<PAGE>
Registration No. __________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
PRECISION OPTICS CORPORATION, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
MASSACHUSETTS 04-2795294
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
22 East Broadway
Gardner, Massachusetts 01440
(978) 630-1800
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
JACK P. DREIMILLER
Senior Vice President, Finance, and Chief Financial Officer
PRECISION OPTICS CORPORATION
22 East Broadway
Gardner, Massachusetts 01440
(978) 630-1800
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
PATRICK O'BRIEN, ESQUIRE
ROPES & GRAY
One International Place
Boston, MA 02110-2624
(617) 951-7000
---------------------------
Approximate date of commencement of proposed sale to the public: From time to
time after the effectiveness of the Registration Statement.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. |_|
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_| ________
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|_________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Title of Shares Amount to be Proposed Maximum Proposed Maximum Amount of
to be Registered Registered Offering Price Per Aggregate Offering Registration Fee
Unit (1) Price (1)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock - $.01 Par 1,255,261 $8.703125 $10,924,693.39 $2,885
Value
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated, pursuant to Rule 457(c), solely for purposes of calculating
the registration fee based on the average of the high and low sales
prices of the Registrant's Common Stock on April 24, 2000 as reported on
the Nasdaq SmallCap Market, which date is within five business days of
the date of this Registration Statement.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDERS MAY NOT SELL THE COMMON STOCK COVERED BY THIS PROSPECTUS
UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL STOCK AND IT IS
NOT SOLICITING AN OFFER TO BUY STOCK IN ANY STATE WHERE AN OFFER AND SALE IS NOT
PERMITTED.
================================================================================
PROSPECTUS SUBJECT TO COMPLETION
__________ __, 2000
PRECISION OPTICS CORPORATION, INC.
-----------------
We design, develop, manufacture and sell a variety of products that
make use of sophisticated lenses, prisms, mirrors and other devices that detect
and transmit light and visual images. Our products include:
- arthroscopes, which are used in joint surgery;
- laryngoscopes, which are used in the diagnosis of
diseases of the throat;
- laparoscopes, which are used in abdominal surgery;
and
- stereo endoscopes, which are currently being tested
for use in heart surgery.
In addition, we are currently developing, producing and marketing filter
components for devices designed to increase the amount of data that can be
transmitted over fiber optic cable lines.
Our principal executive offices are located at 22 East Broadway,
Gardner, Massachusetts 01440 and our phone number is (978) 630-1800.
The persons listed as "selling stockholders" beginning on page 7 of
this prospectus are using the prospectus to offer for sale a total of 1,255,261
shares of our Common Stock, par value $0.01 per share. We will not receive any
of the proceeds of this offering.
Our Common Stock is traded on the Nasdaq SmallCap Market under the
symbol "POCI." On April 26, 2000, the last reported sale price of our Common
Stock was $9 7/8 per share.
AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU
SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 2 OF THIS
PROSPECTUS.
---------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE COMMON STOCK COVERED BY THIS
PROSPECTUS OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------------
The date of this prospectus is __________, 2000
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
Risk Factors.......................................................... 2
Where You Can Find Additional Information............................. 6
Incorporation of Certain Documents By Reference....................... 7
Use of Proceeds. . . . . . ........................................... 7
Selling Stockholders.................................................. 7
Plan of Distribution..................................................11
Legal Matters.........................................................12
Experts...............................................................12
RISK FACTORS
YOU SHOULD CONSIDER CAREFULLY THE INFORMATION CONTAINED IN THIS SECTION
OF THE PROSPECTUS IN DECIDING WHETHER TO PURCHASE SHARES OF OUR COMMON STOCK.
In this prospectus, and from time to time in public statements made by
our management, we have made and will continue to make forward-looking
statements about our business, including predictions about our future financial
performance. OUR ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS
PREDICTED IN THIS PROSPECTUS AND IN FUTURE PUBLIC STATEMENTS. Factors that might
cause such a difference include, but are not limited to, the factors discussed
below:
OUR STOCK FACES SIGNIFICANT PRICE AND VOLUME VOLATILITY--AS A RESULT, YOU COULD
ENCOUNTER DIFFICULTY SELLING OUR STOCK AND OUR STOCK PRICE MAY BE UNSTABLE FROM
TIME TO TIME.
Our common stock has had a public market since November 1990. The
price of our common stock has from time to time experienced volitility.
During calendar year 1999, for example, the market price of our common stock
decreased by 24% in one single trading day and increased by 94% in another
single trading day. Over the 52-week period ended April 21, 2000, the market
price of our common stock reached a low of $15/16 in October 1999 and a high
of $41 3/4 in March 2000. This compares with the last closing sale price of
our common stock on April 26, 2000, which was $9 7/8. The reasons for these
fluctuations are sometimes unrelated to our own operating performance. For
instance, consolidation or other trends within our industry, conditions in
the stock market generally, particularly conditions related to our industry,
or a competitor's product failure or announcement of a new technology or
product may have a significant impact on the market price of our common
stock. In addition, our common stock periodically is the subject of limited
trading activity and, as a result, investors may have difficulty buying or
selling our common stock on any given trading day. During one four day period
in calendar year 1997, for example, no trading in our common stock took place
on the Nasdaq SmallCap Market.
WE ARE CURRENTLY INCURRING NET OPERATING LOSSES--WE CANNOT BE CERTAIN THAT WE
WILL ACHIEVE PROFITABILITY IN THE FUTURE.
We have incurred net operating losses in each of the last three fiscal
years ending June 30, 1999, 1998 and 1997, respectively. These net operating
losses totaled approximately $4,072,000 during this three-year period, and we
had an accumulated deficit of approximately $3,801,000 at June 30, 1999.
We attribute these recent losses largely to our transition away from
night vision products and services sold primarily under contracts or
subcontracts with the United States Government, and our concentration of
research and product development resources on new products, principally filters
for
-2-
<PAGE>
Wavelength Division Multiplexers (WDMs). Our WDM filter product line is still in
development and has not yet resulted in appreciable revenues. Given the
uncertainties surrounding the development and marketing of our WDM filters, it
remains to be seen whether we will achieve profitability as a result of our
initiatives in the WDM area.
THE SUCCESS OF OUR WDM INITIATIVE IS NOT GUARANTEED--IF THIS INITIATIVE IS
UNSUCCESSFUL, OUR OPERATING RESULTS MAY BE SEVERELY IMPAIRED.
We plan to devote the majority of our research and development
resources to the development and marketing of new products, particularly filters
made of specially treated glass which will be used as components in Wavelength
Division Multiplexers (WDMs). WDMs are devices which, when inserted in fiber
optic cable lines, increase significantly the amount of data that such lines can
carry.
The Company is in the process of developing WDM filter prototypes
which can reliably meet a set of performance requirements supplied to us by
potential customers. While in recent months we have begun to market, produce
and distribute WDM filters which meet certain of our customers' performance
requirements, we cannot guarantee that our WDM initiative as a whole will be
successful or that we will succeed in developing and marketing WDM filters or
any other new products. Also, certain domestic and foreign companies have
begun marketing products which employ technologies similar to our WDM filter
technology. We cannot predict whether the WDM filters, which we have
developed or will develop in the future, will be perceived in the marketplace
as more cost-effective, efficient or reliable than these competing products.
Based upon our expectations about market acceptance of our WDM filters,
we expect to continue to increase our research and development expenditures in
the WDM area. Our operating results may be severely impaired if these
development efforts are unsuccessful or if sales of our new products are below
expectations.
OUR QUARTERLY FINANCIAL RESULTS DEPEND ON A LARGE NUMBER OF FACTORS AND
THEREFORE MAY VARY QUARTER TO QUARTER--AS A RESULT, WE CANNOT PREDICT WITH A
HIGH DEGREE OF CERTAINTY OUR OPERATING RESULTS IN ANY PARTICULAR FISCAL QUARTER.
Our quarterly operating results may vary significantly depending upon
factors such as:
- the timing of completion of significant orders
- the timing and amount of our research and development
expenditures
- the costs of initial product production in connection with
new products
- the timing of new product introductions -- both by us and by
our competitors
- the timing and level of market acceptance of new products or
enhanced versions of our existing products
We cannot be certain whether we will be able to grow or sustain revenues or
achieve or maintain profitability on a quarterly or annual basis or that levels
of revenue and/or profitability may not vary from one such period to another.
WE RELY ON A SMALL NUMBER OF CUSTOMERS AND CANNOT BE CERTAIN THEY WILL
CONSISTENTLY PURCHASE OUR PRODUCTS IN THE FUTURE.
In the fiscal year ended June 30, 1999, our largest customer
represented approximately 37% of our total revenues. In the fiscal year ended
June 30, 1998, our three largest customers represented approximately 22%, 14%
and 10%, respectively, of our total revenues. In the fiscal year ended June
-3-
<PAGE>
30, 1997, our two largest customers represented approximately 38% and 23%,
respectively, of our total revenues. No other customer accounted for more than
10% of our revenues during those periods.
Two of the customers described above (one representing 22% of 1998
revenues and 38% of 1997 revenues and one representing 23% of 1997 revenues) no
longer place orders with us. We attribute the loss of their business to two
primary factors: declining demand for their own products (of which our products
were components) and the availability to those customers of lower cost
alternatives to our products sold by foreign manufacturers.
In the future, a small number of customers may continue to represent a
significant portion of our total revenues in any given period. We cannot be
certain that such customers will consistently purchase our products at any
particular rate over any subsequent period.
WE RELY HEAVILY UPON THE TALENTS OF OUR CHIEF EXECUTIVE OFFICER AND OUR SENIOR
VICE PRESIDENT, OPTICAL THIN FILMS TECHNOLOGY--THE LOSS OF EITHER OF THEM COULD
SEVERELY DAMAGE OUR BUSINESS.
Our performance depends to a large extent on a small number of key
scientific, technical, managerial, and marketing personnel. In particular, we
believe our success is highly dependent upon the services and reputation of
our Chief Executive Officer, Mr. Richard E. Forkey, and our Senior Vice
President, Optical Thin Films Technology, Dr. James D. Rancourt (who has
recently assumed primary operating responsibility for our optical thin films
initiative). Loss of either Mr. Forkey's or Dr. Rancourt's services and
scientific contributions could severely damage our business.
WE MUST CONTINUE TO BE ABLE TO ATTRACT EMPLOYEES WITH THE SCIENTIFIC AND
TECHNICAL SKILLS THAT OUR BUSINESS REQUIRES--IF WE ARE UNABLE TO ATTRACT AND
RETAIN SUCH INDIVIDUALS, OUR BUSINESS COULD BE SEVERELY DAMAGED.
Our ability to attract employees with a high degree of scientific and
technical talent is crucial to the success of our business. There is intense
competition for the services of such persons, and we cannot guarantee that we
will be able to attract and retain individuals possessing the necessary
qualifications.
WE HAVE A NUMBER OF LARGE, WELL-FINANCED COMPETITORS WHO HAVE RESEARCH AND
MARKETING CAPABILITIES THAT ARE SUPERIOR TO OURS.
The industries in which we compete are highly competitive. Many of our
existing and potential competitors have greater financial resources and
manufacturing capabilities, more established and larger marketing and sales
organizations and larger technical staffs than we have. Other companies, some
with greater experience in the telecommunications, optics, semiconductor or
medical products industries, are seeking to produce products and services that
compete with our products and services.
WE ARE SUBJECT TO A HIGH DEGREE OF REGULATORY OVERSIGHT--WE CANNOT BE CERTAIN
THAT WE WILL CONTINUE TO RECEIVE THE NECESSARY REGULATORY APPROVALS.
The FDA has allowed us to market the medical products we currently sell
in the United States. However, prior FDA approval may be required before we can
market additional medical products that we may develop in the future. We may
also seek to sell current or future medical products in a manner that requires
us to obtain FDA permission to market such products. We may also require the
regulatory approval or license of other federal, state or local agencies or
comparable agencies in other countries.
We cannot be certain that we will continue to receive the FDA's
permission to market our current products or obtain the necessary regulatory
permission, approvals or licenses for the marketing of any of our future
products. Also, we cannot predict the impact on our business of FDA regulations
or determinations arising from future legislation or administrative action.
-4-
<PAGE>
WE FACE RISKS INHERENT IN PRODUCT DEVELOPMENT AND PRODUCTION UNDER FIXED PRICE
CONTRACTS--WE CANNOT BE SURE THAT THESE CONTRACTS WILL BE PROFITABLE OVER TIME.
A significant portion of our business has been devoted to research,
development and production under fixed price contracts. For our purposes, a
fixed price contract is any contract under which we will provide products or
services for a fixed price over an extended period of time (usually six months
to a year, with some government contracts extending as long as three years). In
our 1999, 1998 and 1997 fiscal years, fixed price contracts represented
approximately 62%, 55% and 67%, respectively, of our total revenues. We expect
that revenues from fixed price contracts will continue to represent a
significant portion of our total revenues in future fiscal years.
Because they involve performance over time, we cannot predict with
certainty the expenses involved in meeting our obligations under fixed price
contracts. Therefore, we can never be sure at the time we enter into any single
fixed price contract that such contract will be profitable for us. Although
fixed price contracts were profitable for us overall in each of 1999, 1998 and
1997, cost overruns have caused, and will likely continue to cause, individual
fixed price contracts that we enter into from time to time to be unprofitable.
THIRD PARTIES MAY INFRINGE ON OUR PATENTS--AS A RESULT, WE COULD INCUR
SIGNIFICANT EXPENSE IN PROTECTING OUR PATENTS OR NOT HAVE SUFFICIENT
RESOURCES TO PROTECT THEM.
We hold a number of patents that are important to our business.
Although we are not currently aware of any past or present infringements of our
patents, we plan to protect these patents from infringement and obtain
additional patents whenever feasible. To this end, we have obtained
confidentiality agreements from our employees and consultants and others who
have access to the design of our products and other proprietary information.
Protecting and obtaining patents, however, is both time consuming and expensive.
We therefore may not have the resources necessary to assert all potential patent
infringement claims or pursue all patents that might be available to us.
THIRD PARTIES MAY CLAIM THAT WE HAVE INFRINGED ON THEIR PATENTS--AS A RESULT, WE
COULD BE PROHIBITED FROM USING ALL OR PART OF ANY TECHNOLOGY USED IN OUR
PRODUCTS.
The technologies used or to be used in our advanced optical systems may
infringe upon patents or proprietary technology held or owned by other persons.
Should these persons claim a proprietary right to all or part of any technology
that we use in our products, such a claim, regardless of its merit, could
involve us in costly litigation. If successful, such a claim could also result
in us being unable to freely to use the technology that was the subject of the
claim, or sell products embodying such technology.
WE DEPEND ON THE AVAILABILITY OF CERTAIN KEY SUPPLIES AND SERVICES THAT ARE
AVAILABLE FROM ONLY A FEW SOURCES--IF WE EXPERIENCE DIFFICULTY WITH A SUPPLIER,
WE MAY HAVE DIFFICULTY FINDING ALTERNATIVE SOURCES OF SUPPLY.
Certain key supplies used in our products, particularly precision
grade optical glass, are available from only a few sources, each of which is
located outside the United States. Also, outside vendors grind and polish
certain of our lenses and other optical components, such as prisms and
windows. Based upon our ordering experience to date, we believe the materials
and services required for the production of our products are currently
available in sufficient quantities. Our requirements are small relative to
the total supply, and we are not currently encountering problems with
availability. However, this does not mean that we will continue to have
timely access to adequate supplies of essential materials and services in the
future or that supplies of these materials and services will be available on
satisfactory terms when the need arises. Our business could be severely
damaged if we become unable to procure essential materials and services in
adequate quantities and at acceptable prices.
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<PAGE>
From time to time, certain of our products may be produced for us by
subcontractors, and our business is subject to the risk that these
subcontractors fail to make timely delivery. Our products and services are also
from time to time used as components of the products and services of other
manufacturers. We are therefore subject to the risk that manufacturers that
integrate our products or services into their own products or services are
unable to acquire essential supplies and services from third parties in a timely
fashion.
SPACE CONSTRAINTS MAY REQUIRE US TO OBTAIN ADDITIONAL FACILITIES, AND ACQUIRING
ADDITIONAL SPACE COULD BE EXPENSIVE.
We believe our current facilities are adequate for our existing
operations. However, we may require additional space if we significantly
increase production, acquire substantial new equipment, begin to produce
materials or supplies that we currently purchase from others or otherwise expand
our manufacturing capabilities. Any acquisition of additional facilities could
require us to make significant expenditures.
OUR CUSTOMERS MAY CLAIM THAT THE PRODUCTS WE SOLD THEM WERE DEFECTIVE--IF OUR
INSURANCE IS NOT SUFFICIENT TO COVER A CLAIM, WE WOULD BE LIABLE FOR THE EXCESS.
Like any manufacturer, we are and always have been exposed to liability
claims resulting from the use of our products. We maintain product liability
insurance to cover us in the event of liability claims, and no such claims have
been asserted or threatened against us to date. However, we cannot be certain
that our insurance will be sufficient to cover all possible future product
liabilities.
WE WOULD BE LIABLE IF OUR BUSINESS OPERATIONS HARMED THE ENVIRONMENT--FAILURE TO
MAINTAIN COMPLIANCE WITH ENVIRONMENTAL LAWS COULD SEVERELY DAMAGE OUR BUSINESS.
Our operations are subject to a variety of federal, state and local
laws and regulations relating to the protection of the environment. From time to
time, we use hazardous materials in our operations. Although we believe that we
are in compliance with all applicable environmental laws and regulations, our
business could be severely damaged by any failure to maintain such compliance.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We are subject to the reporting requirements of the Securities Exchange
Act of 1934. This Act requires us to file annual and quarterly reports on our
financial and business results, proxy materials and other information with the
SEC. Our annual and quarterly reports, proxy statements and other information
can be inspected and copied at the SEC's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. The public may obtain information on the
operation of the Public Reference Room by calling the Commission at
1-800-SEC-0330. In addition, the Commission maintains a web site (at
http://www.sec.gov) that contains reports, proxy and information statements, and
other information regarding issuers (including Precision Optics Corporation)
that file electronically with the SEC.
We have filed with the SEC a registration statement on Form S-3
covering the shares of Common Stock offered with this prospectus. This
prospectus does not contain all information contained in the registration
statement, certain parts of which are omitted in accordance with the SEC's
rules and regulations. Statements made in this prospectus as to the contents
of any other document (including exhibits to the registration statement) are
not necessarily complete. You should review the document itself for a
thorough understanding of its contents. The registration statement (including
exhibits to the registration statement) may be inspected and copied at the
SEC's Public Reference Room. Also, the registration statement was filed
electronically with the SEC and is available on the SEC's web site (at
http://www.sec.gov).
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<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information filed with the
SEC will update and supersede this information. We incorporate by reference the
documents listed below and any future filings made with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until our
offering is completed.
(i) Our annual report on Form 10-KSB for the fiscal year ended
June 30, 1999, including portions of our Proxy Statement dated
October 14, 1999, relating to our 1999 Annual Meeting of
Stockholders (SEC File No. 001-10647).
(ii) Our quarterly reports on Form 10-QSB for the fiscal quarters
ended September 30, 1999 (as amended on Form 10-QSB/A) and
December 31, 1999 (SEC File No. 001- 10647).
(iii) The description of our Common Stock contained in our
registration statement on Form S-1 (SEC File No. 33-43929).
We will provide, upon written or oral request, without charge, to each
person, including any beneficial owner, to whom a copy of this prospectus has
been delivered, a copy of any or all of the documents which have been or may be
incorporated in this prospectus by reference, other than certain exhibits to
such documents. Requests for such copies should be directed to: Jack P.
Dreimiller, Precision Optics Corporation, Inc., 22 East Broadway, Gardner,
Massachusetts 01440, (978) 630-1800.
USE OF PROCEEDS
We will not receive any of the proceeds of the Common Stock offered by
this prospectus.
SELLING STOCKHOLDERS
The following table sets forth certain information regarding the
ownership of our Common Stock by the selling stockholders as of April 4, 2000,
including the number of shares of Common Stock offered with this prospectus.
<TABLE>
<CAPTION>
Shares of Common
Number of Shares Number of Shares Stock Beneficially
of Common Stock of Common Stock Owned After Offering
Beneficially Owned Offered with --------------------
Selling Stockholder Prior to Offering(1) this Prospectus(2) Number Percent
- ------------------- -------------------- ------------------ ------ -------
<S> <C> <C> <C> <C>
Anthony Angelini 15,789(3) 15,789 0 **
Antilles Partners LP 59,210(4) 59,210 0 **
Apodaca Investment Offshore, Ltd. 75,000(5) 75,000 0 **
Apodaca Investment Partners, L.P. 43,421(6) 43,421 0 **
Bald Eagle Fund, Ltd. 21,473(7) 21,473 0 **
Caxton Equity Growth (BVI) Ltd. 4,421(8) 4,421 0 **
Caxton Equity Growth LLC 2,763(9) 2,763 0 **
Caxton International Limited 71,763(10) 71,763 0 **
-7-
<PAGE>
Shares of Common
Number of Shares Number of Shares Stock Beneficially
of Common Stock of Common Stock Owned After Offering
Beneficially Owned Offered with --------------------
Selling Stockholder Prior to Offering(1) This Prospectus(2) Number Percent
- ------------------- -------------------- ------------------ ------ -------
Cohanzick Partners, L.P. 102,747(11) 78,947 23,800 **
Craig Alan Cowan,
Revocable Trust Nov. 22, 1994 7,895(12) 7,895 0 **
C.S.L. Associates L.P. 23,684(13) 23,684 0 **
Endeavor Asset Management, L.P. 54,473(14) 39,473 15,000 **
First Security Van Kasper(15) 75,000(15a) 75,000 0 **
Patti S. & Milledge A. Hart 7,895(16) 7,895 0 **
K.G. Hattich & D.A. Hattich, Trustees 7,895(17) 7,895 0 **
U/D/T Tr dtd 3/12/86
Hoover Equity Partners, L.P. 11,841(18) 11,841 0 **
Jackson Square Partners, L.P 78,947(19) 78,947 0 **
David Kaplan
TTEE FOR DAVID KAPLAN
LIVING TRUST dtd 9/15/87 7,895(20) 7,895 0 **
Kensington Partners L.P. 91,658(21) 91,658 0 **
Kensington Partners II L.P. 5,289(22) 5,289 0 **
Raj Mehra 789(23) 789 0 **
Mitch A. Metzman 50,184(24) 23,684 26,500 **
Alfred W. Mort and Cindy A. Mort, 7,895(25) 7,895 0 **
as Trustees of the Mort Family
Trust dtd 6/18/99
Red Cart Market, Inc. 7,895(26) 7,895 0 **
SAB Capital Partners, L.P 78,947(27) 78,947 0 **
Alan Saloner 7,895(28) 7,895 0 **
Schottenfeld Associates, LP 102,632(29) 102,632 0 **
Timken Living Trust U/A/D 9/14/99 39,473(30) 39,473 0 **
Tirman Family Limited Partnership 11,841(31) 11,841 0 **
Westcore Small-Cap Growth Fund 96,947(32) 78,947 18,000 **
Windy Hill Investments POCI, LLC 7,895(33) 7,895 0 **
WPG Institutional Networking Fund, L.P. 2,369(34) 2,369 0 **
WPG Institutional Software Fund, L.P. 35,732(35) 35,732 0 **
WPG Networking Fund, L.P. 19,524(36) 19,524 0 **
WPG Raytheon Networking Fund, L.P. 56,267(37) 56,267 0 **
WPG Raytheon Software Fund, L.P. 27,230(38) 27,230 0 **
WPG Software Fund, L.P. 15,987(39) 15,987 0 **
</TABLE>
** The number of shares indicated does not exceed one percent of the
number of shares of our Common Stock outstanding.
(1) Beneficial ownership is determined in accordance with the rules of the
SEC. In computing the number of shares beneficially owned by a person
and the percentage ownership of that person, shares of Common
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<PAGE>
Stock subject to warrants held by that person that are currently
exercisable or exercisable within 60 days of the date of this
prospectus are deemed outstanding. Such shares, however, are not deemed
outstanding for the purposes of computing the percentage ownership of
each other person. Except as indicated in the footnotes to this table
and pursuant to applicable community property laws, each selling
stockholder named in the table above has sole voting and investment
power with respect to the shares set forth opposite his or its name.
Percentage beneficial ownership is based on 9,864,708 shares of Common
Stock outstanding as of April 4, 2000.
(2) All shares offered with this prospectus were issued or are issuable
upon exercise of warrants issued, to the selling stockholders in a
private placement on March 17, 2000. As part of the private placement
transaction, we agreed to file the registration statement which
includes this prospectus.
(3) Includes 5,263 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(4) Includes 19,737 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(5) Includes 25,000 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(6) Includes 14,474 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(7) Includes 7,158 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(8) Includes 1,474 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(9) Includes 921 shares which may be acquired within 60 days of the date of
this prospectus upon the exercise of outstanding warrants.
(10) Includes 23,921 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(11) Includes 26,316 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(12) Includes 2,632 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(13) Includes 7,895 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(14) Includes 13,158 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(15) First Security Van Kasper acted as placement agent for us in connection
with the March 17, 2000 private placement referred to in note (2)
above.
(15a) Includes 72,369 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants. Of those
shares, 71,053 may be acquired pursuant to a warrant issued to First
Security Van Kasper in payment of a placement agent fee.
(16) Includes 2,632 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(17) Includes 2,632 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(18) Includes 3,947 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
-9-
<PAGE>
(19) Includes 26,316 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(20) Includes 2,632 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(21) Includes 30,553 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(22) Includes 1,763 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(23) Includes 263 shares which may be acquired within 60 days of the date of
this prospectus upon the exercise of outstanding warrants.
(24) Includes 7,895 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(25) Includes 2,632 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(26) Includes 2,632 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(27) Includes 26,316 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(28) Includes 2,632 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(29) Includes 34,211 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(30) Includes 13,158 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(31) Includes 3,947 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(32) Includes 26,316 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(33) Includes 2,632 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(34) Includes 790 shares which may be acquired within 60 days of the date of
this prospectus upon the exercise of outstanding warrants.
(35) Includes 11,911 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(36) Includes 6,508 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(37) Includes 18,756 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
(38) Includes 9,077 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
-10-
<PAGE>
(39) Includes 5,329 shares which may be acquired within 60 days of the date
of this prospectus upon the exercise of outstanding warrants.
PLAN OF DISTRIBUTION
The selling stockholders have not advised us of any specific plans for
the distribution of the shares of Common Stock covered by this prospectus. These
shares may be sold from time to time by the selling stockholders or their
successors in interest. Such sales may be made in one or more transactions on
the Nasdaq SmallCap Market or otherwise, at prices and at terms then prevailing
or at prices related to the then current market price, or in negotiated
transactions. These sales may take one or more of the following forms:
- a "block" trade in which a broker or dealer will attempt to
sell the shares as an agent but may position and resell a
portion of the block as a principal to facilitate the
transaction;
- purchases by a broker or dealer as a principal and resale by
such broker or dealer for its own account; and
- ordinary brokerage transactions and transactions in which the
broker solicits purchasers.
In effecting sales, brokers or dealers engaged by the selling stockholders may
arrange for other brokers or dealers to participate. Brokers or dealers will
receive commissions or discounts from selling stockholders (and, if they act as
agent for the purchaser, from the purchaser). These commissions may, in certain
situations, be negotiated and in excess of customary rates. Any participating
brokers or dealers and certain of the selling stockholders may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933 in connection
with such sales. In addition, any shares covered by this prospectus which
qualify for sale pursuant to Rule 144 under the Securities Act of 1933 may be
sold under Rule 144 rather than under this prospectus.
If we are notified by a selling stockholder that a material arrangement
has been entered into with a broker-dealer for the sale of shares through a
block trade, special offering, exchange distribution or secondary distribution,
or a purchase by a broker-dealer as a principal, a supplemental prospectus will
be filed listing:
- the name of each selling stockholder and of the participating
broker-dealers(s);
- the number of shares involved;
- the price at which such shares were sold;
- the commissions paid or discounts or concessions allowed to
such broker-dealer(s), where applicable; and
- other facts material to the transaction.
We have agreed to pay the cost of registering the shares covered by
this prospectus and the costs of preparing this prospectus and the registration
statement under which it is filed. These expenses are estimated to be
approximately $27,885.
Precision Optics Corporation and the selling stockholders have agreed
to indemnify each other against certain liabilities, including liabilities
arising under the Securities Act of 1933.
-11-
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock being offered under the
prospectus will be passed upon for Precision Optics Corporation, Inc. by Ropes &
Gray, Boston, Massachusetts.
EXPERTS
The financial statements incorporated in this prospectus by reference
to our Annual Report on Form 10-KSB for the fiscal year ended June 30, 1999 have
been audited by Arthur Andersen LLP, independent auditors, as stated in their
report.
-12-
<PAGE>
================================================================================
NO DEALER, SALES PERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY PRECISION OPTICS CORPORATION, THE SELLING STOCKHOLDERS OR ANY UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF ANY
OFFER TO BUY ANY SHARES OF OUR COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY
PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. THE DELIVERY
OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT INFORMATION HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE.
================================================================================
================================================================================
1,255,261 Shares of Common Stock
PRECISION OPTICS CORPORATION, INC.
_____________, 2000
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemization of the expenses incurred or expected to
be incurred by Precision Optics Corporation, Inc. (the "Company") in connection
with the offering described in this registration statement. No portion of such
expenses are expected to be borne by selling stockholders.
(Items marked with an asterisk (*) represent estimated expenses):
Registration Fee................................. $ 2,885.00
Printing Cost*................................... $ 2,000.00
Legal Fees*...................................... $ 20,000.00
Accounting Fees*................................. $ 2,000.00
Miscellaneous*................................... $ 1,000.00
TOTAL*...................................... $ 27,885.00
===========
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company is organized under the laws of The Commonwealth of
Massachusetts. The Massachusetts Business Corporation Law provides that
indemnification of directors, officers, employees and other agents of a
corporation, and persons who serve at its request as directors, officers,
employees or other agents of another organization, or who serve at its request
in any capacity with respect to any employee benefit plan, may be provided by
the corporation to whatever extent specified in or authorized by its articles of
organization, a by-law adopted by the stockholders or a vote adopted by the
holders of a majority of the shares of stock entitled to vote on the election of
directors, except that no indemnification may be provided for any person with
respect to any matter as to which the person shall have been adjudicated in any
proceeding not to have acted in good faith in the reasonable belief that his
action was in the best interest of the corporation. Under Massachusetts law, a
corporation can purchase and maintain insurance on behalf of any person against
liability incurred as a director, officer, employee, agent or person serving at
the request of the corporation as a director, officer, employee or other agent
of another organization or with respect to any employee benefit plan, in his
capacity as such, whether or not the corporation would have the power to itself
indemnify him against such liability.
The Company's articles of organization provide that its directors shall
not be liable to the Company or its stockholders for monetary damages for breach
of fiduciary duty as a director, except to the extent that exculpation from
liabilities is not permitted under the Massachusetts Business Corporation Law as
in effect at the time such liability is determined. The by-laws of the Company
provide generally that the Company shall, to the extent legally permissible,
indemnify its directors and officers against all liabilities and expenses
incurred by them in connection with the defense or disposition of any action,
suit or other proceeding in which he may be involved, or by which he may be
threatened, by reason of his being or having been a director or officer, except
with respect to any matter as to which he shall have been adjudicated in any
proceeding not to have acted in good faith in the reasonable belief that his
action was in the best interest of the Company. In addition, the Company holds a
directors and officers liability policy.
II-1
<PAGE>
ITEM 16. EXHIBITS
The following exhibits are filed herewith:
<TABLE>
<CAPTION>
Exhibit
No. Title
- ------- -----
<S> <C>
2.1 Securities Purchase Agreement dated as of March 13, 2000 by
and among the Company and the Purchasers as defined therein
(excluding exhibits).
2.2 Securities Purchase Agreement dated as of August 5, 1999 by and among the
Company, Special Situations Cayman Funds, L.P., Special Situations Fund III,
L.P., Special Situations Private Equity Fund, L.P. and Special Situations
Technology Fund, L.P. (1)
2.3 Stock Subscription Agreement dated as of June 30, 1998 by and among the
Company, Special Situations Private Equity Fund, L.P. and Special Situations
Technology Fund, L.P. (2)
4.1 Articles of Organization of the Company (3)
4.2 By-laws of the Company (4)
4.3 Specimen Common Stock Certificate (5)
4.4 Registration Rights Agreement dated as of March 17, 2000 by
and among the Company and the Initial Investors as defined
therein.
4.5 Form of Stock Purchase Warrant dated March 17, 2000 issued to each selling
stockholder.
4.6 Warrant dated March 17, 2000 issued to First Security Van Kasper.*
4.7 Registration Rights Agreement dated as of August 5, 1999 by and among the
Company, Special Situations Cayman Funds, L.P., Special Situations Fund III,
L.P., Special Situations Private Equity Fund, L.P. and Special Situations
Technology Fund, L.P. (1)
4.8 Common Stock Purchase Warrant dated August 5, 1999 issued to Special Situations
Cayman Fund, L.P. (1)
4.9 Common Stock Purchase Warrant dated August 5, 1999 issued to Special Situations
Fund III, L.P. (1)
4.10 Common Stock Purchase Warrant dated August 5, 1999 issued to Special Situations
Private Equity Fund, L.P. (1)
4.11 Common Stock Purchase Warrant dated August 5, 1999 issued to Special Situations
Technology Fund, L.P. (1)
4.12 Registration Rights Agreement dated as of June 30, 1998 by and among the
Company, Special Situations Private Equity Fund, L.P. and Special Situations
Technology Fund, L.P. (2)
II-2
<PAGE>
5.1 Opinion of Ropes & Gray*
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Ropes & Gray (contained in the opinion to be filed as Exhibit 5 to this
Registration Statement)*
24.1 Power of Attorney (included in part II of this Registration Statement under the
caption "Signatures")
</TABLE>
* To be filed by amendment.
(1) Incorporated herein by reference to the Company's 1999 Annual
Report on Form 10- KSB (No. 001-10647).
(2) Incorporated herein by reference to the Company's 1998 Annual
Report on Form 10- KSB (No. 001-10647).
(3) Incorporated herein by reference to the Company's Registration
Statement on Form S-8 POS (No. 333-89989).
(4) Incorporated herein by reference to the Company's 1991 Annual
Report on Form 10- KSB (No. 001-10647).
(5) Incorporated herein by reference to the Company's Registration
Statement on Form S- 18 (No. 33-36710-B).
ITEM 17. UNDERTAKINGS
(a) The Company hereby undertakes:
(1) to file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement;
(i) to include any prospectus required by section 10(a)(3) of
the Securities Act;
(ii) to reflect in the prospectus included within this
registration statement any facts or events arising after the effective
date of this registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in this registration
statement;
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in this registration
statement or any material change to such information in this
registration statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the SEC
by the registrant pursuant to Section 13 or 15(d) of the Exchange Act that are
incorporated by reference in this registration statement.
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement for the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial BONA FIDE
offering thereof;
II-3
<PAGE>
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering; and
(4) that, insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant, the Company has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
[Remainder of this page intentionally left blank]
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the Town of Gardner, Massachusetts, on the 28th day of
April, 2000.
PRECISION OPTICS CORPORATION, INC.
/s/ Richard E. Forkey
____________________________________
By: Richard E. Forkey
Chairman, Chief Executive Officer
and President
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Precision Optics
Corporation, Inc., hereby severally constitute and appoint Richard E. Forkey and
Jack P. Dreimiller and each of them singly, as true and lawful attorneys, with
full power to them and each of them singly, to sign for us in our names in the
capacities indicated below, all additional amendments to this registration
statement, and generally to do all things in our names and on our behalf in such
capacities to enable Precision Optics Corporation, Inc. to comply with the
provisions of the Securities Act of 1993, as amended, and all applicable
requirements of the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement on Form S-3 has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
- --------- -------- ----
<S> <C> <C>
/s/ Richard E. Forkey
__________________________________ Chairman of the April 28, 2000
Richard E. Forkey Board of Directors,
Chief Executive Officer
and President
(principal executive officer)
/s/ Jack P. Dreimiller
__________________________________ Senior Vice President, April 28, 2000
Jack P. Dreimiller Finance, Chief Financial
Officer and Clerk (principal
financial and accounting
officer)
/s/ Edward A. Benjamin
__________________________________ Director April 28, 2000
Edward A. Benjamin
/s/ Angus Macleod
__________________________________ Director April 28, 2000
H. Angus Macleod
/s/ Austin W. Marxe
__________________________________ Director April 28, 2000
Austin W. Marxe
<PAGE>
/s/ Joel R. Pitlor
__________________________________ Director April 28, 2000
Joel R. Pitlor
/s/ Robert R. Shannon
__________________________________ Director April 28, 2000
Robert R. Shannon
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Title
- ------- -----
<S> <C>
2.1 Securities Purchase Agreement dated as of March 13, 2000 by and among the Company
and the Purchasers as defined therein (excluding exhibits).
2.2 Securities Purchase Agreement dated as of August 5, 1999 by and among the Company,
Special Situations Cayman Funds, L.P., Special Situations Fund III, L.P., Special
Situations Private Equity Fund, L.P. and Special Situations Technology Fund, L.P. (1)
2.3 Stock Subscription Agreement dated as of June 30, 1998 by and among the Company,
Special Situations Private Equity Fund, L.P. and Special Situations Technology Fund, L.P.
(2)
4.1 Articles of Organization of the Company (3)
4.2 By-laws of the Company (4)
4.3 Specimen Common Stock Certificate (5)
4.4 Registration Rights Agreement dated as of March 17, 2000 by and among the Company
and the Initial Investors as defined therein.
4.5 Form of Stock Purchase Warrant dated March 17, 2000 issued to each selling stockholder.
4.6 Warrant dated March 17, 2000 issued to First Security Van Kasper.*
4.7 Registration Rights Agreement dated as of August 5, 1999 by and among the Company,
Special Situations Cayman Funds, L.P., Special Situations Fund III, L.P., Special
Situations Private Equity Fund, L.P. and Special Situations Technology Fund, L.P. (1)
4.8 Common Stock Purchase Warrant dated August 5, 1999 issued to Special Situations
Cayman Fund, L.P. (1)
4.9 Common Stock Purchase Warrant dated August 5, 1999 issued to Special Situations Fund
III, L.P. (1)
4.10 Common Stock Purchase Warrant dated August 5, 1999 issued to Special Situations Private
Equity Fund, L.P. (1)
4.11 Common Stock Purchase Warrant dated August 5, 1999 issued to Special Situations
Technology Fund, L.P. (1)
4.12 Registration Rights Agreement dated as of June 30, 1998 by and among the Company,
Special Situations Private Equity Fund, L.P. and Special Situations Technology Fund, L.P.
(2)
5.1 Opinion of Ropes & Gray*
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Ropes & Gray (contained in the opinion to be filed as Exhibit 5 to this Registration
Statement)*
<PAGE>
24.1 Power of Attorney (included in part II of this Registration Statement under the caption
"Signatures")
</TABLE>
* To be filed by amendment.
(1) Incorporated herein by reference to the Company's 1999 Annual
Report on Form 10-KSB (No. 001-10647).
(2) Incorporated herein by reference to the Company's 1998 Annual
Report on Form 10-KSB (No. 001-10647).
(3) Incorporated herein by reference to the Company's Registration
Statement on Form S-8 POS (No. 333-89989).
(4) Incorporated herein by reference to the Company's 1991 Annual
Report on Form 10-KSB (No. 001-10647).
(5) Incorporated herein by reference to the Company's Registration
Statement on Form S-18 (No. 33- 36710-B).
<PAGE>
EXHIBIT 2.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of March 13,
2000, by and among PRECISION OPTICS CORPORATION, INC., a corporation organized
under the laws of the Commonwealth of Massachusetts (the "COMPANY"), and 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. Each Purchaser desires to purchase, severally and not jointly,
subject to the terms and conditions stated in this Agreement, (i) shares of the
Company's common stock, $0.01 par value (the "COMMON STOCK"), and (ii) warrants
in the form attached hereto as EXHIBIT A (including any warrants issued in
replacement thereof, the "WARRANTS"), to acquire shares of Common Stock. The
shares of Common Stock issuable upon exercise of or otherwise pursuant to the
Warrants are referred to herein as the "WARRANT SHARES."
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 B (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.
NOW, THEREFORE, the Company and the Purchasers hereby agree as follows:
1. CERTAIN DEFINITIONS.
For purposes of this Agreement, the following terms shall have the
meanings ascribed to them as provided below:
"BUSINESS DAY" shall mean any day on which the principal United States
securities exchange or trading market on which the Common Stock is listed or
traded as reported by NTMS (as defined below) is open for trading.
"CLOSING PRICE" shall mean for the Common Stock as of any date, the
closing bid price of such security on the principal United States securities
exchange or trading market on which such security is listed or traded as
reported by the Research Service of Nasdaq Trading and Market Services (or a
comparable reporting service of national reputation selected by the Company if
the Research Service of Nasdaq Trading and Market Services is not then reporting
closing bid prices of
<PAGE>
such security) (collectively, "NTMS"), 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 NTMS, or,
if no sale price is reported for such security by NTMS, 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 Day (as defined below) for such security,
on the next preceding day which was a Trading Day. If the Closing Price
cannot be calculated for a share of Common Stock as of either of such dates
on any of the foregoing bases, the Closing Price of such security on such
date shall be the fair market value as determined by an investment banking
firm selected by the Company and reasonably acceptable to the Purchasers,
with the costs of such appraisal to be borne by the Company.
"INVESTMENT AMOUNT" shall mean the dollar amount to be invested in the
Company at the Closing pursuant to this Agreement by a Purchaser, as set forth
on the Execution Page hereto executed by such Purchaser.
"MARKET PRICE" shall mean, with respect to any date of determination,
the average Closing Price during the ten (10) Trading Days ending on the Trading
Day immediately preceding such date of determination, appropriately adjusted to
reflect any stock dividend, stock split or similar transaction during either
such relevant period.
"MATERIAL ADVERSE EFFECT" shall mean any material adverse effect on (i)
the ability of the Company to perform its obligations hereunder (including the
issuance of the Shares and the Warrants), under the Warrants (including the
issuance of the Warrant Shares) or under the Registration Rights Agreement or
(ii) the business, operations, properties or financial condition of the Company
and its subsidiaries, taken as a whole.
"PENALTY SHARES" shall mean any shares of Common Stock issued pursuant
to Section 2(b) of the Registration Rights Agreement.
"PRO RATA PERCENTAGE" shall mean, with respect to any Purchaser, a
percentage computed by dividing such Purchaser's Investment Amount by the
aggregate Investment Amounts of all Purchasers.
"SECURITIES" shall mean the Shares, the Warrants and the Warrant
Shares.
"SHARES" means the shares of Common Stock to be issued and sold by the
Company and purchased by the Purchasers at the Closing.
"TRADING DAY" shall mean a Business Day on which at least 10,000 shares
of Common Stock are traded on the principal United States securities exchange or
trading market on which such security is listed or traded as reported by NTMS.
2
<PAGE>
2. PURCHASE AND SALE OF SHARES AND WARRANTS.
a. GENERALLY. Except as otherwise provided in this Section 2 and
subject to the satisfaction (or waiver) of the conditions set forth in Section 6
and Section 7 below, each Purchaser shall purchase the number of Shares and
Warrants determined as provided in this Section 2, and the Company shall issue
and sell such number of Shares and Warrants to each Purchaser for such
Purchaser's Investment Amount as provided below.
b. NUMBER OF CLOSING SHARES AND WARRANTS; FORM OF PAYMENT; CLOSING
DATE.
i. On the Closing Date (as defined below), the Company shall
sell and each Purchaser shall buy (A) the number of Shares as is equal to the
quotient of (I) such Purchaser's Investment Amount divided by (II) $19.00 and
(B) Warrants exercisable for a number of shares of Common Stock equal to 50% of
the number of Shares referred to in subclause (A) above. On the Closing Date,
each Purchaser shall pay the Company an amount equal to such Purchaser's
Investment Amount.
ii. On the Closing Date, each Purchaser shall pay its
Investment Amount by wire transfer to the Company, in accordance with the
Company's written wiring instructions against delivery of certificates
representing the Shares and duly executed Warrants being purchased by such
Purchaser, and the Company shall deliver such Shares and Warrants against
delivery of the such Purchaser's Investment Amount.
iii. 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
sale of the Shares and the Warrants pursuant to this Agreement (the "CLOSING")
shall be 10:00 a.m. California time on March 15, 2000 or such other date or time
as First Security Van Kasper ("FSVK") and the Company may mutually agree
("CLOSING DATE"). The Closing shall occur at the San Francisco offices of FSVK,
or at such other place as FSVK and the Company may otherwise mutually agree.
3. THE PURCHASER'S REPRESENTATIONS AND WARRANTIES.
Each Purchaser severally and not jointly represents and warrants to the
Company as follows:
a. PURCHASE FOR OWN ACCOUNT. The Purchaser is purchasing the Securities
for the Purchaser's own account and not with a present view towards the
distribution thereof. The Purchaser understands that the 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 any such Securities other than
as contemplated by the Registration Rights Agreement. Notwithstanding anything
in this Section 3(a) to the contrary, except as set forth in Section 8, by
making the foregoing representation, 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 registration under the Securities
Act and any applicable state securities laws.
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b. INFORMATION. The Purchaser has been furnished all materials relating
to the business, finances and operations of the Company and its subsidiaries and
materials relating to the offer and sale of the Securities, which have been
requested by the Purchaser. In addition, the Purchaser acknowledges receipt of
the following documents, which it has carefully reviewed:
(a) The description of risk factors to be considered in
connection with the purchase of the Shares attached as
EXHIBIT D hereto.
(b) The Company's Form 10-KSB for the fiscal year ended June
30, 1999.
(c) The Company's Forms 10-QSB for the fiscal quarters ended
September 30, 1999 (as amended) and December 31, 1999.
The Purchaser hereby acknowledges that it has not received from the
Company nor FSVK or reviewed any projections or other nonpublic information
regarding the Company, and has relied solely on the representations and
warranties contained herein and on filings made by the Company pursuant to the
Exchange Act and the Securities Act in connection with its decision to purchase
shares of Common Stock and Warrants pursuant to this Agreement. The Purchaser
has been afforded the opportunity to ask questions of the Company and has
received what the Purchaser believes to be satisfactory answers to any such
inquiries. The Purchaser understands that its investment in the Securities
involves a high degree of risk. Neither such inquiries nor any other due
diligence investigation conducted by the Purchaser or its counsel or any of its
representatives shall modify, amend or affect the Purchaser's right to rely on
the Company's representations and warranties contained in Section 4 below.
c. GOVERNMENTAL REVIEW. The 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.
d. AUTHORIZATION; ENFORCEMENT. The Purchaser has the requisite power
and authority to enter into and perform its obligations under this Agreement and
to purchase the Shares and the Warrants in accordance with the terms hereof.
This Agreement has been duly and validly authorized, executed and delivered on
behalf of the Purchaser and is a valid and binding agreement of the Purchaser
enforceable against the Purchaser in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and other laws affecting creditors' rights and remedies generally and
to general principles of equity (regardless of whether enforcement is sought in
a proceeding at law or in equity).
e. TRANSFER OR RESALE. The Purchaser understands that (i) except as
provided in the Registration Rights Agreement, the Securities have not been and
are not being registered under the Securities Act or any state securities laws,
and may not be transferred unless (a) subsequently registered thereunder, or (b)
the Purchaser shall have delivered to the Company an opinion of counsel
reasonably acceptable to the Company (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
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sold or transferred may be sold or transferred under an exemption from such
registration (including under Rule 144 promulgated under the Securities Act
(or a successor rule) or to an affiliate of the Purchaser pursuant to an
exemption under the Securities Act); 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 or to comply with the terms and
conditions of any exemption thereunder, in each case, other than pursuant to
the Registration Rights Agreement.
f. LEGENDS. The Purchaser understands that the Shares and the Warrants
and, until such time as the Shares and Warrant Shares have been registered under
the Securities Act as contemplated by the Registration Rights Agreement or
otherwise may be sold by the Purchaser under Rule 144, the certificates for the
Shares and 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 OR SOLD 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.
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 (a) the sale of such Security is registered under the Securities Act
or (b) in connection with the resale of such Security, 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 (including under Rule 144). The 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.
g. ACCREDITED INVESTOR STATUS. The Purchaser is (i) an "Accredited
Investor" as that term is defined in Regulation D under the Securities Act, (ii)
possesses such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of the investment contemplated
hereby, is able to incur a complete loss of such investment and is able to bear
the economic risk of such investment for an indefinite period of time, (iii) has
previously participated as an investor in private placement transactions exempt
from the registration requirements of the Securities Act and (iv) is not
registered as a broker or dealer under Section 15(a) of the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT"), or a member of the NASD (as
defined below).
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4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Purchaser as follows:
a. ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
organized and existing under the laws of the jurisdiction in which it is
incorporated, and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation 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. SCHEDULE 4(a) sets forth the Company's jurisdiction of incorporation and
the name of each of the Company's subsidiaries and its jurisdiction of
incorporation. The Company does not have any subsidiaries whose operations are
material to the Company on a consolidated basis.
b. AUTHORIZATION; ENFORCEMENT. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement, the Warrants and the Registration Rights Agreement, to issue and
sell the Shares and the Warrants in accordance with the terms hereof and to
issue the Warrant Shares upon exercise of the Warrants in accordance with the
terms of the Warrants; (ii) the execution, delivery and performance of this
Agreement, the 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 reservation for issuance and issuance of the
Shares and the issuance of the Warrants and the reservation for issuance and
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 or its shareholders is required; (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 and the other parties thereto to the
extent required of the Registration Rights Agreement and the Warrants, such
agreements will constitute, valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other laws affecting creditors' rights and remedies
generally and to general principles of equity (regardless of whether enforcement
is sought in a proceeding at law or in equity).
c. CAPITALIZATION. The capitalization of the Company and each of its
subsidiaries is set forth on SCHEDULE 4(c), 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
exercisable for, or convertible into or exchangeable for any shares of capital
stock. All of such outstanding shares of the Company's capital stock have been,
or upon issuance will be, validly issued, fully paid and nonassessable. Except
as set forth on SCHEDULE 4(c), no shares of capital stock of the Company
(including the Shares and the Warrant Shares) or any of the subsidiaries are
subject to preemptive rights or any other similar rights of the shareholders of
the Company or any liens or encumbrances. Except for the Securities and as
disclosed in SCHEDULE 4(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 to which the Company or any of the
subsidiaries is a party
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relating to the issuance by the Company or any of its subsidiaries of
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 such
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 4(c), there
are no securities or instruments containing antidilution or similar
provisions that may be triggered by the issuance of the Securities in
accordance with the terms of this Agreement, the Warrants or the Registration
Rights Agreement. The Company has made available to each Purchaser true and
correct copies of the Company's Certificate of Incorporation as in effect on
the date hereof ("CERTIFICATE OF INCORPORATION"), and the Company's By-laws
as in effect on the date hereof (the "BY-LAWS").
d. ISSUANCE OF SHARES. The Shares are duly authorized and when issued
and paid for in accordance with the terms hereof, will be validly issued, fully
paid and non-assessable, and free from all liens, claims and encumbrances (other
than those imposed through acts or omissions of the Purchaser thereof), and will
not be subject to preemptive rights or other similar rights of shareholders of
the Company. The Warrant Shares are duly authorized and reserved for issuance,
and, upon exercise of the Warrants in accordance with the terms thereof, will be
validly issued, fully paid and non-assessable and free from all liens, claims
and encumbrances (other than those imposed through acts or omissions of the
Purchaser thereof), and will not be subject to preemptive rights or other
similar rights of shareholders of the Company. When and if issued in accordance
with the Registration Rights Agreement, the Penalty Shares will be duly
authorized, validly issued, fully paid and non-assessable and free from all
liens, claims and encumbrances and will not be subject to preemptive rights or
other similar rights of shareholders of the Company.
e. NO CONFLICTS. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement and the Warrants by the Company,
and the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the reservation for issuance and
issuance of the Shares and the Warrant Shares and the issuance of the Warrants)
will not (i) conflict with or 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, 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 (assuming the accuracy of the
representations and warranties of the Purchasers) the United States federal and
state securities laws and regulations) 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 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 and 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
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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 actual or possible violations, defaults or rights as would
not, individually or in the aggregate, have a Material Adverse Effect. The
businesses of the Company and its subsidiaries are not being conducted in
violation of any law, ordinance or regulation of any governmental entity,
except for actual or possible violations, if any, 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 as required under
the Securities Act and any applicable state securities laws, 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 in order for it to execute, deliver or
perform any of its obligations under this Agreement including without
limitation the issuance and sale of the Shares and Warrants as provided
hereby), the Warrants (including without limitation the issuance of the
Warrant Shares) or the Registration Rights Agreement (including without
limitation the issuance of the Penalty Shares), in each case in accordance
with the terms hereof or thereof. The Company is not in violation of the
listing requirements of the Nasdaq SmallCap Market and does not reasonably
anticipate that the Common Stock will be delisted by the Nasdaq SmallCap
Market in the foreseeable future based on its rules (and interpretations
thereof) as currently in effect.
f. SEC DOCUMENTS; FINANCIAL STATEMENTS. Since January 1, 1999, the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the Exchange Act,
and has filed all registration statements and other documents required to be
filed by it with the SEC pursuant to the Securities Act (all of the foregoing
filed prior to the date hereof, 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 made available to each Purchaser true and complete copies of the SEC
Documents, except for the exhibits and schedules thereto and the documents
incorporated therein. 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. Any statements
made in any such SEC Documents that are or were required to be updated or
amended under applicable law have been so updated or amended. As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied 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
United States generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes 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 subsidiaries as of the
dates thereof and the results of their operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal and
recurring year-end audit adjustments). Except as set forth in the SEC Documents,
the Company has no liabilities, contingent or otherwise, other than (i)
liabilities
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incurred in the ordinary course of business subsequent to the date of such
SEC Documents and (ii) liabilities not required under generally accepted
accounting principles and the rules and regulations of the Securities and
Exchange Commission to be reflected in such SEC Documents, which liabilities
referred to in clauses (i) and (ii), individually or in the aggregate, have
not had, and would not reasonably be expected to have, a Material Adverse
Effect.
g. ABSENCE OF CERTAIN CHANGES. Except as disclosed in the SEC
Documents, since January 1, 1999, there has been no change or development, which
individually or in the aggregate has had or could have a Material Adverse
Effect.
h. ABSENCE OF LITIGATION. Except as disclosed in the SEC Documents,
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, threatened against or affecting the
Company, or any of its subsidiaries, or any of their directors or officers in
their capacities as such which would have a Material Adverse Effect.
i. INTELLECTUAL PROPERTY. The Company and each of 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 proposed
to be conducted, except where the failure to own or have a right to use any such
Intangible has not had, and would not reasonably be expected to have, a Material
Adverse Effect. Neither the Company nor any of its subsidiaries has received
written notice that it is infringing upon or in conflict with any third party's
Intangibles. Neither the Company nor any of its subsidiaries has entered into
any consent, indemnification, forbearance to sue or settlement agreements with
respect to the validity of the Company's or such subsidiary's ownership or right
to use its Intangibles. To the Company's knowledge, 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 has complied in all material respects with its contractual
obligations relating to the protection of the Intangibles used pursuant to
licenses. To the Company's knowledge, no person is infringing on or violating
any Intangible owned by the Company.
j. ENVIRONMENT. Except as disclosed in the SEC Documents, (i) there is
no environmental liability, nor factors likely to give rise to any environmental
liability, affecting any of the properties of the Company or any of its
subsidiaries, taken as whole, that, individually or in the aggregate, has had or
would reasonably be expected to have a Material Adverse Effect and (ii) neither
the Company nor any of its subsidiaries has violated any environmental law
applicable to it now or previously in effect, other than such violations or
infringements that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect.
k. TITLE. The Company and each of its subsidiaries has good title in
fee simple to all real property and good title to all personal property owned by
it which is material to its business, free
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and clear of all liens, encumbrances and defects, except for such defects in
title that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect. Any real property
and facilities held under lease by the Company or any of its subsidiaries are
held by the Company or such subsidiary under valid, subsisting and
enforceable leases with such exceptions which have not had and would not
reasonably be expected to have a Material Adverse Effect.
l. INSURANCE. To the Company's knowledge, the Company maintains such
insurance relating to its business, operations, assets, officers and directors
as is appropriate to their business, assets and operations, in such amounts and
against such risks as are customarily carried and insured against by owners of
comparable businesses, assets and operations, and such insurance coverages will
be continued in full force and effect to and including the Closing Date, other
than those insurance coverages in respect of which the failure to continue in
full force and effect would not reasonably be expected to have a Material
Adverse Effect.
m. ACKNOWLEDGMENT REGARDING THE PURCHASERS' PURCHASE OF THE SECURITIES.
The Company acknowledges and agrees that no Purchaser is acting as a financial
advisor or is acting as a fiduciary of the Company (or in any similar capacity)
with respect to this Agreement or the transactions contemplated hereby, and the
relationship between the Company and the Purchasers is "arms length" and that
any statement made by any Purchaser or any of its 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 and has not been relied upon by the Company, its officers or
directors in any way. The Company further represents to the Purchaser that the
Company's decision to enter into this Agreement has been based solely on an
independent evaluation by the Company and its representatives.
n. NO BROKERS. The Company has not engaged any person to which or to
whom brokerage commissions, finder's fees, financial advisory fees or similar
payments are or will become due in connection with this Agreement or the
transactions contemplated hereby except for FSVK, whose commissions and fees
will be paid by the Company.
o. TAX STATUS. The Company and each of its subsidiaries has made or
filed all material federal, state and local income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject and
has paid all taxes and other governmental assessments and charges that are
material in amount and are 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 adequate for the payment of all material taxes
for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no material unpaid taxes claimed to be due by the
taxing authority of any jurisdiction. 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. None of the Company's tax returns is
currently being audited by any taxing authority.
p. NO GENERAL SOLICITATION. The Company has not conducted any "general
solicitation" or "general advertising", as such terms are used in Regulation D,
with respect to any of the Securities being offered hereby.
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q. SECURITIES LAWS. Neither the Company, nor any of its officers or
directors, 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 or cause this offering
of Securities to be integrated with any prior offering of securities of the
Company for purposes of the Securities Act or any applicable stockholder
approval provisions, including, without limitation, Rule 4460(i) of the National
Association of Securities Dealers ("NASD") or any similar rule. Subject to the
continued accuracy of the representations and warranties of the Purchasers
contained herein, the offer, sale and delivery of shares of Common Stock upon
exercise of the Warrants will be exempt from the registration requirements of
Section 5 of the Securities Act.
r. YEAR 2000. All hardware and software products used or sold by the
Company and its subsidiaries are able to process date data (including, but not
limited to, calculating, comparing and sequencing) in a consistent manner from,
into and between the twentieth century (through 1999), the year 2000 and the
twenty-first century, including leap year calculations, when used in accordance
with the product documentation accompanying such hardware and software products.
s. FORM S-3 ELIGIBILITY. The Company is currently eligible to
register the resale of its Common Stock on a registration statement on Form
S-3 under the Securities Act. To the knowledge of the Company, there exists
no facts or circumstances (including without limitation any required
approvals or waivers of any circumstances that may delay or prevent the
obtaining of accountant's consents) that would prohibit or delay the
preparation and filing of a registration statement on Form S-3 with respect
to the Registrable Securities (as defined in the Registration Rights
Agreement).
t. DISCLOSURE. No event or circumstance has occurred or exists with
respect to the Company or its subsidiaries or their businesses, properties,
operations, prospects 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 a primary issuance of the
Company's securities.
5. COVENANTS.
a. SATISFACTION OF CONDITIONS. The parties shall use their best efforts
to satisfy in a timely manner each of the conditions set forth 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 Closing Date, 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 each Purchaser on or prior to the
Closing Date.
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c. REPORTING STATUS. So long as a Purchaser beneficially owns any
Securities or has the right to acquire any Securities pursuant to this
Agreement, the Company shall timely file all reports required to be filed with
the SEC pursuant to the Exchange Act, and 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.
d. USE OF PROCEEDS. The Company shall use the net proceeds from the
sale of the Shares and the Warrants for the purposes set forth on SCHEDULE 5(D),
but in no event shall the Company use such net proceeds to repurchase any
outstanding securities of the Company.
e. RESERVATION OF SHARES. The Company has and shall at all times have
authorized and reserved for the purpose of issuance a sufficient number of
shares of Common Stock to provide for the issuance of the Shares as provided in
Section 2 hereof and the full exercise of the Warrants and the issuance of the
Warrant Shares in connection therewith and as otherwise required hereby and by
the Warrants. The Company shall not reduce the number of shares of Common Stock
reserved for issuance under this Agreement (except as a result of the issuance
of the Shares hereunder), the Warrants (except as a result of the issuance of
the Warrant Shares upon the exercise of the Warrants) or the Registration Rights
Agreement, without the consent of the Purchasers.
f. LISTING. On the Closing Date, the Company shall have applied for the
listing of the Shares and Warrant Shares, in each case, upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed or quoted and shall maintain, so long as any other
shares of Common Stock shall be so listed, such listing of all Shares from time
to time issuable hereunder and all Warrant Shares from time to time issuable
upon exercise of the Warrants. The Company shall use its best efforts to
continue the listing and trading of its Common Stock on Nasdaq, the New York
Stock Exchange ("NYSE") or the American Stock Exchange ("AMEX") and will comply
in all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of Nasdaq or any exchanges, as applicable
g. ADDITIONAL EQUITY CAPITAL. The Company agrees that during the period
beginning on the date hereof and ending on the date which is one hundred eighty
(180) days following the Closing Date (the "LOCK-UP PERIOD"), the Company will
not, without the prior written consent of the Purchasers or their designees,
contract with any party to obtain additional financing in which any equity or
equity-linked securities are issued (including any debt financing with an equity
component) (an "EQUITY FINANCING") pursuant to any offering exempt from the
registration requirements of the Securities Act which grants any registration
rights exercisable within one year of the Closing Date. The limitations referred
to in this Section 5(g) shall not apply to (i) any transaction involving
issuances of securities as consideration in a merger, consolidation or
acquisition of assets, or in connection with any strategic partnership,
collaboration or joint venture, or as consideration for the acquisition of a
business, product or license by the Company, (ii) the issuance of securities
pursuant to an underwritten public offering, (iii) the issuance of securities
upon exercise or conversion of the Company's options, warrants or other
convertible securities outstanding as of the date hereof as set forth in
SCHEDULE 4(c) or (iv) the grant of additional options or warrants, or the
issuance of additional
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securities, under any duly authorized Company stock option, stock purchase or
restricted stock plan for the benefit of the Company's employees, consultants
or directors.
h. 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.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell Shares and
Warrants to a Purchaser at the Closing hereunder is subject to the satisfaction,
at or before the Closing Date, of each of the following conditions thereto;
PROVIDED, HOWEVER, that these conditions are for the Company's sole benefit and
may be waived by the Company at any time in its sole discretion.
a. Purchasers purchasing Common Stock hereunder for an aggregate
Investment Amount of at least $15 million shall have executed the signature page
to this Agreement and the Registration Rights Agreement, and delivered the same
to the Company.
b. Each such Purchaser shall have delivered such Purchaser's Investment
Amount in accordance with Section 2(b) above.
c. The representations and warranties of each such Purchaser shall be
true and correct as of the date when made and as of the Closing Date 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 each such Purchaser 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
applicable Purchaser at or prior to the Closing Date.
d. No statute, rule, regulation, executive order, decree, ruling,
injunction, action, proceeding or interpretation shall have been enacted,
entered, promulgated, endorsed or adopted by any court or governmental authority
of competent jurisdiction or any self-regulatory organization, or the staff of
any thereof, 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.
7. CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE SHARES AND WARRANTS.
The obligation of each Purchaser hereunder to purchase Shares and
Warrants to be purchased by it hereunder 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 such Purchaser's sole discretion:
13
<PAGE>
a. The Company shall have executed the signature pages to this
Agreement and the Registration Rights Agreement, and delivered the same to the
Purchaser.
b. The Company shall have delivered to the Purchaser duly executed
certificates representing the number of Shares and duly executed Warrants as
provided in Section 2(b) above.
c. The Shares shall be authorized for quotation on the Nasdaq SmallCap
Market and trading in the Common Stock (or on Nasdaq generally) shall not have
been suspended or be under threat of suspension by the SEC or Nasdaq.
d. The representations and warranties of the Company shall be true and
correct in all material respects as of the date when made and as of the Closing
Date 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 Closing Date. The Purchasers shall have received a
certificate, executed on behalf of the Company by its Chief Financial Officer,
dated as of the Closing Date, to the foregoing effect and attaching true and
correct copies of the resolutions adopted by the Company's Board of Directors
authorizing the execution, delivery and performance by the Company of its
obligations under this Agreement, the Warrants and the Registration Rights
Agreement.
e. No statute, rule, regulation, executive order, decree, ruling,
injunction, action, proceeding or interpretation shall have been enacted,
entered, promulgated, endorsed or adopted by any court or governmental authority
of competent jurisdiction or any self-regulatory organization, or the staff of
any thereof, 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.
f. The Purchasers shall have received an opinion of the Company's
counsel, dated as of the Closing Date, relating to the matters set forth in
EXHIBIT C attached hereto.
g. From the date of this Agreement through the Closing Date, there
shall not have occurred any Material Adverse Effect.
8. INVESTOR LOCK-UP
Each Purchaser hereby agrees that, without the prior written consent of
the Company, it will not, during the period commencing on the Closing Date and
ending 180 days thereafter, (1) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, lend, or otherwise transfer or dispose
of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or (2) enter
into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of the Common Stock, whether
any such transaction described in clause (1) or (2) above is to be settled by
delivery
14
<PAGE>
of Common Stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to transactions relating to shares of Common Stock
or other securities acquired in open market transactions after the Closing
Date.
9. 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.
b. 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.
In the event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause the manually executed Execution Page(s)
hereof to be physically delivered to the other party within five (5) days of the
execution hereof.
c. HEADINGS. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. 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.
e. ENTIRE AGREEMENT; AMENDMENTS; WAIVER. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Purchasers
make any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may amended other than by an instrument
in writing signed by the Company and by the Purchasers as provided in Section
9(n) hereof, to the extent applicable. Any waiver by the Purchasers, on the one
hand, or the Company, on the other hand, of a breach of any provision of this
Agreement shall be in writing and shall not operate as or be construed to be a
waiver of any other breach of such provision of or any breach of any other
provision of this Agreement. The failure of the Purchasers, on the one hand, or
the Company, on the other hand to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement.
f. 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, 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
15
<PAGE>
courier or confirmed telecopy, in each case addressed to a party. The addresses
for such communications shall be:
If to the Company:
Precision Optics Corporation, Inc.
22 East Broadway
Gardner, MA 01440-3338
Telephone No.: 978-630-1800
Facsimile No.: 978-630-1487
Attention: Jack P. Dreimiller
Senior Vice President, Finance and
Chief Financial Officer
With a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Telephone No.: 617-951-7000
Facsimile No.: 617-951-7050
Attention: Patrick O'Brien, Esq.
If to the Purchaser, to the address set forth under the Purchaser's name on the
Execution Page hereto executed by such Purchaser, with a copy to:
First Security Van Kasper
600 California Street, Suite 1700
San Francisco, CA 94108
Telephone No.: (415) 675-2490
Facsimile No.: (415) 954-8309
Attention: Ronald F. Richards
Managing Director, Corporate Finance
Each party hereto may from time to time change its address or facsimile number
for notices under this Section 9 by giving at least ten (10) days' prior written
notice of such changed address or facsimile number, in the case of the
Purchasers to the Company, and in the case of the Company to all of the
Purchasers.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. The
Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers.
h. THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and, except for FSVK, is not for the benefit of, nor may any provision
hereof be enforced by any other person.
16
<PAGE>
i. SURVIVAL. To the extent set forth in this Section 9i., 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 loss or damage relating to the Securities purchased hereunder
arising as a result of any breach by the Company of any of its representations,
warranties or covenants set forth herein. The representations and warranties of
the Company made herein shall survive the Closing, but no claim may be made or
suit instituted under any provision of this Section 9i. for claims with respect
to any representation or warranty of the Company contained in this Agreement
after the date which is 180 days following the Closing Date unless the Purchaser
seeking indemnification hereunder shall have given the Company written notice of
such claim or suit (describing with reasonable specificity the amount of and
basis for such claim or suit) on or prior to the expiration of such period. 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. In no event may any Purchaser's aggregate remedy in
respect of any breach by the Company of any of its representations or warranties
hereunder (pursuant to this Section 9i. or otherwise) exceed such Purchaser's
Investment Amount.
j. 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.
k. TERMINATION. In the event that the Closing Date shall not have
occurred on or before March 24, 2000, 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.
l. JOINT PARTICIPATION IN DRAFTING. Each party to this Agreement has
participated in the negotiation and drafting of this Agreement, the Registration
Rights Agreement and the Warrants. 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, the Registration Rights Agreement or the Warrants.
m. EQUITABLE RELIEF. Each party acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the other parties by
vitiating the intent and purpose of the transactions contemplated hereby.
Accordingly, each party acknowledges that the remedy at law for a breach of its
obligations hereunder will be inadequate and agrees, in the event of a breach or
threatened breach by such party of the provisions of this Agreement, that the
other parties shall be entitled, in addition to all other available remedies, to
an injunction restraining any breach and requiring immediate issuance and
transfer, without the necessity of showing economic loss and without any bond or
other security being required.
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<PAGE>
n. DETERMINATIONS. Except as otherwise expressly provided herein, all
consents, approvals and other determinations to be made by the Purchasers
pursuant to this Agreement and all waivers and amendments to or of any
provisions in this Agreement prior to the Closing Date to be binding upon a
Purchasers shall be made by such Purchaser and except as otherwise expressly
provided herein, all consents, approvals and other determinations (other than
amendments to the terms and provisions of this Agreement) to be made by the
Purchasers pursuant to this Agreement and all waivers and amendments to or of
any provisions in this Agreement after the Closing Date shall be made by
Purchasers (excluding Purchasers who are affiliates of the Company) that have
invested not less than sixty percent (60%) of the aggregate Investment Amounts
invested by all Purchasers (excluding Purchasers who are affiliates of the
Company).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Agreement to be duly executed as of the date first above written.
COMPANY:
PRECISION OPTICS CORPORATION, INC.
By: /s/ Jack P. Dreimiller
-------------------------------------
Name: Jack P. Dreimiller
Title: Senior Vice President, Finance,
Chief Financial Officer and Clerk
THE PURCHASER:
[Name of Purchaser]
-----------------------------------------
By: [Signature of Signing Party]
----------------------------------
Name: [Name of Signing Party]
--------------------------------
Title: [Title of Signing Party]
-------------------------------
Investment Amount: $[Investment Amount]
-------------------
Residence: [Residence Address]
---------------------------
Address: [Address]
-----------------------------
Telephone No.: [Telephone Number]
-----------------------
Telecopy No.: [Telecopy No.]
------------------------
Attention: [Name]
---------------------------
with copies of all notices to:
[Name and Address]
-------------------------------------
Telephone No.: [Telephone Number]
-----------------------
Telecopy No.: [Telecopy No.]
------------------------
Attention: [Name]
------------------------
19
<PAGE>
EXHIBIT 4.4
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of March 17,
2000, by and among PRECISION OPTICS CORPORATION, INC., a corporation organized
under the laws of the Commonwealth of Massachusetts (the "COMPANY"), and the
undersigned (the "INITIAL INVESTORS").
WHEREAS:
A. The Company and the Initial Investors have entered into a Securities
Purchase Agreement dated as of March 13, 2000 (the "SECURITIES PURCHASE
AGREEMENT;" capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreement). In
connection with 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) shares of the Company's common stock, $0.01 par value
(the "COMMON STOCK"), and (ii) warrants to purchase Common Stock (the
"WARRANTS"). The shares of Common Stock issued on the Closing Date under the
Securities Purchase Agreement are referred to herein as the "SHARES" and the
shares of Common Stock issuable upon exercise of or otherwise pursuant to the
Warrants are referred to herein as the "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;
NOW, THEREFORE, in consideration of the premises 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, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS.
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
<PAGE>
Securities Act and pursuant to Rule 415 under the Securities Act or any
successor rule providing for 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 (i) the Shares,
(ii) the Warrant Shares, (iii) any shares of Common Stock issued to an Investor
at such Investor's option pursuant to Section 2(b) hereof, (iv) any shares of
Common Stock issued to First Security Van Kasper ("FSVK") upon exercise of the
warrant issued to FSVK pursuant to the engagement letter dated February 25, 2000
between FSVK and the Company and (v) 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, provided that
any such shares shall cease to be Registrable Securities if (i) such shares are
previously sold pursuant to an effective Registration Statement or pursuant to
Rule 144 under the Securities Act of 1933, as amended (the "1933 Act") or (ii)
such shares may be sold under 144(k) under the 1933 Act (without regard as to
whether the holder is an affiliate of the Company.)
(iv) "REGISTRATION STATEMENT" means one or more
registration statements of the Company under the Securities Act registering all
of the Registrable Securities, including the Initial Registration Statement, any
Uncovered Shares Amendments and Uncovered Shares Registration Statements (each,
as defined below).
2. REGISTRATION.
a. MANDATORY REGISTRATION. Within 45 days following the
Closing Date (the "FILING DEADLINE"), the Company shall file with the United
States Securities and Exchange Commission ("SEC"), a Registration Statement on
Form S-3 (or, if Form S-3 is not then available, on such form of Registration
Statement as is then available to effect a registration of all of the
Registrable Securities) covering the resale of all of the Registrable
Securities, which Registration Statement, to the extent allowable under the
Securities Act and the rules promulgated thereunder 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 "INITIAL REGISTRATION Statement"). The Registrable Securities
included in the Initial Registration Statement shall be registered on behalf of
the Investors as set forth in Section 11(k) hereof. The Initial Registration
Statement (and each amendment or supplement thereto, and each request for
acceleration of effectiveness thereof) shall be provided to (and subject to the
review by) the Initial Investors and their counsel at least three (3) business
days prior to its filing or other submission. If for any reason (including, but
not limited to, a determination by the staff of the SEC that all or any portion
of the Warrant Shares or any other Registrable Securities cannot be included in
the Initial Registration Statement (an "SEC DETERMINATION")), or if the Initial
Registration Statement declared effective by the SEC does not include all of the
Registrable Securities then outstanding (any such shares that are not included
being the "UNCOVERED SHARES"), the Company shall prepare and file with the SEC,
as soon as practicable, but in any event within 45 days after becoming aware of
the existence of any
2
<PAGE>
Uncovered Shares (such date referred to herein as the "UNCOVERED SHARE FILING
DEADLINE"), either (a) an amendment (the "UNCOVERED SHARES AMENDMENT") to the
Initial Registration Statement effecting a registration of the Uncovered
Shares or (b) a registration statement which registers the Uncovered Shares
(the "UNCOVERED SHARES REGISTRATION STATEMENT"). The Uncovered Shares
Amendment or the Uncovered Shares Registration Statement (and each amendment
or supplement thereto, and each request for acceleration of effectiveness
thereof) shall be provided to the Initial Investors and their counsel for
review and comment at least three (3) business days prior to its filing or
other submission. The Company shall use its best efforts to cause each of the
Initial Registration Statement and the Uncovered Shares Amendment or the
Uncovered Shares Registration Statement to become effective as soon as
practicable after the filing thereof.
b. PAYMENTS BY THE COMPANY. The Company shall use its best
efforts to cause each Registration Statement required to be filed pursuant to
Section 2(a) hereof to become effective as soon as practicable, but, as to the
Initial Registration Statement filed pursuant to Section 2(a), in no event later
than the one hundred and twentieth (120th) day after the Closing Date (the
"REGISTRATION DEADLINE"), and as to any Uncovered Shares Amendment or Uncovered
Shares Registration Statement, in no event later than the sixtieth (60th) day
after the Uncovered Share Filing Deadline (the "UNCOVERED SHARE REGISTRATION
DEADLINE"). If (i) the Registration Statement(s) covering the Registrable
Securities required to be filed by the Company pursuant to Section 2(a) hereof
is not filed with the SEC by the Filing Deadline or the Uncovered Share Filing
Deadline, as applicable, or declared effective by the SEC on or before the
Registration Deadline or the Uncovered Share Registration Deadline, as
applicable, or if, after a Registration Statement has been declared effective by
the SEC, sales of all the Registrable Securities required to be included therein
(except, in the case of the Initial Registration Statement, for Uncovered Shares
which are the subject of an SEC Determination) cannot be made pursuant to the
Registration Statement (by reason of a stop order, the Company's failure to
update a Registration Statement, any reason resulting in Uncovered Shares or any
other reason outside the control of the Investors) for a period in excess of 90
days in any 365-day period (the "PERMITTED BLACKOUT PERIOD") or (ii) the Common
Stock is not listed or included for quotation on either the Nasdaq National
Market or the Small Cap Market (the "NASDAQ MARKETS"), or the New York Stock
Exchange (the "NYSE") or the American Stock Exchange (the "AMEX") at any time
after the Registration Deadline, 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(b) as liquidated damages to the Investors by reason of any such
delay in or reduction of their ability to sell the Registrable Securities (which
remedy shall be the sole and exclusive remedy for such delay or reduction of
their ability to sell the Registrable Securities).
The Company shall pay to each Investor an amount equal to (i) the
Investment Amount (as defined in the Securities Purchase Agreement) paid by such
Investor (or if such Investor is not an Initial Investor, the Investment Amount
paid by such Investor's transferor or assignor of such Shares and Warrants) for
the Shares and Warrants purchased by such Investor (or such Investor's
transferor or assignor) pursuant to the Securities Purchase Agreement (the
"AGGREGATE PURCHASE PRICE"), multiplied by (ii) three quarters of one percent
(0.75%) (with respect to the period commencing on the Filing Deadline, the
Uncovered Filing Deadline, the Registration Deadline or the Uncovered Share
Registration Deadline, as applicable; provided that such percentage shall
increase to and
3
<PAGE>
remain at one and one quarter percent (1.25%) for purposes of all
calculations to the extent that such calculations apply to time periods after
the sixtieth (60th) day after the Filing Deadline, the Uncovered Filing
Deadline, the Registration Deadline or the Uncovered Registration Deadline,
as applicable), multiplied by (iii) the sum of (x) the quotient calculated by
dividing (A) the number of days after the Filing Deadline or Uncovered Share
Filing Deadline, as applicable, and prior to the date the Registration
Statement or Uncovered Share Amendment or Uncovered Share Registration
Statement, as applicable, in each case as required to be filed pursuant to
Section 2(a), is filed with the SEC by (B) thirty, plus (y) the quotient
calculated by dividing (A) the number of days after the Registration Deadline
or Uncovered Share Registration Deadline, as applicable, and prior to the
date the Registration Statement or Uncovered Share Amendment or Uncovered
Share Registration Statement, as applicable, in each case as filed pursuant
to Section 2(a), is declared effective by the SEC by (B) thirty, plus (z) the
quotient calculated by dividing (A) the sum of the number of additional days
in excess of the Permitted Blackout Period that (I) sales of any Registrable
Securities required to be included in a Registration Statement (except, in
the case of the Initial Registration Statement, for any Uncovered Shares
which are the subject of an SEC Determination) cannot be made pursuant to a
Registration Statement after such Registration Statement has been declared
effective, or (II) the Common Stock is not listed or included for quotation
on the Nasdaq Markets, the NYSE or AMEX by (B) thirty. For example, if the
Initial Registration Statement becomes effective thirty (30) days after the
Registration Deadline, the Company would pay $7,500 for each $1,000,000 of
Aggregate Purchase Price; thereafter, for the next period of thirty (30) days
that sales cannot be made pursuant to the Initial Registration Statement
(except as to Uncovered Shares which are the subject of an SEC
Determination), the Company would pay an additional $7,500 for each
$1,000,000 of Aggregate Purchase Price and for each additional period of
thirty (30) days that sales cannot be made pursuant to the Initial
Registration Statement (except as to Uncovered Shares which are subject to an
SEC Determination), the Company would pay $12,500 for each $1,000,000 of
Aggregate Purchase Price. Such amounts shall be paid in cash or, at each
Investor's option, in shares of Common Stock which shall be deemed for this
purpose to have a value equal to the Market Price (as defined in the
Securities Purchase Agreement) as of the date such payment is due. Any shares
of Common Stock issued pursuant to this Section 2(b) shall be Registrable
Securities. If the Investor desires to be paid the amounts due hereunder in
Common Stock, it shall so notify the Company in writing within four (4)
business days of the date on which such amounts are first payable in cash.
Payments of cash pursuant hereto shall be made within five (5) Business 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. Delivery of
shares of Common Stock pursuant to this Section 2(b) shall be made within
five (5) business days after the Investor's delivery of a written notice to
the Company requesting payment in Common Stock. If such payment is not made
within such five (5) day period the Investor thereafter shall be entitled to
interest on the unpaid amount at a rate equal of two percent (2%) per month
until such amount is paid in full to the Investor. If the Company is unable
to pay all amounts due and payable with respect to the penalties, the Company
will pay the Investors such amounts pro rata based upon the total amounts
payable to each Investor as a percentage of the total amounts payable to all
Investors. Notwithstanding any other provision of this Section 2(b), no
amount shall accrue or be payable hereunder in respect of any failure of the
Company to fulfill any of its obligations under this Agreement (i) during the
180 day period immediately following the Closing Date under the
4
<PAGE>
Securities Purchase Agreement or (ii) as a result of any act or omission by
the Securities and Exchange Commission, any state governmental or regulatory
body or any Investor.
c. PIGGY BACK REGISTRATIONS. If at any time prior to the
expiration of the Registration Period (as hereinafter defined) 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 continues to hold Registrable Securities written
notice of such determination and, if within fifteen (15) 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 for the account of the Company 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, if any of the Registrable Securities with respect to which such
Investor has requested inclusion hereunder as the underwriter shall permit. 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 (except to the extent any existing
agreements otherwise provide). No right to registration of Registrable
Securities under this Section 2(c) 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(c) 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.
5
<PAGE>
d. ELIGIBILITY FOR FORM S-3. The Company represents and
warrants that it is eligible to register the resale of Registrable Securities on
a registration statement on Form S-3 under the Securities Act, and that there
exist no facts or circumstances (including without limitation any required
approvals or waivers or any circumstances that may delay or prevent the
obtaining of accountant's consents) that would prohibit or delay the preparation
and filing of a registration statement on Form S-3 with respect to the
Registrable Securities. The Company shall file all reports required to be filed
by the Company with the SEC in a timely manner so as to maintain or, if
applicable, regain its eligibility for the use of Form S-3.
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, on or
before the Filing Deadline or the Uncovered Share Filing Deadline, as
applicable, the applicable Registration Statement required by Section 2(a) and
shall use its best efforts to cause such Registration Statement to become
effective as soon as practicable after such filing (but in no event later than
the Registration Deadline or the Uncovered Share Registration Deadline, as
applicable). The Company shall keep such Registration Statement effective
pursuant to Rule 415 at all times until the date on which all of the Registrable
Securities may (in the reasonable opinion of counsel to the Initial Investors)
be immediately sold to the public without registration or restriction pursuant
to Rule 144(k) under the Securities Act, without regard as to whether an
Investor is an affiliate of the Company (the "REGISTRATION PERIOD"). In the
event that the sale of Registrable Securities by one or more Investors is
determined by the SEC to constitute a primary offering, upon the written request
from time to time of any such Investor, the Company shall as promptly as
practicable: cause a Registration Statement to be amended and/or one or more
additional Registration Statements (which may be requested on a sequential
basis) to be filed (as specified by the applicable Investors) and to be declared
effective; and take all other actions reasonably requested by such Investors to
effectuate the offering of Registrable Securities. If the Initial Registration
Statement is not filed on Form S-3, the Company shall, as soon as it is eligible
to do so, file a post-effective amendment on Form S-3 to the Initial
Registration Statement to the extent permitted by the SEC or, if not so
permitted, file a new Registration Statement on Form S-3 to permit sales of the
Registrable Securities under the Securities Act; and the Company shall use its
best efforts to cause such post-effective amendment or Registration Statement to
become effective as soon as possible. Each Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein and all
documents incorporated by reference therein) filed pursuant to this Agreement at
the time filed (i) shall comply in all material respects with the requirements
of the Securities Act and the rules and regulations of the SEC promulgated
thereunder and (ii) 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. The financial statements of the
Company included in the Registration Statement or incorporated by reference
therein will comply 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 shall be prepared in
accordance with U.S.
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generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes 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 shall 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 adjustments).
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration Statement
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
Statement 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 Statement.
c. The Company shall upon request furnish to each Investor
whose Registrable Securities are included in the 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 the Registration
Statement and any amendment thereto, each preliminary prospectus and prospectus
and each amendment or supplement thereto. In the case of the Registration
Statement referred to in Section 2(a), the Company shall upon request furnish to
each Investor a copy of 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 such Registration Statement (other than any portion, if
any, thereof which contains information for which the Company has sought
confidential treatment), (A) on the date of effectiveness of the Registration
Statement or any amendment thereto, a notice stating that the Registration
Statement or amendment has been declared effective, and (B) 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. In responding to comments from the staff of the SEC, the
Company shall cooperate with any Investor that notifies the Company that it
desires to be consulted with respect to such process. Such cooperation shall
include without limitation providing any such Investor with: at least a two (2)
business day period in which to comment on the text and substance of proposed
written responses; and an opportunity to be included in all substantive
telephone conversations and meetings with the staff of the SEC. To the extent
that issues raised by the staff of the SEC have an impact primarily on any such
Investor rather than the Company, the Company shall give reasonable deference to
such Investor's requests with respect to the process and substance of responses
with respect to such issues.
d. The Company shall use its best efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement under
such other securities or "blue
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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 certificate of incorporation
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. As promptly as practicable after becoming aware of such
event, the Company shall notify each Investor by telephone, facsimile or e-mail
of the happening of any event, of which the Company has knowledge, as a result
of which the prospectus included in the 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 promptly 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.
f. 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 date (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 Statement is
supplemented or amended, deliver such number of copies of such supplement or
amendment to each Investor as such Investor may reasonably request).
g. The Company shall permit a single counsel designated by the
Initial Investors to review the Registration Statement and all amendments and
supplements thereto. Any of the foregoing shall be provided to such counsel at
least three (3) business days prior to their filing with the SEC.
h. The Company shall make available for inspection by (i) any
Investor whose Registrable Securities are included in a Registration Statement,
(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
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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.
i. The Company shall hold in confidence and not make any
disclosure of confidential information concerning an Investor provided to the
Company unless (i) disclosure of such information is necessary to comply with
federal or state securities laws, (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.
j. The Company shall use its best efforts to promptly either
(i) secure the designation and quotation, of all the Registrable Securities
covered by the Registration Statement on the Nasdaq National Market or the
Nasdaq Small Cap Market, or (ii) cause all the Registrable Securities covered by
the 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.
k. The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
l. At the request of an Initial Investor or Investors who
holds a majority-in-interest of the Registrable Securities, 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 the Registration Statement as may be necessary in order to
change the plan of distribution set forth in such Registration Statement,
provided such a change is not contrary to the best interests of the Company and
its stockholders.
m. The Company shall comply with applicable federal and state
securities laws and regulations related to a Registration Statement and offering
and sale of securities.
n. 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 (except to the extent existing agreements may otherwise provide) 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
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<PAGE>
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 ten (10)
business days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor of any 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 the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
c. 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. Notwithstanding anything in
this Section 4(c) to the contrary, this Section 4(c) is not intended to limit an
Investor's rights under Section 2(a) or 3(b) hereof.
d. Each Investor agrees that upon receipt of a notice from the
Company pursuant to Section 3(e) that the prospectus included in the
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, each Investor agrees
not to sell any Registrable Securities pursuant to the Registration Statement
until such Investor receives notice from the Company that such Investor may
resume sales under the Registration Statement and copies of any additional or
supplemental filings that are incorporated into such prospectus.
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5. EXPENSES OF REGISTRATION.
All reasonable expenses incurred by the Company or the Investors in
connection with registrations, filings or qualifications pursuant to Sections 2
and 3 above (excluding brokers' fees, underwriting discounts and commissions,
and similar selling expenses), including, without limitation, all registration,
listing and qualifications fees, printers and accounting fees and the fees and
disbursements of counsel for the Company, and the fees and disbursements of one
counsel selected in writing by a majority in interest of the Initial Investors,
shall be borne by the Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in and sold under
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 and
agents of such Investor 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 of a material fact in a Registration Statement or the omission to
state therein a material fact required to be stated or necessary to make the
statements therein not misleading, (ii) any 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 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").
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 prospectus, shall not inure to the benefit of any Indemnified
Person if the untrue statement or omission of material fact contained in such
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
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<PAGE>
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 on behalf of the
Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
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 or
underwriter 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; 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. 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 by the
Investor 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 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
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<PAGE>
shall have the right to retain its own counsel with the reasonable 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 in conflict with 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 any of them
holds 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.
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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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 5(c) of the Securities Purchase Agreement)
and the filing and availability of such reports and other documents as is
required for the applicable provisions of Rule 144; and
b. furnish to each Investor so long as such Investor owns
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 pursuant to 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
assignable by each Investor to any transferee of all or any portion of the
Registrable Securities with an aggregate Market Price (as defined in the
Securities Purchase Agreement) of $500,000 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 with
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. In addition, and notwithstanding anything to
the contrary contained in this Agreement, the Securities Purchase Agreement or
the Warrants, (i) the Securities (as defined in the Securities Purchase
Agreement) may be pledged, and all rights of the Investors under this Agreement
or any other agreement or document related to the transaction contemplated
hereby may be assigned, without further consent of the Company, to a bona fide
pledgee in connection with an Investor's margin or brokerage accounts and (ii)
any Investor may assign its rights under this Agreement to any of its employees,
partners and managers in connection with the transfer to any such person of any
Registrable Securities held by such Investor; PROVIDED, HOWEVER, that by its
execution of this Agreement, each Investor agrees that in connection with any
such assignment such Investor shall remain responsible for the performance of
each of such assignee's obligations as a holder of Registrable Securities
hereunder.
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) by a writing
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signed by the Company, and Investors (excluding Investors who are affiliates
of the Company) who hold fifty percent (50%) in interest of the Registrable
Securities (excluding Registrable Securities held by affiliates of the
Company) or, in the case of a waiver, with the written consent of the party
charged with the enforcement of any such provision. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.
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:
Precision Optics Corporation, Inc.
22 East Broadway
Gardner, MA 01440
Telephone No.: (978) 630-1800
Facsimile No.: (978) 630-1487
Attention: Richard Forkey
with a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Telephone No.: (617) 951-7000
Facsimile No.: (617) 951-7050
Attention: Patrick O'Brien
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If to an Investor, at such address as such Investor shall have provided in
writing to the Company or such other address as such Investor furnishes by
notice given in accordance with this Section 11(b), with a copy to:
First Security Van Kasper
600 California Street, Suite 1700
San Francisco, CA 94108
Telephone No.: (415) 675-2490
Facsimile No.: (415) 954-8309
Attention: Ronald F. Richards
Managing Director, Corporate Finance
Each party hereto may from time to time change its address or facsimile
number for notices under this Section 11(b) by giving at least ten (10) days'
prior written notice of such changed address or facsimile number, in the case of
the Investors to the Company, and in the case of the Company to all of the
Investors.
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.
e. This Agreement, the Securities Purchase Agreement and the
Warrants (including all schedules and exhibits thereto) constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein and therein. This Agreement, the
Securities Purchase Agreement and the Warrants supersede all prior agreements
and understandings among the parties hereto and thereto 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.
16
<PAGE>
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 pursuant to this Agreement shall be made by the Investors
holding fifty percent (50%) of the Registrable Securities (determined as if all
Warrants then outstanding had been exercised by the payment of cash) then held
by all Investors.
k. The initial number of Registrable Securities included on
any Registration Statement and each increase to the number of Registrable
Securities included thereon shall be registered on behalf of each Investor pro
rata based on the number of Registrable Securities held by each 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 deemed to have registered on its behalf 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 on behalf of any person or entity which does not
hold any Registrable Securities shall be deemed registered on behalf of the
remaining Investors, pro rata based on the number of shares of Registrable
Securities then held by such Investors. For the avoidance of doubt, (A) the
number of Registrable Securities held by an Investor shall be determined as if
all Warrants then outstanding and held by an Investor were exercised by the
payment of cash and (B) no provision of this subsection shall operate to reduce
the number of Registrable Securities registered on behalf of any Investor
pursuant to the first sentence of this subsection.
l. 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
PRECISION OPTICS CORPORATION, INC.
By: /s/ Jack P. Dreimiller
------------------------------
Name: Jack P. Dreimiller
Its: Senior Vice President, Finance, Chief Financial Officer and Clerk
INITIAL INVESTORS:
[Name of Initial Investor]
- ---------------------------------
By: [Signature of Signing Party]
------------------------------
Name: [Name of Signing Party]
----------------------------
Its: [Title of Signing Party]
-----------------------------
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EXHIBIT 4.5
VOID AFTER 5:00 P.M., NEW YORK TIME,
ON MARCH 17, 2005
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT 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 OR ANY OTHER JURISDICTION. THE SECURITIES REPRESENTED HEREBY MAY
NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS UNLESS
OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
Date: March 17, 2000
PRECISION OPTICS CORPORATION, INC.
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, [holder of warrant], or its
registered assigns, is entitled to purchase from PRECISION OPTICS CORPORATION,
INC., a corporation organized under the laws of the Commonwealth of
Massachusetts (the "COMPANY"), at any time or from time to time during the
period specified in Section 2 hereof,[number of underlying shares] fully paid
and nonassessable shares of the Company's common stock, $0.01 par value (the
"COMMON STOCK"), at an exercise price per share (the "EXERCISE PRICE) of $27.60.
The number of shares of Common Stock purchasable hereunder (the "WARRANT
SHARES") and the Exercise Price are subject to adjustment as provided in Section
5 hereof. The term "WARRANTS" means this Warrant and the other Warrants of the
Company issued pursuant to that certain Securities Purchase Agreement, dated as
of March 13, 2000, by and among the Company and the other signatories thereto
(the "SECURITIES PURCHASE AGREEMENT"). Terms used but not otherwise defined
herein shall have the meaning set forth in the Securities Purchase Agreement.
<PAGE>
This Warrant is subject to the following terms, provisions and
conditions:
1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
Subject to the provisions hereof, including, without limitation, the limitations
contained in Section 8 hereof, this Warrant may be exercised at any time during
the Exercise Period (as defined below) by the holder hereof, in whole or in
part, by the surrender of this Warrant, together with a completed exercise
agreement in the form attached hereto (the "EXERCISE AGREEMENT"), to the Company
by 5 p.m. California time on any Business Day at the Company's principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof) and upon payment to the Company in
cash, by certified or official bank check or by wire transfer for the account of
the Company, of the applicable Exercise Price for the Warrant Shares specified
in the Exercise Agreement . The Warrant Shares so purchased shall be deemed to
be issued to the holder hereof or such holder's designee, as the record owner of
such shares, as of the close of business on the date on which this Warrant shall
have been surrendered and the completed Exercise Agreement shall have been
delivered and payment shall have been made for such shares as set forth above
or, if such day is not a Business Day, on the next succeeding Business Day. The
Warrant Shares so purchased, representing the aggregate number of shares
specified in the Exercise Agreement, shall be delivered to the holder hereof
within a reasonable time, not exceeding three Business Days, after this Warrant
shall have been so exercised (the "DELIVERY PERIOD"). If the Company's transfer
agent is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer program, and so long as the certificates therefor do not
bear a legend and the holder is not obligated to return such certificate for the
placement of a legend thereon, the Company shall cause its transfer agent to
electronically transmit the Warrant Shares so purchased to the holder by
crediting the account of the 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 Company shall deliver to the
holder physical certificates representing the Warrant Shares so purchased.
Further, the holder may instruct the Company to deliver to the holder physical
certificates representing the Warrant Shares so purchased in lieu of delivering
such shares by way of DTC Transfer. Any certificates so delivered shall be in
such denominations as may be requested by the holder hereof, shall be registered
in the name of such holder or such other name as shall be designated by such
holder and, following the date on which the Warrant Shares may be sold by the
holder pursuant to Rule 144(k) promulgated under the Securities Act (or a
successor rule), shall not bear any restrictive legend. Upon a sale of any
Warrant Shares pursuant to an effective registration statement, any restrictive
legend on the certificates representing such Warrant Shares shall be removed. If
this Warrant shall have been exercised only in part, then, unless this Warrant
has expired, the Company shall, at its expense, at the time of delivery of such
certificates, deliver to the holder a new Warrant representing the number of
shares with respect to which this Warrant shall not then have been exercised.
2. PERIOD OF EXERCISE. Except as set forth in Section 3 below, this
Warrant may be exercised at any time or from time to time (an "EXERCISE DATE")
during the period (the "EXERCISE PERIOD") beginning on (a) the date hereof and
ending (b) at 5:00 p.m., California time, on the fifth annual anniversary of the
date of original issuance hereof.
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3. MANDATORY EXERCISE. On any Notification Date (as defined below), the
Company may request that the holder hereof exercise this Warrant in whole but
not in part (the "MANDATORY EXERCISE") by delivering a written notice to the
holder at such address as such holder shall have provided to the Company in
writing pursuant to Section 10 hereof (the "MANDATORY EXERCISE NOTICE"). The
Mandatory Exercise Notice shall set forth the Exercise Price and the Closing
Price of a share of Common Stock on each of the ten (10) consecutive Trading
Days comprising the Measurement Period (as defined below) specified therein. The
holder shall have twenty (20) Business Days from the date of receipt of the
Mandatory Exercise Notice to exercise this Warrant in whole, but not in part, in
the manner set forth in Section 1 hereof. If the holder does not so exercise the
Warrant within such period, then (i) the holder shall forfeit such holder's
rights, title and interest under this Warrant, (ii) this Warrant shall be deemed
terminated and (iii) the holder shall deliver to the Company promptly this
Warrant marked "cancelled." Notwithstanding the foregoing, no Mandatory Exercise
may occur unless at all times from the Notification Date through the twentieth
(20th) day following the holder's receipt of a Mandatory Exercise Notice (a) a
Registration Statement covering all Registrable Securities (as those terms are
defined in the Registration Rights Agreement)(i) is effective, (ii) does not
require any amendment or supplement and (iii) discloses directly or through
incorporation by reference all material facts relating to Company and the
Registrable Securities, (b) the Company has no reason to believe that, during
the period beginning on the Notification Date and ending ninety (90) days
thereafter (the "INITIAL SELLING PERIOD"), there will be any need to suspend
sales pursuant to the Registration Statement as a result of the need to amend or
supplement the Registration Statement or otherwise; (c) the Company covenants
not to take any action during the Initial Selling Period that is reasonably
likely to result in the suspension of sales during the Initial Selling Period;
and (d) the Mandatory Exercise Notice contains (i) a certification from the
Company's chief financial officer as to the matters set forth in the immediately
preceding subclause (a) and subclause (b) (in both cases as of the Notification
Date); and (ii) the covenant of the Company set forth in the immediately
preceding subclause (c). For purposes of this Section 3, "NOTIFICATION DATE"
shall mean any Business Day during the Exercise Period but after the Trigger
Date (as defined below) which Business Day is not more than five (5) Business
Days following any period of ten (10) consecutive Trading Days (a "Measurement
Period") on each of which the Closing Price for the Common Stock was greater
than $55.20; and "TRIGGER DATE" shall mean the date which is six months after
the Closing Date under the Securities Purchase Agreement.
4. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants and
agrees as follows:
(a) SHARES TO BE FULLY PAID. All Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, be validly issued, fully
paid and nonassessable and free from all taxes, liens, claims and encumbrances.
(b) RESERVATION OF SHARES. During the Exercise Period, the Company
shall at all times have authorized, and reserved for the purpose of issuance
upon exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise in full of this Warrant
-3-
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(without giving effect to the limitations on exercise set forth in Section
8(g) hereof).
(c) LISTING. The Company shall secure the listing of the shares of
Common Stock issuable upon exercise of or otherwise pursuant to this Warrant
upon each national securities exchange or automated quotation system, if any,
upon which shares of Common Stock are then listed or become listed (subject to
official notice of issuance upon exercise of this Warrant) and shall maintain,
so long as any other shares of Common Stock shall be so listed, such listing of
all shares of Common Stock from time to time issuable upon the exercise of or
otherwise pursuant to this Warrant; and the Company shall so list on each
national securities exchange or automated quotation system, as the case may be,
and shall maintain such listing of, any other shares of capital stock of the
Company issuable upon the exercise of or otherwise pursuant to this Warrant if
and so long as any shares of the same class shall be listed on such national
securities exchange or automated quotation system.
(d) CERTAIN ACTIONS PROHIBITED. The Company will not, by amendment
of its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issuance or sale of securities, or any other voluntary
action, intentionally seek to avoid the observance or performance of any of the
terms to be observed or performed by it hereunder, but will at all times in good
faith assist in the carrying out of all the provisions of this Warrant. Without
limiting the generality of the foregoing, the Company (i) will not increase the
par value of any shares of Common Stock receivable upon the exercise of this
Warrant above the Exercise Price then in effect, and (ii) will take all such
actions as may be reasonably necessary or appropriate in order that the Company
may validly and legally issue fully paid and nonassessable shares of Common
Stock upon the exercise of this Warrant.
(e) SUCCESSORS AND ASSIGNS. Subject to Section 5(c) hereof, this
Warrant will be binding upon any entity succeeding to the Company by merger,
consolidation, or acquisition of all or substantially all of the Company's
assets.
(f) BLUE SKY LAWS. The Company shall, on or before the date of
issuance of any Warrant Shares, take such actions as the Company shall
reasonably determine are necessary to qualify the Warrant Shares for, or obtain
exemption for the Warrant Shares for, sale to the holder of this Warrant upon
the exercise hereof under applicable securities or "blue sky" laws of the states
of the United States, and shall provide evidence of any such action so taken to
the holder of this Warrant prior to such date; provided, however, that the
Company shall not be required to qualify as a foreign corporation or file a
general consent to service of process in any such jurisdiction.
5. ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise
Price and the number of Warrant Shares issuable upon the exercise of the
Warrants, shall be subject to adjustment from time to time as provided in this
Section 5. In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
or down to the nearest cent; provided that, in no event shall the Exercise Price
per share be reduced below $.01.
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<PAGE>
(a) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company, at
any time during the Exercise Period, subdivides (by any stock split, stock
dividend, reclassification or otherwise) its shares of Common Stock into a
greater number of shares, then, after the date of record for effecting such
subdivision, the Exercise Price in effect immediately prior to such subdivision
will be proportionately reduced. If the Company, at any time during the Exercise
Period, combines (by reverse stock split, reclassification or otherwise) its
shares of Common Stock into a smaller number of shares, then, after the date of
record for effecting such combination, the Exercise Price in effect immediately
prior to such combination will be proportionately increased.
(b) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 5, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be increased
or decreased to equal the quotient obtained by dividing (i) the product of (A)
the Exercise Price in effect immediately prior to such adjustment, multiplied by
(B) the number of shares of Common Stock issuable upon exercise of this Warrant
immediately prior to such adjustment, by (ii) the adjusted Exercise Price .
(c) CONSOLIDATION, MERGER OR SALE. In case of any capital
reorganization or any reclassification of the shares of Common Stock of the
Company, or in the case of any consolidation with or merger of the Company into
or with another corporation or the sale of all or substantially all of its
assets to another corporation effected in such a manner that the holders of
Common Stock shall be entitled to receive stock, securities or assets with
respect to or in exchange for Common Stock, then, as part of such
reorganization, reclassification, consolidation, merger or sale, as the case may
be, lawful provision shall be made so that the holder of the Warrant shall have
the right thereafter to receive, upon the exercise hereof, the kind and amount
of shares of stock or other securities or property which the holder would have
been entitled to receive if, immediately before such reorganization,
reclassification, consolidation or merger, the holder had held the number of
shares of Common Stock which were then purchasable upon the exercise of the
Warrant had the Warrant been exercised. In any such case, appropriate adjustment
(as determined in good faith by the Board of Directors of the Company) shall be
made in the application of the provisions set forth herein with respect to the
rights and interests thereafter of the holder of the Warrant, to the end that
the provisions set forth herein (including provisions with respect to
adjustments of the exercise price) shall thereafter be applicable, as nearly as
reasonably may be, in relation to any shares of stock or other property
thereafter deliverable upon the exercise of this Warrant.
(d) NOTICE OF ADJUSTMENT. Upon the occurrence of any event which
requires any adjustment of the Exercise Price, then, and in each such case, the
Company shall give notice thereof to the holder of this Warrant, which notice
shall state the Exercise Price resulting from such adjustment and the increase
or decrease in the number of Warrant Shares issuable upon exercise of this
Warrant, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based. Such calculation shall be certified
by the chief financial officer of the Company.
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<PAGE>
(e) MINIMUM ADJUSTMENT OF THE EXERCISE PRICE . No adjustment of
the Exercise Price shall be made in an amount of less than .1% of the Exercise
Price in effect at the time such adjustment is otherwise required to be made,
but any such lesser adjustment shall be carried forward and shall be made at the
time and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than .1% of such
Exercise Price.
(f) NO FRACTIONAL SHARES. No fractional shares of Common Stock are
to be issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the Market Price of a share of Common
Stock on the date of such exercise.
(g) OTHER NOTICES. In case at any time:
(i) the Company shall declare any dividend upon the Common Stock
payable in shares of stock of any class or make any other distribution (other
than dividends or distributions payable in cash out of retained earnings
consistent with the Company's past practices with respect to declaring dividends
and making distributions) to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or other
rights;
(iii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or consolidation or merger of
the Company with or into, or sale of all or substantially all of its assets to,
another corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
(v) then, in each such case, the Company shall give to the
holder of this Warrant (a) notice of the date or estimated date on which the
books of the Company shall close or a record shall be taken for determining the
holders of Common Stock entitled to receive any such dividend, distribution, or
subscription rights or for determining the holders of Common Stock entitled to
vote in respect of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding-up and (b) in the case of any
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, notice of the date (or, if not then known, a
reasonable estimate thereof by the Company) when the same shall take place. Such
notice shall also specify the date on which the holders of Common Stock shall be
entitled to receive such dividend, distribution, or subscription rights or to
exchange their Common Stock for stock or other securities or property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, or winding-up, as the case may be. Such notice
shall be given at least fifteen (15) days prior to the record date or the date
on which the Company's books are closed in respect thereto. Failure to give any
such notice or any defect therein shall not affect the validity of the
proceedings referred to in
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<PAGE>
clauses (i), (ii), (iii) and (iv) above. Notwithstanding the foregoing, the
Company may publicly disclose the substance of any notice delivered hereunder
prior to delivery of such notice to the holder of this Warrant.
6. ISSUE TAX. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
7. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
8. TRANSFER, EXCHANGE, REDEMPTION AND REPLACEMENT OF WARRANT.
(a) RESTRICTION ON TRANSFER. This Warrant and the rights granted
to the holder hereof are transferable in whole or in part, at any one time, upon
surrender of this Warrant, together with a properly executed assignment in the
form attached hereto, at the office or agency of the Company referred to in
Section 8(e) below, PROVIDED, HOWEVER, that any transfer or assignment shall be
subject to the conditions set forth in Sections 8(f), 8(g) and 9 hereof and to
the provisions of Sections 3(e) and 3(f) of the Securities Purchase Agreement.
Until due presentment for registration of transfer on the books of the Company,
the Company may treat the registered holder hereof as the owner and holder
hereof for all purposes, and the Company shall not be affected by any notice to
the contrary. Notwithstanding anything to the contrary contained herein, the
registration rights described in Section 9 hereof are assignable only in
accordance with the provisions of the Registration Rights Agreement.
(b) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Warrant
is exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Section 8(e) below, for new Warrants of
like tenor of different denominations representing in the aggregate the right to
purchase the number of shares of Common Stock which may be purchased hereunder,
each of such new Warrant to represent the right to purchase such number of
shares as shall be designated by the holder hereof at the time of such
surrender.
(c) REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
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(d) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as provided in
this Section 8, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses (other than legal expenses, if any, incurred by the holder or
transferees) and charges payable in connection with the preparation, execution,
and delivery of Warrants pursuant to this Section 8. The Company shall indemnify
and reimburse the holder of this Warrant for all losses and damages arising as a
result of or related to any breach by the Company of the terms of this Warrant,
including costs and expenses (including legal fees) incurred by such holder in
connection with the enforcement of its rights hereunder.
(e) WARRANT REGISTER. The Company shall maintain, at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in which
the Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.
(f) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the time of
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act and under applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such exercise, transfer, or exchange, (i)
that the holder or transferee of this Warrant, as the case may be, furnish to
the Company a written opinion of counsel (which opinion shall be in form,
substance and scope customary for opinions of counsel in comparable
transactions) to the effect that such exercise, transfer, or exchange may be
made without registration under the Securities Act and under applicable state
securities or blue sky laws, (ii) that the holder or transferee execute and
deliver to the Company an investment letter in form and substance reasonably
acceptable to the Company and (iii) that the transferee be an "ACCREDITED
INVESTOR" as defined in Rule 501(a) promulgated under the Securities Act;
PROVIDED that no such opinion, letter, or status as an "accredited investor"
shall be required in connection with a transfer pursuant to Rule 144(k) under
the Securities Act.
(g) ADDITIONAL RESTRICTIONS ON EXERCISE OR TRANSFER.
Notwithstanding anything in Section 1 or Section 3 hereof to the contrary, this
Warrant shall not be exercisable to the extent (but only to the extent) that (a)
the number of shares of Common Stock beneficially owned by the holder of this
Warrant and its affiliates (other than shares of Common Stock which may be
deemed beneficially owned through the ownership of the unexercised portion of
the Warrants or the unexercised or unconverted portion of any other securities
of the Company subject to a limitation on conversion or exercise analogous to
the limitation contained herein) and (b) the number of shares of Common Stock
issuable upon exercise of the Warrants (or portion thereof) with respect to
which the determination described herein is being made, would result in
beneficial ownership by such holder and its affiliates of more than 9.99% of the
outstanding shares of Common Stock. To the extent the above limitation applies,
the determination of whether and to what extent this Warrant shall be
exercisable with respect to other securities owned by such holder shall be in
the sole discretion of the holder and submission
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<PAGE>
of this Warrant for full or partial exercise shall be deemed to be the
holder's determination of whether and the extent to which this Warrant is
exercisable, in each case subject to such aggregate percentage limitation. No
prior inability to exercise the Warrants pursuant to this Section shall have
any effect on the applicability of the provisions of this Section with
respect to any subsequent determination of exercisability. For purposes of
the immediately preceding sentence, beneficial ownership shall be determined
in accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13D-G thereunder, except as otherwise provided in
clause (a) hereof. The restrictions contained in this Section 8(g) may not be
amended without the written consent of the Company and the holder of this
Warrant. Nothing in this Section 8(g) shall affect in any way the obligations
of any holder regarding a Mandatory Exercise as set forth in Section 3 hereof.
9. REGISTRATION RIGHTS. The initial holder of this Warrant (and certain
assignees thereof) are entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in the Registration Rights
Agreement, including the right to assign such rights to certain assignees, as
set forth therein.
10. NOTICES. Any notices required or permitted to be given under the
terms of this Warrant 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 days after being placed in the mail, if
mailed, or upon receipt or refusal of receipt, if delivered personally or by
courier, or by confirmed telecopy, in each case addressed to a party. The
addresses for such communications shall be:
If to the Company:
Precision Optics Corporation, Inc.
22 East Broadway
Gardner, MA 01440-3338
Telephone No.: 978-630-1800
Facsimile No.: 978-630-1487
Attention: Jack P. Dreimiller
Senior Vice President, Finance and
Chief Financial Officer
With a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Telephone No.: 617-951-7000
Facsimile No.: 617-951-7050
Attention: Patrick O'Brien, Esq.
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If to the holder, at such address as such holder shall have provided in writing
to the Company, or at such other address as such holder furnishes by notice
given in accordance with this Section 10, and, for any notice under Section 3,
with a copy to:
First Security Van Kasper
600 California Street, Suite 1700
San Francisco, CA 94108
Telephone No.: (415) 675-2490
Facsimile No.: (415) 954-8309
Attention: Ronald F. Richards
Managing Director, Corporate Finance
11. GOVERNING LAW; JURISDICTION. 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.
12. MISCELLANEOUS.
(a) AMENDMENTS. This Warrant and any provision hereof may only be
amended by an instrument in writing signed by the Company and the holder hereof.
(b) DESCRIPTIVE HEADINGS. The descriptive headings of the several
Sections of this Warrant are inserted for purposes of reference only, and shall
not affect the meaning or construction of any of the provisions hereof.
-10-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
PRECISION OPTICS CORPORATION, INC.
By: _________________________________
Name: Jack P. Dreimiller
Title: Senior Vice President, Finance, Chief
Financial Officer and Clerk
<PAGE>
FORM OF EXERCISE AGREEMENT
(TO BE EXECUTED BY THE HOLDER IN ORDER TO EXERCISE THE WARRANT)
To: Precision Optics Corporation, Inc.
Telephone No.:
Facsimile No.:
Attention:
The undersigned hereby irrevocably exercises the right to purchase
_____________ shares of the Common Stock of PRECISION OPTICS CORPORATION, INC.,
a corporation organized under the laws of the State of Delaware (the "COMPANY"),
and tenders herewith payment of the Exercise Price in full, in the amount of
$_____________, in cash, by certified or official bank check or by wire transfer
for the account of the Company.
The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Common Stock obtained on exercise of the Warrant, except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws.
The undersigned requests that the Company cause its transfer agent to
electronically transmit the Common Stock issuable pursuant to this
Exercise Agreement to the account of the undersigned or its nominee
(which is _________________) with DTC through its Deposit Withdrawal
Agent Commission System ("DTC TRANSFER").
In lieu of receiving the shares of Common Stock issuable pursuant to
this Exercise Agreement by way of DTC Transfer, the undersigned hereby
requests that the Company cause its transfer agent to issue and deliver
to the undersigned physical certificates representing such shares of
Common Stock.
<PAGE>
The undersigned requests that a Warrant representing any unexercised
portion hereof be issued, pursuant to the Warrant, in the name of the Holder and
delivered to the undersigned at the address set forth below:
Dated:
------------------ ------------------------------------
Signature of Holder
------------------------------------
Name of Holder (Print)
Address:
------------------------------------
------------------------------------
------------------------------------
<PAGE>
EXHIBIT4_5.DOC
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the attached Warrant, with
respect to the number of shares of Common Stock covered thereby issuable
pursuant to the attached Warrant set forth hereinbelow, to:
NAME OF ASSIGNEE ADDRESS NO OF SHARES
, and hereby irrevocably constitutes and appoints ______________ as agent and
attorney-in-fact to transfer said Warrant on the books of the within-named
corporation, with full power of substitution in the premises.
Dated:______________,_______
In the presence of
- ------------------
Name:
--------------------------
Signature:
--------------------
Title of Signing Officer or Agent
(if any):
------------------------
Address:
------------------------
------------------------
Note: The above signature
should correspond
exactly with the name
on the face of the
within Warrant.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated July 27, 1999
(except with respect to matters discussed in Note 9, as to which the date is
August 5, 1999), included in Precision Optics Corporation, Inc.'s Form 10-KSB
for the year ended June 30, 1999 and to all references to our Firm included
in this registration statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Boston, Massachusetts
April 27, 2000
