SECURITIES PURCHASE AGREEMENT (CONVERTIBLE DEBENTURES)
Exhibit
10.13
SECURITIES
PURCHASE AGREEMENT (CONVERTIBLE DEBENTURES)
THIS
SECURITIES PURCHASE AGREEMENT
(the
“Agreement”), dated as of __________ ____, 2005, is entered into by and among
Eye
Care International, Inc.,
a
Delaware corporation (the “Company”), having its address at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, and each entity named on the
signature page hereto as a buyer and the permitted assigns of such entity (each,
a “Buyer”) (each agreement with a Buyer being deemed a separate and independent
agreement between the Company and such Buyer, except that each Buyer
acknowledges and consents to the rights granted to each other Buyer under this
Agreement and the Transaction Documents (as defined below)).
W
I T N E S S E T H:
WHEREAS,
the
Company and the Buyers are executing and delivering this Agreement in accordance
with and in reliance upon the exemption from securities registration afforded,
inter
alia,
by Rule
506 under 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 “1933 Act”), and/or Section 4(2) of the 1933 Act;
and
WHEREAS,
the
Buyers severally, and not jointly, wish to purchase, upon the terms and subject
to the conditions of this Agreement, a minimum aggregate amount of $250,000
and
a maximum aggregate amount of $1,000,000 of convertible debentures of the
Company (the “Debentures”), which will be convertible into shares of the
Company’s Class A Common Stock, par value $0.001 per share (the “Common Stock”),
upon the terms and subject to the conditions of the Debentures, and subject
to
acceptance of this Agreement by the Company;
NOW
THEREFORE,
in
consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the parties agree as follows:
1. AGREEMENT
TO PURCHASE; PURCHASE PRICE.
a.
Purchase.
(i)
The
undersigned Buyers hereby severally agree to purchase the Debentures from the
Company on the terms and conditions set forth below in this Agreement and the
other Transaction Documents (as defined below).
(ii)
Subject
to the terms and conditions of this Agreement and the other Transaction
Documents the Buyers will purchase the Debentures at one or more closings (each,
a “Closing”) to be held on the respective Closing Dates (as defined below).
(iii)
The
purchase price to be paid respectively by the Buyers shall equal 100% of the
face amount of the Debentures being purchased on the Closing Date by each Buyer
as set forth on the signature page to this Agreement.
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b.
Certain
Definitions.
As
used
herein, each of the following terms has the meaning set forth below, unless
the
context otherwise requires:
(i)
“Affiliate”
means, with respect to a specific Person referred to in the relevant provision,
another Person who or which controls or is controlled by or is under common
control with such specified Person.
(ii)
“Certificates”
means the relevant Debentures duly executed on behalf of the Company and issued
in the name of the respective Buyer.
(iii)
“Closing
Date” means the respective dates on which the Closings referred to in this
Agreement are held.
(iv)
“Conversion
Shares” means the shares of Common Stock issuable upon conversion of the
Debentures.
(v)
“Effective
Date” means the effective date of the Registration Statement covering the
Registrable Securities (as those terms are defined in the Registration Rights
Agreement defined below) for the Debentures issued on the Closing
Date.
(vi)
“Escrow”
means the Divine Capital Markets LLC EYCI Special Escrow Account maintained
at
▇▇ ▇▇▇▇▇▇ / ▇▇▇▇▇ Manhattan Bank.
(vii)
“Final
Closing Date” shall have the meaning ascribed to such term in Section
6(d).
(viii)
“Person”
means any living person or any entity, such as, but not necessarily limited
to,
a corporation, partnership or trust.
(ix)
“Placement
Agent” means Divine Capital Markets, LLC.
(x)
“Purchase
Price” means the purchase price for the Debentures.
(xi)
“Securities”
means the Debentures and Conversion Shares.
(xii)
“Shares”
means the Conversion Shares and the shares issued to the Placement Agent or
any
of its designees in connection with its services in connection with this
offering of Debentures.
c.
Form
of Payment; Delivery of Certificates.
(i)
Each
of
the Buyers shall pay the Purchase Price for the Debentures to be purchased
by
such Buyer by delivering immediately available good funds in United States
Dollars to the Escrow prior to the respective Closing on the applicable Closing
Date, determined as provided in Section 6.
(ii)
Promptly
following payment to the Company from the Escrow of the Purchase Price to be
paid for the purchase of the Debentures being purchased by such Buyer, the
Company shall deliver to the Buyers the Certificates purchased at such Closing.
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d.
Payment
to the Escrow. All
payments to the Escrow for the purchase of the Debentures shall be made at
or
prior to the Closing by wire transfer of funds to the Escrow, as
follows:
|
Beneficiary
Account Name:
|
Divine
Capital Markets LLC
EYCI
Special Escrow Account
|
|
Beneficiary
Account No.:
|
217-633
623 1-65
|
FBO:
EYCI, Special Account for Exclusive Benefit of Clients of DCM
|
ABA/Transit
No.:
|
▇▇▇-▇▇▇-▇▇▇
|
|
Beneficiary
Bank:
|
▇▇
▇▇▇▇▇▇ / Chase Manhattan Bank
▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
|
2.
BUYERS
REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION; INDEPENDENT
INVESTIGATION.
Each
Buyer represents and warrants to, and covenants and agrees with, the Company
as
follows:
a.
Without
limiting any Buyer’s right to sell the Common Stock pursuant to the Registration
Statement, each Buyer is purchasing the Debentures and will be acquiring the
Conversion Shares for its own account for investment only and not with a view
towards the public sale or distribution thereof and not with a view to or for
sale in connection with any distribution thereof.
b.
Each
Buyer is (i) an “accredited investor” as that term is defined in Rule 501 of the
General Rules and Regulations under the 1933 Act by reason of Rule 501(a)(3),
(ii) experienced in making investments of the kind described in this Agreement
and the related documents, (iii) able, by reason of the business and financial
experience of its officers (if an entity) and professional advisors (who are
not
affiliated with or compensated in any way by the Company or any of its
affiliates or selling agents), to protect its own interests in connection with
the transactions described in this Agreement, and the related documents, and
(iv) able to afford the entire loss of its investment in the
Securities.
c.
All
subsequent offers and sales of the Securities by each Buyer shall be made
pursuant to registration of the Shares under the 1933 Act or pursuant to an
exemption from registration and compliance with applicable states’ securities
laws.
d.
Each
Buyer understands that the Securities are being offered and sold to it in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying upon
the truth and accuracy of, and the Buyer’s compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Buyers set
forth herein in order to determine the availability of such exemptions and
the
eligibility of the Buyers to acquire the Securities.
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e.
Each
Buyer and its advisors, if any, have been furnished with all materials relating
to the business, finances and operations of the Company and materials relating
to the offer and sale of the Securities which have been requested by the Buyer.
Each Buyer and its advisors, if any, have been afforded the opportunity to
ask
questions of the Company and have received complete and satisfactory answers
to
any such inquiries. Without limiting the generality of the foregoing, each
Buyer
has also had the opportunity to obtain and to review the Company’s (1) Annual
Report on Form 10-KSB for the fiscal year ended December 31, 2003, filed April
28, 2004, (2) Quarterly Report on Form 10-QSB for the period ended March 31,
2004 filed May 24, 2004, (3) Quarterly Report on Form 10-QSB for the period
ended June 30, 2004 filed September 8, 2004, (4) Amendment to Quarterly Report
on Form 10-QSB for the period ended June 30, 2004 filed October 19, 2004, (5)
Quarterly Report on Form 10-QSB for the period ended September 30, 2004 filed
November 23, 2004 and (6) Registration Statement on Form SB-2/A filed February
10, 2005 (the “Pending SB-2” and together with the other documents referred to
in the preceding clauses (1) through (5), the “Company’s SEC
Documents”).
f.
Each
Buyer understands that its investment in the Securities involves a high degree
of risk, including the risk of the loss of the Buyer’s entire
investment.
g.
Each
Buyer understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation
or
endorsement of the Securities.
h.
Each
Buyer is duly organized, validly existing and in good standing under the laws
of
the jurisdiction of its organization. This Agreement and the other Transaction
Documents have been duly and validly authorized, executed and delivered on
behalf of the Buyer and create a valid and binding agreement of the Buyer
enforceable in accordance with its terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium and
other
similar laws affecting the enforcement of creditors’ rights
generally.
i.
Such
Buyer has not employed any broker or finder in connection with the transactions
contemplated by this Agreement.
j.
The
state
in which any offer to purchase shares hereunder was made to or accepted by
such
Buyer is the state shown as the Buyer’s address on Schedule I
hereto.
k.
Each
Buyer was not formed for the purpose of investing solely in the Securities
which
may be acquired hereunder.
l.
Each
Buyer is able to bear the complete loss of such Buyer’s investment in the
Securities.
m.
Each
Buyer’s execution, delivery and performance under this Agreement will not breach
the provisions of any agreement to which such Buyer is a party.
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3.
COMPANY
REPRESENTATIONS, ETC.
The
Company represents and warrants to the Buyers that:
a.
Concerning
the Debentures and the Shares. There
are
no preemptive rights of any stockholder of the Company to acquire the Debentures
or the Shares.
b.
Reporting
Company Status. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware 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 the State of Florida and in each other jurisdiction where the nature
of the business conducted or property owned by it makes such qualification
necessary, other than those jurisdictions in which the failure to so qualify
would not have a material adverse effect on the business, operations or
condition (financial or otherwise) or results of operation of the Company and
its subsidiaries taken as a whole (a “Material Adverse Effect”). The Company has
registered its Common Stock pursuant to Section 12 of the Securities Exchange
Act of 1934, as amended (the “1934 Act”), and the Common Stock is listed and
traded on the OTC Bulletin Board Market of the National Association of
Securities Dealers, Inc. (trading symbol: EYCI). The Company has received no
notice, either oral or written, with respect to the continued eligibility of
the
Common Stock for such listing, and the Company has maintained all requirements
for the continuation of such listing.
c.
Authorized
Shares. The
authorized capital stock of the Company consists of 120,000,000 shares of
capital stock, of which 80,000,000 shares are designated as Class A Common
Stock, par value $0.001 per share (the “Common Stock”), 20,000,000 shares are
designated Class B Common Stock, par value $0.001 per share and 20,000,000
shares are designated as Preferred Stock. As of the date hereof, assuming the
conversion or exercise of certain currently outstanding common stock equivalents
of the Company into underlying shares of Common Stock, 23,807,147 shares of
Common Stock (excluding an additional approximately 2,676,344 shares of Common
Stock to be issued upon conversion of certain currently outstanding debentures
and exercise of certain currently outstanding warrants), 5,302,802 shares of
Class B Common Stock and 155 Series A Convertible Preferred Shares and 86 Series
C Mandatory Convertible Preferred Shares of stock are issued and outstanding.
All issued and outstanding shares of Common Stock have been duly authorized
and
validly issued and are fully paid and nonassessable. The Company has sufficient
authorized and unissued shares of Common Stock as may be necessary to effect
the
issuance of the Shares. The Shares have been duly authorized and, when issued
upon conversion of, or as interest on, the Debentures will be duly and validly
issued, fully paid and non-assessable and will not subject the holder thereof
to
personal liability by reason of being such holder. At all times, the Issuer
shall keep available and reserved for issuance to the holders of the Debentures
Common Stock duly authorized for issuance against the Debentures.
d.
Securities
Purchase Agreement; Registration Rights Agreement. This
Agreement and the Registration Rights Agreement, between the Company and the
Buyers, substantially in the form of Exhibit C annexed hereto (the “Registration
Rights Agreement”), and the transactions contemplated thereby, have been duly
and validly authorized by the Company, this Agreement has been duly executed
and
delivered by the Company. Each of this Agreement, the Debentures and the
Registration Rights Agreement, when executed and delivered by the
5
Company,
are and will be, valid, legal and binding agreements of the Company enforceable
in accordance with their respective terms, subject as to enforceability to
general principles of equity and to bankruptcy, insolvency, moratorium, and
other similar laws affecting the enforcement of creditors’ rights
generally.
e.
Non-contravention.
The
execution and delivery of this Agreement, the Debentures and the Registration
Rights Agreement by the Company, the issuance of the Securities, and the
consummation by the Company of the other transactions contemplated by this
Agreement, the Registration Rights Agreement, and the Debentures do not and
will
not conflict with or result in a breach by the Company of any of the terms
or
provisions of, or constitute a default under (i) the Certificate of
Incorporation or by-laws of the Company, each as currently in effect, (ii)
any
indenture, mortgage, deed of trust, or other material agreement or instrument
to
which the Company is a party or by which it or any of its properties or assets
are bound, including any listing agreement for the Common Stock, except as
herein set forth or an event which results in the creation of any lien, charge
or encumbrance upon any assets of the Company or of any of its subsidiaries
or
the triggering of any preemptive or anti-dilution rights or rights of first
refusal or first offer on the part of holders of the Company’s securities, (iii)
to its knowledge, any existing applicable law, rule, or regulation or any
applicable decree, judgment, or order of any court, United States federal or
state regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company or any of its properties or assets, or (iv) the
Company’s listing agreement for its Common Stock, except such conflict, breach
or default which would not have a Material Adverse Effect.
f.
Approvals.
No
authorization, approval or consent of any court, governmental body, regulatory
agency, self-regulatory organization, or stock exchange or market or the
stockholders of the Company is required to be obtained by the Company for the
issuance and sale of the Securities to the Buyers as contemplated by this
Agreement, except such authorizations, approvals and consents that have been
obtained, or such authorizations, approvals and consents, the failure of which
to obtain would not have a Material Adverse Affect.
g.
SEC
Filings. To
the
best of the Company's knowledge, none of the Company’s SEC Documents contained,
at the time they were filed, any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary to make
the statements made therein in light of the circumstances under which they
were
made, not misleading. Except as set forth on Schedule
3(g)
to this
Agreement, the Company has since January 1, 2003 timely filed all requisite
forms, reports and exhibits thereto with the SEC. The Company is not aware
of
any event occurring on or prior to a Closing Date or the Delivery Date (other
than the transactions effected hereby) that would require the filing of, or
with
respect to which the Company intends to file, a Form 8-K after such date.
h.
Absence
of Certain Changes. Since
December 31, 2003, there has been no material adverse change and no material
adverse development in the business, properties, operations, condition
(financial or otherwise), or results of operations of the Company or any of
its
subsidiaries, except as disclosed in the Company’s SEC Documents. Since December
31, 2003, except as provided in the Company’s SEC Documents, neither the Company
nor any of its subsidiaries has (i) incurred or become subject to any material
liabilities (absolute or contingent) except liabilities incurred in the ordinary
course of business consistent with past practices; (ii) discharged or satisfied
any material lien or encumbrance or paid any material obligation or
6
liability
(absolute or contingent), other than current liabilities paid in the ordinary
course of business consistent with past practices; (iii) declared or made any
payment or distribution of cash or other property to stockholders with respect
to its capital stock, or purchased or redeemed, or made any agreements to
purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other tangible assets, or canceled any debts or claims, except
in the ordinary course of business consistent with past practices; (v) suffered
any substantial losses or waived any rights of material value, whether or not
in
the ordinary course of business, or suffered the loss of any material amount
of
existing business; (vi) made any changes in employee compensation, except in
the
ordinary course of business consistent with past practices; or (vii) experienced
any material problems with labor or management in connection with the terms
and
conditions of their employment.
i.
Full
Disclosure. There
is
no fact known to the Company (other than general economic conditions known
to
the public generally or as disclosed in the Company’s SEC Documents) that has
not been disclosed in writing to the Buyers that (i) would reasonably be
expected to have a Material Adverse Effect, (ii) would reasonably be expected
to
materially and adversely affect the ability of the Company to perform its
obligations pursuant to this Agreement or any of the agreements contemplated
hereby (collectively, including this Agreement, the “Transaction Documents”), or
(iii) would reasonably be expected to materially and adversely affect the value
of the rights granted to the Buyers in the Transaction Documents.
j.
Absence
of Litigation. There
is
no action, suit, proceeding, inquiry or investigation before or by any court,
public board or body pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its subsidiaries, wherein an
unfavorable decision, ruling or finding would have a Material Adverse Effect
or
which would adversely affect the validity or enforceability of, or the authority
or ability of the Company and its subsidiaries taken as a whole to perform
its
obligations under, any of the Transaction Documents. Neither the Company nor
any
of its subsidiaries is a party to or subject to the provisions of, any order,
writ, injunction, judgement or decree of any court or government agency or
instrumentality which could reasonably be expected to have a Material Adverse
Effect.
k.
Absence
of Events of Default. Except
as
disclosed in the Company’s SEC Documents, no Event of Default (or its equivalent
term), as defined in the respective agreement, indenture, mortgage, deed of
trust or other instrument to which the Company or any of its subsidiaries is
a
party, and no event which, with the giving of notice or the passage of time
or
both, would become an Event of Default (or its equivalent term) (as so defined
in such document), has occurred and is continuing, which would have a Material
Adverse Effect.
l.
Prior
Issues. Except as
set
forth in the Company’s SEC Documents, during the twelve (12) months preceding
the date hereof, the Company has not issued any convertible securities or any
shares of the Common Stock.
m.
No
Undisclosed Liabilities or Events. The
Company has no liabilities or obligations other than those disclosed in the
Company’s SEC Documents or those incurred in the ordinary course of the
Company’s business since December 31, 2003, and which individually or in the
aggregate, do not or would not have a Material Adverse Effect. No event or
circumstances has occurred or exists with respect to the Company or its
properties, business, condition (financial or otherwise), or results of
operations, which, under applicable law, rule or regulation,
7
requires
public disclosure or announcement prior to the date hereof by the Company but
which has not been so publicly announced or disclosed. There are no proposals
currently under consideration or currently anticipated to be under consideration
by the Board of Directors or the executive officers of the Company which
proposal would (x) change the Certificate of Incorporation, by-laws or any
other
charter document of the Company, each as currently in effect, with or without
shareholder approval, which change would reduce or otherwise adversely affect
the rights and powers of the shareholders of the Common Stock or (y) materially
or substantially change the business, assets or capital of the Company,
including its interests in subsidiaries.
n.
Intentionally
Omitted.
o.
No
Integrated Offering. Neither
the Company nor any of its affiliates nor any person acting on its or their
behalf has, directly or indirectly, at any time since December 31, 2003 made
any
offer or sales of any security or solicited any offers to buy any security
under
circumstances that would eliminate the availability of the exemption from
registration under Rule 506 of Regulation D in connection with the offer and
sale of the Securities as contemplated hereby.
p.
Dilution.
The
number of Shares issuable upon conversion of the Debentures may increase
substantially in certain circumstances, including, but not necessarily limited
to, the circumstance wherein the market price of the Common Stock declines
prior
to the conversion of the Debentures. The Company’s executive officers and
directors have studied and fully understand the nature of the securities being
sold hereby and recognize that they have a potential dilutive effect and further
that the conversion of the Debentures and/or sale of the Conversion Shares
may
have an adverse effect on the market price of the Common Stock. The board of
directors of the Company has concluded, in its good faith business judgment,
that such issuance is in the best interests of the Company. The Company
specifically acknowledges that its obligation to issue the Conversion Shares
upon conversion of the Debentures is binding upon the Company and enforceable
regardless of the dilution such issuance may have on the ownership interests
of
other shareholders of the Company.
q.
Regulatory Permits.
The
Company has all such permits, easements, consents, licenses, franchises and
other governmental and regulatory authorizations from all appropriate federal,
state, local or other public authorities (“Permits”) as are necessary to own and
lease its properties and conduct its businesses in all material respects in
the
manner described in the Registration Statement and as currently being conducted.
All such Permits are in full force and effect and the Company has fulfilled
and
performed all of its material obligations with respect to such Permits, and
no
event has occurred that allows, or after notice or lapse of time would allow,
revocation or termination thereof or will result in any other material
impairment of the rights of the holder of any such Permit, subject in each
case
to such qualification as may be disclosed in the Prospectus. Such Permits
contain no restrictions that would materially impair the ability of the Company
to conduct businesses in the manner consistent with its past practices. The
Company has not received notice or otherwise has knowledge of any proceeding
or
action relating to the revocation or modification of any such
Permit.
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r.
Hazardous
Materials.
The
Company is in compliance with all applicable Environmental Laws in all respects
except where the failure to comply does not have and could not reasonably be
expected to have a Material Adverse Effect. For purposes of the foregoing:
“Environmental
Laws”
means,
collectively, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, the Superfund Amendments and Reauthorization
Act of 1986, the Resource Conservation and Recovery Act, the Toxic Substances
Control Act, as amended, the Clean Air Act, as amended, the Clean Water Act,
as
amended, any other “Superfund” or “Superlien” law or any other applicable
federal, state or local statute, law, ordinance, code, rule, regulation, order
or decree regulating, relating to, or imposing liability or standards of conduct
concerning, the environment or any Hazardous Material.
“Hazardous
Material” means
and includes any hazardous, toxic or dangerous waste, substance or material,
the
generation, handling, storage, disposal, treatment or emission of which is
subject to any Environmental Law.
s.
Independent
Public Accountants. ▇▇▇▇▇▇▇,
▇▇▇▇▇ & ▇▇▇▇▇▇, LLP, who has certified the consolidated financial statements
of the Company, including the notes thereto, included in the Company’s Annual
Report on Form 10-KSB for the year ended December 31, 2003, is an independent
public accountant with respect to the Company, as required by the 1934 Act
and
the 1934 Act, the 1933 Act and the rules and regulations promulgated
thereunder.
t.
Internal
Accounting Controls. The
Company maintains a system of internal accounting controls sufficient to provide
reasonable assurances that (1) transactions are executed in accordance with
management’s general or specific authorization; (2) transactions are recorded as
necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain accountability for
assets; (3) access to assets is permitted only in accordance with management’s
general or specific authorization; and (4) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
u.
No
Brokers.
The
Company has not engaged any person to act on its behalf in connection with
the
purchase and sale of the Debentures to the Buyers hereunder other than Divine
Capital Markets, LLC, and no person is entitled to receive any consideration
from the Company or any Buyer arising from any finder’s agreement, brokerage
agreement or other agreement to which the Company is a party.
4.
CERTAIN
COVENANTS AND ACKNOWLEDGMENTS.
a.
Transfer
Restrictions. The
Buyers acknowledge that (1) the Debentures have not been and are not being
registered under the provisions of the 1933 Act and, except as provided in
the
Registration Rights Agreement, the Shares have not been and are not being
registered under the 1933 Act, and may not be transferred unless (A)
subsequently registered thereunder or (B) the Buyers shall have delivered to
the
Company an opinion of counsel, reasonably satisfactory in form, scope and
substance to the Company, to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; (2) any sale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms
of
said Rule and further, if said
9
Rule
is
not applicable, any resale of such Securities under circumstances in which
the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the
SEC
thereunder and (4) neither the Company nor any other person is under any
obligation to register the Securities (other than pursuant to the Registration
Rights Agreement) under the 1933 Act or to comply with the terms and conditions
of any exemption thereunder.
b.
Restrictive
Legend. The
Buyers acknowledge and agree that the Debentures and, until such time as the
Shares have been registered under the 1933 Act as contemplated by the
Registration Rights Agreement and sold in accordance with an effective
Registration Statement, certificates and other instruments representing any
of
the Securities shall bear a restrictive legend in substantially the following
form (and a stop-transfer order may be placed against transfer of any such
Securities):
THESE
SECURITIES (THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE
AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER
EVIDENCE ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
c.
Registration
Rights Agreement. The
parties hereto agree to enter into the Registration Rights Agreement on or
before the Closing Date.
d.
Filings.
The
Company undertakes and agrees to make all necessary filings in connection with
the sale of the Securities to the Buyers required under any United States laws
and regulations applicable to the Company (including without limitation state
“blue sky” laws), or by any domestic securities exchange or trading market, and
to provide a copy thereof to the Buyers promptly after such filing.
e.
Reporting
Status.
So long
as any of the Buyers beneficially own any of the Securities, the Company shall
timely file prior to or on the date when due all reports required to be filed
with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, and the Company
shall not terminate its status as an issuer required to file reports under
the
1934 Act even if the 1934 Act or the rules and regulations thereunder would
permit such termination. Except as otherwise set forth in this Agreement and
the
Transaction Documents, the Company will take all reasonable action under its
control to obtain and to continue the listing and trading of its Common Stock
(including, without limitation, all Registrable Securities) on the OTC Bulletin
Board Market of the National Association of Securities Dealers, Inc. and will
comply in all material respects with the Company’s reporting, filing and other
obligations under the by-laws or rules of the National Association of Securities
Dealers, Inc. (“NASD”).
f.
Use
of Proceeds.
Subject
to the best interest of the Company, it is the intention of the Company to
use
the proceeds from the sale of the Debentures (excluding
10
amounts
paid by the Company for legal fees in connection with the sale of the
Debentures) for operating expenses and working capital purposes.
g.
Available
Shares.
The
Company shall have at all times authorized and reserved for issuance, free
from
preemptive rights, shares of Common Stock equal to three hundred percent (300%)
of the number of shares of Common Stock issuable upon conversion of the
then-outstanding Debentures (including accrued interest thereon) as may be
required to satisfy the conversion rights of the Buyers pursuant to the terms
and conditions of the Debentures. If at any time, the Company does not have
available an amount of authorized and non-issued Shares necessary to satisfy
full Conversion of the then outstanding amount of the Debentures, the Company
shall, without notice or demand by the Buyers, call within thirty (30) days
of
such occurrence and hold within sixty (60) days of such occurrence a special
meeting of shareholders, for the sole purpose of increasing the number of shares
authorized. Management of the Company shall recommend to shareholders to vote
in
favor of increasing the number of Common Stock authorized. Members of the
Company’s Management shall also vote all of their own shares in favor of
increasing the number of Common Stock authorized. Alternatively, to the extent
permitted by applicable law, the Company may procure the written consent of
stockholders to increase the number of shares authorized, and provide the
stockholders with notice thereof as may be required under applicable law
(including without limitation Section 14(c) of the 1934 Act and Regulation
14C
thereunder). Upon obtaining stockholder approval as aforesaid, the Company
shall
cause the appropriate increase in its authorized shares of Common
Stock.
h.
Reimbursement.
If
(i)
any Buyer, other than by reason of its gross negligence, willful misconduct
or
breach of law, becomes a party defendant in any capacity in any action or
proceeding brought by any stockholder of the Company, in connection with or
as a
result of the consummation of the transactions contemplated by the Transaction
Documents, or if such Buyer is impleaded in any such action, proceeding or
investigation by any Person, or (ii) any Buyer, other than by reason of its
gross negligence, willful misconduct or breach of law, becomes a party defendant
in any capacity in any action or proceeding brought by the SEC against or
involving the Company or in connection with or as a result of the consummation
of the transactions contemplated by the Transaction Documents, or if such Buyer
is impleaded in any such action, proceeding or investigation by any Person,
then
in any such case, the Company will reimburse such Buyer for its reasonable
legal
and other expenses (including the cost of any investigation and preparation)
incurred in connection therewith. The reimbursement obligations of the Company
under this paragraph shall be in addition to any liability which the Company
may
otherwise have, shall extend upon the same terms and conditions to any
affiliates of the Buyers who are actually named in such action, proceeding
or
investigation, and partners, directors, agents, employees and controlling
persons (if any), as the case may be, of the Buyers and any such Affiliate,
and
shall be binding upon and inure to the benefit of any successors, assigns,
heirs
and personal representatives of the Company, the Buyers and any such Affiliate
and any such Person. Except as otherwise set forth in the Transaction Documents,
the Company also agrees that neither any Buyer nor any such Affiliate, partners,
directors, agents, employees or controlling persons shall have any liability
to
the Company or any person asserting claims on behalf of or in right of the
Company in connection with or as a result of the consummation of the Transaction
Documents except to the extent that any losses, claims, damages, liabilities
or
expenses incurred by the Company result from the gross negligence or willful
misconduct of
11
such
Buyer or from a breach of the representations, covenants and conditions
contained herein or from a breach of law.
5.
TRANSFER
AGENT INSTRUCTIONS.
a.
Promptly
following the purchase by the Buyers of the Debentures in accordance with
Section 1(c) hereof, the Company will irrevocably instruct its transfer agent
to
issue Common Stock from time to time upon conversion of the Debentures in such
amounts as specified from time to time by the Company to the transfer agent,
bearing the restrictive legend specified in Section 4(b) of this Agreement
prior
to registration of the Shares under the 1933 Act, registered in the name of
the
respective Buyer or its permitted assigns and in such denominations to be
specified by such Buyer in connection with each conversion of the Debentures.
The Company warrants that if the Buyer is not in breach of the representations
and warranties contained in this Agreement, no instruction other than such
instructions referred to in this Section 5 and stop transfer instructions to
give effect to Section 4(a) hereof prior to registration and sale of the
Converted Shares under the 1933 Act will be given by the Company to the transfer
agent and that the Converted Shares shall otherwise be freely transferable
on
the books and records of the Company as and to the extent provided in this
Agreement, the Registration Rights Agreement, and applicable law. Nothing in
this Section shall affect in any way the Buyers’ obligations and agreement to
comply with all applicable securities laws upon resale of the Securities. If
any
Buyer provides the Company with an opinion of counsel reasonably satisfactory
to
the Company that registration of a resale by such Buyer of any of the Securities
in accordance with clause (1)(B) of Section 4(a) of this Agreement is not
required under the 1933 Act, the Company shall (except as provided in clause
(2)
of Section 4(a) of this Agreement) permit the transfer of the Securities and,
in
the case of the Converted Shares, instruct the Company’s transfer agent to issue
one or more certificates for Common Stock without legend in such name and in
such denominations as specified by the Buyer.
b.
(i) The
Company will permit the Buyers to exercise their rights to convert the
Debentures by telecopying or delivering an executed and completed Notice of
Conversion to the Company. The Company will within two (2) Business Days respond
with its endorsement so as to confirm the outstanding principal amount of any
Debenture submitted for conversion or shall reconcile any difference with the
Buyer promptly after receiving such Notice of Conversion.
(ii)
The
term
“Conversion Date” means, with respect to any conversion elected by the holder of
the Debentures, the date specified in the Notice of Conversion, provided the
copy of the Notice of Conversion is given either via mail or facsimile to or
otherwise delivered to the Company in accordance with the provisions hereof
so
that it is received by the Company on or before such specified date.
(iii)
The
Company will transmit the certificates representing the Converted Shares
issuable upon conversion of any Debentures (together, unless otherwise
instructed by the Buyer, with Debentures not being so converted) to the Buyer
at
the address specified in the Notice of Conversion (which may be the Buyer’s
address for notices as contemplated by Section 12 hereof or a different address)
via express courier, by electronic transfer or otherwise, within five (5)
business days if the address for delivery is in the United States and within
seven (7) business days if the address for delivery is outside the United States
(such fifth business day or seventh business day, as the case may be, the
“Delivery Date”) after (A) the business day on
12
which
the
Company has received both of the Notice of Conversion (by facsimile or other
delivery) and the original Debentures being converted (and if the same are
not
delivered to the Company on the same date, the date of delivery of the second
of
such items) or (B) the date an interest payment on the Debentures, which the
Company has elected to pay by the issuance of Common Stock, as contemplated
by
the Debentures, was due.
c.
From
and
after the date on which the Shares have been registered under the 1933 Act
as
contemplated by the Registration Rights Agreement, the failure to issue
unrestricted, freely tradable Conversion Shares to the Buyers upon Conversion
shall be considered an Event of Default, which if not cured after ten (10)
days
prior written notice, shall
entitle the Buyers (or
any
of them) to demand
that the Debentures held
by
them be immediately redeemed by a cash payment equal to 131% of the principal
amount and accrued interest on such Debentures (whether or not the terms of
such
Debentures expressly
permit the redemption thereof).
The
Company acknowledges that the failure to honor a Notice of Conversion shall
cause quantifiable economic injury to the Buyer whose Notice of Conversion
is
not honored.
d.
The
Company will authorize its transfer agent to give information to a Buyer or
such
Buyer’s representative relating to the transfer of the Company’s shares of
Common Stock to the Buyer, upon the reasonable request of the Buyer or any
such
representative. The Company will provide such Buyer with a copy of the
authorization so given to the transfer agent.
e.
Each
Buyer shall be entitled to exercise its conversion privilege with respect to
the
Debentures notwithstanding the commencement of any case under 11 U.S.C. §101
et
seq.
(the
“Bankruptcy Code”). In the event the Company is a debtor under the Bankruptcy
Code, the Company hereby waives, to the fullest extent permitted, any rights
to
relief it may have under 11 U.S.C. §362 in respect of such Buyer’s conversion
privilege. The Company hereby waives, to the fullest extent permitted, any
rights to relief it may have under 11 U.S.C. §362 in respect of the conversion
of the Debentures. The Company agrees, without cost or expense to such Buyer,
to
take or to consent to any and all action necessary to effectuate relief under
11
U.S.C. §362.
6.
CLOSING
DATE.
a.
The
purchases and sales of Debentures will occur at one or more closings under
this
Agreement, the first of which will occur when Buyers have deposited not less
than $250,000 of the Purchase Price in the Escrow for the transactions
contemplated under this Agreement. The next Closing under this Agreement will
occur on the earlier of (x) the date on which the Buyers who will purchase
the
balance of the Debentures to be purchased and sold under this Agreement have
deposited the full amount of their purchase prices in the Escrow and (y) such
earlier date as the Company and the Buyers purchasing at such Closing shall
agree. If a Closing occurs under (y) of the preceding sentence, then the next
or
final Closing shall occur on the date on which the Buyers who will purchase
the
balance of the Debentures to be purchased and sold under this Agreement have
deposited the full amount of their purchase prices in the Escrow.
b.
In
the
case of each Closing, the Closing Date shall occur on the date which is the
first trading day after each of the conditions contemplated by Sections 7 and
8
hereof shall have either been satisfied or been waived by the party in whose
favor such conditions run.
13
c.
In
the
case of each Closing, the Closing of the purchase and issuance of Debentures
shall occur on the Closing Date at the offices of the Placement Agent’s counsel,
McGuireWoods LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ and
shall
take place no later than 3:00 P.M., New York time, on such day or such other
time as is mutually agreed upon by the Company and the Buyers.
d.
The
Final
Closing Date shall be the Closing Date of the purchase and sale of Debentures
in
the aggregate principal amount of $1,000,000, or such earlier Closing Date
as
the Placement Agent may specify to the Company in writing or the effective
date
of the termination for any reason of the Placement Agent’s engagement as the
Company’s placement agent in connection with the offering of Debentures
hereunder and under the other Transaction Documents, or at the Company's
discretion after June 30, 2005.
7.
CONDITIONS
TO THE COMPANY’S OBLIGATION TO SELL.
The
Company’s obligation to sell the Debentures to the Buyer pursuant to this
Agreement on each Closing Date is conditioned upon:
a.
Delivery
from the Escrow to the Company of good funds as payment in full of an amount
equal to the Purchase Price for the Debentures in accordance with this
Agreement;
b.
The
accuracy on the Closing Date of the representations and warranties of the Buyers
contained in this Agreement, each as if made on such date, and the performance
by the Buyers on or before such date of all covenants and agreements of the
Buyers required to be performed on or before such date; and
c.
There
shall not be in effect any law, rule or regulation prohibiting or restricting
the transactions contemplated hereby, or requiring any consent or approval
which
shall not have been obtained.
8.
CONDITIONS
TO THE BUYERS’ OBLIGATION TO PURCHASE.
The
Buyer’s obligation of those Buyers who are purchasing Debentures at a particular
closing to purchase the Debentures on the applicable Closing Date is conditioned
upon:
a.
The
execution and delivery of this Agreement and the Registration Rights Agreement
by the Company;
b.
Delivery
by the Company to the Buyers of the Debentures to be purchased in accordance
with this Agreement;
c.
Delivery
by the Company to the Buyers of an opinion of counsel to the Company,
substantially in the form attached hereto as Exhibit C and dated as of the
Closing Date;
d.
The
accuracy in all material respects on the Closing Date of the representations
and
warranties of the Company contained in this Agreement, each as if made on such
date, and the performance by the Company on or before such date of all covenants
and agreements of the Company required to be performed on or before such
date;
14
e.
There
shall not be in effect any law, rule or regulation prohibiting or restricting
the transactions contemplated hereby, or requiring any consent or approval
which
shall not have been obtained; and
f.
From
and
after the date hereof to and including the Closing Date, the trading of the
Common Stock shall not have been suspended by the SEC or the NASD and trading
in
securities generally on the New York Stock Exchange or The NASDAQ/National
Market System shall not have been suspended or limited, nor shall minimum prices
been established for securities traded on The NASDAQ/National Market System,
nor
shall there be any outbreak or escalation of hostilities involving the United
States or any material adverse change in any financial market that in either
case in the reasonable judgment of the Buyers makes it impracticable or
inadvisable to purchase the Debentures.
9.
GOVERNING
LAW; MISCELLANEOUS.
a.
This
Agreement shall be governed by and interpreted in accordance with the laws
of
the State of New York for contracts to be wholly performed in such state and
without giving effect to the principles thereof regarding the conflict of laws.
Each of the parties consents to the jurisdiction of the federal courts whose
districts encompass any part of the City of New York or the state courts of
the
State of New York sitting in the City and County of New York in connection
with
any dispute arising under this Agreement and hereby waives, to the maximum
extent permitted by law, any objection, including any objection based on
forum
non conveniens,
to the
bringing of any such proceeding in such jurisdictions. To the extent determined
by such court, the Company shall reimburse the Buyers for any reasonable legal
fees and disbursements incurred by the Buyers in enforcement of or protection
of
any of its rights under any of the Transaction Documents.
b.
Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate as
a
waiver thereof.
c.
This
Agreement shall inure to the benefit of and be binding upon the successors
and
assigns of each of the parties hereto.
d.
All
pronouns and any variations thereof refer to the masculine, feminine or neuter,
singular or plural, as the context may require.
e.
A
facsimile transmission of this signed Agreement shall be legal and binding
on
all parties hereto.
f.
This
Agreement may be signed in one or more counterparts, each of which shall be
deemed an original.
g.
The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.
h.
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
15
the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
i. This
Agreement may be amended only by the written consent of a majority in interest
of the holders of the Debentures and an instrument in writing signed by the
Company.
j. This
Agreement supersedes all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof.
10. NOTICES.
Any
notice required or permitted hereunder shall be given in writing (unless
otherwise specified herein) and shall be deemed effectively given on the
earliest of:
a.
the
date
delivered, if delivered by personal delivery as against written receipt therefor
or by confirmed facsimile transmission,
b.
the
seventh business day after deposit, postage prepaid, in the United States Postal
Service by registered or certified mail, or
c.
the
third
business day after mailing by next-day express courier, with delivery costs
and
fees prepaid, in each case, addressed to each of the other parties thereunto
entitled at the following addresses (or at such other addresses as such party
may designate by ten (10) days’ advance written notice similarly given to each
of the other parties hereto):
|
COMPANY:
|
Eye
Care International, Inc.
|
|
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
|
|
|
▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
|
|
Attn:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President and Chief Executive Officer
|
|
|
Telecopier
No. ▇▇▇-▇▇▇-▇▇▇▇
with
a copy to:
Holland
& Knight
Attn:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier
No. ▇▇▇-▇▇▇-▇▇▇▇
|
|
BUYERS:
|
At
the address set forth on the signature page of this
Agreement
|
|
With
a copy to:
|
|
|
Divine
Capital Markets, LLC
Attn:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇▇
Telecopier
No. ▇▇▇-▇▇▇-▇▇▇▇
|
|
16
11.
SURVIVAL
OF REPRESENTATIONS AND WARRANTIES.
The
Company’s and the Buyers’ representations and warranties herein shall survive
for a period of fifteen (15) months after the execution and delivery of this
Agreement and shall inure to the benefit of the Buyers and the Company and
their
respective successors and assigns.
12.
FEES;
EXPENSES.
a.
At
each
Closing, the Placement Agent shall receive cash compensation equal to thirteen
percent (13%) of the gross proceeds of the Debentures (payable at each Closing),
and in addition, at the first Closing under this Offering, the Company shall
cause 1,000,000 shares of Common Stock (in the form of restricted securities
and
appropriately legended) to be issued to the Placement Agent or to such persons
as the Placement Agent shall designate to the Company in writing. The Company
shall also reimburse the Placement Agent for expenses it incurs in connection
with its services to the Company in its capacity as Placement Agent in
accordance with the terms of the agreement, dated February 22, 2005 between
the
Company and the Placement Agent. The cash compensation and expenses shall be
deducted from the proceeds of the sale of the Debentures at each
Closing.
b.
The
Company will pay the legal fees of the Placement Agent in the amount of $10,000
and will pay the 100% of the disbursements actually incurred by counsel to
the
Placement Agent. The Company will pay $10,000 to such counsel at the first
Closing, and in that connection hereby authorizes the Placement Agent to deduct
such amount from the proceeds of the first Closing and transmit same to the
Placement Agent’s legal counsel. The Company will pay disbursements of the
Placement Agent’s legal counsel within ten (10) days of invoice therefor. The
$10,000 in respect of fees of the Placement Agent’s counsel shall include only
those fees paid for services rendered up to the Final Closing Date, and any
other reasonable legal fees incurred by the Placement Agent’s counsel in
connection with the Transaction Documents (including enforcement of the
Company’s obligations or the exercise of the Placement Agent’s or the Buyers’
remedies thereunder) or, if requested by the Placement Agent, review of the
Registration Statement (as defined in the Registration Rights Agreement)
(including review and comment on drafts thereof and advice concerning sales
of
Registrable Securities (as defined in the Registration Rights Agreement) shall
be payable by the Company to such counsel within ten (10) days of the invoice
therefor.
[Signature
page follows]
17
IN
WITNESS WHEREOF,
this
Agreement has been duly executed by the Buyers and the Company as of the date
set forth below.
Date: __________
____, 2005
|
COMPANY:
|
|
|
Eye
Care International, Inc.
|
|
|
By:
_______________________
|
|
|
Name:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:
President and Chief Executive Officer
|
|
|
BUYER:
|
|
|
Name:
|
|
|
By:
_____________________________
|
|
|
(Signature
of Authorized Person)
|
|
|
Printed
Name:
|
|
|
Address:
|
|
|
Telephone:
|
|
|
Facsimile:
|
|
|
Principal
Amount of Debentures to be Purchased:
$_______________
|
|
|
Tax
ID No.:
|
18
|
Exhibit
A
|
FORM
OF DEBENTURE
|
| Exhibit B |
REGISTRATION
RIGHTS AGREEMENT
|
| Exhibit C |
OPINION
OF COUNSEL
|
19
EXHIBIT
A
DEBENTURE
NEITHER
THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE BEEN
REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THE SECURITIES ARE RESTRICTED AND MAY NOT BE OFFERED, RESOLD, PLEDGED
OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION
REQUIREMENTS THEREOF OR EXEMPTION THEREFROM.
|
No.
__
|
$_____________
|
EYE
CARE INTERNATIONAL, INC.
CONVERTIBLE
DEBENTURE DUE [__________
____, 2008]
[THIRD
ANNIVERSARY OF FINAL CLOSING DATE]
Date
of
Issuance: [__________
____, 2005] [CLOSING DATE OF THIS BUYER’S FUNDING]
FOR
VALUE RECEIVED, EYE CARE INTERNATIONAL, INC.,
a
corporation organized and existing under the laws of the State of Delaware
(the
"Company"), hereby promises to pay to [________________],
having
its address at [_________________________________________]
or
its
assigns (the "Holder" and together with the other holders of Debentures issued
pursuant to the Securities Purchase Agreement (as defined below), the
"Holders"), the principal sum of [SPELL-OUT
NUMBER]
and
00/100 Dollars ($_______________)
on
[__________
____, 2005] [FINAL CLOSING DATE],
2008
(the "Maturity Date") and to pay simple interest on the principal sum
outstanding from time to time in arrears (i) upon conversion as provided herein
or (ii) on the Maturity Date, at the rate of 6% per annum. Interest shall
commence to accrue on this Debenture on the first such business day to occur
after the date hereof and shall continue on a daily basis until payment in
full
of the principal sum has been made or duly provided for or until the full
outstanding amount of this Debenture has been converted in accordance with
the
provisions hereof. The Company has the option to redeem this Debenture prior
to
the Maturity Date pursuant to Section 2(b). All unpaid principal and interest
due and payable on the Maturity Date shall be paid in the form of Class A Common
Stock of the Company, par value $0.001 per share ("Common Stock") pursuant
to
Section 3. The Holder has the option to cause any outstanding principal and
interest on this Debenture to be converted into Common Stock at any time prior
to the Redemption Date (as defined below) or the Maturity Date pursuant to
Section 2(a).
This
Debenture is the Debenture referred to in the Securities Purchase Agreement
(the
"Securities Purchase Agreement") dated [________
____, 2005],
between
the Company and the Holder, is subject to the provisions of the Securities
Purchase Agreement and further is subject to the following additional
provisions:
A-1
1.
This
Debenture has been issued subject to investment representations of the original
purchaser hereof and may be transferred or exchanged only (a) with the Company’s
prior written consent, which consent the Company may grant or withhold, in
its
sole discretion, and (b) in compliance with the Securities Act and other
applicable state and foreign securities laws. In the event of any proposed
transfer of this Debenture to which the Company has granted its consent, the
Company may require, prior to issuance of a new Debenture in the name of such
other person, that it receive reasonable transfer documentation including legal
opinions that the issuance of the Debenture in such other name does not and
will
not cause a violation of the Securities Act or any applicable state or foreign
securities laws. Prior to due presentment for transfer of this Debenture to
which the Company has consented, the Company and any agent of the Company may
treat the person in whose name this Debenture is duly registered on the
Company's Debenture Register as the owner hereof for the purpose of receiving
payment as herein provided and for all other purposes, whether or not this
Debenture be overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
2.
Conversion
at Holder’s Option; Redemption at Company’s Option.
a.
The
Holder is entitled to, at any time or from time to time, convert the Conversion
Amount into shares of Common Stock, at a conversion price for each share of
Common Stock (the “Conversion Price") equal to 75% of the lowest closing bid
price per share (as reported by Bloomberg, LP) of the Company's Common Stock
for
the twenty (20) Trading Days immediately preceding the date of conversion.
Notwithstanding the foregoing, the Holder shall not be entitled to convert
any
part of this Debenture as to which the Company has previously issued to the
Holder a Redemption Notice in accordance with Section 2(b). The Conversion
Price
will be adjusted as provided in Section 6. For purposes of this Debenture,
the
following terms have the meanings indicated below:
(i)
“Conversion
Amount” shall mean the sum of (A) all or any portion of the outstanding
principal amount of this Debenture, as designated by the Holder upon exercise
of
its right of conversion and (B) all interest that has accrued on the portion
of
the principal amount that has been designated for payment pursuant to
(A).
(ii)
“Market
Price of the Common Stock” means (x) the closing bid price of the Common Stock
for the period indicated in the relevant provision hereof (unless a different
relevant period is specified in the relevant provision), as reported by
Bloomberg, LP or, if not so reported, as reported on the over-the-counter market
or (y) if the Common Stock is listed on a stock exchange, the closing price
on
such exchange, as reported in The Wall Street Journal.
(iii)
“Trading
Day” shall mean any day on which the New York Stock Exchange is open for
business.
Conversion
shall be effectuated by surrendering the Debentures to be converted to the
Company’s Transfer Agent, American Stock Transfer & Trust Company, of New
York, New York, at such Transfer Agent’s then-current address, accompanied by or
preceded by facsimile or other delivery to the Company of the form of conversion
notice attached hereto as Exhibit A, executed by the Holder of the Debenture
evidencing such Holder's intention to convert this Debenture or a specified
portion hereof, and accompanied, if required by the Company, by proper
assignment hereof in blank. No fractional shares of Common Stock or scrip
representing fractions of shares will be issued on conversion, but the number
of
shares issuable shall be
A-2
rounded
to the nearest whole share. The date on which notice of conversion is given
(the
"Conversion Date") shall be deemed to be the date on which the Company receives
by fax or by mail the conversion notice (“Notice of Conversion”), substantially
in the form annexed hereto as Exhibit A, duly executed, to the Company;
provided
that the
Holder shall deliver to the Company's Transfer Agent or the Company the original
Debentures being converted within five (5) business days thereafter (and if
not
so delivered within such time, the Conversion Date shall be the date on which
the later of the Notice of Conversion and the original Debentures being
converted is received by the Company). Facsimile delivery of the Notice of
Conversion shall be accepted by the Company at facsimile number ▇▇▇-▇▇▇-▇▇▇▇,
ATTN: Corporate Secretary. Except as otherwise provided certificates
representing Common Stock upon conversion will be delivered within five (5)
business days from the date of delivery of the Notice of
Conversion.
b.
The
Company may at its option call for redemption all or part of the Debentures
prior to the Maturity Date, as follows:
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(i)
|
The
Debentures called for redemption shall be redeemable for an amount
(the
“Redemption Price”) equal to (x) if this Debenture is called for
redemption prior to the date which is six months from the Issuance
Date
set forth on the first page of this Debenture (the “Issuance Date”), 120%,
if this Debenture is called for redemption on or after the date that
is
six months after the Issuance Date but prior to the first anniversary
of
the issuance date, 125%, and if this Debenture is called for redemption
on
or after the date that is the first anniversary of the Issuance Date,
131%, in either case of the principal amount called for redemption,
plus
(y) interest accrued through the day immediately preceding the date
of
redemption (the “Redemption Date”).
|
|
(ii)
|
If
fewer than all outstanding Debentures are to be redeemed, then all
Debentures shall be partially redeemed on a pro
rata
basis.
|
|
(iii)
|
Prior
to the Redemption Date, the Company shall deposit into escrow an
amount
sufficient for the payment of the aggregate Redemption Price of the
Debentures being called for redemption and shall make such funds
available
on and after the Redemption Date for payment to the Holders who present
their Debentures and otherwise comply with the Company’s instructions
contained in the Redemption Notice (as defined
below).
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|
(iv)
|
On
the Redemption Date, the Company shall cause the Holders whose Debentures
have been presented for redemption to be issued payment of the Redemption
Price. In the case of a partial redemption, the Company shall also
issue
new Debentures to the Holders for the principal amount remaining
outstanding after the Redemption Date promptly after the Holders’
presentation of the Debentures called for
redemption.
|
|
(v)
|
Not
less than ten (10) days prior to the Redemption Date, the Company
shall
issue a notice (the “Redemption Notice”) to each Holder setting forth the
following:
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1.
|
the
Redemption Date;
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A-3
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2.
|
the
Redemption Price;
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|
3.
|
the
aggregate principal amount of the Debentures being called for redemption;
|
|
4.
|
a
statement instructing the Holders to surrender their Debentures for
redemption and payment of the Redemption Price, including the name
and
address of the Company or, if applicable, the paying agent of the
Company,
where Debentures are to be surrendered for
redemption;
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5.
|
a
statement advising the Holders that (x) interest will cease to accrue
on
the Debentures (or, in the case of a partial redemption, that portion
of
the Debentures being called for redemption) as of the Redemption
Date, and
(y) that the Debentures (or, in the case of a partial redemption,
that
portion of the Debentures being called for redemption) as of the
Redemption Date will cease to be convertible into Common Stock as
of the
Redemption Date; and
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6.
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in
the case of a partial redemption, a statement advising the Holders
that
after the Redemption Date a substitute Debenture will be issued by
the
Company after deduction the portion thereof called for redemption,
at no
cost to the Holder.
|
3.
Unless
demand has otherwise been made in writing for payment in cash by the Holder,
any
Debentures not previously received for conversion as of the Maturity Date shall
be deemed to have been surrendered for conversion, without further action of
any
kind by the Company or any of its agents, employees or representatives, as
of
the Maturity Date at the Conversion Price applicable on the Maturity Date
(“Mandatory Conversion”).
4.
No
provision of this Debenture shall alter or impair the obligation of the Company,
which is absolute and unconditional to Convert this Debenture into Common Stock,
at the time, place, and rate herein prescribed. This Debenture is a direct
obligation of the Company.
5.
If
the
Company (a) merges or consolidates with another corporation or after business
entity and the Company is not the surviving entity or (b) sells or transfers
all
or substantially all of its assets to another person and the holders of the
Common Stock are entitled to receive stock, securities or property in respect
of
or in exchange for Common Stock, then as a condition of such merger,
consolidation, sale or transfer, the Company and any such successor, purchaser
or transferee will agree that this Debenture may thereafter be converted on
the
terms and subject to the conditions set forth above into the kind and amount
of
stock, securities or property receivable upon such merger, consolidation, sale
or transfer by a holder of the number of shares of Common Stock into which
this
Debenture might have been converted immediately before such merger,
consolidation, sale or transfer, subject to adjustments which shall be as nearly
equivalent as may be practicable. In the event of any (i) proposed merger or
consolidation where the Company is not the surviving entity or (ii) sale or
transfer of all or substantially all of the assets of the Company (in either
such case, a "Sale"), the Holder shall have the right to convert by delivering
a
Notice of Conversion to the Company within fifteen (15) days of receipt of
notice of such Sale from the Company.
A-4
6.
If,
at
any time while any portion of this Debenture remains outstanding, the Company
effectuates a stock split or reverse stock split of its Common Stock or issues
a
dividend on its Common Stock consisting of shares of Common Stock or otherwise
recapitalizes its Common Stock, the Conversion Price shall be equitably adjusted
to reflect such action. By way of illustration, and not in limitation, of the
foregoing (i) if the Company effectuates a 2:1 split of its Common Stock,
thereafter, with respect to any conversion for which the Company issues the
shares after the record date of such split, the Conversion Price shall be deemed
to be one-half of what it had been calculated to be immediately prior to such
split; (ii) if the Company effectuates a 1:10 reverse split of its Common Stock,
thereafter, with respect to any conversion for which the Company issues the
shares after the record date of such reverse split, the Conversion Price shall
be deemed to be the amount of such Conversion Price calculated immediately
prior
to the record date multiplied by 10; and (iii) if the Company declares a stock
dividend of one share of Common Stock for every 10 shares outstanding,
thereafter, with respect to any conversion for which the Company issues the
shares after the record date of such dividend, the Conversion Price shall be
deemed to be the amount of such Conversion Price calculated immediately prior
to
such record date multiplied by a fraction, of which the numerator is the number
of shares for which a dividend share will be issued and the denominator is
such
number of shares plus the dividend share(s) issuable or issued
thereon.
7.
All
payments contemplated hereby to be made “in cash” shall be made by wire transfer
of immediately available funds in such coin or currency of the United States
of
America as at the time of payment is legal tender for payment of public and
private debts. All payments of cash and each delivery of shares of Common Stock
issuable to the Holder as contemplated hereby shall be made to the Holder to
an
account designated by the Holder to the Company and if the Holder has not
designated any such accounts at the address last appearing on the Debenture
Register of the Company as designated in writing by the Holder from time to
time; except that the Holder may designate, by notice to the Company, a
different delivery address for any one or more specific payments or
deliveries.
8.
The
Holder of the Debenture, by acceptance hereof, agrees that this Debenture is
being acquired for investment and that such Holder will not offer, sell or
otherwise dispose of this Debenture or the Shares of Common Stock issuable
upon
conversion thereof except in compliance with the terms of the Securities
Purchase Agreement and the Registration Rights Agreement and under circumstances
which will not result in a violation of the Securities Act or any applicable
state Blue Sky or foreign laws or similar laws relating to the sale of
securities.
9.
This
Debenture shall be governed by and construed in accordance with the laws of
the
State of New York. Each of the parties consents to the jurisdiction of the
federal courts whose districts encompass any part of the City of New York or
the
state courts of the State of New York sitting in the City and County of New
York
in connection with any dispute arising under this Agreement and hereby waives,
to the maximum extent permitted by law, any objection, including any objection
based on forum
non coveniens,
to the
bringing of any such proceeding in such jurisdictions. To the extent determined
by such court, the Company shall reimburse the Holder for any reasonable legal
fees and disbursements incurred by the Holder in enforcement of or protection
of
any of its rights under this Debenture or the Securities Purchase
Agreement.
10.
The
following shall constitute an "Event of Default":
A-5
a.
The
Company fails (i) in the payment of principal or interest on this Debenture
as
required to be paid in cash hereunder or (ii) in the issuance of shares of
Common Stock upon Conversion pursuant to Section 2 and, in either case, the
same
shall continue for a period of (5) days or; or
b.
Any
of
the representations or warranties made by the Company herein, in the Securities
Purchase Agreement, the Registration Rights Agreement, dated as of [__________
____, 2005]
between
the Company and the Investors therein (the "Registration Rights Agreement"),
or
in any certificate or financial or other written statements heretofore or
hereafter furnished by the Company in connection with the execution and delivery
of this Debenture or the Securities Purchase Agreement shall be false or
misleading (including without limitation by way of the misstatement of a
material fact or the omission of a material fact) in any material respect at
the
time made; or
c.
The
Company fails to issue shares of Common Stock to the Holder or to cause its
Transfer Agent to issue shares of Common Stock upon exercise by the Holder
of
the conversion rights of the Holder in accordance with the terms of this
Debenture, fails to transfer or to cause its Transfer Agent to transfer any
certificate for shares of Common Stock issued to the Holder upon conversion
of
this Debenture and when required by this Debenture or the Registration Rights
Agreement, and such transfer is otherwise lawful, or fails to remove any
restrictive legend or to cause its Transfer Agent to transfer any certificate
or
any shares of Common Stock issued to the Holder upon conversion of this
Debenture as and when required by this Debenture, the Agreement or the
Registration Rights Agreement and such legend removal is otherwise lawful,
and
any such failure shall continue uncured for five (5) business days after written
notice from the Holder of such failure; or
d.
The
Company shall fail to perform or observe, in any material respect, any other
covenant, term, provision, condition, agreement or obligation of the Debenture
and, except the case of Section 5, such failure shall continue uncured for
a
period of thirty (30) days after written notice from the holder of such failure.
The Company shall fail to perform or observe, in any material respect, any
covenant, term, provision, condition, agreement or obligation of the Company
under the Securities Purchase Agreement or the Registration Rights Agreement
and
such failure shall continue uncured for a period of thirty (30) days after
written notice from the Holder of such failure; or
e.
The
Company shall (1) admit in writing its inability to pay its debts generally
as
they mature; (2) make an assignment for the benefit of creditors or commence
proceedings for its dissolution; or (3) apply for or consent to the appointment
of a trustee, liquidator or receiver for its or for a substantial part of its
property or business; or
f.
A
trustee, liquidator or receiver shall be appointed for the Company or for a
substantial part of its property or business without its consent and shall
not
be discharged within sixty (60) days after such appointment; or
g.
Any
governmental agency or any court of competent jurisdiction at the instance
of
any governmental agency shall assume custody or control of the whole or any
substantial portion of the properties or assets of the Company and shall not
be
dismissed within sixty (60) days thereafter; or
A-6
h.
Any
final
money judgment, writ or warrant of attachment, or similar process (including
an
arbitral determination), not subject to appeal, in excess of Two Hundred Fifty
Thousand Dollars ($250,000) in the aggregate shall be entered or filed against
the Company or any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of sixty (60) days or in any event
later than five (5) days prior to the date of any proposed sale thereunder;
or
i.
Bankruptcy,
reorganization, insolvency or liquidation proceedings or other proceedings
for
relief under any bankruptcy law or any law for the relief of debtors shall
be
instituted by or against the Company and, if instituted against the Company,
shall not be dismissed within sixty (60) days after such institution or the
Company shall by any action or answer approve of, consent to, or acquiesce
in
any such proceedings or admit the material allegations of, or default in
answering a petition filed in any such proceeding; or
j.
The
issuance of an order, ruling, finding or similar adverse determination by the
Securities and Exchange Commission, the Secretary of State of the State of
Delaware, the National Association of Securities Dealers, Inc. or any other
securities regulatory body having proper jurisdiction that the Company and/or
any of its past or present (as of the date hereof or any subsequent date)
directors or officers have committed a material violation of applicable
securities laws or regulations, provided
that, in
the case of an action pertaining to any person who is not a present director
or
officer but rather who is a past director or officer, such action shall not
constitute an Event of Default if it does not (i) impair the Holder’s rights
under the Securities or result in a suspension, stop order or similar action
with respect to the Registration Statement (as defined in the Registration
Rights Agreement), (ii) result in the delisting or suspension of trading of
the
Shares on the OTC Bulletin Board or other stock exchange on which the Shares
are
listed for quotation or trading, and (iii) have a Material Adverse Effect on
the
Company, taking into account, among other things, coverage available to the
Company under its directors and officers liability insurance and other insurance
policies in favor of the Company.
k.
The
Company shall have its Common Stock suspended or delisted from an exchange
for a
period in excess of five (5) trading days.
Then,
or
at any time thereafter, and in each and every such case, unless such Event
of
Default shall have been waived in writing by a majority in interest of the
Holders of the Debentures (which waiver shall not be deemed to be a waiver
of
any subsequent default) at the option of a majority in interest of the Holders
and in the discretion of a majority in interest of the Holders, the Holder
may
at its option and discretion declare this Debenture, together with all accrued
and unpaid interest (the “Acceleration Amount”), to be immediately due and
payable, without presentment, demand, protest or notice of any kinds, all of
which are hereby expressly waived, anything herein or in any note or other
instruments contained to the contrary notwithstanding. Notwithstanding the
foregoing, in the case of a default under Section 10(a)(ii) arising from a
Conversion at the option of the Holder under Section 2(a), the Acceleration
Amount shall be 131% of the principal plus accrued and unpaid interest. The
Company expressly acknowledges and agrees that the Acceleration Amount as so
increased in the event of a default under Section 10(a)(ii) is reasonable and
appropriate due to the inability to define the financial hardship that the
Company’s default would impose on the Holders. A majority in interest of the
Holders may immediately enforce any and all of the Holder's rights and remedies
provided herein or any other rights or remedies afforded by law.
A-7
11.
Nothing
contained in this Debenture shall be construed as conferring upon the Holder
the
right to vote or to receive dividends or to consent or receive notice as a
shareholder in respect of any meeting of shareholders or any rights whatsoever
as a shareholder of the Company, unless and to the extent converted in
accordance with the terms hereof.
12. This
Debenture may be amended only by the written consent of the parties hereto.
Notwithstanding the foregoing, the principal amount of this Debenture shall
automatically be reduced by any and all Conversion Amounts (to the extent that
the same relate to principal hereof). In the absence of manifest error, the
outstanding principal amount of the Debenture on the Company’s book and records
shall be the correct amount.
13.
No
waivers or consents in regard to any provision of this Debenture may be given
other than by an instrument in writing signed by the Holder.
[Signature
page follows]
A-8
IN
WITNESS WHEREOF,
the
Company has caused this Debenture to be duly executed by an officer thereunto
duly authorized.
|
EYE
CARE INTERNATIONAL, INC.
By:
_____________________________
▇▇▇▇▇
▇. ▇▇▇▇▇▇
President
and Chief Executive Officer
|
A-9
EXHIBIT
A
NOTICE
OF
CONVERSION
(To
be
Executed by the Registered Holder in order to Convert the
Debenture)
The
undersigned hereby irrevocably elects to convert $ ________________ of the
principal amount of the above Debenture No. ___ into Shares of Class A Common
Stock of EYE CARE INTERNATIONAL, INC.
(the
"Company") according to the conditions hereof, as of the date written below.
After giving effect to the conversion requested hereby, the outstanding
principal amount of such debenture is $ ____________________ subject to
confirmation by the Company endorsed below.
Conversion
Date*
Applicable
Conversion Price
Signature
[Name]
Address:
*
This
original Debenture must be received by the Company or its Transfer Agent by
the
fifth business date following the Conversion Date.
The
Company hereby confirms that $ ___________ in principal amount is outstanding
under the above Debenture after giving effect to the conversion requested
hereby.
|
EYE
CARE INTERNATIONAL, INC.
By:_______________________________________
__________________________________________
(Print
Name)
__________________________________________
(Title)
|
A-10
EXHIBIT
B
REGISTRATION
RIGHTS AGREEMENT
(CONVERTIBLE
DEBENTURES)
THIS
REGISTRATION RIGHTS AGREEMENT, dated
as
of __________ _____, 2005 (this "Agreement"), is made by and between EYE CARE
INTERNATIONAL, INC.,
a
Delaware corporation, with headquarters located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ (the “Company”), and each entity named on the signature
page hereto as “Investors” (each, an “Investor”).
W
I T N E S S E T H:
WHEREAS,
upon
the terms and subject to the conditions of the Securities Purchase Agreement,
dated as of [_____________
____, 2005] [SAME DATE AS THE FINAL CLOSING],
between
the Buyers listed therein and the Company (the "Securities Purchase Agreement";
terms not otherwise defined herein shall have the meanings ascribed to them
in
the Securities Purchase Agreement), the Company has agreed to issue and sell
to
the Investors one or more debentures of the Company, in a minimum aggregate
principal amount of $250,000 and a maximum aggregate amount of $1,000,000 (the
"Debentures"); and
WHEREAS,
the
Debentures are convertible into shares of Common Stock (the "Conversion Shares";
which term, for purposes of this Agreement, shall be 300% of that number of
shares of Common Stock into which the Debentures, including without limitation
all shares of Common Stock issuable by the Company in lieu of accrued interest
on conversion as contemplated by the Debentures) upon the terms and subject
to
the conditions contained in the Debentures.
WHEREAS,
to
induce
the Investors to execute and deliver the Securities Purchase Agreement, the
Company has agreed to provide certain registration rights under the Securities
Act of 1933, as amended, and the rules and regulations thereunder, or any
similar successor statute (collectively, the "Securities Act"), with respect
to
the Conversion Shares;
NOW,
THEREFORE, in
consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the Company and the Investors hereby agree as
follows:
1.
Definitions. As
used
in this Agreement, the following terms shall have the following
meanings:
a.
“Holders’
Representative” means the person appointed as the Holders’ Representative by the
Investors pursuant to Section 10 hereof.
B-1
b.
"Investor"
means an Investor and any permitted transferee or assignee who agrees to become
bound by the provisions of this Agreement in accordance with Section 9 hereof
and who holds Debentures or Registrable Securities.
c.
"Potential
Material Event" means any of the following: (i) the possession by the Company
of
material information not ripe for disclosure in a registration statement, which
shall be evidenced by determinations in good faith by the Board of Directors
of
the Company that disclosure of such information in the registration statement
would be detrimental to the business and affairs of the Company; or (ii) any
material engagement or activity by the Company which would, in the good faith
determination of the Board of Directors of the Company, be adversely affected
by
disclosure in a registration statement at such time, which determination shall
be accompanied by a good faith determination by the Board of Directors of the
Company that the registration statement would be materially misleading absent
the inclusion of such information.
d.
"Register,"
"Registered," and "Registration" refer to a registration effected by preparing
and filing a Registration Statement or Statements in compliance with the
Securities Act and pursuant to Rule 415 under the Securities Act or any
successor rule providing for offering securities on a continuous basis ("Rule
415"), and the declaration or ordering of effectiveness of such Registration
Statement by the SEC.
e.
"Registrable
Securities" means the Conversion Shares and, to the extent applicable, any
other
shares of capital stock or other securities of the Company or any successor
to
the Company that are issued upon exchange of the Conversion Shares.
f.
"Registration
Statement" means a registration statement of the Company under the Securities
Act.
g.
“SEC”
means the United States Securities and Exchange Commission.
2.
Piggy-back
Registration.
From
and after the date that is ninety (90) days after the date of this Agreement
and
until the third anniversary of the Closing Date, for so long as any of the
Registrable Securities are outstanding and are not the subject of an effective
registration statement, if the Company contemplates making an offering of Common
Stock (or other equity securities convertible into or exchangeable for Common
Stock) registered for sale under the Securities Act or proposes to file a
Registration Statement covering any of its securities other than (i) a
registration on Form S-8 or S-4, or any successor or similar forms; and (ii)
a
shelf registration under Rule 415 for the sole purpose of registering shares
to
be issued in connection with the acquisition of assets, the Company will to
the
extent permissible by law at each such time give prompt written notice to the
Holders’ Representative and the Investors of its intention to do so and of the
Investor’s rights under this Section 6. Upon the written request of any Investor
made within thirty (30) days after the receipt of any such notice (which request
shall specify the Registrable Securities intended to be disposed of by such
Holder and the intended method of disposition thereof), the Company will use
its
best efforts to effect the registration of all Registrable Securities which
the
Company has been so requested to register by the Investors, to the extent
requisite to permit the disposition (in accordance with the intended methods
of
disposition) of the Registrable Securities by the Investors requesting
registration, by inclusion of
B-2
such
Registrable Securities in the Registration Statement which covers the securities
which the Company proposes to register; provided,
that if,
at any time after giving written notice of its intention to register any
Registrable Securities and prior to the effective date of the Registration
Statement filed in connection with such registration, the Company shall
determine for any reason either not to register or to delay registration of
such
Registrable Securities, the Company may, at its election, give written notice
of
such determination to the Holders’ Representative and the Investors requesting
registration and, thereupon, (i) in the case of a determination not to register,
the Company shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation
to
pay the expenses of registration in connection therewith), and (ii) in the
case
of a determination to delay registering such Registrable Securities, shall
be
permitted to delay registering any Registrable Securities, for the same period
as the delay in registering such other securities.
3.
Obligations
of the Company.
In
connection with the registration of the Registrable Securities, the Company
shall do each of the following:
(a)
To
prepare promptly, and, within thirty (30) days after the Closing Date (or as
soon thereafter as the Company is legally permitted under the Securities Act
and
the applicable rules and regulations of the SEC) (the “Required Filing Date”)
file with the SEC a Registration Statement with respect to not less than the
number of Registrable Securities provided in Section 2 above, and thereafter
use
its best reasonable efforts to cause such Registration Statement relating to
Registrable Securities to become effective as promptly as possible but in any
event within one hundred twenty (120) days after the Closing Date (the “Targeted
Effective Date”) and keep the Registration Statement effective at all times
during the period (the "Registration Period") continuing until the earliest
of
(i) the date that is three (3) years after the last day of the calendar month
following the month in which the Registration Statement so filed is declared
effective by the SEC, (ii) the date when the Investors may sell all Registrable
Securities under Rule 144, or (iii) the date the Investors no longer own any
of
the Registrable Securities, which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall
not
contain any untrue statement of a material fact or omit to state a material
fact
required to be stated therein or necessary to make the statements therein,
in
light of the circumstances in which they were made, not misleading.
Notwithstanding the foregoing, if the Pending Registration Statement has not
been declared effective by the SEC prior to the Closing Date, then the Company
may, at the Company's discretion, prior to the Required Filing Date, file a
pre-effective amendment to the Pending Registration Statement to include therein
the Investors as selling stockholders and their respective Registrable
Securities as registered shares, and shall endeavor to have the Pending
Registration Statement as so amended declared effective by the SEC as soon
as
practicable but in any event prior to the Targeted Effective Date.
Notwithstanding the foregoing, prior to the Targeted Effective Date, the Company
may contact the Holders’ Representative to request a waiver or extension of the
requirement that the Registration Statement be declared effective by the SEC
by
the Targeted Closing Date, in which case the Company shall provide, in writing,
all information available to it as to the reasons why such a waiver or extension
is appropriate or advisable, and the Holders’ Representative shall consider such
request and, within three (3) business days of its receipt of the aforesaid
information, advise the Company of its determination as to whether to grant
such
waiver or extension, which shall be in the Holders’ Representative’s absolute
discretion;
B-3
(b)
Prepare
and file with the SEC such amendments (including post-effective amendments)
and
supplements to the Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary to keep the Registration
Statement effective at all times during the Registration Period, and, during
the
Registration Period, comply with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities of the Company covered
by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement;
(c)
The
Company shall permit a single firm of legal counsel designated by the Holders’
Representative (the “Investors’ Counsel”) to review drafts of the Registration
Statement and all amendments and supplements thereto a reasonable period of
time
(but not less than three (3) business days) prior to their filing with the
SEC,
and not file any document in a form to which such Investors’ Counsel reasonably
objects. If the Investors’ Counsel objects, the Company shall take under
advisement such objections and shall endeavor to promptly make such revisions
to
the Registration Statement (or ancillary documents and/or SEC filings in
connection therewith) as are necessary to satisfy the objections of the
Investors’ Counsel;
(d)
Notify
the Holders’ Representative and the Investors’ Counsel, and any managing
underwriters immediately (and, in the case of (i)(A) below, not less than five
(5) days prior to the contemplated date of such filing) and (if requested by
any
the Holders' Representative) confirm such notice in writing no later than one
(1) business day following the day (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment to the Registration Statement is proposed
to be filed; (B) whenever the SEC notifies the Company whether there will be
a
“review” of Registration Statement; (C) whenever the Company receives (or a
representative of the Company receives on its behalf) any oral or written
comments from the SEC relating to a Registration Statement (copies or, in the
case of oral comments, summaries of such comments shall be promptly furnished
by
the Company to the Investors); and (D) with respect to the Registration
Statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the SEC or any other Federal or state governmental
authority for amendments or supplements to the Registration Statement or
Prospectus or for additional information; (iii) of the issuance by the SEC
of
any stop order suspending the effectiveness of the Registration Statement
covering any or all of the Registrable Securities or the initiation of any
Proceedings for that purpose; (iv) if at any time the Company has actual
knowledge that any of the representations or warranties of the Company contained
in any agreement (including any underwriting agreement) contemplated hereby
ceases to be true and correct in all material respects; (v) of the receipt
by
the Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of
any
Proceeding for such purpose; and (vi) of the occurrence of any event that to
the
best knowledge of the Company makes any statement made in the Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration Statement, Prospectus or other
documents so that, in the case of the Registration Statement or the Prospectus,
as the case may be, it will not contain any untrue statement of a material
fact
or omit to state any material fact required to be stated therein or necessary
to
make the statements therein, in light of the circumstances under which they
were
made, not misleading. In addition, if requested by the Holders' Representative,
the
B-4
Company
shall furnish the Holders' Representative with copies of all intended written
responses to the comments contemplated in clause (C) of this Section 3(d) not
later than one (1) business day in advance of the filing of such responses
with
the SEC so that the Holders’ Representative and the Investors’ Counsel shall
have the opportunity to comment thereon;
(e)
Furnish
to the Holders’ Representative and the Investors’ Counsel (i) promptly after the
same is prepared and publicly distributed, filed with the SEC, or received
by
the Company, one (1) copy of the Registration Statement, each preliminary
Prospectus and Prospectus, and each amendment or supplement thereto, and (ii)
if
so requested by any Investor, such number of copies of a Prospectus, and all
amendments and supplements thereto and such other documents, as such Investor
may reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Investor;
(f)
As
promptly as practicable after becoming aware thereof, notify the Holders’
Representative of the happening of any event of which the Company has actual
knowledge, as a result of which the prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact
or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were
made, not misleading, and use its best efforts promptly to prepare a supplement
or amendment to the Registration Statement or other appropriate filing with
the
SEC to correct such untrue statement or omission, and deliver a number of copies
of such supplement or amendment to the Holders' Representative and each Investor
as such Investor may reasonably request;
(g)
As
promptly as practicable after becoming aware thereof, notify the Holders’
Representative of the issuance by the SEC of a Notice of Effectiveness or any
notice of effectiveness or any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest possible time;
(h)
Notwithstanding
the foregoing, if at any time or from time to time after the date of
effectiveness of a Registration Statement, the Company notifies the Holders’
Representative in writing of the existence of a Potential Material Event, the
Investors shall not offer or sell any Registrable Securities, or engage in
any
other transaction involving or relating to the Registrable Securities, from
the
time of the giving of notice with respect to a Potential Material Event until
such Investor receives written notice from the Company that such Potential
Material Event either has been disclosed to the public or no longer constitutes
a Potential Material Event; provided,
however,
that
the Company may not so suspend the right to such Holders of Registrable
Securities for more than two twenty (20) business day periods in the aggregate
during any 12-month period ("Suspension Period") with at least a ten (10)
business day interval between such periods, during the periods the Registration
Statement is required to be in effect;
(i)
Use
its
reasonable efforts to secure and maintain the designation of all the Registrable
Securities covered by the Registration Statement on the NASDAQ/National Market
System or the "OTC Bulletin Board Market" or any successor thereto of the
National Association of Securities Dealers Automated Quotations System
("NASDAQ") within the meaning of Rule 11Aa2-1 of the SEC under the Securities
Exchange Act of 1934, as amended (the "Exchange
B-5
Act"),
and the quotation of the Registrable Securities on The NASDAQ National Market
System; and further use its efforts to arrange for at least two market makers
to
register with the National Association of Securities Dealers, Inc. ("NASD")
as
such with respect to such Registrable Securities;
(j)
Provide
a
transfer agent and registrar, which may be a single entity, for the Registrable
Securities not later than three (3) business days after the effective date
of
the Registration Statement;
(k)
Cooperate
with the Investors to facilitate the timely preparation and delivery of
certificates for the Registrable Securities to be offered pursuant to the
Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts as the case may be, as the
Investors may reasonably request, and, within five (5) business days after
a
Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal counsel
selected by the Company to deliver, to the transfer agent for the Registrable
Securities (with copies to the Investors whose Registrable Securities are
included in such Registration Statement) an appropriate instruction and opinion
of such counsel;
(l)
Take
all
other reasonable actions necessary to expedite and facilitate disposition by
the
Investor of the Registrable Securities pursuant to the Registration Statement;
(m)
Not
take,
or omit to take, any actions that would preclude the filing or effectiveness
of
the Registration Statement or require the withdrawal of the Registration
Statement.
4.
Payments
by the Company.
Unless
the Company's performance is waived in writing by the Holders'
Representative:
(i)
If
the
Registration Statement covering the Registrable Securities is not filed with
the
SEC by the Required Filing Date, the Company will make payment to the Investors
in such amounts and at such times as shall be determined pursuant to this
Section 4.
(ii)
If
the
Registration Statement covering the Registrable Securities is not declared
effective by the SEC by the Targeted Effective Date, the Company will make
payment to the Investors in such amounts and at such times as shall be
determined pursuant to this Section 4.
(iii)
If
the
Company does not respond (by written substantive response addressing each
comment, such response to be filed with the SEC) to comments issued by the
SEC
within five (5) business days of first receipt thereof by the Company or its
counsel, then the Company will make payments to the Investors in such amounts
and at such times as shall be determined pursuant to this Section 4.
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(iv)
If
any of
the conditions set forth in Clauses (i) through (iii) are not satisfied as
required thereby, then within three (3) days after the end of the time periods
referenced in Clauses (i) and (ii) (the third such date being referred to as
the
“Set Date”), as the case may be, the Company shall immediately pay to the
Investors without demand therefor a cash amount equal to 2% per month of the
outstanding principal amount of the Debentures and, until such time as the
actions required by Clause (i) or (ii), as the case may be, shall have been
taken, the same amount shall accrue and become payable to the Investors within
three days on the same day as the Set Date of each subsequent month until such
Clauses shall have been complied with. In light of the difficulty of
ascertaining the amount of damage that the Investors will suffer as a result
of
the Company’s failure to comply therewith, all amounts payable under this
Section 4 shall be payable as liquidated damages, and not as a penalty. The
Company shall keep the Registration Statement effective throughout the period
during which the life of the Registrable Securities are issued and
outstanding.
(v)
The
parties acknowledge that the damages which may be incurred by the Investors
if
the Registration Statement is not filed by the Required Filing Date or if the
Registration Statement has not been declared effective as promptly as possible
may be difficult to ascertain. The parties agree that the payments to be paid
to
the Investors under this Section 4 represent a reasonable estimate on the part
of the parties, as of the date of this Agreement, of the amount of such damages,
and shall be the exclusive remedy.
Notwithstanding
the foregoing, the amounts payable by the Company pursuant to this Section
4
shall not be payable to the extent any delay in the effectiveness of the
Registration Statement occurs because of an act of, or a failure to act or
to
act timely by the Investors or its counsel, or in the event all of the
Registrable Securities may be sold pursuant to Rule 144 or another available
exemption under the Act.
5.
Obligations
of the Investors.
In
connection with the registration of the Registrable Securities, the Investors
shall have the following obligations:
(a)
It
shall
be a condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Investor that such Investor shall furnish to the
Company such information regarding itself, the Registrable Securities held
by
it, and the intended method of disposition of the Registrable Securities held
by
it, as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with
such
registration as the Company may reasonably request. At least ten (10) business
days prior to the first anticipated filing date of the Registration Statement,
the Company shall notify each Investor of the information the Company requires
from each such Investor (the "Requested Information") if such Investor elects
to
have any of such Investor's Registrable Securities included in the Registration
Statement. If at least two (2) business days prior to the filing date the
Company has not received the Requested Information from an Investor (a
"Non-Responsive Investor"), then the Company may file the Registration Statement
without including Registrable Securities of such Non-Responsive
Investor;
B-7
(b)
Each
Investor, by such Investor's acceptance of the Registrable Securities, agrees
to
cooperate with the Company as reasonably requested by the Company in connection
with the preparation and filing of the Registration Statement hereunder, unless
such Investor has notified the Company in writing of such Investor's election
to
exclude all of such Investor's Registrable Securities from the Registration
Statement; and
(c)
Each
Investor agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(e) or 3(f), above,
such Investor will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(e) or 3(f) and, if so directed by the
Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such
notice.
(d)
Each
holder of Registrable Securities that sells Registrable Securities pursuant
to a
registration under this Agreement agrees that in connection with registration
as
follows:
(i)
Such
seller shall cooperate as reasonably requested by the Company with the Company
in connection with the preparation of the registration statement, and for as
long as the Company is obligated to file and keep effective the registration
statement, shall provide to the Company, in writing, for use in the registration
statement, all such information regarding such seller and its plan of
distribution of the Registrable Securities as may reasonably be necessary to
enable the Company to prepare the registration statement and prospectus covering
the Registrable Securities, to maintain the currency and effectiveness thereof
and otherwise to comply with all applicable requirements of law in connection
therewith; and
(ii)
During
such time as such seller may be engaged in a distribution of the Registrable
Securities, such seller shall comply with Rules 10b-6 and 10b-7 promulgated
under the Securities Exchange Act and pursuant thereto it shall, among other
things; (x) not engage in any stabilization activity in connection with the
securities of the Company in contravention of such rules; (y) distribute the
Registrable Securities under the registration statement solely in the manner
described in the registration statement; and (z) cease distribution of such
Registrable Securities pursuant to such registration statement upon written
notice from the Company that the prospectus covering the Registrable Securities
contains any untrue statement of a material fact required to be stated therein
or necessary to make the statements therein not misleading.
6. Expenses
of Registration.
(a)
All
reasonable expenses (other than underwriting discounts and commissions of the
Investors) incurred in connection with registrations, filings or qualifications
pursuant to Sections 2 and 3, but including, without limitation, all
registration, listing, and qualifications fees,
B-8
printers,
legal and accounting fees, the fees and disbursements of counsel for the Company
and a fee for the Investors’ Counsel (as a group and not individually) not
exceeding $50,000 for the Registration Statement covering the Registrable
Securities applicable to the Debentures shall be borne by the Company.
(b)
Neither
the Company nor any of its subsidiaries has, as of the date hereof, nor shall
the Company nor any of its subsidiaries, on or after the date of this Agreement,
entered into any agreement with respect to its securities that is inconsistent
with the rights granted to the Investors in this Agreement or otherwise
conflicts with the provisions hereof. Except as disclosed in the Securities
Purchase Agreement or the other documents entered into simultaneously therewith,
neither the Company nor any of its subsidiaries has previously entered into
any
agreement granting any registration rights with respect to any of its securities
to any Person. Without limiting the generality of the foregoing, without the
written consent of the Investors holding a majority of the Registrable
Securities, the Company shall not grant to any person the right to request
the
Company to register any securities of the Company under the Securities Act
unless the rights so granted are subject in all respects to the prior rights
in
full of the Investors set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement and the other Transaction
Documents.
7.
Indemnification.
In the
event any Registrable Securities are included in a Registration Statement under
this Agreement:
(a)
To
the
extent permitted by law, the Company will indemnify and hold harmless the
Holders’ Representative and each Investor who holds such Registrable Securities,
the directors, managers and members, if any, of the Holders’ Representative or
such Investor, the officers, if any, of the Holders’ Representative or such
Investor, and each person, if any, who controls the Holders’ Representative or
any Investor within the meaning of the Securities Act or the Exchange Act (each,
an "Indemnified Person" or "Indemnified Party"), against any losses, claims,
damages, liabilities or expenses (joint or several) incurred (collectively,
"Claims") to which any of them may become subject under the Securities Act,
the
Exchange Act or otherwise, insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) relate to the Company
and
arise out of or are based upon any of the following statements, omissions or
violations in the Registration Statement, or any post-effective amendment
thereof, or any prospectus included therein: (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
or
any post-effective amendment thereof or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make
the statements therein not misleading, (ii) any untrue statement or alleged
untrue statement of a material fact contained in the final prospectus (as
amended or supplemented, if the Company files any amendment thereof or
supplement thereto with the SEC) or the omission or alleged omission to state
therein any material fact necessary to make the statements made therein, in
light of the circumstances under which the statements therein were made, not
misleading or (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation under the Securities Act, the Exchange Act or any state securities
law (the matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). Subject to clause (b) of this Section 6, the Company shall
reimburse the Investors, promptly as such expenses are incurred and are due
and
payable, for any legal fees or other reasonable expenses incurred by them in
connection with
B-9
investigating
or defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a) shall
not
(I) apply to a Claim arising out of or based upon a Violation which occurs
in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of any Indemnified Person expressly for use in
connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto, if such prospectus was timely made
available by the Company pursuant to Section 3(c) hereof; (II) be available
to
the extent such Claim is based on a failure of the Investor to deliver or cause
to be delivered the prospectus made available by the Company; (III) apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of the Company, which consent shall not be
unreasonably withheld; or (IV) apply to any violation or alleged violation
by an
Indemnified Person of the Securities Act, the Exchange Act, any state securities
laws or any rule or regulation under the Securities Act, the Exchange Act,
or
any state securities laws. Each Investor will indemnify the Company and its
officers, directors and agents (each, an "Indemnified Person" or "Indemnified
Party") against any claims arising out of or based upon a Violation which occurs
in reliance upon and in conformity with information furnished in writing to
the
Company, by or on behalf of such Investor, expressly for use in connection
with
the preparation of the Registration Statement, subject to such limitations
and
conditions as are applicable to the Indemnification provided by the Company
to
this Section 6. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Indemnified Person and shall
survive the transfer of the Registrable Securities by the Investors pursuant
to
Section 9.
(b)
Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section
6
of notice of the commencement of any action (including any governmental action),
such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to
the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person
or
the Indemnified Party, as the case may be. In case any such action is brought
against any Indemnified Person or Indemnified Party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will
be
entitled to participate in, and, to the extent that it may wish, jointly with
any other indemnifying party similarly notified, assume the defense thereof,
subject to the provisions herein stated and after notice from the indemnifying
party to such Indemnified Person or Indemnified Party of its election so to
assume the defense thereof, the indemnifying party will not be liable to such
Indemnified Person or Indemnified Party under this Section 6 for any legal
or
other reasonable out-of-pocket expenses subsequently incurred by such
Indemnified Person or Indemnified Party in connection with the defense thereof
other than reasonable costs of investigation, unless the indemnifying party
shall not pursue the action to its final conclusion. The Indemnified Person
or
Indemnified Party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and reasonable
out-of-pocket expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the Indemnified Person or
Indemnified Party. The failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action shall
not
relieve such indemnifying party of any liability to the Indemnified Person
or
Indemnified Party
B-10
under
this Section 6, except to the extent that the indemnifying party is prejudiced
in its ability to defend such action. The indemnification required by this
Section 6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as such expense, loss, damage or
liability is incurred and is due and payable.
8.
Contribution.
To the
extent any indemnification by an indemnifying party is prohibited or limited
by
law, the indemnifying party agrees to make the maximum contribution with respect
to any amounts for which it would otherwise be liable under Section 6 to the
fullest extent permitted by law; provided,
however,
that
(a) no contribution shall be made under circumstances where the maker would
not
have been liable for indemnification under the fault standards set forth in
Section 6; (b) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any seller of Registrable Securities
who
was not guilty of such fraudulent misrepresentation; and (c) contribution by
any
seller of Registrable Securities shall be limited in amount to the net amount
of
proceeds received by such seller from the sale of such Registrable
Securities.
9.
Reports
under Exchange Act.
With a
view to making available to the Investors the benefits of Rule 144 promulgated
under the Securities Act or any other similar rule or regulation of the SEC
that
may at any time permit the Investors to sell securities of the Company to the
public without registration ("Rule 144"), the Company agrees to:
a.
make
and
keep public information available, as those terms are understood and defined
in
Rule 144;
b.
file
with
the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act;
c.
furnish
to each Investor so long as such Investor owns Registrable Securities, promptly
upon request, (i) a written statement by the Company that it has complied with
the reporting requirements of Rule 144, the Securities Act and the Exchange
Act,
(ii) a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company and (iii) such other
information as may be reasonably requested to permit the Investors to sell
such
securities pursuant to Rule 144 without registration; and
d.
cause
its
counsel to deliver to its transfer agent such opinions of law as shall be
required to remove restrictive legends on the shares to be sold.
10.
Amendment
of Registration Rights.
Any
provision of this Agreement may be amended and the observance thereof may be
waived (either generally or in a particular instance and either retroactively
or
prospectively), only with the written consent of the Company and Investors
who
hold a fifty (50%) percent interest of the Registrable Securities. Any amendment
or waiver effected in accordance with this Section 10 shall be binding upon
each
Investor and the Company.
11.
Appointment
and Indemnification of Holders’ Representative.
Each of
the Investors hereby appoints as the Holders’ Representative Divine Capital
Markets, LLC to so act until such time as all Registrable Securities have become
Registered and there shall be no
B-11
Debentures
issued and outstanding, or such time as a successor to the then-acting Holders’
Representative is appointed in writing signed by the Investors representing
greater than 50% of the then-outstanding Debentures and Registrable Securities.
The Holders’ Representative shall have full discretion and authority, without
consultation with the Holders, to accept and give notices on behalf of the
Holders, to communicate with the Holders at such times and in such manner as
the
Holders’ Representative in its discretion determines is appropriate and to grant
extensions of deadlines or waive any payment obligations set forth in Sections
2
and 3 hereof. The Holders' Representative shall not have discretion or authority
to exercise any investment discretion over the Debentures, including causing
the
conversion of any Debentures, absent a Holder's express written authority.
Notwithstanding
any provision to the contrary contained elsewhere herein or in the Securities
Purchase Agreement or the Debentures, the Holders’ Representative shall not have
any duties or responsibilities, except those expressly set forth herein, nor
shall the Holders’ Representative have or be deemed to have any fiduciary
relationship with any Holder, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or the Securities Purchase Agreement or Debentures or otherwise exist
against the Holders’ Representative. The Holders shall indemnify upon demand the
Holders’ Representative (to the extent not reimbursed by or on behalf of the
Company and without limiting the obligation of the Company to do so under
Section 6 hereof or under any other agreement or applicable law), pro
rata,
and
hold harmless the Holders’ Representative from and against any and all
against
any losses, claims, damages, liabilities or expenses (joint or several) incurred
(collectively, "Holders’ Representative’s Claims") incurred
by it; provided,
however,
that no
Holder shall be liable for the payment to the Holders’ Representative of any
portion of such Holders’ Representative’s Claims to the extent determined in a
final, nonappealable judgment by a court of competent jurisdiction to have
resulted from the Holders’ Representative’s own gross negligence or willful
misconduct; provided,
however,
that no
action taken in accordance with the directions of the Holders shall be deemed
to
constitute gross negligence or willful misconduct for purposes of this Section
10. Without limitation of the foregoing, each Holder shall reimburse the
Holders’ Representative upon demand for its ratable share of any costs or
out-of-pocket expenses incurred by the Holders’ Representative in connection
with the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement, the Securities Purchase Agreement, the Debentures, or any
document contemplated by or referred to herein, to the extent that the Holders’
Representative is not reimbursed for such expenses by or on behalf of the
Company.
12.
Miscellaneous.
a.
A
person
or entity is deemed to be a holder of Registrable Securities whenever such
person or entity owns of record such Registrable Securities. If the Company
receives conflicting instructions, notices or elections from two or more persons
or entities with respect to the same Registrable Securities, the Company shall
act upon the basis of instructions, notice or election received from the
registered owner of such Registrable Securities.
b.
Notices
required or permitted to be given hereunder shall be given in the manner
contemplated by the Securities Purchase Agreement, (i) if to the Company or
to
the Investors, to their respective address contemplated by the Securities
Purchase Agreement, and
B-12
(iii)
if
to any other Investor, at such address as such Investor shall have provided
in
writing to the Company, or at such other address as each such party furnishes
by
notice given in accordance with this Section 12(b).
c.
Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate as
a
waiver thereof.
d.
This
Agreement shall be governed by and interpreted in accordance with the laws
of
the State of New York for contracts to be wholly performed in such state and
without giving effect to the principles thereof regarding the conflict of laws.
Each of the parties consents to the jurisdiction of the federal courts whose
districts encompass any part of the City of New York or the state courts of
the
State of New York sitting in the City of New York in connection with any dispute
arising under this Agreement and hereby waives, to the maximum extent permitted
by law, any objection, including any objection based on forum
non coveniens,
to the
bringing of any such proceeding in such jurisdictions. To the extent determined
by such court, the Company shall reimburse the Buyer for any reasonable legal
fees and disbursements incurred by the Buyer in enforcement of or protection
of
any of its rights under this Agreement.
e.
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.
f.
Subject
to the requirements of Section 9 hereof, this Agreement shall inure
to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto.
g.
All
pronouns and any variations thereof refer to the masculine, feminine or neuter,
singular or plural, as the context may require.
h.
The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning thereof.
i.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original but all of which shall constitute one and the same agreement.
This Agreement, once executed by a party, may be delivered to the other party
hereto by telephone line facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
j.
The
Company acknowledges that any failure by the Company to perform its obligations
under Section 3(a) hereof, or any delay in such performance could result in
loss
to the Investors, and the Company agrees that, in addition to any other
liability the Company may have by reason of such failure or delay, the Company
shall be liable for all direct damages caused by any such failure or delay,
unless the same is the result of force majeure. Neither party shall be liable
for consequential damages.
k.
This
Agreement constitutes the entire agreement among the parties hereto with respect
to the subject matter hereof. There are no restrictions, promises, warranties
or
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undertakings,
other than those set forth or referred to herein. This Agreement supersedes
all
prior agreements and understandings among the parties hereto with respect to
the
subject matter hereof. This Agreement may be amended only by an instrument
in
writing signed by the party to be charged with enforcement thereof.
IN
WITNESS WHEREOF, the
parties have caused this Agreement to be duly executed by their respective
officers thereunto duly authorized as of the day and year first above
written.
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COMPANY:
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EYE
CARE INTERNATIONAL, INC.
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By:
_____________________________
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Name:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Title: President
and Chief Executive Officer
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INVESTOR:
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Print
Name of Investor
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By:
________________________________
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Print
Name of Signatory:
Title:
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EXHIBIT
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Tel ▇▇▇
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Fax
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Holland
& Knight LLP
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March
9,
2005
TO
THE
BUYERS
NAMED
ON
SCHEDULE I
Re: Securities
Purchase Agreement
Ladies
and Gentlemen:
We
have
acted as special counsel for Eye Care International, Inc. (the "Company"),
a
Delaware corporation, in connection with the transactions under (i) the
Securities Purchase Agreement, by and among each entity named therein as a
“Buyer” (each, a “Buyer”) and the Company, dated as of ________,
2005
(the "Securities Purchase Agreement"), (ii) the Registration Rights Agreement,
between the Investors and the Company, dated as of __________, 2005 (the
“Registration Rights Agreement”) and (iii) the Company’s Convertible Debenture
due 2008 (the "Debentures," and, together with the Securities Purchase Agreement
and the Registration Rights Agreement, the "Transaction Documents"). This
opinion is furnished to you pursuant to Section 8 of the Securities Purchase
Agreement. All capitalized terms used herein have the meanings defined for
them
in the Securities Purchase Agreement unless otherwise defined
herein.
For
purposes of this opinion, we have examined and are relying upon the
following:
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1.
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the
Securities Purchase Agreement;
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2.
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the
Registration Rights Agreement;
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3.
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the
Debentures.
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Except
as
may be otherwise specifically noted in this opinion letter, the opinions
expressed herein relate solely to the documents listed above, and not to any
other documents, including any documents that are referred to in, incorporated
by reference into, or listed as attachments, exhibits, or schedules to any
of
such documents.
In
rendering the opinions set forth below, we have also examined and, as to
corporate matters, are relying solely upon the following:
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1.
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The
Certificate of Incorporation (the "Articles") and Bylaws (the "Bylaws")
of
the Company, as amended to date;
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2.
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Resolutions
adopted by the Board of Directors of the Company, dated as of March
5,
2005 with respect to the Transaction
Documents;
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3.
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Certificates
of legal existence and good standing dated __________ for the Company
issued by the Delaware Secretary of State (the "Status
Certificate");
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4.
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A
certificate dated ____________ as to the qualification and good standing
of the Company as a foreign corporation issued by the Florida Secretary
of
State (the "Company Qualification Certificate(s)");
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5.
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The
Officer's Certificate dated March __, 2005 stating that the Transaction
as
contemplated by the Transaction Documents does not conflict with,
or
constitute a material default (or an event that with notice or lapse
of
time or both would become a material default) under, or give to others
any
rights of termination, amendment, acceleration or cancellation of,
any
material agreement, indenture, instrument or any "lock-up" or similar
provision of any underwriting or similar agreement to which the Company
is
a party; and
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6.
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The
Secretary's Certificate dated ___________ as to the Articles and
Bylaws,
and containing an incumbency certification as to the Company (the
"Secretary's Certificate").
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With
your
consent, we have assumed that certificates of public officials dated earlier
than the date of this opinion remain accurate from such earlier date through
and
including the date of this letter. As to matters of fact, we have relied on
the
representations and warranties made by the parties in the Transaction Documents
and on certificates of public officials and the Secretary's Certificate and
Officer's Certificate. We have made no independent investigation of the accuracy
or completeness of such matters of fact.
For
purposes of this opinion letter, the term “to our knowledge” or a similar phrase
means the conscious awareness of facts or other information, at the time of
delivery of this opinion letter, by the lawyers in our firm who have given
substantive attention to the preparation of, and transactions effected by,
the
Transaction Documents, and does not include constructive, implied, imputed,
presumed, or assumed notice or knowledge of facts or information. Except to
the
extent expressly set forth herein, and with your permission, we have not
undertaken any independent investigation (including without limitation review
of
any governmental records or court dockets) to determine the existence or absence
of any facts or other information, and no inference as to our knowledge or
the
existence or absence of any such facts or other information should be drawn
from
the fact of our representation of the Company as special counsel.
In
rendering the opinions herein, we have relied, without independent
investigation, upon the following assumptions:
(A)
Each
party to the Transaction Documents (other than the Company) is duly organized
and is validly existing and in good standing in its jurisdiction of
organization;
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(B)
Each
party to the Transaction Documents (other than the Company) has full power
and
authority to execute, deliver and perform its obligations under the Transaction
Documents to which it is a party, and the Transaction Documents to which it
is a
party have been duly authorized by all necessary action on its part and have
been duly executed and duly delivered by it;
(C)
The
Transaction Documents constitute the valid and binding obligation of each party
thereto (other than the Company), enforceable against such party in accordance
with their respective terms;
(D)
Each
natural person executing the Transaction Documents or any other document
referred to herein is legally competent to do so;
(E)
Each
party to the Transaction Documents (other than the Company) has complied with
all legal requirements pertaining to its status, as such status relates to
its
rights to enforce such documents against the Company (including, but not limited
to, qualifying to do business, if required, in the relevant
jurisdiction);
(F)
Each
document submitted to us for review is accurate and complete, each such document
that is an original is authentic, each such document that is a copy or a draft
conforms to an authentic original, and all signatures on each such document
are
genuine (other than those of officers of the Company on the Transaction
Documents);
(G)
There
has
not been any mutual mistake of fact or misunderstanding, fraud, duress, or
undue
influence;
(H)
The
Transaction Documents will be enforced in circumstances and in a manner in
which
it is commercially reasonable to do so and the conduct of the parties complies
with any requirement of good faith and fair dealing;
(I)
There
are
no agreements or understandings among the parties, written or oral, and there
is
no usage of trade or course of prior dealing among the parties that would,
in
either case, define, supplement or qualify the terms of the Transaction
Documents;
(J)
Each
person who has taken any action relevant to any of our opinions in the capacity
of director or officer was duly elected to that director or officer position
and
held that position when such action was taken;
(K)
The
constitutionality and validity of all relevant laws, regulations, and agency
actions unless a reported case has otherwise held or widespread concern has
been
expressed by commentators as reflected in materials which lawyers routinely
consult;
(L)
All
statutes, judicial and administrative decisions, and rules and regulations
of
governmental agencies constituting law are generally available (i.e. in terms
of
C-3
access
and distribution following publication or other release) to lawyers practicing
in the State of New York, and are in a format that makes legal research
reasonably feasible;
(M)
The
Company is not subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act, or the Investment Company Act of 1940,
each
as amended to date; and
(N)
The
payment when due of any documentary stamp taxes and non-recurring intangible
taxes required to be paid in connection with the execution, delivery, recording,
or filing of the Transaction Documents.
Based
on
and subject to the foregoing and subject to the exceptions, qualifications,
and
limitations herein set forth, we express the following opinions:
1.
The
Company is a corporation validly existing and in good standing under the laws
of
the State of Delaware. The Company has the corporate power and authority to
conduct its business and, based solely on the Company Qualification
Certificate(s), the Company is qualified to do business as a foreign corporation
in the State of Florida.
2.
The
Company has the corporate power to perform its obligations under the Transaction
Documents and to sell, issue and deliver the Debentures. The execution and
delivery of the Transaction Documents by the Company and the consummation by
it
of the transactions contemplated thereby have been authorized by all necessary
corporate action. Each of the Transaction Documents has been executed and
delivered by the Company, and each of the Transaction Documents constitutes
valid and binding obligations of the Company enforceable against the Company
in
accordance with its terms.
3.
The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated thereby,
including, without limitation, the sale, issuance and delivery of the
Debentures, do not to our knowledge (i) result in a violation of the Articles
or
the By-Laws; (ii) based solely on the Officer's Certificate, conflict with,
or
constitute a material default (or an event that with notice or lapse of time
or
both would become a material default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement,
indenture, instrument or any "lock-up" or similar provision of any underwriting
or similar agreement to which the Company is a party; or (iii) result in a
violation of any federal or state law, rule or regulation that is to our
knowledge applicable to the Company except for such violations as would not,
individually or in the aggregate, have a Material Adverse Effect.
4.
Subject
to the accuracy of the Buyer's representations, that the Buyer is an accredited
investor as defined under the Securities Act of 1933, the purchase and sale
of
the Debentures pursuant to the Transaction Documents is exempt from registration
under the Securities Act of 1933, as amended, pursuant to Section 4(2)
thereof.
5.
Upon
conversion of the Debentures in accordance with the terms therein, the Common
Stock to be issued thereunder will be authorized, issued and fully paid in
non-assessable shares of the Company.
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6.
The
authorized capital stock of the Company consists of 120,000,000 shares of
capital stock, of which 80,000,000 shares are designated as Class A Common
Stock, par value $0.001 per share (the “Common Stock”), 20,000,000 shares are
designated Class B Common Stock, par value $0.001 per share and 20,000,000
shares are designated as Preferred Stock. As of the date hereof, assuming the
conversion or exercise of certain currently outstanding common stock equivalents
of the Company into underlying shares of Common Stock, 23,807,147 shares of
Common Stock (excluding an additional approximately 2,676,344 shares of Common
Stock to be issued upon conversion of certain currently outstanding debentures
and exercise of certain currently outstanding warrants), 5,302,802 shares of
Class B Common Stock and 155 Series A Convertible Preferred Shares and 86 Series
C Mandatory Convertible Preferred Shares of stock are issued and outstanding.
All issued and outstanding shares of Common Stock have been duly authorized
and
validly issued and are fully paid and nonassessable. The Company has sufficient
authorized and unissued shares of Common Stock as may be necessary to effect
the
issuance of the Shares.
Based
on
and subject to the foregoing and subject to the exceptions, qualifications,
and
limitations herein set forth, we hereby confirm that to our knowledge, the
Company is not a party to any pending actions, suits, proceedings or
investigations which could reasonably be expected to have a Material Adverse
Effect.
Our
opinions are subject to bankruptcy, insolvency, fraudulent conveyance or
transfer, reorganization, arrangement, moratorium and other laws affecting
the
rights and remedies of creditors generally, including limitations imposed by
judicial decisions relating thereto, and to general principles of equity,
regardless of whether considered in a proceeding in equity or at law, including
without limitation concepts of materiality, reasonableness, good faith, and
fair
dealing, and including principles under which a court has discretion in granting
specific performance or injunctive or other equitable relief.
Our
opinions are also subject to the effect of rules of law that:
(A)
limit
or
affect the enforcement of provisions of a contract that purport to waive, or
to
require waiver of, the obligations of good faith, fair dealing, diligence and
reasonableness;
(B)
provide
that forum selection clauses with respect to courts in contracts are not
necessarily binding on the court(s) in the forum selected;
(C)
limit
the
availability of a remedy under certain circumstances where another remedy has
been elected;
(D)
relate
to
the sale or disposition of collateral or the requirements of a commercially
reasonable sale;
(E)
limit
the
enforceability of provisions releasing, exculpating or exempting a party from,
or requiring indemnification of a party for, liability for its own action or
inaction, to the extent the action or inaction involves gross negligence,
recklessness, willful misconduct, unlawful conduct, violation of law or public
policy or litigation against another party determined adversely to such
party;
C-5
(F)
may,
if
less than all of a contract is unenforceable, limit the enforceability of the
remainder of the contract to circumstances in which the unenforceable portion
is
not an essential part of the agreed exchange;
(G)
govern
and afford judicial discretion regarding the determination of damages and
entitlement to attorneys’ fees and other costs; and
(H)
permit
a
party that has materially failed to render or offer performance required by
the
contract to cure that failure unless (i) permitting a cure would
unreasonably hinder the aggrieved party from making substitute arrangements
for
performance, or (ii) it was important in the circumstances to the aggrieved
party that performance occur by the date stated in the contract.
This
opinion letter is based as to matters of law solely on (i) the General
Corporation Law as in effect on the date hereof in the State of Delaware, and
(ii) such internal law of the State of New York (but not including any statutes,
ordinances, administrative decisions, rules or regulations of any political
subdivision of the State of New York) and such Federal law that, in each case
in
our experience, is normally applicable to a transaction of the type contemplated
by the Transaction Documents and to the parties thereto, without our having
made
any special investigation concerning any other law, rule or regulation.
Without
limiting the generality of the foregoing paragraph, and in some cases in
addition thereto, and notwithstanding anything to the contrary contained herein,
we express no opinion as to: (a) any Federal, state, or local law or regulation
relating to (i) taxation, usury, choice-of-law provisions, antitrust or trade
regulation, banking, securities, including the "blue sky" laws of any state,
except as specifically set forth in opinion paragraph 4 hereof, or labor or
employee rights and benefits laws, including the Employee Retirement Income
Security Act of 1974, as amended; (ii) planning, zoning, historic preservation,
condominiums, cooperatives, subdivisions, inland or wetland matters, air, water,
or noise pollution, effluent waste disposal, hazardous substances, environmental
contamination, fire, life safety, or building codes, occupational safety or
health, or the Americans with Disabilities Act; or (iii) corrupt practices,
including, without limitation, the Foreign Corrupt Practices Act of 1977; (b)
laws, rules, or regulations of any county, municipality, or similar political
subdivision or any agency or instrumentality thereof (c) the creation,
perfection, constructive notice, or priority of any security interest, lien,
or
other encumbrance on any real or personal property; or (d) the applicability
to
the obligations of the Company (or the enforceability thereof) of Section 548
of
the U.S. Bankruptcy Code or any other provision of law relating to fraudulent
transfers, conveyances and obligations.
Our
advice on each legal issue addressed herein represents our opinion concerning
how that issue would be resolved were it to be considered by the highest court
of the jurisdiction upon whose law our opinion on that issue is based. The
manner in which any particular issue would be treated in any actual court case
would depend in part on facts and circumstances peculiar to the case, and our
opinions are not a guaranty of an outcome of any legal dispute which may arise
with regard to the Transaction Documents.
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This
letter speaks as of the date hereof. We disclaim any obligation to provide
you
with any subsequent opinion or advice by reason of any future changes or events
which may affect or alter any opinion rendered herein. Our opinion is limited
to
the matters stated herein, and no opinion is to be implied or inferred beyond
the matters stated herein.
This
letter is being delivered to you and may be relied upon only by you in
connection with the Transaction Documents. This letter may not be relied upon
by, furnished to, referred to, quoted, in whole or part, by, or filed with,
any
other person, or used for any other purpose, without our prior written
consent.
Very
truly yours,
HOLLAND
& KNIGHT LLP
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SCHEDULE
I TO COMPANY COUNSEL LEGAL OPINION
[INSERT
NAMES OF BUYERS AT EACH RESPECTIVE CLOSING]
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