VOID AFTER 5:00 P.M., NEW YORK CITY TIME,
ON APRIL 1, 2004
THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER JURISDICTION. THE SECURITIES REPRESENTED
HEREBY MAY NOT BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES
LAWS UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
Right to Purchase 145,495 Shares
of Common Stock, no par value per share
Date: April 1, 1999
MICROVISION, INC.
SERIES 1 STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, Capital Ventures International, or
its registered assigns, is entitled to purchase from MICROVISION, INC., a
corporation organized under the laws of the State of Washington (the "Company"),
at any time or from time to time during the period specified in Section 2
hereof, One Hundred and Forty Five Thousand Four Hundred and Ninety Five
(145,495) fully paid and nonassessable shares of the Company's common stock, no
par value per share (the "Common Stock"), at an exercise price per share (the
"Exercise Price") equal to $19.05225. The number of shares of Common Stock
purchasable hereunder (the "Warrant Shares") and the Exercise Price are subject
to adjustment as provided in Section 4 hereof. The term "Warrants" means this
Warrant, the other Series 1 Warrants (the "Series 1 Warrants") and the Series 2
Warrants of the Company issued pursuant to that certain Securities Purchase
Agreement, dated as of April 1, 1999, by and among the Company and the other
signatories thereto (the "Securities Purchase Agreement").
This Warrant is subject to the following terms, provisions and conditions:
1. Manner of Exercise; Issuance of Certificates; Payment for Shares.
Subject to the provisions hereof, including, without limitation, the limitations
contained in Section 7 hereof, this Warrant may be exercised at any time during
the Exercise Period (as defined below) by the holder hereof, in whole or in
part, by the surrender of this Warrant, together with a completed exercise
agreement in the form attached hereto (the "Exercise Agreement"), to the Company
by 11:59 p.m. New York time on any business day at the Company's principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof) and upon (i) payment to the Company in
cash, by certified or official bank check or by wire transfer for the account of
the Company, of the Exercise Price for the Warrant Shares specified in the
Exercise Agreement or (ii) if the holder is permitted to effect a Cashless
Exercise (as defined in Section 11(c) hereof) pursuant to Section 11(c) hereof,
delivery to the Company of a written notice of an election to effect a Cashless
Exercise for the Warrant Shares specified in the Exercise Agreement. The Warrant
Shares so purchased shall be deemed to be issued to the holder hereof or such
holder's designee, as the record owner of such shares, as of the close of
business on the date on which this Warrant shall have been surrendered and the
completed Exercise Agreement shall have been delivered and payment shall have
been made for such shares as set forth above or, if such day is not a business
day, on the next succeeding business day. The Warrant Shares so purchased,
representing the aggregate number of shares specified in the Exercise Agreement,
shall be delivered to the holder hereof within a reasonable time, not exceeding
two business days, after this Warrant shall have been so exercised (the
"Delivery Period"). If the Company's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer program, and
so long as the certificates therefor do not bear a legend and the holder is not
obligated to return such certificate for the placement of a legend thereon, the
Company shall cause its transfer agent to electronically transmit the Warrant
Shares so purchased to the holder by crediting the account of the holder or its
nominee with DTC through its Deposit Withdrawal Agent Commission system ("DTC
Transfer"). If the aforementioned conditions to a DTC Transfer are not
satisfied, the Company shall deliver to the holder physical certificates
representing the Warrant Shares so purchased. Further, the holder may instruct
the Company to deliver to the holder physical certificates representing the
Warrant Shares so purchased in lieu of delivering such shares by way of DTC
Transfer. Any certificates so delivered shall be in such denominations as may be
requested by the holder hereof, shall be registered in the name of such holder
or such other name as shall be designated by such holder and, following the date
on which the Warrant Shares have been registered under the Securities Act
pursuant to that certain Registration Rights Agreement, dated as of April 1,
1999, by and between the Company and the other signatories thereto (the
"Registration Rights Agreement") or otherwise may be sold by the holder pursuant
to Rule 144 promulgated under the Securities Act (or a successor rule), shall
not bear any restrictive legend. If this Warrant shall have been exercised only
in part, then, unless this Warrant has expired, the Company shall, at its
expense, at the time of delivery of such certificates, deliver to the holder a
new Warrant representing the number of shares with respect to which this Warrant
shall not then have been exercised.
If, at any time during the Exercise Period, a holder of this Warrant
submits this Warrant, an Exercise Agreement and payment to the Company of the
Exercise Price for each of the Warrant Shares specified in the Exercise
Agreement, and the Company fails for any reason to deliver, on or prior to the
third business day following the expiration of the Delivery Period for such
exercise, the number of shares of Common Stock to which the holder is entitled
upon such exercise (an "Exercise
2
Default"), then the Company shall pay to the holder payments ("Exercise Default
Payments") for an Exercise Default in the amount of (a) (N/365), multiplied by
(b) the amount by which the Market Price (as defined in Section 4(l) hereof) on
the date the Exercise Agreement giving rise to the Exercise Default is
transmitted in accordance with this Section 1 (the "Exercise Default Date")
exceeds the Exercise Price in respect of such Warrant Shares, multiplied by (c)
the number of shares of Common Stock the Company failed to so deliver in such
Exercise Default, multiplied by (d) .24, where N = the number of days from the
Exercise Default Date to the date that the Company effects the full exercise of
this Warrant which gave rise to the Exercise Default. The accrued Exercise
Default Payment for each calendar month shall be paid in cash or shall be
convertible into Common Stock (subject to the limitations on the Company's
ability to issue such shares set forth in Rule 4460(i) of the National
Association of Securities Dealers or any successor rule), at the holder's
option, as follows:
(a) In the event the holder elects to take such payment in cash, cash
payment shall be made to holder by the fifth day of the month following the
month in which it has accrued; and
(b) In the event the holder elects to take such payment in Common
Stock, the holder may convert such payment amount into Common Stock at a
conversion price equal to the lower of the Exercise Price or the Market Price
(as defined in Section 4(l)) (as in effect at the time of conversion) at any
time after the fifth day of the month following the month in which it has
accrued, which shares of Common Stock shall be delivered within two (2) business
days thereafter.
Nothing herein shall limit the holder's right to pursue actual damages
for the Company's failure to maintain a sufficient number of authorized shares
of Common Stock as required pursuant to the terms of Section 3(b) hereof or to
otherwise issue shares of Common Stock upon exercise of this Warrant in
accordance with the terms hereof, and the holder shall have the right to pursue
all remedies available at law or in equity (including a decree of specific
performance and/or injunctive relief).
2. Period of Exercise. This Warrant may be exercised at any time or from
time to time during the period (the "Exercise Period") beginning on (a) the date
hereof and ending (b) at 5:00 p.m., New York City time, on the fifth annual
anniversary of the date of original issuance hereof.
3. Certain Agreements of the Company. The Company hereby covenants and
agrees as follows:
(a) Shares to be Fully Paid. All Warrant Shares will, upon issuance in
accordance with the terms of this Warrant, be validly issued, fully paid and
nonassessable and free from all taxes, liens, claims and encumbrances.
(b) Reservation of Shares. During the period (the "Investment Period")
beginning on the Closing Date and ending upon the expiration of the Exercise
Period, the Company shall at all times have authorized, and reserved for the
purpose of issuance upon exercise of this
3
Warrant, a sufficient number of shares of Common Stock to provide for the
exercise in full of this Warrant (without giving effect to the limitations on
exercise set forth in Section 7(g) hereof).
(c) Listing. The Company has secured the listing of the shares of
Common Stock issuable upon exercise of this Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed or become listed (subject to official notice of
issuance upon exercise of this Warrant) and shall maintain, so long as any other
shares of Common Stock shall be so listed, such listing of all shares of Common
Stock from time to time issuable upon the exercise of this Warrant; and the
Company shall so list on each national securities exchange or automated
quotation system, as the case may be, and shall maintain such listing of, any
other shares of capital stock of the Company issuable upon the exercise of this
Warrant if and so long as any shares of the same class shall be listed on such
national securities exchange or automated quotation system.
(d) Certain Actions Prohibited. The Company will not, by amendment of
its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issuance or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
to be observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the economic benefit inuring to the holder hereof
and the exercise privilege of the holder of this Warrant against dilution or
other impairment, consistent with the tenor and purpose of this Warrant. Without
limiting the generality of the foregoing, the Company (i) will not increase the
par value of any shares of Common Stock receivable upon the exercise of this
Warrant above the Exercise Price then in effect, and (ii) will take all such
actions as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant.
(e) Successors and Assigns. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all of the Company's assets.
(f) Blue Sky Laws. The Company shall, on or before the date of
issuance of any Warrant Shares, take such actions as the Company shall
reasonably determine are necessary to qualify the Warrant Shares for, or obtain
exemption for the Warrant Shares for, sale to the holder of this Warrant upon
the exercise hereof under applicable securities or "blue sky" laws of the states
of the United States, and shall provide evidence of any such action so taken to
the holder of this Warrant prior to such date; provided, however, that the
Company shall not be required to qualify as a foreign corporation or file a
general consent to service of process in any such jurisdiction.
4. Antidilution Provisions. During the Investment Period, the Exercise
Price and the number of Warrant Shares issuable hereunder shall be subject to
adjustment from time to time as provided in this Section 4.
4
In the event that any adjustment of the Exercise Price as required herein
results in a fraction of a cent, such Exercise Price shall be rounded up or down
to the nearest cent.
(a) Adjustment of Exercise Price. Except as otherwise provided in
Sections 4(b)(vi), 4(c) and 4(e) hereof, if and whenever during the Investment
Period the Company issues or sells, or in accordance with Section 4(b) hereof is
deemed to have issued or sold, any shares of Common Stock for no consideration
or for a consideration per share less than the Market Price (as hereinafter
defined) on the date of issuance (a "Dilutive Issuance"), then effective
immediately upon the Dilutive Issuance, the Exercise Price will be adjusted in
accordance with the following formula:
E' = E x O + P/M
-------
CSDO
where:
E' = the adjusted Exercise Price;
E = the then current Exercise Price;
M = the then current Market Price (as defined in
Section 4(1)(ii));
O = the number of shares of Common Stock outstanding immediately
prior to the Dilutive Issuance;
P = the aggregate consideration, calculated as set forth in
Section 4(b) hereof, received by the Company upon such
Dilutive Issuance; and
CSDO = the total number of shares of Common Stock Deemed
Outstanding (as defined in Section 4(l)(i)) immediately
after the Dilutive Issuance.
(b) Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under Section 4(a) hereof, the following
will be applicable:
(i) Issuance of Rights or Options. If the Company in any manner
issues or grants any warrants, rights or options, whether or not immediately
exercisable, to subscribe for or to purchase Common Stock or other securities
exercisable, convertible into or exchangeable for Common Stock ("Convertible
Securities") (such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as "Options") and the price
per share for which Common Stock is issuable upon the exercise of such Options
is less than the Market Price in effect on the date of issuance of such Options
("Below Market Options"), then the maximum total number of shares of Common
Stock issuable upon the exercise of all such Below Market Options (assuming full
exercise, conversion or exchange of Convertible Securities, if applicable) will,
as of the date of the issuance or grant of such Below Market Options, be deemed
to be outstanding and to have been issued and sold by the Company for such price
per share. For purposes of the preceding sentence, the "price per share for
which Common Stock is issuable upon the exercise of such Below Market Options"
is determined by dividing (i) the total amount, if any, received or receivable
by the Company as consideration for the issuance or granting of all such Below
Market Options, plus the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the exercise of all such Below Market
Options, plus, in the case of Convertible Securities issuable upon the exercise
of such Below Market Options, the minimum
5
aggregate amount of additional consideration payable upon the exercise,
conversion or exchange thereof at the time such Convertible Securities first
become exercisable, convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the exercise of all such Below
Market Options (assuming full conversion of Convertible Securities, if
applicable). No further adjustment to the Exercise Price will be made upon the
actual issuance of such Common Stock upon the exercise of such Below Market
Options or upon the exercise, conversion or exchange of Convertible Securities
issuable upon exercise of such Below Market Options.
(ii) Issuance of Convertible Securities.
(A) If the Company in any manner issues or sells any
Convertible Securities, whether or not immediately exercisable, convertible or
exchangeable (other than where the same are issuable upon the exercise of
Options) and the price per share for which Common Stock is issuable upon such
exercise, conversion or exchange (as determined pursuant to Section 4(b)(ii)(B)
if applicable) is less than the Market Price in effect on the date of issuance
of such Convertible Securities, then the maximum total number of shares of
Common Stock issuable upon the exercise, conversion or exchange of all such
Convertible Securities will, as of the date of the issuance of such Convertible
Securities, be deemed to be outstanding and to have been issued and sold by the
Company for such price per share. For the purposes of the preceding sentence,
the "price per share for which Common Stock is issuable upon such exercise,
conversion or exchange" is determined by dividing (i) the total amount, if any,
received or receivable by the Company as consideration for the issuance or sale
of all such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the exercise,
conversion or exchange thereof at the time such Convertible Securities first
become exercisable, convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the exercise, conversion or
exchange of all such Convertible Securities. No further adjustment to the
Exercise Price will be made upon the actual issuance of such Common Stock upon
exercise, conversion or exchange of such Convertible Securities.
(B) If the Company in any manner issues or sells any
Convertible Securities with a fluctuating conversion or exercise price or
exchange ratio (a "Variable Rate Convertible Security"), then the "price per
share for which Common Stock is issuable upon such exercise, conversion or
exchange" for purposes of the calculation contemplated by Section 4(b)(ii)(A)
shall be deemed to be the lowest price per share which would be applicable
(assuming all holding period and other conditions to any discounts contained in
such Convertible Security have been satisfied) if the Market Price on the date
of issuance of such Convertible Security was 75% of the Market Price on such
date (the "Assumed Variable Market Price"). Further, if the Market Price at any
time or times thereafter is less than or equal to the Assumed Variable Market
Price last used for making any adjustment under this Section 4 with respect to
any Variable Rate Convertible Security, the Exercise Price in effect at such
time shall be readjusted to equal the Exercise Price which would have resulted
if the Assumed Variable Market Price at the time of issuance of the Variable
Rate Convertible Security had been 75% of the Market Price existing at the time
of the adjustment required by this sentence.
6
(iii) Change in Option Price or Conversion Rate. If there is a
change at any time in (i) the amount of additional consideration payable to the
Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the exercise, conversion or
exchange of any Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into, or exercisable or exchangeable for,
Common Stock (in each such case, other than under or by reason of provisions
designed to protect against dilution), the Exercise Price in effect at the time
of such change will be readjusted to the Exercise Price which would have been in
effect at such time had such Options or Convertible Securities still outstanding
provided for such changed additional consideration or changed conversion rate,
as the case may be, at the time initially granted, issued or sold.
(iv) Treatment of Expired Options and Unexercised Convertible
Securities. If, in any case, the total number of shares of Common Stock issuable
upon exercise of any Option or upon exercise, conversion or exchange of any
Convertible Securities is not, in fact, issued and the rights to exercise such
Option or to exercise, convert or exchange such Convertible Securities shall
have expired or terminated, the Exercise Price then in effect will be readjusted
to the Exercise Price which would have been in effect at the time of such
expiration or termination had such Option or Convertible Securities, to the
extent outstanding immediately prior to such expiration or termination (other
than in respect of the actual number of shares of Common Stock issued upon
exercise or conversion thereof), never been issued.
(v) Calculation of Consideration Received. If any Common Stock,
Options or Convertible Securities are issued, granted or sold for cash, the
consideration received therefor for purposes of this Warrant will be the amount
received by the Company therefor, before deduction of reasonable commissions,
underwriting discounts or allowances or other reasonable expenses paid or
incurred by the Company in connection with such issuance, grant or sale. In case
any Common Stock, Options or Convertible Securities are issued or sold for a
consideration part or all of which shall be other than cash, the amount of the
consideration other than cash received by the Company will be the fair market
value of such consideration, except where such consideration consists of
securities, in which case the amount of consideration received by the Company
will be the Market Price thereof as of the date of receipt. In case any Common
Stock, Options or Convertible Securities are issued in connection with any
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair market value of
such portion of the net assets and business of the non-surviving corporation as
is attributable to such Common Stock, Options or Convertible Securities, as the
case may be. The fair market value of any consideration other than cash or
securities will be determined in good faith by an investment banker or other
appropriate expert of national reputation selected by the Company and reasonably
acceptable to the holder hereof, with the costs of such appraisal to be borne by
the Company.
(vi) Exceptions to Adjustment of Exercise Price. No adjustment to
the Exercise Price will be made (i) upon the exercise of any warrants, options
or convertible securities issued and outstanding on the Closing Date and set
forth on Schedule 4(c) of the Securities Purchase Agreement in accordance with
the terms of such securities as of such date; provided, however, that an
adjustment to the Exercise Price will be made if, and to the extent that, the
exercise price or
7
conversion price of such outstanding warrants, options or convertible securities
is reduced by the Company in accordance with the terms of such securities (other
than a reduction in connection with a recapitalization, reclassification, stock
split, stock dividend or the like as provided therein) or otherwise; (ii) upon
the issuance of any securities reserved for contingent issuance as set forth on
Schedule 4(c) of the Securities Purchase Agreement, and upon the exercise or
conversion of such securities in accordance with the terms thereof; (iii) upon
the grant or exercise of any stock or options which may hereafter be granted or
exercised under any employee benefit plan, stock option plan or stock purchase
plan of the Company now existing or to be implemented in the future, so long as
the grant of such stock or options is approved in accordance with the terms of
any such plan and the Company's usual and customary approval procedures with
respect thereto; (iv) upon the issuance of any Common Stock or Warrants in
accordance with the terms of the Securities Purchase Agreement; (v) upon
exercise of the Warrants; (vi) upon the issuance or exercise of any Common
Stock, warrants, options, convertible securities or any combination of the
foregoing, which are issued in connection with an underwritten primary public
offering for the account of the Company, so long as the underwriting agreement
with respect thereto contains only usual and customary terms and provisions and
so long as the underwriting discounts and commissions in connection with such
public offering are not in excess of what is usual and customary in connection
with a public offering of comparable size with respect to like securities of a
company, the common stock of which is registered under the Securities Exchange
Act of 1934, as amended; provided, however, that the exception to the adjustment
of the Exercise Price set forth in this clause (vi) shall not be applicable if a
Variable Rate Convertible Security is issued in connection with such
underwritten primary public offering; or (vii) upon the issuance or exercise of
any Common Stock, warrants, options, convertible securities or any combination
of the foregoing, which are issued on or after the six (6) month anniversary of
the Closing Date in connection with the Company's receipt of an aggregate of up
to five million dollars ($5,000,000) of private financing during any twelve
month period, so long as the Deemed Discount (as defined below) associated with
the securities, assets and other consideration, if any, issued or granted by the
Company in connection with such financing is not greater than 15% of the gross
proceeds to the Company of such financing (an "Excepted Financing"); provided,
however, that any financing in which a Variable Rate Convertible Security is
issued or in which the Deemed Discount is in excess of 15% shall not be an
Excepted Financing. For purposes of this Section 4(b)(vi), "Deemed Discount"
shall mean the quotient obtained by dividing (I) the amount by which (A) the sum
of (x) the value of the securities, assets and any other consideration, if any,
issued or granted by the Company in connection with the Excepted Financing,
taking into account, with respect to securities, stated discounts, liquidation
preferences, conversion features, look-back mechanisms, warrant coverage and any
other feature representing value, plus (y) the amount of any cash consideration
from the Company to an investor in such Excepted Financing or such investor's
affiliates in connection with the provision of such Excepted Financing exceeds
(B) the gross proceeds to the Company of the Excepted Financing, by (II) the
gross proceeds to the Company of the Excepted Financing. The Company shall
calculate, using commercial valuation methods appropriate for valuing such
securities, assets or other items of consideration, the Deemed Discount within
five (5) business days after the closing of the Excepted Financing; provided,
however, that if the holder of this Warrant does not agree to such calculation
within three (3) business days after receipt thereof (and the details in respect
thereto), then the Deemed Discount shall be determined in good faith by an
investment banker or other appropriate expert of national reputation selected by
the Company and reasonably acceptable to the holder of
8
this Warrant, with the costs of such determination to be borne by the Company.
For the avoidance of doubt, if the gross proceeds to the Company in an Excepted
Financing exceed five million dollars ($5,000,000), then the Exercise Price
shall be adjusted pursuant to this Section 4 based on the issuance of the
pro-rata amount and type of securities issued in such Excepted Financing in
respect of such excess.
(c) Subdivision or Combination of Common Stock. If the Company, at any
time during the Investment Period, subdivides (by any stock split, stock
dividend, recapitalization, reorganization, reclassification or otherwise) its
shares of Common Stock into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company, at
any time during the Investment Period, combines (by reverse stock split,
recapitalization, reorganization, reclassification or otherwise) its shares of
Common Stock into a smaller number of shares, then, after the date of record for
effecting such combination, the Exercise Price in effect immediately prior to
such combination will be proportionately increased.
(d) Adjustment in Number of Shares. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 4, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be increased
or decreased to equal the quotient obtained by dividing (i) the product of (A)
the Exercise Price in effect immediately prior to such adjustment, multiplied by
(B) the number of shares of Common Stock issuable upon exercise of this Warrant
immediately prior to such adjustment, by (ii) the adjusted Exercise Price.
(e) Consolidation, Merger or Sale. In case of any consolidation of the
Company with, or merger of the Company into, any other entity, or in case of any
sale or conveyance of all or substantially all of the assets of the Company
other than in connection with a plan of complete liquidation of the Company at
any time during the Investment Period, then as a condition of such
consolidation, merger or sale or conveyance, adequate provision will be made
whereby the holder of this Warrant will have the right to acquire and receive
upon exercise of this Warrant in lieu of the shares of Common Stock immediately
theretofore acquirable upon the exercise of this Warrant, such shares of stock,
securities, cash or assets as may be issued or payable with respect to or in
exchange for the number of shares of Common Stock immediately theretofore
acquirable and receivable upon exercise of this Warrant had such consolidation,
merger or sale or conveyance not taken place. In any such case, the Company will
make appropriate provision to insure that the provisions of this Section 4 will
thereafter be applicable as nearly as may be in relation to any shares of stock
or securities thereafter deliverable upon the exercise of this Warrant. The
Company will not effect any consolidation, merger or sale or conveyance unless
prior to the consummation thereof, the successor entity (if other than the
Company) assumes by written instrument the obligations under this Warrant and
the obligations to deliver to the holder of this Warrant such shares of stock,
securities or assets as, in accordance with the foregoing provisions, the holder
may be entitled to acquire. Notwithstanding the foregoing, in the event of any
consolidation of the Company with, or merger of the Company into, any other
entity, or the sale or conveyance of all or substantially all of the assets of
the Company, at any time during the Investment Period, the holder of the Warrant
shall, at its option, have the right to receive, in connection with such
transaction, cash consideration equal
9
to the fair value of this Warrant as determined in accordance with customary
valuation methodology used in the investment banking industry.
(f) Distribution of Assets. In case the Company shall declare or make
any distribution of its assets (or rights to acquire its assets) to holders of
Common Stock as a partial liquidating dividend, stock repurchase, by way of
return of capital or otherwise (including any dividend or distribution to the
Company's shareholders of cash or shares (or rights to acquire shares) of
capital stock of a subsidiary) (a "Distribution"), at any time during the
Investment Period, then, upon exercise of this Warrant for the purchase of any
or all of the shares of Common Stock subject hereto, the holder of this Warrant
shall be entitled to receive its pro-rata amount of such assets (or such rights)
as would have been payable to the holder had such holder been the holder of such
shares of Common Stock on the record date for the determination of shareholders
entitled to such Distribution.
(g) Notice of Adjustment. Upon the occurrence of any event which
requires any adjustment of the Exercise Price, then, and in each such case, the
Company shall give notice thereof to the holder of this Warrant, which notice
shall state the Exercise Price resulting from such adjustment and the increase
or decrease in the number of Warrant Shares issuable upon exercise of this
Warrant, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based. Such calculation shall be certified
by the chief financial officer of the Company.
(h) Minimum Adjustment of Exercise Price. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(i) No Fractional Shares. No fractional shares of Common Stock are to
be issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the Market Price of a share of Common
Stock on the date of such exercise.
(j) Other Notices. In case at any time:
(i) the Company shall declare any dividend upon the Common Stock
payable in shares of stock of any class or make any other distribution (other
than dividends or distributions payable in cash out of retained earnings
consistent with the Company's past practices with respect to declaring dividends
and making distributions) to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or other
rights;
10
(iii) there shall be any capital reorganization of the Company,
or reclassification of the Common Stock, or consolidation or merger of the
Company with or into, or sale of all or substantially all of its assets to,
another corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date or estimated date on which the books of the Company shall
close or a record shall be taken for determining the holders of Common Stock
entitled to receive any such dividend, distribution, or subscription rights or
for determining the holders of Common Stock entitled to vote in respect of any
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up and (b) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, notice of the date (or, if not then known, a reasonable estimate
thereof by the Company) when the same shall take place. Such notice shall also
specify the date on which the holders of Common Stock shall be entitled to
receive such dividend, distribution, or subscription rights or to exchange their
Common Stock for stock or other securities or property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding-up, as the case may be. Such notice shall be given at
least thirty (30) days prior to the record date or the date on which the
Company's books are closed in respect thereto. Failure to give any such notice
or any defect therein shall not affect the validity of the proceedings referred
to in clauses (i), (ii), (iii) and (iv) above. Notwithstanding the foregoing,
the Company shall publicly disclose the substance of any notice delivered
hereunder prior to delivery of such notice to the holder of this Warrant.
(k) Certain Events. If, at any time during the Investment Period, any
event occurs of the type contemplated by the adjustment provisions of this
Section 4 but not expressly provided for by such provisions, the Company will
give notice of such event as provided in Section 4(g) hereof, and the Company's
Board of Directors will make an appropriate adjustment in the Exercise Price and
the number of shares of Common Stock acquirable upon exercise of this Warrant so
that the rights of the holder shall be neither enhanced nor diminished by such
event.
(l) Certain Definitions.
(i) "Common Stock Deemed Outstanding" shall mean the number of
shares of Common Stock actually outstanding, plus (x) in the case of any
adjustment required by Section 4(a) resulting from the issuance of any Options,
the maximum total number of shares of Common Stock issuable upon the exercise of
the Options for which the adjustment is required (including any Common Stock
issuable upon the conversion of Convertible Securities issuable upon the
exercise of such Options), and (y) in the case of any adjustment required by
Section 4(a) resulting from the issuance of any Convertible Securities, the
maximum total number of shares of Common Stock issuable upon the exercise,
conversion or exchange of the Convertible Securities for which the adjustment is
required, as of the date of issuance of such Convertible Securities, if any.
11
(ii) "Market Price," as of any date, (i) means the average of the
closing bid prices for the shares of Common Stock as reported on The Nasdaq
National Market ("Nasdaq") by Bloomberg Financial Markets ("Bloomberg") for the
five consecutive trading days immediately preceding such date, or (ii) if Nasdaq
is not the principal trading market for the shares of Common Stock, the average
of the last reported bid prices as reported by Bloomberg on the principal
trading market for the Common Stock during the same period, or, if there is no
bid price for such period, the last reported sales price as reported by
Bloomberg for such period, or (iii) if market value cannot be calculated as of
such date on any of the foregoing bases, the Market Price shall be the average
fair market value as reasonably determined by an investment banking firm
selected by the Company and reasonably acceptable to the holder, with the costs
of the appraisal to be borne by the Company. The manner of determining the
Market Price of the Common Stock set forth in the foregoing definition shall
apply with respect to any other security in respect of which a determination as
to market value must be made hereunder.
(iii) "Common Stock," for purposes of this Section 4, includes
the Common Stock and any additional class of stock of the Company having no
preference as to dividends or distributions on liquidation, provided that the
shares purchasable pursuant to this Warrant shall include only Common Stock in
respect of which this Warrant is exercisable, or shares resulting from any
subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Section 4(e) hereof, the stock or other securities or
property provided for in such Section.
5. Issue Tax. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
6. No Rights or Liabilities as a Shareholder. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
7. Transfer, Exchange, Redemption and Replacement of Warrant.
(a) Restriction on Transfer. This Warrant and the rights granted to
the holder hereof are transferable, in whole or in part, upon surrender of this
Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Section 7(e)
below, provided, however, that any transfer or assignment shall be subject to
the conditions set forth in Sections 7(f) and 7(g) hereof and to the provisions
of Sections 3(e) and 3(f) of the Securities Purchase Agreement. Until due
presentment for registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the owner and holder hereof
for all purposes, and the Company shall not be affected by any notice to the
contrary.
12
Notwithstanding anything to the contrary contained herein, the registration
rights described in Section 8 hereof are assignable only in accordance with the
provisions of the Registration Rights Agreement.
(b) Warrant Exchangeable for Different Denominations. This Warrant is
exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Section 7(e) below, for new Series 1
Warrants of like tenor of different denominations representing in the aggregate
the right to purchase the number of shares of Common Stock which may be
purchased hereunder, each of such new Series 1 Warrants to represent the right
to purchase such number of shares as shall be designated by the holder hereof at
the time of such surrender.
(c) Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
(d) Cancellation; Payment of Expenses. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as provided in
this Section 7, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses (other than legal expenses, if any, incurred by the Holder or
transferees) and charges payable in connection with the preparation, execution,
and delivery of Series 1 Warrants pursuant to this Section 7. The Company shall
indemnify and reimburse the holder of this Warrant for all losses and damages
arising as a result of or related to any breach by the Company of the terms of
this Warrant, including costs and expenses (including legal fees) incurred by
such holder in connection with the enforcement of its rights hereunder.
(e) Warrant Register. The Company shall maintain, at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in which
the Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.
(f) Exercise or Transfer Without Registration. If, at the time of the
surrender of this Warrant in connection with any exercise, transfer, or exchange
of this Warrant, this Warrant (or, in the case of any exercise, the Warrant
Shares issuable hereunder), shall not be registered under the Securities Act and
under applicable state securities or blue sky laws, the Company may require, as
a condition of allowing such exercise, transfer, or exchange, (i) that the
holder or transferee of this Warrant, as the case may be, furnish to the Company
a written opinion of counsel (which opinion shall be in form, substance and
scope customary for opinions of counsel in comparable transactions) to the
effect that such exercise, transfer, or exchange may be made without
registration under the Securities Act and under applicable state securities or
blue sky laws, (ii) that the holder or transferee execute and deliver to the
Company an investment letter in form and substance reasonably acceptable to the
Company and (iii) that the transferee be an "accredited investor" as defined in
13
Rule 501(a) promulgated under the Securities Act; provided that no such opinion,
letter, or status as an "accredited investor" shall be required in connection
with a transfer pursuant to Rule 144 under the Securities Act.
(g) Additional Restrictions on Exercise or Transfer. Notwithstanding
anything contained herein to the contrary, this Warrant shall not be exercisable
by a holder hereof to the extent (but only to the extent) that (a) the number of
shares of Common Stock beneficially owned by such holder and its affiliates
(other than shares of Common Stock which may be deemed beneficially owned
through the ownership of the unexercised portion of the Warrants or the
unexercised or unconverted portion of any other securities of the Company
subject to a limitation on conversion or exercise analogous to the limitation
contained herein) and (b) the number of shares of Common Stock issuable upon
exercise of the Warrants (or portion thereof) with respect to which the
determination described herein is being made, would result in beneficial
ownership by such holder and its affiliates of more than 9.99% of the
outstanding shares of Common Stock. To the extent the above limitation applies,
the determination of whether and to what extent this Warrant shall be
exercisable with respect to other securities owned by such holder shall be in
the sole discretion of the holder and submission of this Warrant for full or
partial exercise shall be deemed to be the holder's determination of whether and
the extent to which this Warrant is exercisable, in each case subject to such
aggregate percentage limitation. No prior inability to exercise the Warrants
pursuant to this Section shall have any effect on the applicability of the
provisions of this Section with respect to any subsequent determination of
exercisability. For purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13D-G thereunder, except as
otherwise provided in clause (a) hereof. The restrictions contained in this
Section 7(g) may not be amended without the consent of the holder of this
Warrant and the holders of a majority of the Company's then outstanding Common
Stock.
8. Registration Rights. The initial holder of this Warrant (and certain
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in the Registration Rights
Agreement, including the right to assign such rights to certain assignees, as
set forth therein.
9. Notices. Any notices required or permitted to be given under the terms
of this Warrant shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier or by confirmed telecopy, and
shall be effective five days after being placed in the mail, if mailed, or upon
receipt or refusal of receipt, if delivered personally or by courier, or by
confirmed telecopy, in each case addressed to a party. The addresses for such
communications shall be:
14
If to the Company:
Microvision, Inc.
0000 Xxxxxxx Xxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx Xxxxxx
If to the holder, at such address as such holder shall have provided in writing
to the Company, or at such other address as such holder furnishes by notice
given in accordance with this Section 9.
10. Governing Law; Jurisdiction. This Warrant shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed in the State of New York. The Company
irrevocably consents to the jurisdiction of the United States federal courts and
state courts located in New York, New York in any suit or proceeding based on or
arising under this Warrant and irrevocably agrees that all claims in respect of
such suit or proceeding may be determined in such courts. The Company
irrevocably waives any objection to the laying of venue and the defense of an
inconvenient forum to the maintenance of such suit or proceeding. The Company
further agrees that service of process upon the Company mailed by certified or
registered mail to the address set forth in Section 9 shall be deemed in every
respect effective service of process upon the Company in any such suit or
proceeding. Nothing herein shall affect the holder's right to serve process in
any other manner permitted by law. The Company agrees that a final
non-appealable judgment in any such suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on such judgment or in any other
lawful manner.
11. Miscellaneous.
(a) Amendments. Except as provided in Section 7(g) hereof, this
Warrant and any provision hereof may only be amended by an instrument in writing
signed by the Company and the holder hereof.
(b) Descriptive Headings. The descriptive headings of the several
Sections of this Warrant are inserted for purposes of reference only, and shall
not affect the meaning or construction of any of the provisions hereof.
(c) Cashless Exercise. Notwithstanding anything to the contrary
contained in this Warrant, if the resale of the Warrant Shares by the holder is
not then registered pursuant to an effective registration statement under the
Securities Act, this Warrant may be exercised at any time or from time to time
during the Exercise Period, by presentation and surrender of this Warrant to the
Company at its principal executive offices with a written notice of the holder's
intention to effect a cashless exercise, including a calculation of the number
of shares of Common Stock to be issued upon such exercise in accordance with the
terms hereof (a "Cashless Exercise"). In the event of a Cashless Exercise, in
lieu of paying the Exercise Price in cash, the holder shall surrender this
Warrant for that number of shares of Common Stock determined by multiplying (i)
the number of
15
Warrant Shares to which it would otherwise be entitled by (ii) a fraction, the
numerator of which shall be the difference between the last reported sale price
per share of the Common Stock on the date of exercise (as reported on the Nasdaq
National Market, or if not so reported, as reported on the principle United
States securities market on which the Common Stock is then traded) and the
Exercise Price, and the denominator of which shall be such last reported sale
price per share of Common Stock.
(d) Business Day. For purposes of this Warrant, the term "business
day" means any day, other than a Saturday or Sunday or a day on which banking
institutions in the State of New York are authorized or obligated by law,
regulation or executive order to close.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
16
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
MICROVISION, INC.
By: /s/ XXXXXXX X. XXXXXX
--------------------------------
Name: Xxxxxxx X. Xxxxxx
---------------------------
Title: CFO/VP Operations
--------------------------
FORM OF EXERCISE AGREEMENT
(To be Executed by the Holder in order to Exercise the Warrant)
To: MICROVISION, INC.
0000 Xxxxxxx Xxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx Xxxxxx
The undersigned hereby irrevocably exercises the right to purchase
_____________ shares of the Common Stock of MICROVISION, INC., a corporation
organized under the laws of the State of Washington (the "Company"), evidenced
by the attached Warrant and herewith makes payment of the Exercise Price with
respect to such shares in full, all in accordance with the conditions and
provisions of said Warrant.
The undersigned agrees not to offer, sell, transfer or otherwise dispose of
any Common Stock obtained on exercise of the Warrant, except under circumstances
that will not result in a violation of the Securities Act of 1933, as amended,
or any state securities laws.
o The undersigned requests that the Company cause its transfer agent to
electronically transmit the Common Stock issuable pursuant to this Exercise
Agreement to the account of the undersigned or its nominee (which is
_________________) with DTC through its Deposit Withdrawal Agent Commission
System ("DTC Transfer").
o In lieu of receiving the shares of Common Stock issuable pursuant to this
Exercise Agreement by way of DTC Transfer, the undersigned hereby requests
that the Company cause its transfer agent to issue and deliver to the
undersigned physical certificates representing such shares of Common Stock.
The undersigned requests that a Warrant representing any unexercised
portion hereof be issued, pursuant to the Warrant, in the name of the Holder and
delivered to the undersigned at the address set forth below:
Dated:
------------------ ----------------------------------
Signature of Holder
----------------------------------
Name of Holder (Print)
Address:
----------------------------------
----------------------------------
----------------------------------
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights of the undersigned under the attached Warrant, with respect to
the number of shares of Common Stock covered thereby set forth hereinbelow, to:
Name of Assignee Address No of Shares
---------------- ------- ------------
, and hereby irrevocably constitutes and appoints _____________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.
Dated:
-------------, ----
In the presence of
-------------------------
Name:
------------------------------
Signature:
-------------------------
Title of Signing Officer or Agent
(if any):
--------------------------
Address: --------------------------
--------------------------
Note: The above signature should
correspond exactly with the
name on the face of the within
Warrant.
