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
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.
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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 Xxx Xxxxxx ("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
7
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
8
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 xxx 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
9
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.
11
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
12
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
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
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
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.
00 Xxxx Xxxxxxxx
Xxxxxxx, XX 00000-0000
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
Attention: Xxxx X. Xxxxxxxxxx
Senior Vice President, Finance and
Chief Financial Officer
With a copy to:
Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
Attention: Xxxxxxx X'Xxxxx, 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 Xxx Xxxxxx
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx
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
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.
17
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]
18
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/ Xxxx X. Xxxxxxxxxx
-------------------------------------
Name: Xxxx X. Xxxxxxxxxx
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
