EXHIBIT 4.9
EXECUTION COPY
PRECISION OPTICS CORPORATION, INC.
SPECIAL SITUATIONS FUND III, L.P.
COMMON STOCK PURCHASE WARRANT
Precision Optics Corporation, Inc., a Massachusetts corporation (the
"COMPANY"), hereby agrees that, for value received, Special Situations Fund III,
L.P., a Delaware limited partnership, is entitled, subject to the terms set
forth below, to purchase from the Company at any time or from time to time after
August 5, 1999, and before 5:00 p.m., Boston, Massachusetts time, on August 5,
2004, in whole or in part, an aggregate of 375,000 shares (the "WARRANT SHARES")
of the common stock of the Company, $0.01 par value per share (the "COMMON
STOCK"), at a price per share of $1.125 (the "INITIAL WARRANT PRICE").
1. EXERCISE OF WARRANT. The purchase rights exercised by this Warrant
shall be exercised by the holder surrendering this Warrant to the Company at its
principal office, accompanied by payment, in cash or by certified or official
bank check payable to the order of the Company, of the Warrant Price (as defined
in Section 3.a) payable in respect of the Warrant Shares being purchased, along
with the exercise form attached hereto duly executed by such holder. If less
than all of the Warrant Shares are purchased, the Company will, upon such
exercise, execute and deliver to the holder hereof a new Warrant (dated the date
thereof) evidencing the number of Warrant Shares not so purchased. Two business
days after the exercise of this Warrant and payment of the Warrant Price, the
Company will cause to be issued in the name of and delivered to the holder
hereof, or as such holder may direct, a certificate or certificates representing
the shares purchased. The Company may require that such certificate or
certificates contain on the face thereof legends substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT") OR ANY APPLICABLE STATE SECURITIES LAWS
AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATING THERETO OR AN OPINION OF
COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT OR SUCH STATE LAWS."
2. NEGOTIABILITY. This Warrant is issued upon the following terms, to
which each taker or owner hereof consents and agrees:
a. This Warrant may be sold, assigned or transferred by endorsement (by
the holder hereof executing the form of assignment attached hereto) and delivery
in the same manner as in the case of a negotiable instrument transferable by
endorsement and delivery.
b. Subject to the next paragraph, any person in possession of this
Warrant, properly endorsed, is authorized to represent himself or herself as
absolute owner hereof and is granted power to transfer absolute title hereto by
endorsement and delivery hereof to a holder in due course. Each prior taker or
owner waives and renounces all of his, her or its equities or rights in this
Warrant in favor of every such holder in due course, and every such holder in
the due course shall acquire absolute title hereto and to all rights represented
hereby.
c. Until this Warrant is transferred on the books of the Company, the
Company may treat the registered holder of this Warrant as absolute owner hereof
for all purposes without being affected by any notice to the contrary.
3. ADJUSTMENT OF COMMON STOCK ISSUABLE UPON EXERCISE.
a. GENERAL; NUMBER OF SHARES; WARRANT PRICE. The number of shares of
Common Stock which the holder of this Warrant shall be entitled to receive upon
each exercise hereof shall be determined by multiplying the number of shares of
Common Stock which would otherwise (but for the provisions of this Section 3) be
issuable upon such exercise, as designated by the holder of this Warrant
pursuant to Section 1 hereof, by the fraction of which (a) the numerator is the
Initial Warrant Price and (b) the denominator is the Warrant Price in effect on
the date of such exercise. The "WARRANT PRICE" shall initially be the Initial
Warrant Price, shall be adjusted and readjusted from time to time as provided in
this Section 3 and, as so adjusted or readjusted, shall remain in effect until a
further adjustment or readjustment thereof is required by this Section 3.
b. ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In case the Company
at any time or from time to time after the date hereof shall issue or sell
Additional Shares of Common Stock (as defined below) without consideration or
for a consideration per share less than the greater of the Current Market Price
or the Warrant Price in effect immediately prior to such issue or sale, then,
and in each such case, subject to Section 3.g hereof, such Warrant Price shall
be reduced, concurrently with such issue or sale, to a price (calculated to the
nearest .001 of a cent) determined by multiplying such Warrant Price by a
fraction:
i. the numerator of which shall be (i) the number of shares of
Common Stock outstanding immediately prior to such issue or
sale plus (ii) the number of shares of Common Stock which the
aggregate consideration received by the Company for the total
number of such Additional Shares of Common Stock so issued or
sold would purchase at the greater of such Current Market
Price and such Warrant Price; and
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ii. the denominator of which shall be the number of shares of
Common Stock outstanding immediately after such issue or sale.
For purposes of this Warrant, (i) the term "ADDITIONAL SHARES OF COMMON STOCK"
means all shares (including treasury shares) of Common Stock issued or sold (or,
pursuant to Section 3.c or 3.d hereof, deemed to be issued) by the Company after
the date hereof, whether or not subsequently reacquired or retired by the
Company, other than the shares of Common Stock issued upon the exercise of this
Warrant and (ii) the term "CURRENT MARKET PRICE" means, on any date specified
herein, the average closing bid price, for the ten most recent trading days, of
the Common Stock on the Nasdaq Small Cap Market or, if the Common Stock shall
not then be quoted on the Nasdaq Small Cap Market but shall otherwise be traded
in the over-the-counter market, on such over-the-counter market. If at any time
the Common Stock shall not be quoted on the Nasdaq Small Cap Market or otherwise
traded in the over-the-counter market, the "Current Market Price" of a share of
Common Stock shall be deemed to be the fair value thereof (as determined in good
faith by the Board of Directors) as of a date which shall be within 15 days of
the date of determination.
c. TREATMENT OF OPTIONS AND CONVERTIBLE SECURITIES. In case the Company
at any time or from time to time after the date hereof shall issue, sell, grant
or assume any Options or Convertible Securities (both as defined below), then,
and in each such case, the maximum number of Additional Shares of Common Stock
(as set forth in the instrument relating thereto, without regard to any
provisions contained therein for a subsequent adjustment of such number the
purpose of which is to protect against dilution) at any time issuable upon the
exercise of such Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible Securities, shall be
deemed to be Additional Shares of Common Stock issued as of the time of such
issue, sale, grant or assumption; PROVIDED, HOWEVER, that such Additional Shares
of Common Stock shall not be deemed to have been issued unless the consideration
per share (determined pursuant to Section 3.e hereof) of such shares would be
less than the greater of the Current Market Price or the Warrant Price in effect
on the date of and immediately prior to such issue, sale, grant or assumption,
as the case may be; and PROVIDED, FURTHER, that in any such case in which
Additional Shares of Common Stock are deemed to be issued:
i. no further adjustment of the Warrant Price shall be made upon
the exercise of such Options or the conversion or exchange of
such Convertible Securities and the consequent issue or sale
of Convertible Securities or shares of Common Stock;
ii. if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any
increase in the consideration payable to the Company, or
decrease in the number of Additional Shares of Common Stock
issuable, upon the exercise, conversion or exchange thereof
(by change of rate or otherwise), the Warrant Price computed
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upon the original issue, sale, grant or assumption thereof,
and any subsequent adjustments based thereon, shall, upon any
such increase or decrease becoming effective, be recomputed to
reflect such increase or decrease insofar as it affects such
Options, or the rights of conversion or exchange under such
Convertible Securities, which are outstanding at such time;
iii. upon the expiration (or purchase by the Company and
cancellation or retirement) of any such Options which shall
not have been exercised, or the expiration of any rights of
conversion or exchange under any such Convertible Securities
which (or purchase by the Company and cancellation or
retirement of any such Convertible Securities the rights of
conversion or exchange under which) shall not have been
exercised, the Warrant Price computed upon the original issue,
sale, grant or assumption thereof, and any subsequent
adjustments based thereon, shall, upon (and effective as of)
such expiration (or such cancellation or retirement, as the
case may be), be recomputed as if:
(A) in the case of Options or Convertible Securities, the
only Additional Shares of Common Stock issued or sold
were the Additional Shares of Common Stock, if any,
actually issued or sold upon the exercise of such
Options or the conversion or exchange of such
Convertible Securities and the consideration received
therefor was the consideration actually received by
the Company for the issue, sale, grant or assumption
of all such Options, whether or not exercised, plus
the consideration actually received by the Company
upon such exercise, or for the issue or sale of all
such Convertible Securities which were actually
converted or exchanged, plus the additional
consideration, if any, actually received by the
Company upon such conversion or exchange, and
(B) in the case of Options for Convertible Securities,
only the Convertible Securities, if any, actually
issued or sold upon the exercise of such Options were
issued at the time of the issue, sale, grant or
assumption of such Options, and the consideration
received by the Company for the Additional Shares of
Common Stock deemed to have then been issued was the
consideration actually received by the Company for
the issue, sale, grant or assumption of all such
Options, whether or not exercised, plus the
consideration deemed to have been received by the
Company (pursuant to Section 3.e hereof) upon the
issue or sale of such
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Convertible Securities with respect to which such
Options were actually exercised;
For purposes of this Warrant, (i) the term "OPTIONS" means rights, options or
warrants to subscribe for, purchase or otherwise acquire either Additional
Shares of Common Stock or Convertible Securities and (ii) the term "CONVERTIBLE
SECURITIES" means all evidences of indebtedness, shares of stock (other than
Common Stock) or other securities directly or indirectly convertible into or
exchangeable for Additional Shares of Common Stock.
d. TREATMENT OF STOCK DIVIDENDS, STOCK SPLITS, ETC. In case the Company
at any time or from time to time after the date hereof shall declare or pay any
dividend on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, Additional Shares of
Common Stock shall be deemed to have been issued (i) in the case of any such
dividend, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend or (ii) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action becomes
effective.
e. COMPUTATION OF CONSIDERATION. For the purposes of this Section 3:
i. the consideration for the issue or sale of any Additional
Shares of Common Stock shall, irrespective of the accounting
treatment of such consideration:
(A) insofar as it consists of cash, be computed at the
amount of cash actually received by the Company, without
deducting any expenses paid or incurred by the Company
or any commissions or compensations paid or concessions
or discounts allowed to underwriters, dealers or others
performing similar services in connection with such
issue or sale;
(B) insofar as it consists of property (including
securities) other than cash actually received by the
Company, or of consideration other than cash or of other
property, be computed at the fair value thereof at the
time of such issue or sale, as determined in good faith
by the Board of Directors of the Company;
(C) in case Additional Shares of Common Stock are issued or
sold together with other stock or securities or other
assets of the Company for a consideration which covers
both, be the portion of such consideration so received,
computed as provided in
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clauses (A) and (B) above, allocable to such Additional
Shares of Common Stock, all as determined in good faith
by the Board of Directors of the Company;
ii. Additional Shares of Common Stock deemed to have been issued
pursuant to Section 2.c hereof shall be deemed to have been
issued for a consideration per share determined by dividing:
(A) the total amount of cash and other property, if any,
received and receivable by the Company as direct consideration for
the issue, sale, grant or assumption of the Options or Convertible
Securities in question, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating
thereto, without regard to any provision contained therein for a
subsequent adjustment of such consideration the purpose of which is
to protect against dilution) payable to the Company upon the
exercise in full of such Options or the conversion or exchange of
such Convertible Securities or, in the case of Options for
Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible
Securities, in each case computing such consideration as provided in
Section 3.e.i.,
by
(B) the maximum number of shares of Common Stock (as set forth
in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number the
purpose of which is to protect against dilution) issuable upon the
exercise of such Options or the conversion or exchange of such
Convertible Securities; and
iii. Additional Shares of Common Stock deemed to have been issued
pursuant to Section 3.d hereof shall be deemed to have been
issued for no consideration.
f. ADJUSTMENTS FOR COMBINATIONS, ETC. In case the outstanding shares of
Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Warrant Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
g. MINIMUM ADJUSTMENT OF WARRANT PRICE. If the amount of any adjustment
of the Warrant Price required pursuant to this Section 3 would be less than one
percent (1%) of the Warrant Price in effect at the time such adjustment is
otherwise so required to be made, such amount shall be carried forward and
adjustment with respect thereto made at the time of and
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together with any subsequent adjustment which, together with such amount and any
other amount or amounts so carried forward, shall aggregate at least one percent
(1%) of such Warrant Price.
h. SHARES DEEMED OUTSTANDING. For all purposes of the computations to
be made pursuant to this Section 3: (i) immediately after any Additional Shares
of Common Stock are deemed to have been issued pursuant to Section 3.c or 3.d
hereof, such Additional Shares shall be deemed to be outstanding, (ii) treasury
shares shall not be deemed to be outstanding, (iii) no adjustment shall be made
in the Warrant Price upon the issuance of Common Stock, Options and Convertible
Securities to employees, directors of and consultants to the Company pursuant to
the Company's 1997 Incentive Plan (under which a total of 1,200,000 shares of
Common Stock have been reserved for issuance) in respect of services rendered to
the Company by such persons and (iv) no adjustment shall be made in the Warrant
Price upon the issuance of shares of Common Stock pursuant to Options and
Convertible Securities outstanding on the date hereof, including without
limitation the Warrants, but this Section 3.h shall not prevent other
adjustments in the Warrant Price arising by virtue of such outstanding Options
or Convertible Securities pursuant to the provisions of Section 3.c hereof.
4. MERGER; REORGANIZATION. 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 the Warrant.
5. REPORT AS TO ADJUSTMENTS. When any adjustment is required to be made
in the Warrant Price, the Company shall forthwith determine the new Warrant
Price; and
a. Prepare and retain on file a statement describing in reasonable
detail the method used in arriving at the new Warrant Price; and
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b. Cause a copy of such statement to be mailed to the holder of this
Warrant as of a date within ten days after the date when the circumstances
giving rise to the adjustment occurred.
6. INVESTMENT INTENT. The Warrant Shares are subject to the
Registration Rights Agreement dated as of August 5, 1999 between the Company,
Special Situations Cayman Fund, L.P., Special Situations Fund III, L.P., Special
Situations Private Equity Fund, L.P. and Special Situations Technology Fund,
L.P. However, as of the date hereof, neither this Warrant nor the Warrant Shares
have been registered under the Securities Act of 1933, as amended (the
"SECURITIES ACT"). The Warrant is issued to the holder on the condition that
this Warrant and any Common Stock purchased upon exercise of this Warrant are or
will be purchased for investment purposes and not with an intent to distribute
the same. Before making any disposition of this Warrant or of any Common Stock
purchased upon exercise of this Warrant, the holder will give written notice to
the Company describing briefly the manner of any such proposed disposition.
7. COMPANY CALL. If, prior to the exercise or earlier expiration of
this Warrant pursuant to the terms hereof, the last sale price of the Common
Stock on the Nasdaq Small Cap Market equals or exceeds $2.25 on each of any 20
consecutive trading days, the Company shall be entitled, within 10 trading days
of the last of such 20 consecutive trading days, at its option, to issue a
notice (a "CALL NOTICE") to the holder of this Warrant to the effect that the
Company is exercising its rights pursuant to this Section 7. Upon receipt of a
Call Notice (which receipt will be deemed to occur on the one business day
following the dispatch of such Call Notice by the Company by a nationally
recognized overnight courier), the holder shall have until 5.00 p.m., Boston,
Massachusetts time, on the tenth business day following receipt of the Call
Notice to exercise the Warrant in accordance with Section 1 hereof. Upon the
expiration of such ten day period, if not sooner exercised, this Warrant will
terminate and the holder's and the Company's rights and obligations hereunder
will cease without payment of consideration. Notwithstanding the foregoing
provisions of this Section 7, the Company may not issue a Call Notice unless and
until a registration statement is effective, or no longer required, with respect
to the resale of the Warrant Shares.
8. NOTICES. The Company shall mail to the registered holder of this
Warrant, at his or her last address appearing on the books of the Company, not
less than 20 days prior to the date on which (a) a record will be taken for the
purpose of determining the holders of Common Stock entitled to dividends (other
than cash dividends) or subscription right, or (b) a record will be taken (or in
lieu thereof, the transfer books will be closed) for the purpose of determining
the holders of Common Stock entitled to notice of and to vote at a meeting of
stockholders at which any capital reorganization, reclassification of shares of
Common Stock, consolidation, merger, dissolution, liquidation, winding up or
sale of substantially all of the Company's assets shall be considered and acted
upon.
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Notwithstanding such notice requirements, until exercise and payment
therefor, any holder of this Warrant shall not be deemed a shareholder of the
Company with respect to shares of Common Stock underlying the Warrant.
9. RESERVATION OF COMMON STOCK. A number of shares of Common Stock
sufficient to provide for the exercise of this Warrant on the terms and
conditions herein set forth shall be reserved at all times for the exercise of
such Warrant.
10. MISCELLANEOUS. Whenever reference is made herein to the issuance or
sale of shares of Common Stock, the term "Common Stock" shall include any stock
of any class of the Company other than preferred stock with a fixed limit on
dividends and a fixed amount payable in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company.
The Company will not, by amendment of its Articles of Organization or
through reorganization, consolidation, merger, dissolution or sale of assets, or
by any other voluntary act or deed, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to be observed
or performed hereunder by the Company, but will, at all times in good faith,
assist, insofar as it is able, in the carrying out of all provisions hereof and
in the taking of all other action which may be necessary in order to protect the
rights of the holder hereof against dilution.
The representations, warranties and agreements herein contained shall
survive the exercise of this Warrant. References to the "holder of" include the
immediate holder of Warrant Shares purchased on the exercise of this Warrant and
the holder of any new Warrants issued pursuant to Section 1 upon the purchase of
less than all of the Common Stock purchasable under this Warrant, and the word
"holder" shall include the plural thereof.
All shares of Common Stock or other securities issued upon the exercise
of this Warrant shall be validly issued, fully paid and nonassessable, and the
Company will pay all taxes in respect of the issuance thereof.
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IN WITNESS WHEREOF, this Warrant has been duly executed by Precision
Optics Corporation, Inc. this 5th day of August, 1999.
PRECISION OPTICS CORPORATION, INC.
By: /s/ Xxxxxxx X. Xxxxxx
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President
[Special Situations Fund III, L.P.]
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[Warrant]
EXERCISE FORM
(TO BE SIGNED ONLY UPON EXERCISE OF WARRANT)
To Precision Optics Corporation, Inc.:
The undersigned, the holder of the within warrant, hereby irrevocably
elects to exercise the purchase right represented by such warrant for, and to
purchase thereunder *________________ shares of the Common Stock of Precision
Optics Corporation, Inc., and herewith makes payment of $______ therefor, and
requests that the certificates for such shares be issued in the name of, and
delivered to the undersigned.
Dated: SPECIAL SITUATIONS FUND III, L.P.
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By:
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Title:
[Address]
*Insert here all or such portion of the number of shares called for on the face
of the within warrant in 10,000 or more share increments with respect to which
the holder desires to exercise the purchase right represented thereby, without
adjustment for any other or additional stock, other securities, property or cash
which may be deliverable on such exercise.
ASSIGNMENT FORM
(TO BE SIGNED ONLY UPON TRANSFER OF THE WARRANT)
For value received, the undersigned hereby sells, assigns and transfers
unto _______________________ the right represented by the within warrant to
purchase _________________ of the shares of Common Stock of Precision Optics
Corporation, Inc. to which the within warrant relates and appoints
_____________________ attorney to transfer said right on the books of Precision
Optics Corporation, Inc., with full power of substitution in the premises.
Dated: SPECIAL SITUATIONS FUND III, L.P.
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By:
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Title:
