Common Stock it sold for
$10,000, the Corporation will be required to pay Holder $1,000. Holder shall
provide the Corporation written notification indicating any amounts payable to
Holder pursuant to this Paragraph C, together with evidence supporting such
calculation. The Corporation shall make any payments required pursuant to this
Paragraph C in accordance with and subject to the provisions of Article IX.
D. Right to Require Payment of Default Amount. If the Corporation fails,
and such failure continues uncured for five (5) business days after the
Corporation has been notified thereof in writing by Holder, for any reason
(other than because such issuance would exceed Holder's allocable portion of the
Reserved Amount or Cap Amount, for which failures Holder shall have the remedies
set forth in Articles III and V, respectively) to issue shares of Common Stock
within ten (10) business days after the expiration of the Delivery Period with
respect to any exercise of this Warrant, then Holder may elect at any time prior
to the Default Cure Date for such Exercise Default, by delivery of a Default
Notice (as defined in Article VI.C.) to the Corporation, to require the
Corporation to pay to Holder an amount in cash equal to the Default Amount (as
defined in Article VI.B). Upon payment by the Corporation of the Default Amount,
this Warrant shall be null and void. If the Corporation fails to pay such
Default Amount within five (5) business days after its receipt of a Default
Notice, then Holder shall be entitled to the remedies provided in Article VI.C.
ARTICLE V
INABILITY TO EXERCISE DUE TO CAP AMOUNT
A. Obligation to Cure. If at any time the then unissued portion of any
Holder's Cap Amount is less than 135% of the number of shares of Common Stock
then issuable upon the full exercise of all Prepaid Warrants owned by such
Holder (a "TRADING MARKET TRIGGER EVENT"), the Corporation shall immediately
notify the Holders of Prepaid Warrants of such occurrence and shall take
immediate action (including, if necessary, seeking the approval of its
stockholders to authorize the issuance of the full number of shares of Common
Stock which would be issuable upon the full exercise of all Prepaid Warrants
issued or issuable pursuant to the Securities Purchase Agreement but for the Cap
Amount) to eliminate any prohibitions under applicable law or the rules or
regulations of any stock exchange, interdealer quotation system or other
self-regulatory organization
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<PAGE> 13
with jurisdiction over the Corporation or any of its securities on the
Corporation's ability to issue shares of Common Stock in excess of the Cap
Amount. In the event the Corporation fails to eliminate all such prohibitions
within ninety (90) days after the Trading Market Trigger Event and thereafter
Holder is unable to exercise all or any portion of the outstanding Prepaid
Amount of this Warrant as a result of the operation of Article II.C.(i), then
Holder shall thereafter have the option, exercisable at any time until such date
that all such prohibitions are eliminated, by delivery of a Default Notice (as
defined in Article VI.C.) to the Corporation, to require the Corporation to pay
to Holder an amount in cash equal to the Default Amount (as defined in Article
VI.B). Upon payment by the Corporation of the Default Amount, this Warrant shall
be null and void. If the Corporation fails to deliver the Default Amount within
five (5) business days after its receipt of such Default Notice, then such
holder shall be entitled to the remedies provided in Articles V.B.
B. Remedies. If the Corporation fails to pay the Default Amount pursuant
to Article V.A. within five (5) business days after its receipt of such Default
Notice, Holder may elect either or both of the following additional remedies:
(i) to require, with the consent of the Majority Holders, the
Corporation to terminate the listing of its Common Stock on the Nasdaq National
Market (or any other stock exchange, interdealer quotation system or trading
market) and to cause its Common Stock to be eligible for trading on the
over-the-counter electronic bulletin board; or
(ii) to require the Corporation to issue shares of Common Stock
in accordance with Holder's Notice of Exercise at an Exercise Price equal to the
average of the Closing Bid Prices for the Common Stock during the five (5)
consecutive trading days ending on the trading day immediately preceding the
date of Holder's written notice to the Corporation of its election to receive
shares of Common Stock pursuant to this subparagraph (ii) (subject to equitable
adjustment for any stock splits, stock dividends, reclassifications or similar
events during such five (5) trading day period).
ARTICLE VI
EVENTS OF DEFAULT
A. Events of Default. If any of the following events of default (each, an
"EVENT OF DEFAULT") shall occur:
(i) the Common Stock (including any of the shares of Common Stock
issuable upon exercise of this Warrant) is suspended from trading on any of, or
is not listed (and authorized) for trading on at least one of, the New York
Stock Exchange, the American Stock Exchange, the Nasdaq National Market or the
Nasdaq SmallCap Market for an aggregate of ten (10) trading days in any nine (9)
month period;
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<PAGE> 14
(ii) any Registration Statement required to be filed by the
Corporation pursuant to Sections 2(a) or 3(b) of that certain Registration
Rights Agreement by and among the Corporation and the other signatories thereto
entered into in connection with the Securities Purchase Agreement (the
"REGISTRATION RIGHTS AGREEMENT") has not been declared effective by the
thirtieth (30th) day following the date on which such Registration Statement is
required to be declared effective pursuant to the Registration Rights Agreement,
or any such Registration Statement, after being declared effective, cannot be
utilized by Holders for the resale of all of its Registrable Securities (as
defined in the Registration Rights Agreement) for an aggregate of more than
thirty (30) days;
(iii) the Corporation fails to remove any restrictive legend on
any certificate or any shares of Common Stock issued to Holder upon exercise of
any Prepaid Warrant owned by Holder as and when required by the Prepaid
Warrants, the Securities Purchase Agreement or the Registration Rights Agreement
(a "LEGEND REMOVAL FAILURE"), and any such failure continues uncured for five
(5) business days after the Corporation has been notified thereof in writing by
the holder;
(iv) the Corporation provides notice to any of the Holders of
Prepaid Warrants, including by way of public announcement, at any time, of its
intention not to issue shares of Common Stock to any of the Holders of Prepaid
Warrants upon exercise in accordance with the terms of the Prepaid Warrants
(other than due to the circumstances contemplated by Articles III or V for which
the Holders shall have the remedies set forth in such Articles);
(v) the Corporation shall:
(a) sell, convey or dispose of all or substantially all of its
assets;
(b) merge, consolidate or engage in any other business
combination with any other entity (other than pursuant to a migratory merger
effected solely for the purpose of changing the jurisdiction of incorporation of
the Corporation, other than pursuant to a merger in which the Corporation is the
surviving or continuing entity and its authorized capital stock is unchanged and
other than pursuant to a merger in which the surviving or continuing entity (if
other than the Corporation) assumes the Corporation's obligations under the
Securities Purchase Agreement, the Prepaid Warrants, the Incentive Warrants and
the Registration Rights Agreement and is a publicly-traded corporation whose
common stock is listed for trading on the New York Stock Exchange, the American
Stock Exchange, the Nasdaq National Market or the Nasdaq SmallCap Market); or
(c) have fifty percent (50%) or more of the voting power of its
capital stock owned beneficially by one person, entity or "group" (as such term
is used under Section 13(d) of the Exchange Act) other than Purchasers (as
defined in the Securities Purchase Agreement) and their affiliates;
(vi) the Corporation otherwise shall breach any material term
hereunder (other than as specifically provided in subparagraphs (i)-(v) of this
Paragraph A) or under the Securities
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<PAGE> 15
Purchase Agreement or the Registration Rights Agreement and such breach
continues uncured for ten (10) business days after the occurrence of such event;
(vii) any representation or warranty of the Corporation made herein
or in any agreement, statement or certificate given in writing pursuant hereto
or in connection herewith (including, without limitation, the Securities
Purchase Agreement and the Registration Rights Agreement), shall be false or
misleading in any material respect when made and the breach of which would have
a Material Adverse Effect (as defined in the Securities Purchase Agreement);
(viii) the Corporation or any material subsidiary of the Corporation
shall make an assignment for the benefit of creditors, or apply for or consent
to the appointment of a receiver or trustee for it or for a substantial part of
its property or business; or such a receiver or trustee shall otherwise be
appointed and such appointment shall continue undismissed for 45 days;
(ix) bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Corporation or
any material subsidiary of the Corporation and shall continue undismissed for 45
days in the case of proceedings initiated against the Corporation or its
material subsidiaries; or
(x) the Corporation shall issue to a Holder a number of shares of
Common Stock equal to such Holder's Cap Amount and such Holder delivers a Notice
of Exercise for additional shares;
then, upon the occurrence and during the continuation of any Event of Default
specified in subparagraphs (i)-(vii) and (x) of this Paragraph A, at the option
of Holder exercisable through the delivery of a Default Notice (as defined in
Paragraph C below), and upon the occurrence of an Event of Default specified in
subparagraphs (viii) or (ix) of this Paragraph A, the Corporation shall pay
Holder, in satisfaction of its obligation to issue shares of Common Stock upon
exercise of this Warrant, an amount equal to the Default Amount and such Default
Amount, together with all other ancillary amounts payable hereunder, shall
immediately become due and payable, all without demand, presentment or notice,
all of which hereby are expressly waived, together with all costs, including,
without limitation, legal fees and expenses of collection, and Holder shall be
entitled to exercise all other rights and remedies available at law or in
equity. For the avoidance of doubt, the occurrence of any event described in
clauses (i), (ii), (iv), (v), (vii), (viii), (ix) or (x) above shall immediately
constitute an Event of Default and there shall be no cure period.
B. Definition of Default Amount. The "DEFAULT AMOUNT" with respect to
this Warrant means an amount equal to the greater of:
(i) A X M
---------
EP
and
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<PAGE> 16
(ii) The sum of (x) the product of (I) one hundred percent (100%)
divided by the Exercise Percentage, times (II) the outstanding Prepaid Amount
hereof on the date on which the Corporation receives the Default Notices plus
all accrued and unpaid Premium thereon through the date of payment of the
Default Amount, plus (y) all unpaid Exercise Default Payments owing (if any)
with respect thereto through the date of payment of the Default Amount.
where:
"A" means the outstanding Prepaid Amount of this Warrant on the date on
which the Corporation receives the Default Notice plus all unpaid Exercise
Default Payments owing (if any) and any accrued and unpaid Premium with respect
thereto through the date of payment of the Default Amount;
"EP" means the Exercise Price in effect on the date on which the
Corporation receives the Default Notice; and
"M" means (i) with respect to all Events of Default other than an Event
of Default specified in Article VI.A(v) hereof, the highest Closing Bid Price of
the Corporation's Common Stock during the period beginning on the date on which
the Corporation receives the Default Notice and ending on the date immediately
preceding the date of payment of the Default Amount and (ii) with respect to an
Event of Default specified in Article VI.A(v) hereof, the greater of (a) the
amount determined pursuant to clause (i) of this definition or (b) the fair
market value, as of the date on which the Corporation receives the Default
Notice, of the consideration payable to the holder of a share of Common Stock
pursuant to the transaction which triggers the Event of Default. For purposes of
this definition, "fair market value" shall be determined by an investment
banking firm selected by the Corporation and reasonably acceptable to the
Majority Holders, with the costs of such appraisal to be borne by the
Corporation.
C. Failure to Pay Default Amount. If the Corporation fails to pay the
Default Amount within five (5) business days of its receipt of a notice
requiring such payment (a "DEFAULT NOTICE"), then the Holder (i) shall be
entitled to interest on the Default Amount at a per annum rate equal to the
lower of twenty-four percent (24%) and the highest interest rate permitted by
applicable law from the date on which the Corporation receives the Default
Notice until the date of payment of the Default Amount hereunder, and (ii) shall
have the right, at any time and from time to time, to require the Corporation,
upon written notice, to immediately convert (in accordance with the terms of
Paragraph A of Article II) all or any portion of the Default Amount, plus
interest as aforesaid, into shares of Common Stock at the lowest Exercise Price
in effect during the period beginning on the date on which the Corporation
receives the Default Notice and ending on the Exercise Date with respect to the
conversion of such Default Amount. In the event the Corporation is not able to
pay all amounts due and payable with respect to all Prepaid Warrants subject to
Default Notices, the Corporation shall pay the Holders of such Prepaid Warrants
which are the subject of Default Notices such amounts pro rata, based on the
total amounts payable to each such Holder relative to the total amounts payable
to all such Holders.
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<PAGE> 17
ARTICLE VII
ADJUSTMENTS TO THE EXERCISE PRICE
The Exercise Price shall be subject to adjustment from time to time as
follows:
A. Stock Splits, Stock Dividends, Etc. If, at any time on or after the
Closing Date, the number of outstanding shares of Common Stock is increased by a
stock split, stock dividend, combination, reclassification or other similar
event, the Fixed Exercise Price shall be proportionately reduced, or if the
number of outstanding shares of Common Stock is decreased by a reverse stock
split, combination or reclassification of shares, or other similar event, the
Fixed Exercise Price shall be proportionately increased. In such event, the
Corporation shall notify the Corporation's transfer agent of such change on or
before the effective date thereof.
B. Adjustment Due to Merger, Consolidation, Etc. If, at any time after
the Closing Date, there shall be (i) any reclassification or change of the
outstanding shares of Common Stock (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a result of
a subdivision or combination), (ii) any consolidation or merger of the
Corporation with any other entity (other than a migratory merger effected solely
for the purpose of changing the jurisdiction of incorporation of the Corporation
and other than a merger in which the Corporation is the surviving or continuing
entity and its authorized capital stock is unchanged), (iii) any sale or
transfer of all or substantially all of the assets of the Corporation or (iv)
any share exchange pursuant to which all of the outstanding shares of Common
Stock are converted into other securities or property (each of (i) - (iv) above
being a "CORPORATE CHANGE"), then the Holders shall thereafter have the right to
receive upon exercise hereof, in lieu of the shares of Common Stock otherwise
issuable, such shares of stock, securities and/or other property as would have
been issued or payable in such Corporate Change with respect to or in exchange
for the number of shares of Common Stock which would have been issuable upon
exercise hereof (without giving effect to the limitations contained in Article
II.C.) had such Corporate Change not taken place, and in any such case,
appropriate provisions shall be made with respect to the rights and interests of
Holder to the end that the provisions hereof (including, without limitation,
provisions for adjustment of the Exercise Price and of the number of shares of
Common Stock issuable upon exercise of this Warrant) shall thereafter be
applicable, as nearly as may be practicable in relation to any shares of stock
or securities thereafter deliverable upon the exercise thereof. The Corporation
shall not effect any Corporate Change unless (i) Holder has received written
notice of such transaction at least seventy-five (75) days prior thereto, but,
in no event prior to the public disclosure thereof and not later than twenty
(20) days prior to the record date for the determination of stockholders
entitled to vote with respect thereto, and (ii) the resulting successor or
acquiring entity (if not the Corporation) assumes by written instrument the
obligations of the Corporation under this Warrant. The above provisions shall
apply regardless of whether or not there would have been a sufficient number of
shares of Common Stock authorized and available for issuance upon exercise of
the Prepaid Warrants
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<PAGE> 18
outstanding as of the date of such transaction, and shall similarly apply to
successive reclassifications, consolidations, mergers, sales, transfers or share
exchanges.
C. Adjustment Due to Major Announcement. In the event the Corporation at
any time after the Closing Date (i) makes a public announcement that it intends
to consolidate or merge with any other entity (other than a migratory merger
effected solely for the purpose of changing the jurisdiction of incorporation of
the Corporation and other than a merger in which the Corporation is the
surviving or continuing entity and its capital stock is unchanged) or to sell or
transfer all or substantially all of the assets of the Corporation or (ii) any
person, group or entity (including the Corporation) publicly announces a tender
offer, exchange offer or another transaction to purchase 50% or more of the
Corporation's Common Stock or otherwise publicly announces an intention to
replace a majority of the Corporation's Board of Directors by waging a proxy
battle or otherwise (the date of the announcement referred to in clause (i) or
(ii) of this Paragraph C is hereinafter referred to as the "ANNOUNCEMENT DATE"),
then the Exercise Price shall, effective upon the Announcement Date and
continuing through the sixth (6th) trading day following the earlier of the
consummation of the proposed transaction or tender offer, exchange offer or
another transaction or the Abandonment Date (as defined below), be equal to the
lower of (x) the Exercise Price which would have been applicable for an exercise
occurring on the Announcement Date and (y) the Exercise Price determined in
accordance with Article I.D. on the Exercise Date set forth in the applicable
Notice of Exercise. From and after the sixth (6th) trading day following the
Abandonment Date, the Exercise Price shall be determined as set forth in Article
I.D. "ABANDONMENT DATE" means with respect to any proposed transaction or tender
offer, exchange offer or another transaction for which a public announcement as
contemplated by this Paragraph C has been made, the date upon which the
Corporation (in the case of clause (i) above) or the person, group or entity (in
the case of clause (ii) above) publicly announces the termination or abandonment
of the proposed transaction or tender offer, exchange offer or another
transaction which caused this Paragraph C to become operative.
D. Adjustment Due to Distribution. If, at any time after the Closing
Date, the Corporation shall declare or make any distribution of its assets (or
rights to acquire its assets) to holders of Common Stock as a partial
liquidating dividend, by way of return of capital or otherwise (including any
dividend or distribution to the Corporation's shareholders in cash or shares (or
rights to acquire shares) of capital stock of a subsidiary (i.e. a spin-off)) (a
"DISTRIBUTION"), then Holder shall be entitled, upon any exercise of this
Warrant after the date of record for determining stockholders entitled to such
Distribution, to receive the amount of such assets which would have been payable
to Holder with respect to the shares of Common Stock issuable upon such exercise
(without giving effect to the limitations contained in Article II.C.) had Holder
been the holder of such shares of Common Stock on the record date for the
determination of stockholders entitled to such Distribution.
E. Issuance of Other Securities With Variable Conversion Price. If, at
any time after the Closing Date, the Corporation shall issue any securities
which are convertible into or exchangeable for Common Stock ("CONVERTIBLE
SECURITIES") at a conversion or exchange rate based on a discount to the market
price of the Common Stock at the time of conversion or exercise, then the
Exercise
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<PAGE> 19
Percentage in respect of any exercise of any portion of this Warrant after such
issuance shall be the lesser of (i) one minus the greatest discount applicable
to any such Convertible Securities and (ii) the Exercise Percentage then in
effect.
F. Purchase Rights. If, at any time after the Closing Date, the
Corporation issues any Convertible Securities or rights to purchase stock,
warrants, securities or other property (the "PURCHASE RIGHTS") pro rata to the
record holders of any class of Common Stock, then Holder will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which Holder could have acquired if Holder had held the number
of shares of Common Stock acquirable upon complete exercise of this Warrant
(without giving effect to the limitations contained in Article II.C.)
immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights.
G. Adjustment of Exercise Price. Except as otherwise provided herein, if
and whenever during the Exercise Period the Corporation issues or sells, or in
accordance with Article VII.G(b) hereof is deemed to have issued or sold, any
shares of Common Stock for no consideration or for a consideration per share
less than the Market Price (as hereinafter defined) on the date of issuance (a
"DILUTIVE ISSUANCE"), then effective immediately upon the Dilutive Issuance, the
Fixed Exercise Price will be adjusted in accordance with the following formula:
FE' = FE x O + P/M
------------
CSDO
where:
FE' = the adjusted Fixed Exercise Price;
FE = the then current Fixed Exercise Price;
M = the then current Market Price (as defined below);
O = the number of shares of Common Stock outstanding
immediately prior to the Dilutive Issuance;
P = the aggregate consideration, calculated as set forth
below, received by the Corporation upon such Dilutive
Issuance; and
CSDO = the total number of shares of Common Stock Deemed
Outstanding (as defined below) immediately after the
Dilutive Issuance.
(i) Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Fixed Exercise Price, the following will be applicable:
(a) Issuance of Rights or Options. If the Corporation in any
manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock or
Convertible Securities (such warrants, rights and options to purchase Common
Stock or Convertible Securities are hereinafter referred to as "OPTIONS") and
the price per
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<PAGE> 20
share for which Common Stock is issuable upon the exercise of such Options is
less than the Market Price in effect on the date of issuance of such Options
("BELOW MARKET OPTIONS"), then the maximum total number of shares of Common
Stock issuable upon the exercise of all such Below Market Options (assuming full
exercise, conversion or exchange of Convertible Securities, if applicable) will,
as of the date of the issuance or grant of such Below Market Options, be deemed
to be outstanding and to have been issued and sold by the Corporation for such
price per share. For purposes of the preceding sentence, the "price per share
for which Common Stock is issuable upon the exercise of such Below Market
Options" is determined by dividing (i) the total amount, if any, received or
receivable by the Corporation as consideration for the issuance or granting of
all such Below Market Options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the exercise of all such
Below Market Options, plus, in the case of Convertible Securities issuable upon
the exercise of such Below Market Options, the minimum aggregate amount of
additional consideration payable upon the exercise, conversion or exchange
thereof at the time such Convertible Securities first become exercisable,
convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the exercise of all such Below Market Options
(assuming full conversion of Convertible Securities, if applicable). No further
adjustment to the Exercise Price will be made upon the actual issuance of such
Common Stock upon the exercise of such Below Market Options or upon the
exercise, conversion or exchange of Convertible Securities issuable upon
exercise of such Below Market Options.
(b) Issuance of Convertible Securities.
(A) If the Corporation in any manner issues or sells any
Convertible Securities, whether or not immediately convertible (other than where
the same are issuable upon the exercise of Options) and the price per share for
which Common Stock is issuable upon such exercise, conversion or exchange (as
determined below, if applicable) is less than the Market Price in effect on the
date of issuance of such Convertible Securities, then the maximum total number
of shares of Common Stock issuable upon the exercise, conversion or exchange of
all such Convertible Securities will, as of the date of the issuance of such
Convertible Securities, be deemed to be outstanding and to have been issued and
sold by the Corporation for such price per share. For the purposes of the
preceding sentence, the "price per share for which Common Stock is issuable upon
such exercise, conversion or exchange" is determined by dividing (i) the total
amount, if any, received or receivable by the Corporation as consideration for
the issuance or sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the Corporation
upon the exercise, conversion or exchange thereof at the time such Convertible
Securities first become exercisable, convertible or exchangeable, by (ii) the
maximum total number of shares of Common Stock issuable upon the exercise,
conversion or exchange of all such Convertible Securities. No further adjustment
to the Exercise Price will be made upon the actual issuance of such Common Stock
upon exercise, conversion or exchange of such Convertible Securities.
(B) If the Corporation in any manner issues or sells any
Convertible Securities with a fluctuating conversion or exercise price or
exchange ratio (a "VARIABLE RATE CONVERTIBLE SECURITY"), then the "price per
share for which Common Stock is issuable upon such
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<PAGE> 21
exercise, conversion or exchange" for purposes of the calculation contemplated
hereby shall be deemed to be the lowest price per share which would be
applicable (assuming all holding period and other conditions to any discounts
contained in such Convertible Security have been satisfied) if the Market Price
on the date of issuance of such Convertible Security was 75% of the Market Price
on such date (the "ASSUMED VARIABLE MARKET PRICE"). Further, if the Market Price
at any time or times thereafter is less than or equal to the Assumed Variable
Market Price last used for making any adjustment hereunder with respect to any
Variable Rate Convertible Security, the Exercise Price in effect at such time
shall be readjusted to equal the Exercise Price which would have resulted if the
Assumed Variable Market Price at the time of issuance of the Variable Rate
Convertible Security had been 75% of the Market Price existing at the time of
the adjustment required by this sentence.
(c) Change in Option Price or Conversion Rate. If there is a
change at any time in (i) the amount of additional consideration payable to the
Corporation upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Corporation upon the exercise, conversion
or exchange of any Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock (in
each such case, other than under or by reason of provisions designed to protect
against dilution), the Exercise Price in effect at the time of such change will
be readjusted to the Exercise Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding provided for such
changed additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold.
(d) Treatment of Expired Options and Unexercised Convertible
Securities. If, in any case, the total number of shares of Common Stock issuable
upon exercise of any Option or upon exercise, conversion or exchange of any
Convertible Securities is not, in fact, issued and the rights to exercise such
Option or to exercise, convert or exchange such Convertible Securities shall
have expired or terminated, the Fixed Exercise Price then in effect will be
readjusted to the Fixed Exercise Price which would have been in effect at the
time of such expiration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such expiration or
termination (other than in respect of the actual number of shares of Common
Stock issued upon exercise or conversion thereof), never been issued.
(e) Calculation of Consideration Received. If any Common Stock,
Options or Convertible Securities are issued, granted or sold for cash, the
consideration received therefor for purposes of this Warrant will be the amount
received by the Corporation therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Corporation in connection with such issuance, grant or
sale. In case any Common Stock, Options or Convertible Securities are issued or
sold for a consideration part or all of which shall be other than cash, the
amount of the consideration other than cash received by the Corporation 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 Corporation will be the Market Price thereof as of the date of receipt. In
case any Common Stock, Options or Convertible Securities are issued in
connection with any merger or consolidation in which the Corporation is the
surviving
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<PAGE> 22
corporation, the amount of consideration therefor will be deemed to be the fair
market value of such portion of the net assets and business of the non-surviving
corporation as is attributable to such Common Stock, Options or Convertible
Securities, as the case may be. The fair market value of any consideration other
than cash or securities will be determined in good faith by an investment banker
or other appropriate expert of national reputation selected by the Corporation
and reasonably acceptable to the holder hereof, with the costs of such appraisal
to be borne by the Corporation.
(f) Exceptions to Adjustment of Exercise Price. No adjustment to
the Exercise Price will be made (i) upon the exercise of any warrants, options
or convertible securities issued and outstanding on the Issue Date and set forth
on Schedule 3(c) of the Securities Purchase Agreement in accordance with the
terms of such securities as of such date; (ii) upon the grant or exercise of any
stock or options which may hereafter be granted or exercised under any employee
benefit plan of the Corporation now existing or to be implemented in the future,
so long as the issuance of such stock or options is approved by a majority of
the non-employee members of the Board of Directors of the Corporation or a
majority of the members of a committee of non-employee directors established for
such purpose; (iii) upon the issuance of any Prepaid Warrants or Incentive
Warrants (as such term is defined in the Securities Purchase Agreement) issued
or issuable in accordance with the terms of the Securities Purchase Agreement;
(iv) upon exercise of the Prepaid Warrants and the Incentive Warrants; (v) upon
the issuance of Common Stock in a firm commitment underwritten public offering;
or (vi) upon the issuance of securities to an investor listed on Schedule 1
hereto.
(ii) Certain Definitions.
(a) "COMMON STOCK DEEMED OUTSTANDING" shall mean the number of
shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Corporation), plus (x) in the case of any
adjustment required resulting from the issuance of any Options, the maximum
total number of shares of Common Stock issuable upon the exercise of the Options
for which the adjustment is required (including any Common Stock issuable upon
the conversion of Convertible Securities issuable upon the exercise of such
Options), and (y) in the case of any adjustment required resulting from the
issuance of any Convertible Securities, the maximum total number of shares of
Common Stock issuable upon the exercise, conversion or exchange of the
Convertible Securities for which the adjustment is required, as of the date of
issuance of such Convertible Securities, if any.
(b) "MARKET PRICE," as of any date, (i) means the average of the
closing bid prices for the shares of Common Stock as reported on the Nasdaq
National Market by Bloomberg Financial Markets ("BLOOMBERG") for the five (5)
consecutive trading days immediately preceding such date, or (ii) if the Nasdaq
National Market is not the principal trading market for the shares of Common
Stock, the average of the last sale prices reported by Bloomberg on the
principal trading market for the Common Stock during the same period, or, if
there is no sale price for such period, the last bid price reported by Bloomberg
for such period, or (iii) if the foregoing do not apply, the last sale price of
such security in the over-the-counter market on the pink sheets or bulletin
board for such security as reported by Bloomberg, or if no sale price is so
reported for such security, the last bid price of
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<PAGE> 23
such security as reported by Bloomberg, or (iv) if market value cannot be
calculated as of such date on any of the foregoing bases, the Market Price shall
be the average fair market value as reasonably determined by an investment
banking firm selected by the Corporation and reasonably acceptable to the
Majority Holders, with the costs of the appraisal to be borne by the
Corporation. The manner of determining the Market Price of the Common Stock set
forth in the foregoing definition shall apply with respect to any other security
in respect of which a determination as to market value must be made hereunder.
(c) "COMMON STOCK," for purposes of this Article VII.G, includes the
Common Stock and any additional class of stock of the Corporation having no
preference as to dividends or distributions on liquidation, provided that the
shares purchasable pursuant to this Warrant shall include only Common Stock in
respect of which this Warrant is exercisable, or shares resulting from any
subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to above, the stock or other securities or property provided
for.
H. Notice of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Exercise Price pursuant to this Article VII, the
Corporation, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to Holder a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, provided that such notice shall not contain
any material nonpublic information. The Corporation shall, upon the written
request at any time of Holder, furnish to Holder a like certificate setting
forth (i) such adjustment or readjustment, (ii) the Exercise Price at the time
in effect and (iii) the number of shares of Common Stock and the amount, if any,
of other securities or property which at the time would be received upon
exercise of this Warrant.
ARTICLE VIII
REDEMPTION AND CALL
A. Subject to the conditions set forth below, the Corporation shall have
the right, at any time at which a Notice of Exercise is delivered and the
Exercise Price is less than the Floor Price and provided the Corporation is not
in material violation of any of its obligations under this Prepaid Warrant, the
Securities Purchase Agreement or the Registration Rights Agreement and so long
as no Event of Default shall have occurred and be continuing (and the Holder
doesn't waive such violation or Event of Default), to redeem (an "OPTIONAL
REDEMPTION") all of the Exercise Amount subject to such Notice of Exercise for
cash, at an amount per share equal to the Optional Redemption Amount (as defined
below). For purposes hereof, the "OPTIONAL REDEMPTION AMOUNT" means:
V
--------- X M
EP
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<PAGE> 24
where:
"V" means the Prepaid Amount being redeemed plus the accrued Premium
thereon and all unpaid Default Payments owing (if any) with respect thereto
through the Effective Date of Redemption;
"EP" means the Exercise Price in effect on the date of the Optional
Redemption Notice; and
"M" means the Closing Bid Price of the Corporation's Common Stock on the
date of the Optional Redemption Notice.
The Corporation shall exercise its Optional Redemption by (i) delivering
written notice by facsimile and overnight courier (an "OPTIONAL REDEMPTION
NOTICE") to the holders of Prepaid Warrants not less than five (5) business days
prior to the beginning of the period during which the Corporation shall exercise
its Optional Redemption rights in connection with any Notice of Exercise
delivered in the period set forth in such notice by the Corporation (the
"OPTIONAL REDEMPTION PERIOD") and (ii) on or prior to the date of delivery of
such Optional Redemption Notice, the Corporation shall have deposited with an
escrow agent reasonably acceptable to holders of a majority of the then Prepaid
Warrants, as a trust fund, cash sufficient in amount to pay all amounts to which
the holders of Prepaid Warrants are entitled upon such redemption pursuant to
this Paragraph A, with irrevocable instructions and authority to such escrow
agent to complete the redemption thereof in accordance with this Paragraph A.
Any Optional Redemption Notice delivered in accordance with the immediately
preceding sentence shall be accompanied by a statement executed by a duly
authorized officer of its escrow agent, certifying the amount of funds which
have been deposited with such escrow agent and that the escrow agent has been
instructed and agrees to act as redemption agent hereunder. The Optional
Redemption Period shall terminate effective on the date indicated in the
Corporation's Optional Redemption Notice. The Corporation may terminate an
Optional Redemption Period prior to the date indicated in the applicable
Optional Redemption Notice with respect to Exercise Amounts which are not
delivered for exercise prior to the effective date of such termination notice by
providing each holder of Prepaid Warrants with written notice of such
termination at least five business days prior to the effective date of such
termination.
The Optional Redemption Notice shall be delivered to (i) the holders of
Prepaid Warrants at the address and facsimile number of each holder appearing in
the Corporation's register and (ii) the transfer agent for the Common Stock,
which Optional Redemption Notice shall be deemed to have been delivered on the
business day after the Corporation's fax (with a copy sent by overnight courier
to the holders of Prepaid Warrants) of such notice to the holders of Prepaid
Warrants. Notwithstanding anything to the contrary in this Article VIII, the
Corporation shall exercise any Exercise Amount pursuant to Article II if such
Exercise Amount is submitted for exercise (i) before the beginning, or after the
effective date of the termination, of the Optional Redemption Period, (ii) for
an Exercise Price greater than the Floor Price or (iii) in an amount in excess
of such holder's pro
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<PAGE> 25
rata allocation of the maximum Exercise Amount the Corporation indicated that it
would redeem in its Optional Redemption Notice as described below.
B. (a) The Optional Redemption Amount shall be paid to the holders of
Prepaid Warrants being redeemed within three (3) business days of the applicable
Exercise Date; provided, however, that the Corporation shall not be obligated to
deliver any portion of the Optional Redemption Amount until either the
certificates evidencing the Prepaid Warrants being redeemed are delivered to the
office of the Corporation or the escrow agent or the holder notifies the
Corporation or the escrow agent that such certificates have been lost, stolen or
destroyed and delivers the documentation in accordance with Article IX.G hereof.
Notwithstanding anything herein to the contrary, in the event that the
certificates evidencing the Prepaid Warrants being redeemed are not delivered to
the Corporation or the escrow agent prior to the third business day following
the Effective Date of Redemption, the redemption of the Prepaid Warrants
pursuant to this Article VIII shall still be deemed effective as of the
Effective Date of Redemption and the Optional Redemption Amount shall be paid to
the holder of Prepaid Warrants being redeemed within five (5) business days of
the date the certificates evidencing the Prepaid Warrants being redeemed are
actually delivered to the Corporation or the escrow agent.
(b) In the event that any Optional Redemption Notice delivered by the
Corporation pursuant to this Article VIII relates to less than all of the
Prepaid Warrants then outstanding, the Corporation shall redeem Prepaid Warrants
from each holder pro rata, based on the total Prepaid Amount outstanding on the
date of the Corporation's delivery of an Optional Redemption Notice held by each
holder of Prepaid Warrants relative to the total number of shares of Prepaid
Warrants outstanding on the Effective Date of Redemption held by all holders of
Prepaid Warrants as specified in the Optional Redemption Notice.
(c) If the Corporation fails to pay, when due and owing, any Optional
Redemption Amount, then the holder of Prepaid Warrants entitled to receive such
Optional Redemption Amount shall have the right, at any time and from time to
time during the twenty (20) trading day period following the Effective Date of
Redemption (the "Optional Redemption Amount Exercise Period"), to require the
Corporation, upon written notice, to immediately exercise (in accordance with
the terms of paragraph A of Article IV) any or all of the Prepaid Amount which
is the subject of such redemption, into shares of Common Stock at the lowest
Exercise Price in effect during the period beginning on the date the Corporation
elected to redeem such Prepaid Warrants and ending on expiration of the Optional
Redemption Amount Exercise Period. From and after the expiration of the Optional
Redemption Amount Exercise Period, the holders may convert Prepaid Warrants at
the Exercise Price then in effect and in accordance with Article IV.
C. (a) At any time or times on or after the date hereof, the Corporation
shall have the right, in its sole discretion, to redeem any or all of the
Exercise Amounts of outstanding Prepaid Warrants which Exercise Amounts at such
time are exercisable on the date the Corporation delivers a Notice of Call
("ELIGIBLE EXERCISE AMOUNTS") pursuant to Article II.C(iii)(a "CALL"); provided
that the
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<PAGE> 26
Conditions to a Call (as set forth below) are satisfied. The Corporation shall
exercise its right to Call by providing each holder of Prepaid Warrants written
notice ("NOTICE OF CALL") at least 30 days prior to the date selected by the
Corporation for a Call (the "CALL DATE"). On the Call Date the Corporation shall
pay the Call Amount (as defined below) to each Holder in accordance with Article
VII.C(b). If the Corporation elects to so Call some, but not all, of the
Eligible Exercise Amounts, the Corporation shall Call a pro rata amount of the
Eligible Exercise Amounts from each holder of Prepaid Warrants (based on the
dollar amount of the Eligible Exercise Amounts of Prepaid Warrants held by such
holder relative to the total dollar amount of Prepaid Warrants outstanding on
the date of the Corporation's delivery of the Notice of Call). The Notice of
Call shall indicate (x) the dollar amount of the Eligible Exercise Amounts of
Prepaid Warrants the Corporation has selected for Call, (y) the Call Date, which
date shall not be less than 30 or more than 40 days after each holder's receipt
of such notice, and (z) each holder's pro rata share of the Eligible Exercise
Amounts of outstanding Prepaid Warrants which the Corporation elects to Call.
All holders of Prepaid Warrants shall thereupon and within two business days
after the Call Date surrender all of the Eligible Exercise Amounts of Prepaid
Warrants selected for call to the Corporation provided the Corporation has paid
the Call Amount. "CONDITIONS TO CALL" means the following conditions: (i) on
each day during the period beginning 20 trading days prior to the Notice of Call
and ending on and including the date of the Call Date, the Registration
Statement shall be effective and available for the sale of no less than 150% of
the sum of (A) the number of shares of Common Stock then issuable upon the
exercise of all outstanding Prepaid Warrants (without regard to any limitations
on exercise herein or elsewhere) and (B) the number of shares of Common Stock
issued upon exercise of Prepaid Warrants that are then held by the holders of
the Prepaid Warrants, (ii) on each day during the period beginning 20 trading
days prior to the date of the Notice of Call and ending on and including the
Call Date, the Common Stock is designated for quotation on the National Market
or listed on NYSE or AMEX and is not suspended from trading; (iii) the average
of the Closing Bid Price of the Common Stock during the 20 consecutive trading
days immediately preceding the date of the Notice of Call is less than the Fixed
Exercise Price on such date, (iv) the Closing Bid Price of the Common Stock on
the date of the Notice of Call is less than the Fixed Exercise Price; (v) no
more than three (3) Calls shall previously have occurred; (vi) the Shareholder
Approvals (as defined in the Securities Purchase Agreement) shall have been
obtained on or prior to the date of the Corporation's Notice of Call at
Corporation's Election in accordance with Section 4(l) of the Securities
Purchase Agreement; (vii) during the period beginning on the Issuance Date and
ending on and including the Call Date, the Corporation shall have delivered
shares upon exercise of the Prepaid Warrants to the Investors on a timely basis
as set forth in Article II of the Prepaid Warrants; (viii) none of an Event of
Default, an Exercise Default, a Trading Market Triggering Event or any event
that with the passage of time would constitute an Event of Default or a Trading
Market Triggering Event (assuming it was not cured) shall have occurred; (ix)
the Corporation otherwise has satisfied its obligations and is not in default
under this Certificate of Designations, the Securities Purchase Agreement and
the Registration Rights Agreement; and (x) the Corporation has sufficient funds
immediately available to satisfy its obligations to pay the Call Amount as set
forth herein. Notwithstanding the above, any holder of Prepaid Warrants may
exercise such Prepaid Warrants for Common Stock pursuant to Article II on or
prior to the Corporation's Election Call Date.
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<PAGE> 27
(b) In the event of a Call, the Call Amount (as defined below) in
immediately available funds shall be paid to the holders of Prepaid Warrants
being called on the applicable Call Date; provided, however, that the
Corporation shall not be obligated to deliver any portion of the Call Amount
until either the certificates evidencing the Prepaid Warrants being redeemed are
delivered to the office of the Corporation or the escrow agent or the holder
notifies the Corporation or the escrow agent that such certificates have been
lost, stolen or destroyed and delivers the documentation in accordance with
Article IX.G hereof. Notwithstanding anything herein to the contrary, in the
event that the certificates evidencing the Prepaid Warrants being redeemed are
not delivered to the Corporation or the escrow agent prior to the third business
day following the Call Date, the call of the Prepaid Warrants pursuant to this
Article VIII shall still be deemed effective as of the Call Date and the Call
Amount shall be paid to the holder of Prepaid Warrants being called within five
(5) business days of the date the certificates evidencing the Prepaid Warrants
being called actually delivered to the Corporation or the escrow agent. "CALL
AMOUNT" shall mean and amount equal to the product of 1.2 and the Eligible
Exercise Amount of all Prepaid Warrants being called plus all outstanding and
unpaid premium and any Exercise Default Payments payable with respect thereto.
(c) If the Corporation fails to pay, when due and owing, any Call
Amount, then the holder of Prepaid Warrants entitled to receive such Call Amount
shall have the right, at any time and from time to time during the twenty (20)
trading day period following the Call Date to require the Corporation, upon
written notice, to immediately exercise (in accordance with the terms of
paragraph A of Article II) any or all of the Prepaid Amount which is the subject
of such call, into shares of Common Stock at the lowest Exercise Price in effect
during the period beginning on the date the Corporation elected to call such
Prepaid Warrants and ending on expiration of such twenty trading day period.
From and after the expiration of such twenty trading day period, the holders may
exercise Prepaid Warrants at the Exercise Price then in effect and in accordance
with Article II.
ARTICLE IX
MISCELLANEOUS
A. Failure or Indulgency Not Waiver. No failure or delay on the part of
the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.
B. Notices. Any notice herein required or permitted to be given shall be
in writing and may be personally served or delivered by courier and shall be
deemed to have been given upon receipt (which shall include telephone line
facsimile transmission). The addresses for such communications shall be:
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<PAGE> 28
If to the Corporation:
Robotic Vision Systems, Inc.
5 Shawmut Road
Canton, MA 02021
Telecopy: (781) 828-9852
Attn: Pat V. Costa, Chairman and Chief Executive Officer
with a copy to:
Cooperman Levitt Winikoff Lester & Newman, P.C.
800 Third Avenue
New York, NY 10022
Telecopy: (212) 755-2839
Attn: Ira Roxland, Esq.
If to the Holder, at such address as such Holder shall have provided
in writing to the Corporation.
C. Amendment Provision. Except as otherwise provided herein, this Warrant
and any provision hereof may only be amended by an instrument in writing signed
by the Corporation and the Majority Holders. The term "WARRANT" and all
references thereto, as used throughout this instrument, shall mean this
instrument as originally executed, or if later amended or supplemented, then as
so amended or supplemented.
D. Assignability. This Warrant shall be binding upon the Corporation and
its successors and assigns and shall inure to the benefit of the Holder and its
successors and assigns.
E. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed in the State of New York. The Corporation irrevocably
consents to the jurisdiction of the United States federal courts and state
courts located in the City of New York in the State of New York in any suit or
proceeding based on or arising under this Warrant and irrevocably agrees that
all claims in respect of such suit or proceeding may be determined in such
courts. The Corporation irrevocably waives the defense of an inconvenient forum
to the maintenance of such suit or proceeding. The Corporation further agrees
that service of process upon the Corporation mailed by first class mail shall be
deemed in every respect effective service of process upon the Corporation in any
such suit or proceeding. Nothing herein shall affect Holder's right to serve
process in any other manner permitted by law. The Corporation agrees that a
final non-appealable judgment in any such suit or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on such judgment or in any
other lawful manner.
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<PAGE> 29
F. Denominations. At the request of Holder, upon surrender of this
Warrant, the Corporation shall promptly issue new Warrants in the aggregate
outstanding Prepaid Amount hereof, in the form hereof, in such denominations as
Holder shall request.
G. Lost or Stolen Warrants. Upon receipt by the Corporation of (i)
evidence of the loss, theft, destruction or mutilation of this Warrant and (ii)
(y) in the case of loss, theft or destruction, of indemnity and affidavit
reasonably satisfactory to the Corporation, or (z) in the case of mutilation,
upon surrender and cancellation of this Warrant, the Corporation shall execute
and deliver new Warrants, in the form hereof, in such denominations as Holder
may request. However, the Corporation shall not be obligated to reissue such
lost or stolen Warrants if Holder contemporaneously requests the Corporation to
exercise this Warrant.
H. Allocation of Cap Amount and Reserved Amount. The initial Cap Amount
and Reserved Amount shall be allocated pro rata among the Holders of Prepaid
Warrants based on the aggregate Prepaid Amount of the Prepaid Warrants issued to
each Holder. Each increase to the Cap Amount and the Reserved Amount shall be
allocated pro rata among the Holders of Prepaid Warrants based on the aggregate
Prepaid Amount of the Prepaid Warrants held by each Holder at the time of the
increase in the Cap Amount or Reserved Amount. In the event a Holder shall sell
or otherwise transfer any of such Holder's Prepaid Warrants, each transferee
shall be allocated a pro rata portion of such transferor's Cap Amount and
Reserved Amount. Any portion of the Cap Amount or Reserved Amount which remains
allocated to any person or entity which does not hold any Prepaid Warrants shall
be allocated to the remaining Holders of Prepaid Warrants pro rata based on the
aggregate Prepaid Amount of the Prepaid Warrants then held by such Holders.
I. Quarterly Statements of Available Shares. The Corporation shall
deliver (or cause its transfer agent to deliver) to Holder a written report
notifying Holder of any occurrence which prohibits the Corporation from issuing
Common Stock upon any exercise of Prepaid Warrants. The Corporation (or its
transfer agent) shall also provide, within fifteen (15) days after delivery to
the Corporation of a written request by any Holder, any of the following
information as of the date of such request: (i) the total outstanding Prepaid
Amount of all Prepaid Warrants, (ii) the total number of shares of Common Stock
issued upon all exercises of all Prepaid Warrants prior to such date, (iii) the
total number of shares of Common Stock which are reserved for issuance upon
exercise of the Prepaid Warrants which are then outstanding, and (iv) the total
number of shares of Common Stock which may thereafter be issued by the
Corporation upon exercise of the Prepaid Warrants before the Corporation would
exceed the Reserved Amount and the Cap Amount.
J. Payment of Cash; Defaults. Except as otherwise provided herein,
whenever the Corporation is required to make any cash payment to Holder under
this Warrant (as an Exercise Default Payment or otherwise), such cash payment
shall be made to Holder within five (5) business days after delivery by Holder
of a notice specifying that Holder elects to receive such payment in cash and
the method (e.g., by check, wire transfer) in which such payment should be made.
If such payment is not delivered within such five (5) business day period,
Holder shall thereafter be entitled
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to interest on the unpaid amount at a per annum rate equal to the lower of
twenty-four percent (24%) and the highest interest rate permitted by applicable
law until such amount is paid in full to Holder.
K. Restrictions on Shares. The shares of Common Stock issuable upon
exercise of this Warrant may not be sold or transferred unless (i) they first
shall have been registered under the Securities Act and applicable state
securities laws, (ii) the Corporation shall have been furnished with an opinion
of legal counsel (in form, substance and scope customary for opinions in such
circumstances) to the effect that such sale or transfer is exempt from the
registration requirements of the Securities Act or (iii) they are sold under
Rule 144 under the Act. Except as otherwise provided in the Securities Purchase
Agreement, each certificate for shares of Common Stock issuable upon exercise of
this Warrant that have not been so registered and that have not been sold under
an exemption that permits removal of the legend, shall bear a legend
substantially in the following form, as appropriate:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY
NOT BE OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER APPLICABLE SECURITIES LAWS UNLESS OFFERED, SOLD
OR TRANSFERRED UNDER AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
Upon the request of a holder of a certificate representing any shares of Common
Stock issuable upon exercise of this Warrant, the Corporation shall remove the
foregoing legend from the certificate and issue to such holder a new certificate
therefor free of any transfer legend, if (i) with such request, the Corporation
shall have received either (A) an opinion of counsel, in form, substance and
scope customary for opinions in such circumstances, to the effect that any such
legend may be removed from such certificate, or (B) satisfactory representations
from Holder that Holder is eligible to sell such security under Rule 144 or (ii)
a registration statement under the Securities Act covering the resale of such
securities is in effect. Nothing in this Warrant shall (i) limit the
Corporation's obligation under the Registration Rights Agreement, or (ii) affect
in any way Holder's obligations to comply with applicable securities laws upon
the resale of the securities referred to herein.
L. Status as Warrantholder. Upon submission of a Notice of Exercise by
Holder, the Prepaid Amount of this Warrant (other than any portion of this
Warrant, if any, which cannot be exercised because the exercise thereof would
exceed Holder's allocated portion of the Reserved Amount or Cap Amount) shall be
deemed exercised for shares of Common Stock as of the Exercise Date and Holder's
rights as a holder of this Warrant shall cease and terminate, excepting only the
right to receive certificates for such shares of Common Stock and to any
remedies provided herein or otherwise available at law or in equity to Holder
because of a failure by the Corporation to comply with the terms of this
Warrant.
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<PAGE> 31
Notwithstanding the foregoing, if Holder has not received certificates for all
shares of Common Stock prior to the tenth (10th) business day after the
expiration of the Delivery Period with respect to an exercise for any reason,
then (unless Holder otherwise elects to retain its status as a holder of Common
Stock by so notifying the Corporation) the portion of the Prepaid Amount subject
to such exercise shall be deemed outstanding under this Warrant and the
Corporation shall, as soon as practicable, return this Warrant to Holder. In all
cases, Holder shall retain all of its rights and remedies (including, without
limitation, (i) the right to receive Exercise Default Payments pursuant to
Article IV.A to the extent required thereby for such Exercise Default and any
subsequent Exercise Default and (ii) the right to have the Exercise Price with
respect to subsequent exercises determined in accordance with Article IV.B) for
the Corporation's failure to honor the exercise of this Warrant.
M. Remedies Cumulative. The remedies provided in this Warrant shall be
cumulative and in addition to all other remedies available under this Warrant,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), no remedy contained herein shall be deemed a waiver of
compliance giving rise to such remedy and nothing herein shall limit Holder's
right to pursue actual damages for any failure by the Corporation to comply with
the terms of this Warrant. The Corporation acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Corporation therefore
agrees, in the event of any such breach or threatened breach, the Holder shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
N. Payment in Stock in Lieu of Cash Payments. In lieu of making any cash
payment required hereunder (other than pursuant to Article VIII and except as
prohibited by Article II(c)(ii)), the Corporation may, at its option, if and
only if such cash payment would result in a breach or violation of the
Corporation's existing bank credit facility or any new or replacement facility,
deliver to holders entitled to receive such payment a number of shares of Common
Stock equal to the amount of the required cash payment divided by the Exercise
Price then in effect provided such delivery of shares is in compliance with all
applicable securities laws and regulations. Notwithstanding the foregoing, as of
the date of delivery of such shares (i) no Event of Default, Exercise Default or
Trading Market Triggering Event shall have occurred or any event that with the
passage of time would constitute an Event of Default or a Trading Market
Triggering Event (assuming it was not cured) shall have occurred, (ii) the
resale of such shares shall be covered by an effective registration statement
and such shares shall be available for sale thereunder and otherwise shall be
freely tradeable, (iii) such shares shall be listed and authorized for trading
on the National Market, the New York Stock Exchange or the American Stock
Exchange, and (iv) the Corporation shall have received the Stockholder
Approvals. In the event that after the date of delivery of such shares and
before such shares are sold by the holder thereof, the registration statement
covering such shares is not effective for any reason for more than one business
day, the Corporation shall immediately pay to such holder the cash amount such
holder was otherwise entitled to receive plus interest thereon at a per annum
rate of 24.0% and upon such payment, such holder shall redeliver all unsold
shares to the Corporation. The operation of this Article IX.N shall not affect
the ability of the Corporation to make payments of Premium in cash in accordance
with Article II.A(ii) hereof.
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<PAGE> 32
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be signed
by its duly authorized officer.
ROBOTIC VISION SYSTEMS, INC.
By:
----------------------------------
Name:
Title:
<PAGE> 33
EXHIBIT 1
NOTICE OF EXERCISE
To: Robotic Vision Systems, Inc.
5 Shawmut Road
Canton, MA 02021
Telecopy: (781) 828-9852
Attn: Pat V. Costa, Chairman and Chief Executive Officer
The undersigned hereby irrevocably elects to exercise $____________ of the
Prepaid Amount of this Warrant (the "EXERCISE") into shares of common stock
("COMMON STOCK") of Robotic Vision Systems, Inc. (the "CORPORATION") according
to the conditions of the Prepaid Common Stock Purchase Warrant dated February
18, 1999 (the "WARRANT"), as of the date written below. If securities are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto. No fee will be charged to
the holder for any Exercise, except for transfer taxes, if any.
If the Corporation's transfer agent is participating in the Depository Trust
Company ("DTC") Fast Automated Securities Transfer program, the Corporation
shall electronically transmit the Common Stock issuable pursuant to this Notice
of Exercise to the account of the undersigned or its nominee (which is
________________) with DTC through its Deposit Withdrawal Agent Commission
System ("DTC TRANSFER"). If the Corporation's transfer agent does not
participate in the DTC program as aforementioned, or if Holder checks the box
set forth below, the Corporation shall deliver to Holder physical certificates
representing the Common Stock issuable upon exercise of the Warrant.
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable to the undersigned upon exercise of this
Warrant shall be made pursuant to registration of the Common Stock under the
Securities Act or pursuant to an exemption from registration under the Act.
In the event of partial exercise, please reissue an appropriate Warrant(s) for
the portion of the Prepaid Amount which shall not have been exercised.
Check Box if Applicable:
/ / In lieu of receiving the shares of Common Stock issuable pursuant to
this Notice of Exercise by way of DTC Transfer, the undersigned hereby
requests that the Corporation issue and deliver to the undersigned
physical certificates representing such shares of Common Stock.
Date of Exercise:_______________________________________
Applicable Exercise Price:______________________________
Portion of Prepaid Amount to be exercised:______________
Amount of Exercise Default
Payments to be exercised, if any:_______________________
Number of Shares of
Common Stock to be Issued:______________________________
Signature:______________________________________________
Name:___________________________________________________
Address:________________________________________________
<PAGE> 1
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of February
19, 1999, by and among ROBOTIC VISION SYSTEMS, INC., a corporation organized
under the laws of the State of Delaware (the "COMPANY"), and the undersigned
(together with affiliates, the "INITIAL INVESTORS").
WHEREAS:
A. In connection with the Securities Purchase Agreement of even date
herewith by and between the Company and the Initial Investors (the "SECURITIES
PURCHASE AGREEMENT"), the Company has agreed, upon the terms and subject to the
conditions contained therein, to issue and sell to the Initial Investors (i)
prepaid common stock purchase warrants (the "PREPAID WARRANTS") which entitle
the holder thereof to acquire shares of the Company's common stock, par value
$.01 per share (the "COMMON STOCK"), upon the terms and subject to the
limitations and conditions set forth in the Prepaid Warrants and (ii) additional
warrants (the "INCENTIVE WARRANTS" and, collectively with the Prepaid Warrants,
the "WARRANTS") to acquire shares of Common Stock (the shares of Common Stock
issuable upon exercise of, or otherwise pursuant to, the Warrants shall be
deemed "WARRANT SHARES");
B. To induce the Initial Investors to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"SECURITIES ACT"), and applicable state securities laws; and
NOW, THEREFORE, in consideration of the promises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investors hereby agree as follows:
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have the
following meanings:
(i) "INVESTORS" means the Initial Investors and any
transferees or assignees who agree to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(ii) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for
<PAGE> 2
offering securities on a continuous basis ("RULE 415"), and the declaration or
ordering of effectiveness of such Registration Statement by the United States
Securities and Exchange Commission (the "SEC").
(iii) "REGISTRABLE SECURITIES" means the Warrant Shares
(including any Warrant Shares issuable with respect to Exercise Default Payments
under the Warrants and any Warrant Shares issuable with respect to the Default
Amount under the Prepaid Warrants) issued or issuable upon exercise of, or
otherwise with respect to, the Warrants and any shares of capital stock issued
or issuable, from time to time (with any adjustments), as a distribution on or
in exchange for or otherwise with respect to any of the foregoing.
(iv) "REGISTRATION STATEMENT" means a registration statement
of the Company under the Securities Act.
b. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement and the Warrants.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare, and, on or
before the sixtieth (60th) day following the date of the Closing under the
Securities Purchase Agreement (the "FILING DATE"), file with the SEC a
Registration Statement on Form S-1 (or, if Form S-1 is not then available, on
such form of Registration Statement as is then available to effect a
registration of all of the Registrable Securities required to be included in
such Registration Statement, subject to the consent of the Initial Investors (as
determined pursuant to Section 11(j) hereof)) covering the resale of at least
165% (and on and after the date the Stockholder Approvals are received, 200%) of
the maximum number of shares of Common Stock issuable upon the full exercise of
or otherwise with respect to the Prepaid Warrants issued at the Closing (based
upon the lowest Exercise Price thereunder), plus 100% of the maximum number of
shares of Common Stock issuable upon the full exercise of the Incentive Warrants
issued at the Closing). The Registration Statement filed hereunder, to the
extent allowable under the Securities Act and the Rules promulgated thereunder
(including Rule 416), shall state that such Registration Statement also covers
such indeterminate number of additional shares of Common Stock as may become
issuable upon exercise of the Warrants to prevent dilution resulting from stock
splits, stock dividends or similar transactions. The Registrable Securities
included in any Registration Statement filed hereunder shall be allocated to the
Investors as set forth in Section 11(k) hereof. The Registration Statement filed
hereunder (and each amendment or supplement thereto, and each request for
acceleration of effectiveness thereof) shall be provided to (and subject to the
approval of) the Initial Investors and their counsel prior to its filing or
other submission.
b. Underwritten Offering. If any offering pursuant to the
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, the Investors who hold a majority in interest of the Registrable
Securities subject to such underwritten offering, with the consent of the
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<PAGE> 3
Initial Investors, shall have the right to select one legal counsel to represent
the Investors (at the Investors' expense) and an investment banker or bankers
and manager or managers to administer the offering, which investment banker or
bankers or manager or managers shall be reasonably satisfactory to the Company.
In the event that any Investors elect not to participate in such underwritten
offering, the Registration Statement covering all of the Registrable Securities
shall contain appropriate plans of distribution reasonably satisfactory to the
Investors participating in such underwritten offering and the Investors electing
not to participate in such underwritten offering (including, without limitation,
the ability of nonparticipating Investors to sell from time to time and at any
time during the effectiveness of such Registration Statement).
c. Payments by the Company. The Company shall cause each
Registration Statement required to be filed pursuant to Section 2(a) hereof to
become effective as soon as practicable, but in no event later than the
ninetieth (90th) day following the date it was required to be filed hereunder
(each a "REGISTRATION DEADLINE"). If (i) (A) the Registration Statement required
to be filed by the Company pursuant to Section 2(a) hereof is not declared
effective by the SEC on or before the Registration Deadline applicable to such
Registration Statement or (B) the Registration Statement required to be filed by
the Company pursuant to Section 3(b) hereof is not declared effective by the SEC
within sixty (60) days after the applicable Registration Trigger Date (as
defined in Section 3(b) hereof), or (ii) if, after any such Registration
Statement has been declared effective by the SEC, sales of all of the
Registrable Securities required to be covered by such Registration Statement
(including any Registrable Securities required to be registered pursuant to
Section 3(b) hereof) cannot be made pursuant to such Registration Statement (by
reason of a stop order or the Company's failure to update the Registration
Statement or any other reason outside the control of the Investors) or (iii) the
Common Stock (including any Registrable Securities) is not listed or included
for quotation on the Nasdaq National Market ("NNM"), the New York Stock Exchange
(the "NYSE") or the American Stock Exchange (the "AMEX") at any time after the
initial Registration Deadline hereunder, then the Company will make payments to
the Investors in such amounts and at such times as shall be determined pursuant
to this Section 2(c) as partial relief for the damages to the Investors by
reason of any such delay in or reduction of their ability to sell the
Registrable Securities (which remedy shall not be exclusive of any other
remedies available at law or in equity). The Company shall pay to each Investor
an amount equal to the product of (i) the aggregate Purchase Price of the
Warrants held by such Investor (including, without limitation, Warrants that
have been exercised for Warrant Shares then held by such Investor) (the
"AGGREGATE SHARE PRICE"), multiplied by (ii) twelve ten thousandths (.0012), for
each day during the first thirty (30) day period (A) after a Registration
Deadline and prior to the date the applicable Registration Statement filed
pursuant to Section 2(a) is declared effective by the SEC, (B) after the
sixtieth (60th) day following a Registration Trigger Date (as defined in Section
3(b)) and prior to the date the Registration Statement filed pursuant to Section
3(b) hereof is declared effective by the SEC, and (C) during which sales of any
Registrable Securities cannot be made pursuant to any such Registration
Statement after the Registration Statement has been declared effective or the
Common Stock (including any Registrable Securities) is not listed or included
for quotation on the NNM, NYSE or AMEX. In addition, the Company shall pay to
each Investor an amount equal to the product of (i) the Aggregate Share Price,
multiplied by (ii) eight-teen ten thousandths (.0018), for each day
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<PAGE> 4
following the initial thirty (30) day period referred to in the preceding
sentence (A) after a Registration Deadline and prior to the date the applicable
Registration Statement filed pursuant to Section 2(a) is declared effective by
the SEC, (B) after the sixtieth (60th) day following a Registration Trigger Date
and prior to the date the Registration Statement filed pursuant to Section 3(b)
hereof is declared effective by the SEC, and (C) during which sales of any
Registrable Securities cannot be made pursuant to any such Registration
Statement after the Registration Statement has been declared effective or the
Common Stock (including any Registrable Securities) is not listed or included
for quotation on the NNM, NYSE or AMEX; provided, however, that there shall be
excluded from each such period any delays which are solely attributable to
changes (other than corrections of Company mistakes with respect to information
previously provided by the Investors) required by the Investors in the
Registration Statement with respect to information relating to the Investors,
including, without limitation, changes to the plan of distribution. (For
example, if a Registration Statement is not effective by the Registration
Deadline applicable thereto, the Company would pay $1,200 for each day during
the first thirty (30) days and $1,800 for each day thereafter with respect to
each $1,000,000 of Aggregate Share Price until the Registration Statement
becomes effective.) Such amounts shall be paid in cash or, at each Investor's
option, may be convertible into Common Stock at the "EXERCISE PRICE" then in
effect with respect to the Prepaid Warrants. Any shares of Common Stock issued
upon conversion of such amounts shall be Registrable Securities. If the Investor
desires to convert the amounts due hereunder into Registrable Securities it
shall so notify the Company in writing within two (2) business days after the
date on which such amounts are first payable in cash and such amounts shall be
so convertible beginning on the last day upon which the cash amount would
otherwise be due in accordance with the following sentence. Payments of cash
pursuant hereto shall be made within five (5) days after the end of each period
that gives rise to such obligation, provided that, if any such period extends
for more than thirty (30) days, interim payments shall be made for each such
thirty (30) day period.
d. Piggy-Back Registrations. If at any time prior to the
expiration of the Registration Period (as hereinafter defined) when the
Registrable Securities are not the subject of an effective registration
statement the Company shall file with the SEC a Registration Statement relating
to an offering for its own account or the account of others under the Securities
Act of any of its equity securities (other than on Form S-4 or Form S-8 or their
then equivalents relating to equity securities to be issued solely in connection
with any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans), the Company shall
send to each Investor who is entitled to registration rights under this Section
2(d) written notice of such determination and, if within five (5) business days
after the date of such notice, such Investor shall so request in writing, the
Company shall include in such Registration Statement all or any part of the
Registrable Securities such Investor requests to be registered, except that if,
in connection with any underwritten public offering, the managing underwriter(s)
thereof shall impose a limitation on the number of shares of Common Stock which
may be included in the Registration Statement because, in such underwriter(s)'
judgment, marketing or other factors dictate such limitation is necessary to
facilitate public distribution, then the Company shall be obligated to include
in such Registration Statement only such limited portion of the Registrable
Securities with respect to which such Investor has requested inclusion hereunder
as the underwriter shall permit.
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<PAGE> 5
Any exclusion of Registrable Securities shall be made pro rata among the
Investors seeking to include Registrable Securities, in proportion to the number
of Registrable Securities sought to be included by such Investors; provided,
however, that the Company shall not exclude any Registrable Securities unless
the Company has first excluded all outstanding securities, the holders of which
are not entitled to inclusion of such securities in such Registration Statement
or are not entitled to pro rata inclusion with the Registrable Securities; and
provided, further, however, that, after giving effect to the immediately
preceding proviso, any exclusion of Registrable Securities shall be made pro
rata with holders of other securities having the right to include such
securities in the Registration Statement other than holders of securities
entitled to inclusion of their securities in such Registration Statement by
reason of demand registration rights. No right to registration of Registrable
Securities under this Section 2(d) shall be construed to limit any registration
required under Section 2(a) hereof. If an offering in connection with which an
Investor is entitled to registration under this Section 2(d) is an underwritten
offering, then each Investor whose Registrable Securities are included in such
Registration Statement shall, unless otherwise agreed by the Company, offer and
sell such Registrable Securities in an underwritten offering using the same
underwriter or underwriters and, subject to the provisions of this Agreement, on
the same terms and conditions as other shares of Common Stock included in such
underwritten offering.
e. Eligibility for Form S-3. The Company agrees that when it
meets the requirements for the use of Form S-3 it shall register the Registrable
Securities on Form S-3 (or file a Post Effective Amendment on Form S-3 to the
Registration Statement on Form S-1, if applicable) for the sale by the Initial
Investors and any other Investor of the Registrable Securities and the Company
shall file all reports required to be filed by the Company with the SEC in a
timely manner so as to maintain such eligibility for the use of Form S-3.
Notwithstanding the foregoing, the Company shall maintain the effectiveness of
the Registration Statement then in effect until such time as a Registration
Statement on Form S-3 (or such Post Effective Amendment) covering the
Registrable Securities has been declared effective by the SEC.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare and file with the SEC the
Registration Statements required by Section 2(a) (but in no event later than the
applicable Filing Date with respect thereto), and cause such Registration
Statements relating to Registrable Securities to become effective as soon as
practicable after such filing (but in no event later than the Registration
Deadline applicable thereto), and keep such Registration Statements effective
pursuant to Rule 415 at all times until such date as is the earlier of (i) the
date on which all of the Registrable Securities have been sold and (ii) the date
on which all of the Registrable Securities (in the reasonable opinion of counsel
to the Initial Investors) may be immediately sold to the public without
registration or restriction pursuant to Rule 144(k) under the Securities Act or
any successor provision (the "REGISTRATION PERIOD"), which Registration
Statements (including any amendments or supplements thereto and prospectuses
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<PAGE> 6
contained therein and all documents incorporated by reference therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein not
misleading.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statements and the prospectus used in connection with the
Registration Statements as may be necessary to keep the Registration Statements
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the Securities Act with respect to the disposition
of all Registrable Securities of the Company covered by the Registration
Statements until such time as all of such Registrable Securities have been
disposed of in accordance with the intended methods of disposition by the seller
or sellers thereof as set forth in the Registration Statements. In the event (i)
the Company delivers a Rule 416 Notice to the Investors or the Investors who
hold a majority in interest of the Registrable Securities shall reasonably
determine, or the SEC shall state formally or informally, that Rule 416 under
the Securities Act does not permit a registration statement to cover securities
which may become issuable upon conversion or exercise of convertible or
exercisable securities by reason of reductions in the conversion or exercise
price of such securities and (ii) the number of shares available under all
Registration Statements filed pursuant to this Agreement is, for any three (3)
consecutive trading days (the last of such three (3) trading days being the
"REGISTRATION TRIGGER DATE"), insufficient to cover one hundred thirty-five
percent (135%) of the Registrable Securities issued or issuable upon exercise of
the Warrants (without giving effect to any limitations on exercise contained in
the Warrants), the Company shall amend the Registration Statements, or file a
new Registration Statement (on the short form available therefor, if
applicable), or both, so as to cover two hundred percent (200%) of the
Registrable Securities issued or issuable (without giving effect to any
limitations on exercise contained in the Warrants) as of the Registration
Trigger Date, in each case, as soon as practicable, but in any event within
fifteen (15) days after the Registration Trigger Date (based on the market price
then in effect of the Common Stock and other relevant factors on which the
Company reasonably elects to rely). The Company shall cause such amendment(s)
and/or new Registration Statement to become effective as soon as practicable
following the filing thereof, but in any event within sixty (60) days after the
applicable Registration Trigger Date.
c. The Company shall furnish to each Investor whose Registrable
Securities are included in any Registration Statement and its legal counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of each such Registration Statement
and any amendment thereto, each preliminary prospectus and prospectus and each
amendment or supplement thereto, and, in the case of any Registration Statement
referred to in Section 2(a), each letter written by or on behalf of the Company
to the SEC or the staff of the SEC (including, without limitation, any request
to accelerate the effectiveness of any Registration Statement or amendment
thereto), and each item of correspondence from the SEC or the staff of the SEC,
in each case relating to any such Registration Statement (other than any
portion, if any, thereof which contains information for which the Company has
sought confidential treatment), (ii) on the date of effectiveness of any
Registration Statement or any amendment thereto, a notice stating that
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<PAGE> 7
such Registration Statement or amendment has been declared effective, and (iii)
such number of copies of a prospectus, including a preliminary prospectus, and
all amendments and supplements thereto and such other documents as such Investor
may reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Investor.
d. The Company shall use its best efforts to (i) register and
qualify the Registrable Securities covered by each Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as each Investor who holds Registrable Securities being offered
reasonably requests, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (a) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause the Company undue expense
or burden, or (e) make any change in its charter or bylaws, which in each case
the Board of Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders.
e. In the event the Investors who hold a majority in interest of
the Registrable Securities being offered in an offering select underwriters for
the offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.
f. As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor of the happening of any event, of which
the Company has knowledge, as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request.
g. The Company shall use its best efforts to prevent the issuance
of any stop order or other suspension of effectiveness of a Registration
Statement, and, if such an order is issued, to obtain the withdrawal of such
order at the earliest practicable moment (including in each case by amending or
supplementing such Registration Statement) and to notify each Investor who holds
Registrable Securities being sold (or, in the event of an underwritten offering,
the managing underwriters) of the issuance of such order and the resolution
thereof (and if such Registration
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<PAGE> 8
Statement is supplemented or amended, deliver such number of copies of such
supplement or amendment to each Investor as such Investor may reasonably
request).
h. The Company shall permit a single firm of counsel designated
by the Initial Investors to review each Registration Statement (at the Initial
Investors' expense) and all amendments and supplements thereto in a reasonable
period of time prior to their filing with the SEC, and not file any document in
a form to which such counsel reasonably objects and will not request
acceleration of the effectiveness of any Registration Statement without prior
notice to such counsel.
i. The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the Securities Act) covering a
twelve-month period beginning not later than the first day of the Company's
fiscal quarter next following the effective date of a Registration Statement.
j. At the request of any Investor, the Company shall furnish, on
the date of effectiveness of any Registration Statement which involves an
underwritten offering (i) an opinion, dated as of such date, from counsel
representing the Company addressed to the Investors and in form, scope and
substance as is customarily given in an underwritten public offering and (ii) a
letter, dated such date, from the Company's independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters, if any, and the Investors.
k. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to a
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Investors, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "INSPECTORS") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "RECORDS"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; provided, however, that each Inspector shall
hold in confidence and shall not make any disclosure (except to an Investor) of
any Record or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(a) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (b) the release of such
Records is ordered pursuant to a subpoena or other order from a court or
government body of competent jurisdiction, or (c) the information in such
Records has been made generally available to the public other than by disclosure
in violation of this or any other agreement. The Company shall not be required
to disclose any confidential information in such Records to any Inspector until
and unless such Inspector shall have entered into confidentiality agreements (in
form and substance satisfactory to the Company) with the Company with respect
thereto, substantially in the form of this Section 3(k). Each Investor agrees
that it shall,
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<PAGE> 9
upon learning that disclosure of such Records is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential. Nothing herein shall be deemed to limit
the Investors' ability to sell Registrable Securities in a manner which is
otherwise consistent with applicable laws and regulations.
l. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws (as determined in good faith by the Company upon advice of
outside legal counsel), (ii) the disclosure of such information is necessary to
avoid or correct a misstatement or omission in any Registration Statement, (iii)
the release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement, or (v) such Investor
consents to the form and content of any such disclosure. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure, and allow the Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
m. The Company shall use its best efforts to promptly either (i)
cause all of the Registrable Securities covered by any Registration Statement to
be listed on the NYSE or the AMEX or another national securities exchange and on
each additional national securities exchange on which securities of the same
class or series issued by the Company are then listed, if any, if the listing of
such Registrable Securities is then permitted under the rules of such exchange,
or (ii) secure the designation and quotation of all of the Registrable
Securities covered by any Registration Statement on the NNM and, without
limiting the generality of the foregoing, to arrange for or maintain at least
two market makers to register with the National Association of Securities
Dealers, Inc. ("NASD") as such with respect to such Registrable Securities.
n. The Company shall provide a transfer agent for the Registrable
Securities not later than the effective date of any Registration Statement.
o. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to any Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Investors may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Investors may request, and, within three (3)
business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel selected by the Company to deliver, to the
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transfer agent for the Registrable Securities (with copies to the Investors
whose Registrable Securities are included in such Registration Statement) an
opinion of such counsel in the form attached hereto as EXHIBIT 1.
p. At the request of any Investor, the Company shall prepare and
file with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used in connection
with such Registration Statement as may be necessary in order to change the plan
of distribution set forth in such Registration Statement.
q. The Company shall comply with all applicable laws related to a
Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith
(including, without limitation, the Securities Act and the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated by the SEC.)
r. The Company shall take all such other actions as any Investor
or the underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of the Registrable Securities.
s. From and after the date of this Agreement, the Company shall
not, and shall not agree to, allow the holders of any securities of the Company
to include any of their securities in any Registration Statement under Section
2(a) hereof or any amendment or supplement thereto under Section 3(b) hereof
without the consent of the holders of a majority in interest of the Registrable
Securities.
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least five (5)
business days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor of the information the Company
requires from each such Investor.
b. Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of each
Registration Statement hereunder, unless such Investor has notified
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the Company in writing of such Investor's election to exclude all of such
Investor's Registrable Securities from such Registration Statement.
c. In the event Investors holding a majority in interest of the
Registrable Securities being offered determine to engage the services of an
underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor has notified the
Company in writing of such Investor's election not to participate in such
underwritten distribution.
d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Sections 3(f) or
3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Sections 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
e. No Investor may participate in any underwritten distribution
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements in usual and
customary form entered into by the Company, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions and any expenses in excess of those payable by the
Company pursuant to Section 5 below.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, the
fees and disbursements of counsel for the Company and the fees and disbursements
contemplated by Section 3(k) hereof shall be borne by the Company. In addition,
the Company shall pay all of the Investors' reasonable costs and expenses
(including reasonable legal fees) incurred in connection with the enforcement of
the rights of the Investors hereunder.
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<PAGE> 12
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify,
hold harmless and defend (i) each Investor who holds such Registrable
Securities, and (ii) the directors, officers, partners, members, employees,
agents and each person who controls any Investor within the meaning of Section
15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT"), if any, (each, an "INDEMNIFIED PERSON"),
against any joint or several losses, claims, damages, liabilities or expenses
(collectively, together with actions, proceedings or inquiries by any regulatory
or self-regulatory organization, whether commenced or threatened, in respect
thereof, "CLAIMS") to which any of them may become subject insofar as such
Claims arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of a material fact in a Registration Statement or the omission
or alleged omission to state therein a material fact required to be stated or
necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any other
applicable securities law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities (the matters in the foregoing clauses (i) through (iii)
being, collectively, "VIOLATIONS"). Subject to the restrictions set forth in
Section 6(c) with respect to the number of legal counsel, the Company shall
reimburse the Investors and each other Indemnified Person, promptly as such
expenses are incurred and are due and payable, for any reasonable legal fees or
other reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by such Indemnified Person expressly for use in the Registration
Statement or any such amendment thereof or supplement thereto; (ii) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld; and (iii) with respect to any preliminary prospectus,
shall not inure to the benefit of any Indemnified Person if the untrue statement
or omission of material fact contained in the preliminary prospectus was
corrected on a timely basis in the prospectus, as then amended or supplemented,
if such corrected prospectus was timely made available by the Company pursuant
to Section 3(c) hereof, and the Indemnified Person was promptly advised in
writing not to use the incorrect prospectus prior to the use giving rise to a
Violation and such Indemnified Person, notwithstanding such advice, used it.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or
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<PAGE> 13
on behalf of the Indemnified Person and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9 hereof.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not jointly
to indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 6(a), the Company, each of its directors, each of
its officers who signs the Registration Statement, its employees, agents and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder within the
meaning of the Securities Act or the Exchange Act (collectively and together
with an Indemnified Person, an "INDEMNIFIED PARTY"), against any Claim to which
any of them may become subject, under the Securities Act, the Exchange Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation,
in each case to the extent (and only to the extent) that such Violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement; and subject to Section 6(c) such Investor will reimburse any legal or
other expenses (promptly as such expenses are incurred and are due and payable)
reasonably incurred by them in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this
Section 6(b) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Investor, which
consent shall not be unreasonably withheld; provided, further, however, that the
Investor shall be liable under this Agreement (including this Section 6(b) and
Section 7) for only that amount as does not exceed the net proceeds actually
received by such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9 hereof. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented, and the Indemnified Party
failed to utilize such corrected prospectus.
c. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to made against any indemnifying
party under this Section 6, deliver to the indemnifying party a written notice
of the commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that such indemnifying party shall not be entitled to assume such
defense and an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the
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<PAGE> 14
fees and expenses to be paid by the indemnifying party, if, in the reasonable
opinion of counsel retained by the indemnifying party, the representation by
such counsel of the Indemnified Person or Indemnified Party and the indemnifying
party would be inappropriate due to actual or potential conflicts of interest
between such Indemnified Person or Indemnified Party and any other party
represented by such counsel in such proceeding or the actual or potential
defendants in, or targets of, any such action include both the Indemnified
Person or the Indemnified Party and the indemnifying party and any such
Indemnified Person or Indemnified Party reasonably determines that there may be
legal defenses available to such Indemnified Person or Indemnified Party which
are different from or in addition to those available to such indemnifying party.
The indemnifying party shall pay for only one separate legal counsel for the
Indemnified Persons or the Indemnified Parties, as applicable, and such legal
counsel shall be selected by Investors holding a majority-in-interest of the
Registrable Securities included in the Registration Statement to which the Claim
relates (with the approval of the Initial Investors if they hold Registrable
Securities included in such Registration Statement), if the Investors are
entitled to indemnification hereunder, or by the Company, if the Company is
entitled to indemnification hereunder, as applicable. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is actually prejudiced in its
ability to defend such action. The indemnification required by this Section 6
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as such expense, loss, damage or liability is
incurred and is due and payable.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited
or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
such fraudulent misrepresentation, and (iii) contribution (together with any
indemnification or other obligations under this Agreement) by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities under the
Registration Statement.
8. REPORTS UNDER THE EXCHANGE ACT.
With a view to making available to the Investors the benefits of Rule
144 promulgated under the Securities Act or any other similar rule or regulation
of the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees to:
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<PAGE> 15
a. file with the SEC in a timely manner and make and keep
available all reports and other documents required of the Company under the
Securities Act and the Exchange Act so long as the Company remains subject to
such requirements (it being understood that nothing herein shall limit the
Company's obligations under Section 4(c) of the Securities Purchase Agreement)
and the filing and availability of such reports and other documents is required
for the applicable provisions of Rule 144; and
b. furnish to each Investor so long as such Investor owns shares
of Preferred Stock, Warrants or Registrable Securities, promptly upon request,
(i) a written statement by the Company that it has complied with the reporting
requirements of Rule 144, the Securities Act and the Exchange Act, (ii) a copy
of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably requested to permit the Investors to sell such securities
under Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights of the Investors hereunder, including the right to have the
Company register Registrable Securities pursuant to this Agreement, shall be
automatically assignable by each Investor to any transferee of all or any
portion of the Warrants or the Registrable Securities if: (i) the Investor
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company after such assignment, (ii)
the Company is furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned, (iii) following such
transfer or assignment, the further disposition of such securities by the
transferee or assignee is restricted under the Securities Act and applicable
state securities laws, (iv) the transferee or assignee agrees in writing for the
benefit of the Company to be bound by all of the provisions contained herein,
and (v) such transfer shall have been made in accordance with the applicable
requirements of the Securities Purchase Agreement.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with written consent of the Company and
Investors who hold a majority in interest of the Registrable Securities;
provided, however, that no amendment hereto which restricts the ability of an
Investor to elect not to participate in an underwritten offering shall be
effective against any Investor which does not consent in writing to such
amendment; provided, further, however, that no consideration shall be paid to an
Investor by the Company in connection with an amendment hereto unless each
Investor similarly affected by such amendment receives a pro-rata amount of
consideration from the Company. Unless an Investor otherwise agrees, each
amendment hereto must similarly affect each Investor. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each Investor
and the Company.
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<PAGE> 16
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices required or permitted to be given under the terms
of this Agreement shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier or by confirmed telecopy, and
shall be effective five (5) days after being placed in the mail, if mailed, or
upon receipt or refusal of receipt, if delivered personally or by courier or
confirmed telecopy, in each case addressed to a party. The addresses for such
communications shall be:
If to the Company:
Robotic Vision Systems, Inc.
5 Shawmut Road
Canton, MA 02021
Telecopy: (781) 828-9852
Attn: Pat V. Costa, Chairman and Chief Executive Officer
with a copy to:
Cooperman Levitt Winikoff Lester & Newman, P.C.
800 Third Avenue
New York, NY 10022
Telecopy: (212) 755-2839
Attn: Ira Roxland, Esq.
and if to any Investor, at such address as such Investor shall have provided in
writing to the Company, or at such other address as each such party furnishes by
notice given in accordance with this Section 11(b).
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed in the State of New York. The Company irrevocably consents
to the jurisdiction of the United States federal courts and the state courts
located in the City of New York in the State of New York in any suit or
proceeding
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<PAGE> 17
based on or arising under this Agreement and irrevocably agrees that all claims
in respect of such suit or proceeding may be determined in such courts. The
Company irrevocably waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding. The Company further agrees that service
of process upon the Company, mailed by first class mail shall be deemed in every
respect effective service of process upon the Company in any such suit or
proceeding. Nothing herein shall affect the Investors' right to serve process in
any other manner permitted by law. The Company agrees that a final
non-appealable judgment in any such suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on such judgment or in any other
lawful manner.
e. This Agreement, the Securities Purchase Agreement (including
all schedules and exhibits thereto) and the Warrants constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. This Agreement, the Securities Purchase Agreement and the Warrants
supersede all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
j. All consents, approvals and other determinations to be made by
the Investors or the Initial Investors pursuant to this Agreement shall be made
by the Investors or the Initial Investors holding a majority in interest of the
Registrable Securities (determined as if all Warrants then outstanding had been
exercised for Registrable Securities) held by all Investors or Initial
Investors, as the case may be.
k. The initial number of Registrable Securities included on any
Registration Statement and each increase (if any) to the number of Registrable
Securities included thereon shall be allocated pro rata among the Investors
based on the number of Registrable Securities held by each
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<PAGE> 18
Investor at the time of such establishment or increase, as the case may be. In
the event an Investor shall sell or otherwise transfer any of such holder's
Registrable Securities, each transferee shall be allocated a pro rata portion of
the number of Registrable Securities included on a Registration Statement for
such transferor. Any shares of Common Stock included on a Registration Statement
and which remain allocated to any person or entity which does not hold any
Registrable Securities shall be allocated to the remaining Investors, pro rata
based on the number of shares of Registrable Securities then held by such
Investors. For the avoidance of doubt, the number of Registrable Securities held
by any Investor shall be determined as if all Warrants then outstanding were
exercised for Registrable Securities.
l. Each party to this Agreement has participated in the
negotiation and drafting of this Agreement. As such, the language used herein
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against any
party to this Agreement.
m. For purposes of this Agreement, the term "business day" means
any day other than a Saturday or Sunday or a day on which banking institutions
in the State of New York are authorized or obligated by law, regulation or
executive order to close.
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<PAGE> 19
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
ROBOTIC VISION SYSTEMS, INC.
By:
-------------------------------
Name:
-------------------------------
Its:
-------------------------------
INITIAL INVESTORS:
OMICRON PARTNERS, L.P.
By:
-------------------------------
Name:
-------------------------------
Its:
-------------------------------
ZANETT LOMBARDIER, LTD.
By:
-------------------------------
Name:
-------------------------------
Its:
-------------------------------
FISHER CAPITAL LTD.
By:
-------------------------------
Name:
-------------------------------
Its:
-------------------------------
WINGATE CAPITAL LTD.
By:
-------------------------------
Name:
-------------------------------
Its:
-------------------------------
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<PAGE> 20
EXHIBIT 1
TO
REGISTRATION
RIGHTS
AGREEMENT
[Date]
[Name and address
of transfer agent]
RE: ROBOTIC VISION SYSTEMS, INC.
Ladies and Gentlemen:
We are counsel to ROBOTIC VISION SYSTEMS, INC., a corporation organized
under the laws of the State of Delaware (the "COMPANY"), and we understand that
[Name of Investor] (the "HOLDER") has purchased from the Company (i) prepaid
common stock purchase warrants (the "PREPAID WARRANTS") which entitle the holder
thereof to acquire shares of the Company's common stock, par value $.01 per
share (the "COMMON STOCK"), and (ii) additional warrants (the "INCENTIVE
WARRANTS") to acquire shares of Common Stock. Pursuant to a Registration Rights
Agreement, dated as of February __, 1999, by and among the Company and the
signatories thereto (the "REGISTRATION RIGHTS AGREEMENT"), the Company agreed
with the Holder, among other things, to register the Registrable Securities (as
that term is defined in the Registration Rights Agreement) under the Securities
Act of 1933, as amended (the "SECURITIES ACT"), upon the terms provided in the
Registration Rights Agreement. In connection with the Company's obligations
under the Registration Rights Agreement, on _____________, 1999, the Company
filed a Registration Statement on Form S-___ (File No. 333- _____________) (the
"REGISTRATION STATEMENT") with the Securities and Exchange Commission (the
"SEC") relating to the Registrable Securities, which names the Holder as a
selling stockholder thereunder. The Registration Statement was declared
effective by the SEC on _____________, 1999.
[Other customary introductory and scope of examination language to be
inserted]
Based on the foregoing, we are of the opinion that the Registrable
Securities have been registered under the Securities Act.
[Other customary language to be included.]
Very truly yours,
cc: [Name of Investor]
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