AGREEMENT
THIS AGREEMENT is entered into as of the 30th day of September,
1997 by and among FRANKLIN OPHTHALMIC INSTRUMENTS CO., INC., a Delaware
corporation (the Company), and Xxxxxxx X. Xxxxxxx and Xxxxx X. Xxxxx
(together, the Stockholders).
RECITALS
A. The Company has outstanding various warrants to purchase
shares of the Company's common stock, $0.001 par value per share (the
Common Stock), including warrants issued in connection with the
Company's initial public offering (the Class A Warrants).
B. Certain sales of Common Stock by the Company occurring after
the issuance of the Class A Warrants have triggered anti-dilution
provisions of the Class A Warrants which have had the effect of
increasing the number of shares issuable upon the exercise of the Class
A Warrants.
C. As a result of such antidilution provisions, the Company lacks
sufficient authorized and unissued shares of Common Stock to be able to
provide for the exercise of all outstanding warrants and options to
purchase Common Stock.
D. The Company intends to propose to the stockholders of the
Company, for approval at the Company's next annual meeting of
stockholders, an amendment to the Company's certificate of incorporation
increasing the number of authorized shares of Common Stock to alleviate
the current potential shortfall.
E. Pending approval of the amendment to the certificate of
incorporation, the Company desires to make adequate provision for the
exercise of all outstanding warrants and options.
F. The Stockholders, as principal stockholders and executive
officers of the Company believe it in their best interest to assist the
Company in making such provision.
NOW, THEREFORE, in consideration of the foregoing Recitals and the
mutual premises contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
AGREEMENT
1. Redemption of Shares. If at any time from time to time during
the term of this Agreement, the Company does not have sufficient shares
of Common Stock to provide for the issuance of shares underlying Common
Stock purchase warrants or options which the holders thereof have
elected to exercise (a Stock Deficiency), the Company shall redeem,
and the Stockholders shall surrender to the Company for redemption, a
number of shares equal to their pro rata shares of the Stock Deficiency,
up the maximum aggregate amounts set forth below (such maximum aggregate
amount of shares for each Stockholder being hereinafter referred to as
the Redeemable Shares):
Stockholder Maximum Aggregate Amount
Xxxxxxx X. Xxxxxxx 1,225,000 shares
Xxxxx X. Xxxxx 1,225,000 shares
Any Redeemable Shares so redeemed by the Company shall be redelivered
from the Company's Treasury to the person or persons exercising the
warrants or options that the Company would otherwise be unable to cover
as a result of the Stock Deficiency.
2. Redemption Price. The redemption price for any Redeemable
Shares redeemed pursuant to paragraph 1 shall be the same as the price
received by the Company upon the exercise of any warrants or options
which the Redeemable Shares are used to cover. The redemption price
shall be paid to the Stockholders by check or wire transfer
contemporaneously with any redemption of Redeemable Shares.
3. Custody.
(a) To facilitate redemptions of the Redeemable Shares, each
Stockholder agrees, promptly upon execution of this Agreement, to
deposit with the Company, (i) certificates representing the Redeemable
Shares and (ii) duly executed stock powers, endorsed in blank, covering
the Redeemable Shares. The Company agrees to hold such certificates and
stock powers in its custody as provided herein.
(b) The Redeemable Shares, while in the custody of the Company,
shall be deemed to be the property of the Stockholders. Accordingly,
the Stockholders shall be entitled to vote the Redeemable Shares, and
any cash dividends paid or other payments made with respect to such
shares while in the Company's custody shall be for the benefit of, and
paid to, the Stockholders in proportion to the number of Redeemable
Shares of each Stockholder held in Escrow on the record date applicable
to such dividends or other payments. The Stockholders shall not,
however, be permitted to transfer or encumber the Redeemable Shares, and
any stock dividends or other payments in the form of securities with
respect to the Redeemable Shares which would be issuable to the holders
of options or warrants upon the exercise thereof shall be held in the
Company's custody and shall be deemed Redeemable Shares.
(c) Within ten (10) business days of the termination of this
Agreement, the Company shall deliver to the Stockholders any remaining
certificates in its custody representing the Redeemable Shares and any
related stock powers.
4. Stockholders' Representations and Warranties. Each Stockholder
represents and warrants to the Company that:
(a) the Stockholders are the legal and beneficial owner of
the Redeemable Shares;
(b) the Stockholders have good, valid and marketable title to
the Redeemable Shares, free and clear of liens, claims,
restrictions or encumbrances of any kind; and
(c) Upon redemption of any of the Redeemable Shares as
provided herein, the Company shall be the owner of such Redeemable
Shares free and clear of any liens, claims, restrictions or
encumbrances.
5. Covenants of the Company. The Company hereby covenants and
agrees that:
(a) during the term of this Agreement it will not issue any
additional shares of Common Stock, or any warrants, options or
other securities exercisable for or convertible into shares of
Common Stock; and
(b) it will use its best efforts to cause an amendment to the
Company's certificate of incorporation to be approved at the
Company's next annual meeting of stockholders and filed promptly
thereafter, increasing the number of authorized shares of the
Company's Common Stock to an amount sufficient to cover all
outstanding warrants and options.
6. Term. The term of this Agreement shall continue until the
earlier to occur of (a) effectiveness of the amendment to the Company's
certificate of incorporation referred to in paragraph 6(a) or (b) the
expiration of warrants and/or options in an amount sufficient to
eliminate any potential Stock Deficiency.
7. Entire Agreement. This Agreement contains the complete and
entire understanding of the parties with respect to the subject matter
hereof, and no modification hereof shall be recognized as valid unless
in writing, signed by the parties and dated subsequent to the date
hereof. No specific waiver of any of the terms of this Agreement shall
be considered as a general waiver.
8. Assignment. This Agreement may not be assigned by any party
without the consent in writing of the other parties hereto.
9. Governing Law. This Agreement shall be governed by the laws
of the State of Illinois without regard to conflict of law principles
thereof.
10. Notices. Any notice or other communication given shall be in
writing and shall be delivered personally or sent by certified mail,
postage prepaid, addressed as follows, or to such other address as a
party may designate in like manner from time to time: if to the
Company, addressed to its President at the principal office of the
Company; and if to a Stockholder, to the address of the Stockholder as
shown on the books of the transfer agent.
11. Counterparts. 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 instrument.
12. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of each of the parties hereto and their respective
successors, heirs and assigns, if any.
13. Captions. Captions to paragraphs herein are for purposes of
reference only and in no way shall limit, define or otherwise affect the
provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
FRANKLIN OPHTHALMIC INSTRUMENTS CO., INC.,
a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxx, President
/s/ Xxxxxxx X. Xxxxxxx
XXXXXXX X. XXXXXXX
/s/ Xxxxx X. Xxxxx
XXXXX X. XXXXX
SSCUH1- 117589-2 -4-
