CONVERTIBLE DEBENTURES AND WARRANTS SUBSCRIPTION AGREEMENT
OF STERLING VISION, INC.
THIS CONVERTIBLE DEBENTURES AND WARRANTS SUBSCRIPTION AGREEMENT (the
"Agreement") is made and entered into as of the 17th day of February, 1998, by
and between STERLING VISION, INC., a New York corporation ("Seller"), and ,
-----------------------, a ------------------- ("Buyer"), providing for the
purchase and sale of --------------- ( ) Units (the "Units"), each Unit
consisting of the principal amount of One Hundred Thousand ($100,000.00) Dollars
of certain convertible debentures of Seller to become due on February 17, 1999
(the "Maturity Date") (collectively, the "Debentures"), convertible into shares
(collectively, the "Debenture Shares") of the common stock, par value $.01 per
share (the "Common Stock"), of Seller, and Twenty Thousand (20,000) Warrants
(collectively, the "Warrants") of Seller, each Warrant entitling Buyer to
purchase one share (collectively, the "Warrant Shares") of Common Stock (the
Debenture Shares and the Warrant Shares being hereinafter collectively referred
to as the "Shares"), in connection with an offering by Seller of an aggregate of
35 Units consisting of Debentures, in the aggregate principal amount of Three
Million Five Hundred ($3,500,000) Dollars, and an aggregate of Seven Hundred
Thousand (700,000) Warrants. Seller and Buyer (collectively, the "Parties") each
hereby represent and agree as follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
(i) Buyer hereby subscribes for------------( ) Units, consisting of
Debentures having an aggregate principal amount of ----------------------------
--- Dollars ($ ) and -------------------------------- ( ) Warrants. The
Debentures shall be onvertible into Shares in accordance with the terms set
forth in the form of Debenture attached as Exhibit A to this Agreement. The
Warrants shall entitle Buyer to purchase Shares in accordance with the terms of
the form of Warrant attached as Exhibit B to this Agreement.
(ii) The Debentures shall bear interest computed at the rate of ten
(10%) percent per annum and shall mature twelve (12) months from the date of
Closing (as defined below). Interest on the Debentures shall be payable
quarter-annually, in arrears, on each of May 17, 1998, August 17, 1998, November
17 , 1998 and the Maturity Date. Subject to the terms and limitations contained
in the Debentures, the Debentures shall be convertible into Shares at a price
per Share (the "Conversion Price") of Five ($5.00) Dollars. Notwithstanding the
foregoing, Seller, on the Maturity Date, shall pay to the Buyer the outstanding
principal amount of such portion
of the Debentures not theretofore converted by the Buyer, together with all
accrued and unpaid interest thereon and, in addition, additional interest
thereon, in an amount equal to five (5%) percent of such principal amount not
theretofore converted by Buyer. Subject to the terms and limitations contained
therein, the Warrants shall be exercisable at any time after Closing, each
Warrant entitling the holder thereof to purchase one Share at a price of $5.00
per Share. The Warrants shall expire three (3) years from the date of grant.
(iii) Buyer shall pay the aforesaid principal amount as the purchase
price for the Units subscribed for by it by wire transfer of immediately
available, Federal funds in United States dollars against counter-delivery of
Buyer's Units by Seller. The closing of the purchase and sale of the Units (the
"Closing") shall take place on or about February 17, 1998, at 10:00 a.m., at the
offices of Seller's counsel, Camhy ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ or at such other place as the parties shall agree.
2. BUYER'S REPRESENTATIONS AND COVENANTS.
Buyer represents, warrants and covenants to Seller as follows:
(i) This Agreement has been duly authorized, validly executed and
delivered on behalf of Buyer and is a valid and binding agreement of Buyer
enforceable in accordance with its terms, subject to general principles of
equity and of bankruptcy or other laws affecting the enforcement of creditors'
rights;
(ii) Buyer is purchasing the Unit(s) for its own account for investment
purposes only and not with a view towards distribution. Buyer understands and
agrees that it must bear the economic risks of its investment for an indefinite
period of time. Buyer has received and carefully reviewed copies of the Public
Documents (as defined in Section 3). Buyer understands that the offer and sale
of the Units are being made only by means of this Agreement. No representations
or warranties have been made to Buyer by Seller, the officers or directors of
Seller, or any agent, employee or affiliate of any of them, except as
specifically set forth herein. Buyer is aware that the purchase of the Units
involves a high degree of risk and that it may sustain, and has the financial
ability to sustain, the loss of its entire investment. Buyer has had the
opportunity to ask questions of, and receive answers satisfactory to it from,
Seller's management regarding Seller. Buyer understands that no federal or state
governmental authority has made any finding or determination relating to the
fairness of an
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investment in the Units and that no federal or state governmental authority has
recommended or endorsed, or will recommend or endorse, the investment herein.
Buyer, in making the decision to purchase the Units subscribed for, has relied
upon independent investigation made by it and has not relied on any information
or representations made by third parties. Buyer has significant assets and upon
consummation of the purchase of the Units will continue to have significant
assets exclusive of the Units. Buyer has not been organized for the sole purpose
of acquiring the Units;
(iii) Buyer is an "accredited investor" within the meaning of
Rule 501 promulgated under the Securities Act of 1933, as amended (the
"Securities Act");
(iv) Buyer understands that the Units are being offered and
sold to it in reliance on specific provisions of federal and state securities
laws and that Seller is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
Buyer set forth herein in order to determine the applicability of such
provisions;
(v) Buyer agrees that for a period of twelve (12) months from
the Closing it shall not offer, sell, contract to sell, grant any option to
purchase or otherwise dispose of any Common Stock (any of the foregoing, a
"Sale") that Buyer does not own as of such date, provided, however, that no such
restriction shall apply to any Shares to be issued to Buyer upon the conversion
of any Debentures or the exercise of any Warrants in the event Seller receives
from Buyer, within five (5) business days after any such Sale, (x) a Notice of
Conversion (as defined in the form of Debenture attached as Exhibit A to this
Agreement) with respect to such Debentures or (y) the Election to Exercise with
respect to such Warrants;
(vi) Buyer has not employed any investment banker, broker or
finder or incurred any liability for any brokerage fees, commissions or finder's
fees in connection with the transactions contemplated by this Agreement; and
(vii) Buyer understands that neither the Units, the Debentures, the
Warrants nor the Shares have been registered under the Securities Act and
therefore it cannot dispose of any or all of the Units, the Debentures, the
Warrants or the Shares unless and until such Units, Debentures, Warrants or
Shares, as the case may be, are subsequently registered under the Securities Act
or exemptions from such registration are available, it being understood that
subject to certain limitations, only the Shares shall be registered by Seller.
Buyer acknowledges that a legend substantially as follows will be placed on the
certificates
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representing the Debentures, the Warrants and the Shares:
THE SECURITIES REPRESENTED HEREBY ARE RESTRICTED SECURITIES WITHIN THE MEANING
OF THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH SUCH ACT AND THE
RULES AND REGULATIONS PROMULGATED THEREUNDER AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS. THE ISSUER OF THESE SECURITIES WILL NOT TRANSFER SUCH
SECURITIES EXCEPT UPON RECEIPT OF EVIDENCE SATISFACTORY TO THE ISSUER THAT THE
REGISTRATION PROVISIONS OF SUCH ACT HAVE BEEN COMPLIED WITH OR THAT SUCH
REGISTRATION IS NOT REQUIRED AND THAT SUCH TRANSFER WILL NOT VIOLATE ANY
APPLICABLE FEDERAL OR STATE SECURITIES LAWS.
3. SELLER'S REPRESENTATIONS AND COVENANTS.
Seller represents, warrants and covenants to Buyer as follows:
(i) Seller has been duly incorporated and is validly existing and in
good standing under the laws of the State of New York, with full corporate power
and authority to own, lease and operate its properties and to conduct its
business as currently conducted, and is duly registered and qualified to conduct
its business and is in good standing in each jurisdiction or place where the
nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure to register or qualify
is not reasonably anticipated to have a material adverse effect on the condition
(financial or other), business, properties, net worth or results of operations
of Seller and its subsidiaries taken as a whole;
(ii) Seller has registered shares of its Common Stock pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), is in full compliance with all reporting requirements of the Exchange
Act, and the Common Stock is quoted on the Nasdaq National Market (trading
symbol ISEE);
(iii) Seller has delivered to ▇▇▇▇▇ ▇▇▇▇▇▇, Esq., counsel to the Buyer,
with copies of Seller's most recent Annual Report on Form 10-K filed with the
Securities and Exchange Commission (the "Commission"), all Forms 10-Q and 8-K
filed thereafter and all other filings made with the Commission after the filing
of the most recent Form 10-K (collectively, the "Public Documents"). The Public
Documents at the time of their filing did not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading;
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(iv) At the Closing, each of the Units, the Debentures and the Warrants
shall be duly authorized and validly issued and each of them shall be
enforceable in accordance with their terms (subject to general principles of
equity and bankruptcy, fraudulent conveyance, preference and other laws
affecting creditors' rights generally). The Shares, when issued and delivered
upon conversion of the Debentures or exercise of the Warrants, will be duly and
validly authorized and issued, fully paid and nonassessable, free from all
encumbrances and restrictions other than restrictions on transfer imposed by
applicable securities laws and/or this Agreement, and will not subject the
holders thereof to personal liability by reason of being such holders. Seller
has reserved 1,400,000 shares of Common Stock for issuance upon conversion of
the Debentures and exercise of the Warrants. There are no preemptive rights of
any shareholder of Seller with respect to the Debentures, the Warrants or the
Shares;
(v) This Agreement has been duly authorized, validly executed and
delivered on behalf of Seller and is a valid and binding agreement of Seller
enforceable in accordance with its terms, subject to general principles of
equity and to bankruptcy or other laws affecting the enforcement of creditors'
rights generally, and Seller has full power and authority to execute and deliver
this Agreement and the other agreements and documents contemplated hereby and to
perform its obligations hereunder and thereunder;
(vi) The execution and delivery of this Agreement, the issuance of the
Debentures, the Warrants, the Shares (upon conversion of the Debentures and the
exercise of the Warrants) and the consummation of the transactions contemplated
by this Agreement by Seller, will not conflict with or result in a breach of or
a default under any of the terms or provisions of, Seller's certificate of
incorporation or By-laws, or of any material provision of any indenture,
mortgage, deed of trust or other material agreement or instrument to which
Seller is a party or by which it or any of its properties or assets is bound,
any material provision of any law, statute, rule, regulation, or any existing
applicable decree, judgment or order by any court, federal or state regulatory
body, administrative agency, or other governmental body having jurisdiction over
Seller, or any of its properties or assets or will result in the creation or
imposition of any material lien, charge or encumbrance upon any property or
assets of Seller or any of its subsidiaries pursuant to the terms of any
agreement or instrument to which any of them is a party or by which any of them
may be bound or to which any of their property or any of them is subject;
(vii) No authorization, approval, filing with or
5
consent of any governmental body is required for the issuance and sale of the
Debentures, the Warrants or the Shares (upon conversion of the Debentures or the
exercise of the Warrants) as contemplated by this Agreement, except as may be
required under the securities or blue sky laws of the various states;
(viii) There is no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, now pending or, to the actual
knowledge of Seller (without inquiry), threatened, against or affecting Seller,
or any of its properties, which would reasonably be anticipated to result in any
material adverse change in the condition (financial or otherwise) or in the
earnings, business affairs, business prospects, properties or assets of Seller
and its subsidiaries, taken as a whole;
(ix) Seller shall issue the Debentures in the name of Buyer in the
amount specified in Section 1(i) above in denominations of ($ ) Dollars. Seller
shall issue the Warrants in the name of Buyer in the amount specified in Section
1(i) in denominations of ( ) Warrants. Upon conversion of the Debentures or the
exercise of the Warrants, Seller will issue one or more certificates
representing the Shares, in the name of Buyer, with a legend (if applicable)
substantially in the form specified by Section 2(vii) above, and in such
denominations to be specified by Buyer prior to conversion or exercise, as the
case may be; and
(x) Seller has not employed any investment banker, broker or finder or
incurred any liability for any brokerage fees, commissions or finder's fees in
connection with the transactions contemplated by this Agreement except for a fee
payable by Seller, at the Closing, to ▇▇▇▇▇▇▇ & Company, Inc., in an amount
equal to five (5%) percent of the principal amount of this Debenture.
4. REGISTRATION.
Seller hereby agrees to file, within a maximum period of sixty (60)
days from the Closing, a registration statement (the "Registration Statement")
under the Securities Act on Form S-3, covering all of the Shares. Seller shall
use its reasonable, good faith efforts to cause the Registration Statement to
become effective within one hundred twenty (120) days after the date of filing
of the Registration Statement. The Registration Statement shall be a "shelf"
registration statement for purposes of Rule 415 under the Securities Act, and
Seller shall maintain its effectiveness until the earlier of (x) three (3) years
from the date the Registration Statement has been declared effective and (y) the
date all the Debenture Shares have been sold and all of the
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Warrants have been exercised. In furtherance of the foregoing, Seller shall, as
expeditiously as possible:
(i) before filing a registration statement or prospectus or any
amendments or supplements thereto (x) furnish to one counsel selected by Buyer
copies of all such documents proposed to be filed, and (y) notify Buyer and such
counsel of any stop order issued or threatened by the Commission and take all
reasonable actions required to prevent the entry of such stop order or to remove
it if entered;
(ii) prepare and file with the Commission such amendments and
supplements to any Registration Statement and the prospectus included therein as
may be necessary to keep such Registration Statement effective until the earlier
of (i) the date the distribution described in the Registration Statement is
completed and (ii) the date all Shares shall otherwise have been sold (but not
before the expiration of the period referred to in Section 4(3) of the
Securities Act and Rule 174 thereunder, if applicable), and comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such Registration Statement;
(iii)furnish to Buyer and any underwriter of the Shares to be included
in the Registration Statement, copies of such Registration Statement as filed
and each amendment and supplement thereto (in each case including all exhibits
thereto), the prospectus included in such Registration Statement (including each
preliminary prospectus) and such other documents as Buyer may reasonably request
in order to facilitate the disposition of the Shares owned by Buyer;
(iv) use its reasonable, good faith efforts to register or qualify the
Shares under such other securities or blue sky laws of such jurisdictions as
Buyer or any underwriter of the Shares reasonably requests, and do any and all
other acts which may be reasonably necessary or advisable to enable Buyer to
consummate the disposition in such jurisdictions of the Shares; provided that
Seller will not be required to (x) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 4(iv), (y) subject itself to taxation in any such jurisdiction, or (z)
consent to general service of process in any such jurisdiction;
(v) use its reasonable, good faith efforts to cause the Shares covered
by such Registration Statement to be registered with or approved by such other
governmental agencies or other
7
authorities as may be necessary by virtue of the business and operations of
Seller to enable Buyer to consummate the disposition of the Shares;
(vi) notify Buyer and any underwriter of the Shares, at any time when a
prospectus relating thereto is required to be delivered under the Securities Act
(even if such time is after the period referred to in Section 4(ii)), of the
happening of any event as a result of which the prospectus included in such
Registration Statement contains an untrue statement of a material fact or omits
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, and prepare a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of the Shares, such prospectus
will not contain an 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;
(vii) make available for inspection by Buyer, any underwriter
participating in any disposition pursuant to such Registration Statement, and
any attorney, accountant or other agent retained by Buyer or any such
underwriter (collectively, the "Inspectors"), all financial and other pertinent
records and pertinent corporate documents of Seller (collectively, the
"Records"), and cause Seller's officers, directors and employees to supply all
information reasonably requested by any such Inspector, as shall be reasonably
necessary to enable them to exercise their due diligence responsibility, in
connection with such Registration Statement. Records or other information which
Seller determines, in good faith, to be confidential and which it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors unless (x)
the disclosure of such Records or other information is necessary to avoid or
correct a misstatement or omission in the Registration Statement, or (y) the
release of such Records or other information is ordered pursuant to a subpoena
or other order from a court of competent jurisdiction. Buyer shall, upon
learning that disclosure of such Records or other information is sought in a
court of competent jurisdiction, give notice to Seller and allow Seller, at
Seller's expense, to undertake appropriate action to prevent disclosure of the
Records or other information deemed confidential;
(viii) furnish, at the request of Buyer, on the date that the Shares
are delivered to the underwriters for sale pursuant to such Registration
Statement or, if the Shares are not being sold through underwriters, on the date
that the Registration Statement with respect to the Shares becomes effective,
(i) a signed opinion,
8
dated such date, of the legal counsel representing Seller for the purposes of
such registration, addressed to the underwriters, if any, or if the Shares are
not being sold through underwriters, then to Buyer, as to such matters as such
underwriters or Buyer, as the case may be, may reasonably request and as would
be customary in such a transaction; and (y) a letter dated such date, from the
independent certified public accountants of Seller, addressed to the
underwriters, if any, or if the Shares are not being sold through underwriters,
then to Buyer and, if such accountants refuse to deliver such letter to Buyer,
then to Seller (xx) stating that they are independent certified public
accountants within the meaning of the Securities Act and that, in the opinion of
such accountants, the financial statements and other financial data of Seller
included in the registration statement or the prospectus, or any amendment or
supplement thereto, comply as to form in all material respects with the
applicable accounting requirements of the Securities Act, and (yy) covering such
other financial matters (including information as to the period ending not more
than five business days prior to the date of such letter) with respect to the
registration in respect of which such letter is being given as Buyer may
reasonably request and as would be customary in such a transaction;
(ix) enter into customary agreements (including if the method of
distribution is by means of an underwriting, an underwriting agreement in
customary form) and take such other actions as are reasonably required in order
to expedite or facilitate the disposition of the Shares to be so included in the
Registration Statement; and
(x) use its reasonable, good faith efforts to cause all the Shares to
be quoted on the NASDAQ National Market System.
Seller may require Buyer to furnish to Seller such information
regarding the distribution of the Shares as Seller may from time to time
reasonably request in writing. Buyer agrees to timely cooperate with Seller in
connection with the preparation and filing of the Registration Statement and to
promptly furnish to Seller such information regarding Buyer and the distribution
of the Shares as reasonably requested by Seller. Buyer represents and warrants
that no information furnished in writing to Seller will 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 contained therein not
misleading.
Buyer agrees that, upon receipt of any notice from Seller of the
happening of any event of the kind described in Section 4(vi) hereof, Buyer will
forthwith discontinue disposition of the
9
Shares pursuant to the Registration Statement until Buyer's receipt of the
copies of the supplemented or amended prospectus contemplated by Section 4(vi)
hereof, and, if so directed by Seller, Buyer will deliver to Seller (at Seller's
expense) all copies, other than permanent file copies then in Buyer's
possession, of the prospectus covering the Shares current at the time of receipt
of such notice. In the event Seller shall give any such notice, Seller shall
extend the period during which the Registration Statement shall be maintained
effective pursuant to this Agreement by the number of days during the period
from and including the date of the giving of such notice pursuant to Section
4(vi) hereof to and including the date when Buyer shall have received the copies
of the supplemented or amended prospectus contemplated by Section 4(vi) hereof.
Seller further agrees that in the event the holder of a Warrant shall,
after the date such Registration Statement shall be declared effective, deliver
to the Seller written notice of the transfer/assignment thereof (in the form
annexed to the Warrant), the Seller shall, within ten (10) business days
thereafter, file with the SEC a supplement to said Registration Statement
setting forth the name and address of such transferee/assignee; provided,
however, that Seller, as a condition thereto, may require such
transferee/assignee to provide it with the information otherwise required of
Buyer hereunder.
5. EXPENSES OF REGISTRATION.
All expenses incurred in connection with the registration of the Shares
contemplated by this Agreement, excluding underwriters' discounts and
commissions and the fees of Buyer's counsel, but including, without limitation,
all registration, filing and qualification fees, word processing, duplicating,
printers, and Seller's accounting fees (including the expenses of any special
audits or "cold comfort" letters required by or incident to such performance and
compliance), exchange listing fees or National Association of Securities Dealers
fees, messenger and delivery expenses, all fees and expenses of complying with
securities or blue sky laws and fees and disbursements of counsel for Seller
shall be paid by Seller. Buyer shall bear and pay any underwriting commissions
and discounts applicable to the Shares offered for its account and the fees of
its counsel in connection with any registrations, filings and qualifications
made pursuant to this Agreement.
6. INDEMNIFICATION AND CONTRIBUTION
IN CONNECTION WITH REGISTRATION.
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(i) Subject to Buyer's obligation to indemnify Seller as provided in
Section 6(ii)hereof, Seller agrees to indemnify, to the full extent permitted by
law, Buyer, its officers, directors, employees, shareholders, attorneys and
agents and each person who controls Buyer (within the meaning of the Securities
Act) against any and all losses, claims, damages, liabilities and expenses
resulting from any untrue or alleged untrue statement of material fact contained
in any Registration Statement, (including any prospectus or preliminary
prospectus constituting a part thereof) or any amendment thereof or supplement
thereto or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein (in
case of a prospectus or preliminary prospectus, in the light of the
circumstances under which they were made) not misleading. Seller will also
indemnify any underwriters of the Shares, their officers and directors and each
person who controls such underwriters (within the meaning of the Securities Act)
to the same extent as provided above with respect to the indemnification of
Buyer.
(ii) In connection with any Registration Statement (pursuant to which
the Shares are to be registered), Buyer will furnish promptly to Seller in
writing such information with respect to Buyer as Seller reasonably requests for
use in connection with any such Registration Statement or amendment thereof or
supplement thereto and agrees to indemnify, to the extent permitted by law,
Seller, its officers, directors, employees, shareholders, attorneys and agents
and each person who controls Seller (within the meaning of the Securities Act)
against any and all losses, claims, damages, liabilities and expenses resulting
from any untrue or alleged untrue statement of material fact or any omission or
alleged omission of a material fact required to be stated in the Registration
Statement, (including the prospectus or preliminary prospectus constituting a
part thereof) or any amendment thereof or supplement thereto or necessary to
make the statements therein (in the case of a prospectus or preliminary
prospectus, in the light of the circumstances under which they were made) not
misleading, to the extent, but only to the extent, that such untrue statement or
omission is contained in any information with respect to Buyer furnished or
required to be furnished by Buyer. Notwithstanding the foregoing, the liability
of Buyer under this Subsection 6(ii) shall be limited to an amount equal to the
gross proceeds of the Shares sold by Buyer under the Registration Statement,
unless such liability arises out of or is based on the gross negligence and/or
willful misconduct of Buyer.
(iii) Any person entitled to indemnification hereunder agrees to give
prompt written notice to the indemnifying party after the receipt by such person
of any written notice of the
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commencement of any action, suit, proceeding or investigation for which such
person will or may claim indemnification or contribution pursuant to this
Agreement and, unless in the reasonable judgment of such indemnified party, a
conflict of interest may exist between such indemnified party and the
indemnifying party with respect to such claim, permit the indemnifying party to
assume the defense of such claims with counsel reasonably satisfactory to such
indemnified party. Whether or not such defense is assumed by the indemnifying
party, the indemnifying party will not be subject to any liability for any
settlement made without its consent (but such consent will not be unreasonably
withheld and/or delayed). Failure by such person to provide said notice to the
indemnifying party shall in and of itself not create liability except to the
extent of any injury directly resulting therefrom. No indemnifying party will
consent to entry of any judgment or enter into any settlement which does not
include, as an unconditional term thereof, the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
of such claim or litigation. If the indemnifying party is not entitled to, or
elects not to, assume the defense of a claim, it will not be obligated to pay
the fees and expenses of more than one counsel with respect to such claim,
unless in the reasonable judgment of any indemnified party a conflict of
interest may exist between such indemnified party and any other such indemnified
parties with respect to such claim, in which event the indemnifying party shall
be obligated to pay the fees and expenses of such additional counsel or
counsels.
(iv) If, for any reason, the indemnity provided for in this Section 6
is unavailable to, or is insufficient to hold harmless, an indemnified party,
then the indemnifying party shall contribute to the amount paid or payable by
the indemnified party as a result of such losses, claims, damages, liabilities
or expenses (x) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party on the one hand and the indemnified
party on the other, or (y) if the allocation provided by clause (x) above is not
permitted by applicable law, or provides a lesser sum to the indemnified party
than the amount hereinafter calculated, in such proportion as is appropriate to
reflect not only the relative benefits received by the indemnifying party on the
one hand and the indemnified party on the other but also the relative fault of
the indemnifying party and the indemnified party as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied (or required to be supplied)
by, such indemnifying party or indemnified parties, and the parties'
12
relative intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in Subsection 6(iv), any
legal or other fees or expenses reasonably incurred by such party in connection
with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Subsection 6(iv) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(v) If indemnification is available under this Section 6, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in Sections 6(i) and (ii) without regard to the relative fault of said
indemnifying party or indemnified party or any other equitable consideration
provided for in this Section 6.
(vi) The provisions of this Section 6 shall survive any termination of
this Agreement.
7. TRANSFER OF RIGHTS AND OBLIGATIONS.
The rights and obligations of Buyer under this Agreement (including the
registration rights with respect to the Shares) may be assigned to any person;
provided that such transfer may otherwise be effected in accordance with
applicable securities laws; provided further, that Buyer shall give Seller
written notice at or prior to the time of such transfer stating the name and
address of the transferee and identifying the securities with respect to which
the rights under this Agreement are being transferred; provided further, that
such transferee shall agree in writing, in form and substance satisfactory to
Seller, to be bound by the provisions of this Agreement; and provided further,
that such assignment shall be effective only if immediately following such
transfer the further disposition of such securities by such transferee is
restricted under the Securities Act. With respect to the foregoing, in the event
of any such transfer by Buyer, such
transferee (of the rights and obligations of the Buyer hereunder) shall
thereafter be deemed to be Buyer hereunder.
13
8. ADDITIONAL INDEMNIFICATION PROVISIONS.
(i) In addition to the indemnification provisions contained in Section
6 hereof, Buyer hereby agrees to indemnify and hold harmless Seller and its
officers, directors, shareholders, employees, agents and attorneys against any
and all losses, claims, damages, liabilities and expenses incurred by each such
person in connection with defending or investigating any such claims or
liabilities, whether or not resulting in any liability to such person, to which
any such indemnified party may become subject under the Securities Act, or under
any other statute, at common law or otherwise, insofar as such losses, claims,
demands, liabilities and expenses arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact made by Buyer, (ii) any
omission or alleged omission of a material fact with respect to Buyer or (iii)
any breach of any representation, warranty or agreement made by Buyer in this
Agreement.
(ii) In addition to the indemnification provisions contained in Section
6 hereof, Seller hereby agrees to indemnify and hold harmless Buyer and its
officers, directors, shareholders, employees, agents and attorneys against any
and all losses, claims, damages, liabilities and expenses incurred by each such
person in connection with defending or investigating any such claims or
liabilities, whether or not resulting in any liability to such person, to which
any such indemnified party may become subject under the Securities Act, or under
any other statute, at common law or otherwise, insofar as such losses, claims,
demands, liabilities and expenses arise of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact made by Seller; (ii)
any omission or alleged omission of a material fact with respect to Seller; or
(iii) any breach of any representation, warranty or agreement made by Seller in
this Agreement.
9. DELIVERIES AT CLOSING.
(i) Buyer shall make the following deliveries to Seller at the Closing:
(x) payment of the Purchase Price as provided in Section 1(i); and (y) delivery
of an investor questionnaire in the form attached as Exhibit D to this
Agreement.
(ii) Seller shall make the following deliveries to Buyer at the
Closing: (x) deliver in the name of Buyer certificates for the Debentures and
the Warrants.
10. MISCELLANEOUS.
(i) This Agreement shall be governed by, and
14
interpreted in accordance with, the laws of the State of New York without giving
effect to the rules governing the conflicts of laws.
(ii) This Agreement may be executed by facsimile signature and in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(iii) Each of the Parties agrees to pay its own
expenses incident to this Agreement and the performance of its obligations
hereunder, including, but not limited to, the fees and expenses of each such
Party's legal counsel.
(iv) All notices and other communications provided for or permitted
hereunder shall be made in writing by hand delivery, express overnight courier,
registered first class mail, overnight courier, or telecopied, initially to the
address set forth below, and thereafter at such other address, notice of which
is given in accordance with the provisions of this Section 10.
if to Seller:
Sterling Vision, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: General Counsel
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
with a copy (which shall not constitute
notice) to:
Camhy ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
if to Buyer, at such address as is listed
for Buyer on the signature page hereto.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; three (3) business days
after being deposited in the mail, postage prepaid, if mailed; the next business
day after being deposited with an overnight courier, if deposited with a
nationally recognized, overnight courier service; when receipt is acknowledged,
if telecopied.
15
(v) This Agreement together with the Exhibits and Schedules hereto
constitutes the entire agreement of the Parties with respect to the subject
matter hereof and supersedes all prior oral or written proposals or agreements
relating thereto. This Agreement may not be amended or any provision hereof
waived in whole or in part, except by a written amendment signed by both of the
Parties.
IN WITNESS WHEREOF, this Agreement was duly executed on the date first
written above.
STERLING VISION, INC.
By:----------------------
▇▇▇▇▇ ▇▇▇▇▇, President
Address:
Sterling Vision, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
By:------------------------
Name: ----------------
Title: ---------------
Address:
----------------------------
----------------------------
Telephone:------------------
Fax:------------------------
16
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), NOR UNDER ANY STATE SECURITIES LAW AND SUCH
SECURITIES MAY NOT BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED, OR OTHERWISE
TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE
UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAW OR (2) THE COMPANY
RECEIVES AN OPINION OF COUNSEL TO THE COMPANY OR COUNSEL TO THE HOLDER OF SUCH
SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH SECURITIES MAY BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED, OR
TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS.
STERLING VISION, INC.
CONVERTIBLE DEBENTURE DUE FEBRUARY 17, 1999
$ February 17 , 1998 No. _____
------------------- ------
FOR VALUE RECEIVED, STERLING VISION, INC., a New York corporation
the "Company"), hereby promises to pay to the order of -----------------------
(the "Original Holder"), or registered assigns (collectively with the Original
Holder, the "Holder") on February 17, 1999 (the "Maturity Date"), the principal
amount of -------------------------- ($ ) Dollars, together with interest
thereon, computed at the rate of ten (10%) percent per annum, and such
additional interest, if any, to become payable pursuant to the provisions of
Subsection 2.1(d) hereof. This Convertible Debenture (the "Debenture") has
been issued pursuant to that certain Convertible Debentures and Warrants
Subscription Agreement executed between the Original Holder and the Company,
dated February 17, 1998 (the "Agreement").
Article 1. Method of Payment.
Section 1.1 Payment of Interest.
Interest on the principal amount of this Debenture (including, but
not limited to, all accrued and unpaid interest on such portion, if any, on the
principal amount of this Debenture as may have been previously converted
pursuant to the provisions hereof) shall be paid, in United States Dollars,
quarter-annually, in arrears, on each of May 17, 1998, August 17, 1998, November
17 , 1998 and the Maturity Date.
Section 1.2 Payment of Principal Amount.
This Debenture must be surrendered to the Company free and clear of
any and all claims, liens or encumbrances in order for the Holder to receive
payment of the principal amount hereof. Subject to Articles 2 and 3 hereof, the
Company shall pay the principal of this Debenture in United States dollars.
Principal and interest payments shall be subject to withholding (if any) under
applicable United States Federal Internal Revenue Service Regulations.
Exhibit A
Article 2. Conversion.
Section 2.1 Conversion Privilege
(a) Subject to the terms and conditions of this
Debenture, the Holder of this Debenture shall have the right, prior to the
Maturity Date, exercisable at one or more times, at its option, to convert all
or a portion of this Debenture into the common stock, par value $.01 per share
("Common Stock"), of the Company at the times hereafter specified. The number of
shares of Common Stock issuable upon the conversion of this Debenture shall be
determined by dividing the principal amount hereof to be converted by the
Conversion Price (as defined in paragraph (b) of this Section 2.1 below) in
effect on the conversion date and rounding the result to the nearest 1/100th of
a share.
(b) Subject to the provisions of Article 3 hereof, less
than all of the principal amount of this Debenture may be converted into Common
Stock if the portion converted is $1,000 or a whole multiple of $1,000, it being
understood that the provisions of this Article that apply to the conversion of
this Debenture also apply to the conversion of a portion of it. All or any
portion of this Debenture is convertible, from and after the date, if any, that
the Closing Price of the Common Stock as quoted on the Nasdaq National Market
System or the Nasdaq Small Cap Market equals or exceeds $6.00 for a period of
ten (10) or more trading days in any period of fifteen (15) consecutive trading
days, whether or not the Registration Statement (referred to in Article 4 of the
Agreement) is then in effect, it being understood that the effectiveness of said
Registration Statement shall not be a condition precedent to any such
conversion. The "Conversion Price" for each conversion shall be Five ($5.00)
Dollars. For purposes hereof, the "Closing Price" shall mean the closing price
on the Nasdaq National Market System published by the Nasdaq Stock Market or if
no longer traded on the Nasdaq National Market, the closing price on the Nasdaq
Small Cap Market, the over-the-counter market or the principal national
securities exchange on which the Common Stock is so traded, and if such closing
prices are not available, the mean of the high and low prices on the principal
national securities exchange, the over-the-counter market or the Nasdaq Stock
Market on which the Common Stock is so traded.
(c) Notwithstanding anything contained herein to the
contrary, this Debenture shall not be convertible by the Holder to the extent
that and so long as the Common Stock which would be acquired upon such
conversion when aggregated with any other shares of Common Stock at the time of
conversion beneficially owned by the Holder and not theretofore sold by the
Holder would aggregate more than 4.9% of the then outstanding shares of Common
Stock of the Company. For this purpose, "beneficial ownership" shall be
calculated in accordance with the provisions of Section 13(d) of the Securities
Exchange Act of 1934 and the rules and regulations promulgated thereunder. The
opinion of the Holder's counsel shall be conclusive in calculating the Holder's
beneficial ownership.
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(d) In the event any portion of this Debenture remains
outstanding on the Maturity Date, the Company shall pay to the Holder, on the
Maturity Date, such principal amount then outstanding, together with all accrued
and unpaid interest thereon and, in addition, additional interest thereon, in an
amount equal to five (5%) percent of the principal amount thereof.
Section 2.2 Conversion Procedure.
(a) To convert this Debenture into Common Stock the
Holder must (a) complete, sign and deliver to the Company, the Notice of
Conversion attached hereto, together with the Buyer's representation letter
annexed thereto (the "Representation Letter") and (b) surrender the Debenture to
the Company free and clear of any and all claims, liens and/or encumbrances.
Except as otherwise provided herein, the date upon which the Company receives
the completed Notice of Conversion and Representation Letter (by recognized
overnight courier, hand-delivery or facsimile, followed by hand-delivery or
courier delivery within two (2) business days thereafter) is the conversion
date, provided that the Company shall not be required to deliver a certificate
for shares of Common Stock unless and until the Company receives the original of
this Debenture. Within seven (7) business days after its receipt of the Notice
of Conversion and Representation Letter as aforesaid, provided the Company has
then received the original of this Debenture from the Holder, the Company shall
deliver a certificate as specified in the Agreement for the number of full
shares of Common Stock issuable upon the conversion and a check for any fraction
of a share. The person in whose name the certificate representing shares of
Common Stock is to be registered shall be treated as a shareholder of record on
and after the conversion date. Upon surrender of a Debenture that is to be
converted in part, the Company shall issue to the Holder a new Debenture equal
in principal amount to the unconverted portion of the Debenture surrendered.
(b) Notwithstanding the provisions of Subsection 2.2(a)
above, from and after the date that the Registration Statement (referred to in
Article 4 of the Agreement) shall become and thereafter remain effective, the
Company, if so requested by the Holder, shall, within three (3) business days
after its receipt of the Notice of Conversion and Representation Letter (as
required pursuant to Subsection 2.2(a) above), and provided the Company has then
received the original of this Debenture from the Holder, serve written
instructions on its Transfer Agent to "DWAC" the shares of Common Stock to be
issued upon any such conversion of this Debenture, it being understood that no
further documentation shall be required of Buyer in connection therewith.
Section 2.3 Fractional Shares. The Company shall not issue a
fractional share of Common Stock upon the conversion of all or any portion of
this Debenture. Instead, the Company shall pay, in lieu of any fractional share,
the cash value thereof at the Conversion Price of the Common Stock as determined
pursuant to Section 2.1 above.
Section 2.4 Taxes on Conversion. The Company shall pay any
documentary, stamp or similar issue or transfer tax due on the issuance of
Common Stock upon the conversion of this
-3-
Debenture. The Holder, however, shall pay any such tax which is due because such
shares are issued in a name other than its name.
Section 2.5 Company to Reserve Stock. The Company shall reserve out
of its authorized but unissued Common Stock for issuance as provided in the
Subscription Agreement a number of shares of Common Stock into which this
Debenture may be converted. All shares of Common Stock which may be issued upon
the conversion hereof shall be fully paid and nonassessable.
Section 2.6 Restrictions on Transfer. This Debenture and the Common
Stock issuable upon the conversion hereof have not been registered under the Act
and have been sold pursuant to an exemption under the Act. The Debenture may not
be pledged, transferred or resold except pursuant to registration, under or an
exemption from, the Act. Any shares of Common Stock issued hereunder shall bear
a restrictive legend similar to the legend set forth on the first page hereof.
Article 3. Recapitalization, Mergers, etc.
Section 3.1 Recapitalization Generally. In case the Company, prior
to the Maturity Date, shall (i) subdivide its outstanding Common Stock
(including by means of a dividend or distribution on the Common Stock payable in
Common Stock), (ii) combine its outstanding Common Stock into a smaller number
of shares, or (iii) issue by capital reorganization or reclassification of its
Common Stock (other than a subdivision or combination of its shares provided for
above, a reorganization, merger, consolidation, or sale of assets provided for
elsewhere in this Article 3, or the issuance of any shares of Common Stock in
connection with the acquisition of assets or the repayment of debt) any shares
of Common Stock of the Company, the Conversion Price in effect thereafter shall
be adjusted so that it shall be adjusted to reflect such action. In case of any
such action, the $6.00 price set forth in Subsection 2.1(b) hereof shall be
adjusted to reflect such action. An adjustment made pursuant to this subsection
shall become effective retroactively immediately after the effective date in the
case of a subdivision, combination or reclassification.
Section 3.2 Mergers. Until this Debenture is paid in full or has
been converted into Common Stock, the Company shall not consolidate or merge
into, or transfer all or substantially all of its assets to, any person, unless
such person assumes the obligations of the Company under this Debenture and
immediately after such transaction no Event of Default exists. Any reference
herein to the Company shall refer to such surviving or transferee corporation
and the obligations of the Company shall terminate upon such assumption. If the
Company merges or consolidates with another corporation or 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 shall amend this Debenture to provide that it may thereafter be
converted on the terms and subject to the conditions set forth above into the
stock, securities or property receivable upon such merger, consolidation, sale
or transfer by a holder of shares of Common Stock into which this Debenture
might have been converted immediately
-4-
before such merger, consolidation, sale or transfer, entity in such merger,
consolidation, sale or transfer. In any such case, appropriate adjustment shall
be made in the application of the provisions of this Article 3 with respect to
the rights of the Holder upon and after such merger, consolidation, sale or
transfer to the end that the provisions of this Article 3 (including adjustment
of the Conversion Price then in effect and the number of shares issuable upon
conversion of this Debenture) shall be applicable after that event as nearly
equivalently as may be practicable. Except as otherwise provided herein, the
Conversion Price shall be the same as the applicable Conversion Price defined in
Article 3 above.
Article 4. Certain Payments.
Section 4.1 Registration Statement. In the event the Registration
Statement is not declared effective within one hundred twenty (120) days after
the Closing (as defined in the Agreement), this Debenture, or any portion hereof
outstanding on and after such date, shall thereafter bear interest (until the
earlier of: (i) the Maturity Date; (ii) the date that all of this Debenture has
been converted into Common Stock; and (iii) the date that such Registration
Statement shall be declared effective) at a rate per annum equal to eighteen
(18%) percent. Such interest shall: (i) be in addition to the additional
interest payable pursuant to Subsection 2.1(d) hereof; (ii) include (but not be
limited to) all accrued and unpaid interest on such portion, if any, of the
principal amount of this Debenture as may have been previously converted
pursuant to the provisions hereof; and (iii) be due and payable on each of May
17, 1998, August 17, 1998, November 17, 1998 and the Maturity Date.
Section 4.2 Failure to Perform Certain Covenants. In the event the
Company breaches its obligation to deliver certificates for Common Stock
pursuant to Section 2.2 above, the Company shall be required to make payment to
the Holder of this Debenture, within five (5) business days after each demand by
the Holder, of an amount equal to One Thousand ($1,000) Dollars per day with
respect to each One Hundred Thousand ($100,000) Dollars (or the pro-rata portion
thereof) principal amount of this Debenture outstanding during such period as
such breach continues.
Section 4.3 Rights and Remedies. The rights and remedies provided
to the Holder under Sections 4.1 and 4.2 above shall not limit any other rights
and remedies afforded by law to the Holder.
Article 5. Reports.
The Company will mail to the Holder hereof at its address as shown
on the Register (as defined in Section 7.2) a copy of any annual, quarterly or
current report that it files with the Securities and Exchange Commission
promptly after the filing thereof and a copy of any annual, quarterly or other
report or proxy statement that it gives to its shareholders generally at the
time such report or statement is sent to shareholders.
-5-
Article 6. Defaults and Remedies.
Section 6.1 Events of Default. An "Event of Default" shall be
deemed to have occurred if (a) the Company fails to pay any installment of
interest to become due hereunder for a period in excess of five (5) business
days after the Company's receipt of written notice thereof, (b) the Company
fails to issue Common Stock upon conversion, within the time period specified in
Section 2.2 hereof, (c) the Company fails to comply with any of its other
agreements in this Debenture and such failure continues for thirty (30) days
after receipt of written notice from the Holder, (d) any of the representations
or warranties made by the Company herein or in the Agreement shall be false or
misleading, in any material respect, as of the date made or (e) the Company
breaches, in any material respect, any of its agreements contained in the
Subscription Agreement.
Section 6.2 Acceleration. If an Event of Default occurs and is
continuing, the Holder hereof by notice to the Company may declare the principal
of this Debenture to be due and payable. Upon such declaration, the principal
shall be due and payable immediately without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived, anything herein or
in any note or other instruments contained to the contrary notwithstanding, and
the Holder may immediately, and without expiration of any period of grace,
enforce any and all of the Holder's rights or remedies afforded by law. The
Company expressly waives demand and presentment for payment, notice of
nonpayment, protest, notice of protest, notice of dishonor, notice of
acceleration or intent to accelerate, bringing of suit and diligence in taking
any action to collect amounts called for hereunder and shall be directly and
primarily liable for the payment of all sums owing and to be owing hereon,
regardless of and without any notice, diligence, act or omission as or with
respect to the collection of any amount called for hereunder and for the payment
of reasonable legal fees incurred by the Holder in bringing suit to collect
amounts due and payable hereunder.
Article 7. Registered Debentures.
Section 7.1 Series. This Debenture is one of a numbered series of
Debentures issued to the Holder and certain other parties and designated as
"Convertible Debentures Due February 17, 1999." Such Debentures are referred to
herein collectively as the "Debentures."
Section 7.2 Record Ownership. The Company shall maintain a register
of the holders of the Debentures (the "Register") showing their names and
addresses and the serial numbers and principal amounts of Debentures issued to
or transferred of record by them from time to time. The Register may be
maintained in electronic, magnetic or other form. The Company may treat the
person named as the Holder of this Debenture in the Register as the sole owner
of the Debenture. The Holder of the Debenture is the person exclusively entitled
to receive notifications with respect to the Debenture, convert it into Common
Stock and otherwise exercise all of the rights and powers as the absolute owner
hereof.
-6-
Section 7.3 Registration of Transfer. Transfers of this Debenture
may be registered on the books of the Company maintained for such purpose
pursuant to Section 6.2 above (i.e., the Register). Transfers shall be
registered when this Debenture is presented to the Company with a request to
register the transfer hereof and the Debenture is duly endorsed by the Holder,
reasonable assurances are given that the endorsements are genuine and effective,
the Company has received a certificate from the Holder that it owns this
Debenture free and clear of all claims, liens and/or encumbrances, and the
Company has received evidence satisfactory to it that such transfer is rightful
and in compliance with all applicable laws, including tax laws and State and
Federal securities laws. When this Debenture is presented for transfer and duly
transferred hereunder, it shall be canceled and one or more new Debentures
showing the name(s) of the transferee(s) as the Holder(s) thereof shall be
issued in lieu hereof. When this Debenture is presented to the Company with a
reasonable request to exchange it for an equal principal amount of Debentures of
other denominations, the Company shall make such exchange and shall cancel this
Debenture and issue, in lieu thereof, Debentures having a total principal amount
equal to this Debenture in the denominations requested by the Holder.
Section 7.4 Worn and Lost Debentures. If this Debenture becomes
worn, defaced or mutilated but is still substantially intact and recognizable,
the Company or its agent may issue a new Debenture in lieu hereof upon its
surrender. Where the Holder of this Debenture claims that the Debenture has been
lost, destroyed or wrongfully taken, the Company shall issue a new Debenture in
place of the original Debenture if the Holder so requests by written notice to
the Company (which notice is actually received by the Company before it is
notified that this Debenture has been acquired by a bona fide purchaser) and the
Holder has delivered to the Company an indemnity bond in such amount and issued
by such surety as the Company deems satisfactory together with an affidavit of
the Holder setting forth the facts concerning such loss, destruction or wrongful
taking and such other information in such form and with such proof or
verification as the Company may request.
Article 8. Notices.
All notices and other communications provided for or permitted
hereunder shall be made in writing by hand delivery, registered first class
mail, overnight courier, or telecopied, initially to the address set forth
below, and thereafter at such other address, notice of which is given in
accordance with the provisions of this Article 8.
All notices to Holders are to be directed to each Holder at such
address as is listed for such Holder in the Register.
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All notices to the Company are to be directed to:
Sterling Vision, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: General Counsel
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
Camhy ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; three (3) business
days after being deposited in the mail, postage prepaid, if mailed; the next
business day after being deposited with an overnight courier, if deposited with
a nationally recognized, overnight courier service; when receipt is acknowledged
if telecopied.
Article 9. Times.
Where this Debenture authorizes or requires the payment of money or
the performance of a condition or obligation on a Saturday or Sunday or a public
holiday, or authorizes or requires the payment of money or the performance of a
condition or obligation within, before or after a period of time computed from a
certain date, and such period of time ends on a Saturday or a Sunday or a public
holiday, such payment may be made or condition or obligation performed on the
next succeeding business day, and if the period ends at a specific hour, such
payment may be made or condition performed, at or before the same hour of such
next succeeding business day, with the same force and effect as if made or
performed in accordance with the terms of this Debenture.
Article 10. Rules of Construction.
In this Debenture, unless the context otherwise requires, words in
the singular number include the plural, and in the plural include the singular,
and words of the masculine gender include the feminine and the neuter, and when
the sense so indicates, words of the neuter gender may refer to any gender. The
numbers and titles of sections contained in this Debenture are inserted for
-8-
convenience of reference only, and they neither form a part of this Debenture
nor are they to be used in the construction or interpretation hereof. Wherever,
in this Debenture, a determination of the Company is required or allowed, such
determination shall be made by a majority of the Board of Directors of the
Company and if it is made in good faith, it shall be conclusive and binding upon
the Company and the Holder of this Debenture.
Article 11. Nature of the Obligation; Rank.
No provision of this Debenture shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the principal of
this Debenture at the time and place and in the coin or currency, herein
prescribed. This Debenture and all other Debentures now or hereafter issued of
similar terms are direct obligations of the Company. This Debenture ranks
equally with all other Debentures now or hereafter issued under the terms set
forth herein.
Article 12. Governing Law.
The validity, terms, performance and enforcement of this Debenture
shall be governed and construed by the provisions hereof and in accordance with
the laws of the State of New York without regard to the laws governing conflicts
of laws.
IN WITNESS WHEREOF, the Company has duly executed this Debenture as
of the date first written above.
STERLING VISION, INC.
By: -------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
-----------------
Title: President
----------------
-9-
NOTICE OF CONVERSION
[To be completed and signed only upon conversion of Debenture]
The undersigned, the Holder of this Debenture, hereby irrevocably
elects to exercise the right to convert it into Common Stock, par value $.01 per
share, of Sterling Vision, Inc. as follows:
[Complete if less than all of Dollars ($ )*
the principal amount is to be ---------------------------------------
converted] ($1,000 or integral multiples of $1,000)
[Signature must be guaranteed if ---------------------------------------
registered holder of stock differs (Name of Holder of shares if different
from registered Holder of Debenture] than registered Holder of Debenture)
---------------------------------------
(Address of Holder of shares if
different than address of registered
Holder of Debenture)
---------------------------------------
(Social Security or EIN of Holder of
shares if different than Holder of
Debenture)
* If the principal amount of the Debenture to be converted is less than the
entire principal amount thereof, a new Debenture for the balance of the
principal amount shall be returned to the Holder of the Debenture. All notices
to be transmitted by hand delivery, facsimile or overnight courier.
The undersigned requests that the Shares to be issued pursuant to this Notice of
Conversion be issued:
-10-
CHECK ONE:
----------
[ ] by issuance of a Certificate therefor to the Holder;
[ ] by DWAC to the entity and address set forth below:
-------------------------------
-------------------------------
-------------------------------
NOTE: IF THE SHARES OF COMMON STOCK (TO BE ISSUED PURSUANT TO THIS
NOTICE OF CONVERSION) ARE TO BE "DWAC'd", THE UNDERSIGNED HEREBY REPRESENTS AND
WARRANTS THAT: (I) HE/SHE/IT HAS PREVIOUSLY RECEIVED A COPY OF THE REGISTRATION
STATEMENT REFERRED TO IN SECTION 4.1 OF THIS DEBENTURE; AND (II) A COPY OF THE
PROSPECTUS INCLUDED IN SAID REGISTRATION STATEMENT WILL BE DELIVERED, PRIOR TO
THE UNDERSIGNED'S SALE AND/OR TRANSFER OF ANY SUCH SHARES, TO THE PROPOSED
PURCHASER/TRANSFEREE THEREOF OR HIS/HER/ITS BROKER OR AUTHORIZED AGENT.
Date:----------- Sign: ---------------------------------
(Signature must conform in all respects to
name of Holder shown on face of Debenture)
-11-
ASSIGNMENT OF DEBENTURE
The undersigned hereby sell(s) and assign(s) and transfer(s) unto
-------------------------------------------------------------------------------
(name, address and SSN or EIN of assignee)
-------------------------------------------------------------------------------
(principal amount of Debenture, $1,000 or integral multiples of $1,000)
of principal amount of the Debenture.
Date:---------------------------- Sign: -------------------------------------
(Signature must conform in all respects to
name of Holder shown on face of Debenture)
-12-
FORM OF REPRESENTATION LETTER
-----------------------------
[NAME/ADDRESS OF HOLDER]
___________, 199_
VIA FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Sterling Vision, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn.: General Counsel
Re: Convertible Debentures and Warrants Subscription Agreement
Gentlemen:
Reference is made to: (i) that certain Convertible Debentures and Warrants
Subscription Agreement (the "Subscription Agreement"), dated as of February __,
1998, pursuant to which the undersigned subscribed to purchase from Sterling
Vision, Inc. ("SVI" or the "Seller") an aggregate of $___________ principal
amount of SVI's Convertible Debentures (the "Debentures"); and (ii) the
undersigned's Notice of Conversion, dated ___________, 199_ ( the "Notice"),
pursuant to which he/she/it requested that SVI convert $________ principal
amount of the Debentures. All capitalized terms used (but not otherwise defined)
herein shall have the respective, identical meanings ascribed to them in said
Subscription Agreement.
With respect to the foregoing, this letter will serve to confirm and certify to
SVI that the undersigned has not, as of the date hereof, violated and/or
breached the provisions of Subsection 2(v) of the Subscription Agreement which
prohibits the undersigned, for a period of twelve (12) months from the Closing,
from offering, selling, contracting to sell, granting any options to purchase,
or otherwise disposing (collectively, a "Sale") of any Common Stock that the
undersigned does not own as of such date; provided, however, that no such
restriction will apply to any Shares to be issued to the undersigned upon the
conversion of any Debentures in the event the Seller receives from the
undersigned, within five (5) business days after any such Sale, a Notice of
Conversion with respect to such Debentures.
Very truly yours,
[NAME OF HOLDER]
By:__________________________
-13-
THIS WARRANT AND ANY SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), NOR
UNDER ANY STATE SECURITIES LAW AND SUCH SECURITIES MAY NOT BE PLEDGED, SOLD,
ASSIGNED, HYPOTHECATED, OR OTHERWISE TRANSFERRED UNTIL (1) A REGISTRATION
STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE
STATE SECURITIES LAW OR (2) THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE
COMPANY OR COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION
ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE PLEDGED,
SOLD, ASSIGNED, HYPOTHECATED, OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS.
THE TRANSFER OF THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE HEREOF IS
RESTRICTED AS DESCRIBED HEREIN.
STERLING VISION, INC.
Warrant for the purchase of shares of Common Stock,
$.01 par value per share
No.___
THIS CERTIFIES that, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, ____________________________
____________ (the "Holder"), is entitled to subscribe for and purchase from
Sterling Vision, Inc., a New York corporation (the "Company"), upon the terms
and conditions set forth herein, at any time or from time to time, during the
period commencing on the date hereof and expiring at 5:00 p.m. on February 16 ,
2001 (the "Exercise Period"), ______ shares of the Company's common stock,
$.01 par value per share (the "Common Stock"), at a price (the "Exercise Price")
per share of Common Stock of Five ($5.00) Dollars. As used herein, the term
"this Warrant" shall mean and include this Warrant and any Warrant or Warrants
hereafter issued as a consequence of the exercise or transfer of this Warrant in
whole or in part. This Warrant is one of a series of warrants issued to the
original Holder in connection with the sale by the Company of certain units
consisting of convertible debentures (collectively, the "Debentures") and this
Warrant. As used herein, the term "Holder" shall include any transferee to whom
this Warrant has been transferred in accordance with the terms hereof.
EXHIBIT B
The number of shares of Common Stock issuable upon exercise of
the Warrants (the "Warrant Shares") may be adjusted from time to time as
hereinafter set forth.
1. This Warrant may be exercised during the Exercise Period,
as to the whole or any lesser number of whole Warrant Shares, by transmission to
the Company, by telecopy, of the Election to Exercise attached hereto, together
with the Holder's representation letter annexed thereto (the "Representation
Letter") followed within three (3) business days by the surrender of this
Warrant (with the Election to Exercise duly executed) to the Company at its
office at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other
place as is designated in writing by the Company, together with a certified or
bank cashier's check payable to the order of the Company, in an amount equal to
the product of the Exercise Price and the number of Warrant Shares for which
this Warrant is being exercised (the "Aggregate Exercise Price").
2. Notwithstanding anything to the contrary contained in this
Warrant, this Warrant: (i) shall be exercisable, in whole or in part,
notwithstanding the conversion of all or any part of the Debentures and/or the
payment thereof; and (ii) shall not be exercisable by the Holder to the extent
that and so long as the Common Stock which would be acquired upon such exercise
when aggregated with any other shares of Common Stock at the time of exercise
beneficially owned by the Holder and not previously sold by the Holder would
aggregate more than 4.9% of the then outstanding shares of Common Stock of the
Company. For this purpose, "beneficial ownership" shall be calculated in
accordance with the provisions of Section 13(d) of the Securities Exchange Act
of 1934 and the rules and regulations promulgated thereunder. The opinion of the
Holder's counsel shall be conclusive in calculating the Holder's beneficial
ownership.
3.(a) Upon each exercise of the Holder's rights to purchase
Warrant Shares, the Holder shall be deemed to be the holder of record of the
Warrant Shares issuable upon such exercise, notwithstanding that the transfer
books of the Company shall then be closed or certificates representing such
Warrant Shares shall not then have been actually delivered to the Holder. Within
seven (7) business days after each such exercise of this Warrant and receipt by
the Company of this Warrant, the Election to Exercise, the Representation Letter
and the Aggregate Exercise Price, the Company shall issue and deliver to the
Holder a certificate or certificates for the Warrant Shares issuable upon such
exercise, registered in the name of the Holder or its designee. If this Warrant
should be exercised in part only, the Company shall, upon surrender of this
Warrant for cancellation, execute and deliver a new Warrant evidencing the right
of the Holder to purchase the balance of the Warrant Shares (or portions
thereof) subject to purchase hereunder.
(b) Notwithstanding the provisions of Subsection 3(a)
above, from and after the date that the Registration Statement (referred to in
Article 4 of that certain Convertible Debentures and Warrants Subscription
Agreement, dated the date hereof; hereinafter referred to as the "Registration
Statement") shall become and thereafter remain effective, the Company, if so
requested by the Holder, shall, within three (3) business days after its receipt
of this Warrant, the
-2-
Election to Exercise, the Representation Letter and the Aggregate Exercise Price
(as required pursuant to Subsection 3(a) above), serve written instructions on
its Transfer Agent to "DWAC" the shares of Common Stock to be issued upon any
such election, it being understood that no further documentation shall be
required of the Holder in connection therewith.
4. Any Warrants issued upon the transfer or exercise in part
of this Warrant shall be numbered and shall be registered in a warrant register
(the "Warrant Register") as they are issued. The Company shall be entitled to
treat the registered holder of any Warrant on the Warrant Register as the owner
in fact thereof for all purposes and shall not be bound to recognize any
equitable or other claim to, or interest in, such Warrant on the part of any
other person, and shall not be liable for any registration of transfer of
Warrants which are registered or to be registered in the name of a fiduciary or
the nominee of a fiduciary unless made with the actual knowledge of the general
counsel of the Company that a fiduciary or nominee is committing a breach of
trust in requesting such registration of transfer. This Warrant shall be
transferable on the Warrant Register only upon delivery thereof duly endorsed by
the Holder or by his duly authorized attorney or representative, or accompanied
by proper evidence of succession, assignment, or authority to transfer, subject
in all cases to compliance with the terms and provisions of that certain
Convertible Debentures and Warrants Subscription Agreement, dated as of February
__, 1998 (the "Subscription Agreement"), between the Company and the Holder.. In
all cases of transfer by an attorney, executor, administrator, guardian, or
other legal representative, duly authenticated evidence of his or its author ity
shall be produced. Upon any registration of transfer, the Company shall deliver
a new Warrant or Warrants to the person entitled thereto. This Warrant may be
exchanged, at the option of the Holder thereof, for another Warrant, for other
Warrants of different denominations, of like tenor and representing in the
aggregate the right to purchase a like number of Warrant Shares (or portions
thereof), upon surrender to the Company or its duly authorized agent.
Notwithstanding anything contained herein to the contrary, the Company shall
have no obligation to cause Warrants to be transferred on its books to any
person if, in the opinion of counsel to the Company, such transfer does not
comply with the provisions of the Act, and the rules and regulations thereunder,
and any applicable state securities laws.
5. In the event the Company fails to deliver to the Holder a
certificate or certificates for the Warrant Shares in accordance with Section 3,
the Company shall be required to make payment to the Holder of this Warrant
within five (5) business days after each demand by the Holder, of an amount
equal to One Thousand ($1,000) Dollars per day with respect to each One Hundred
Thousand ($100,000) Dollars (or the pro-rata portion thereof) of Warrant Shares
(based on the Exercise Price) to be issued to the Holder with respect to the
Elect to Exercise delivered to the Company.
6. The Company shall at all times reserve and keep available
out of its authorized and unissued Common Stock, solely for the purpose of
providing for the exercise of the rights to purchase all Warrant Shares granted
pursuant to the Warrants, such number of shares
-3-
of Common Stock equal to the number of Warrants covered hereby. The Company
covenants that all shares of Common Stock issuable upon exercise of this
Warrant, upon receipt by the Company of the full Exercise Price therefor, shall
be validly issued, fully paid, nonassessable, and free of preemptive rights.
7. (a) The Exercise Price in effect at any time and the number
and kind of securities purchasable upon the exercise of this Warrant shall be
subject to adjustment from time to time upon the happening of certain events, as
follows:
(b) In case the Company shall (i) declare a dividend or
make a distribution on its outstanding shares of Common Stock, in each case, in
shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of
Common Stock into a greater number of shares, or (iii) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares, the Exercise
Price in effect at the time of the record date for such dividend or distribution
or of the effective date of such subdivision, combination or reclassification
shall be adjusted so that it shall equal the price determined by multiplying the
Exercise Price by a fraction, the denominator of which shall be the number of
shares of Common Stock outstanding after giving effect to such action, and the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such action. Such adjustment shall be made successively
whenever any event listed above shall occur.
(c) Upon each adjustment of the Exercise Price pursuant
to the provisions of this Section 6, the number of Warrant Shares issuable upon
the exercise at the adjusted Exercise Price of each Warrant shall be adjusted to
the nearest number of whole shares of Common Stock by multiplying a number equal
to the Exercise Price in effect immediately prior to such adjustment by the
number of Warrant Shares issuable upon exercise of this Warrant immediately
prior to such adjustment and dividing the product so obtained by the adjusted
Exercise Price.
(d) For the purpose of this Agreement, the term "Common
Stock" shall mean (i) the class of stock designated as Common Stock in the
Articles of Incorporation of the Company as amended as of the date hereof, or
(ii) any other class of stock resulting from successive changes or
reclassifications of such Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value.
(e) In case of any consolidation of the Company with, or
merger of the Company into, another corporation (other than a consolidation or
merger which does not result in any reclassification or change of the
outstanding Common Stock), the corporation formed by such consolidation or
merger shall execute and deliver to the Holder a supplemental warrant agreement
providing that the Holder of this Warrant shall have the right thereafter (until
the expiration of such Warrant) to receive, upon exercise of such Warrant, the
kind and amount of
-4-
shares of stock and other securities and property receivable upon such
consolidation or merger by a holder of the number of shares of Common Stock for
which such Warrant might have been exercised immediately prior to such
consolidation, merger, sale or transfer. Such supplemental warrant agreement
shall provide for adjustments which shall be identical to the adjustments
provided in this Section.6 7. The above provision of this subsection shall
similarly apply to successive consolidations or mergers.
(f) No adjustment in the number of Warrant Shares shall
be required if such adjustment is less than one; provided, however, that any
adjustments which by reason of this Subsection 7(f) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 7 shall be made to the nearest
one-thousandth of a share.
(g) In any case in which this Section 7 shall require
that an adjustment in the number of Warrant Shares be made effective as of a
record date for a specified event, the Company may elect to defer, until the
occurrence of such event, issuing to the Holder, if the Holder exercised this
Warrant after the record date, the Warrant Shares, if any, issuable upon such
exercise over and above the Warrant Shares, if any, issuable upon such exercise
prior to such adjustment; pro vided, however, that the Company shall deliver to
the Holder a due ▇▇▇▇ or other appropriate instrument evidencing the Holder's
right to receive such additional Warrant Shares upon the occurrence of the event
requiring such adjustment.
(h) Whenever there shall be an adjustment as provided in
this Section 7, the Company shall promptly cause written notice thereof to be
sent by certified mail, postage prepaid, to the Holder, at its address as it
shall appear in the Warrant Register, which notice shall be accompanied by an
officer's certificate setting forth the number of Warrant Shares issuable upon
the exercise of this Warrant if such Warrant were exercisable on the date of
such notice, and setting forth a brief statement of the facts requiring such
adjustment and the computation thereof, which officer's certificate shall be
conclusive evidence of the correctness of any such adjustment absent manifest
error.
8. In case at any time the Company shall propose
(a) to pay any dividend or make any distribution
on shares of Common Stock in shares of Common Stock or make any other
distribution (other than regularly scheduled cash dividends which are not in a
greater amount per share than the most recent such cash dividend) to all holders
of Common Stock; or
(b) to issue any rights, warrants, or other
securities to all holders of Common Stock entitling them to purchase any
additional shares of Common Stock or any other rights, warrants, or other
securities; or
-5-
(c) to effect any reclassification or change of
outstanding shares of Common Stock, or any consolidation or merger as described
in Section 7; or
(d) to effect any liquidation, dissolution, or
winding-up of the Company, then, and in any one or more of such cases, the
Company shall give written notice thereof, by registered mail, postage prepaid,
to the Holder at the Holder's address as it shall appear in the Warrant
Register, mailed at least 15 days prior to (i) the date as of which the holders
of record of shares of Common Stock to be entitled to receive any such dividend,
distribution, rights, warrants, or other securities are to be determined, or
(ii) the date on which any such reclassification, change of outstanding shares
of Common Stock, consolidation, merger, liquidation, dissolution, or winding-up
is expected to become effective, and the date as of which it is expected that
holders of record of shares of Common Stock shall be entitled to exchange their
shares for securities or other property, if any, deliverable upon such
reclassification, change of outstanding shares, consolidation, merger, sale,
lease, conveyance of property, liquidation, dissolution, or winding-up.
9. The issuance of any shares or other securities upon the
exercise of this Warrant, and the delivery of certificates or other instruments
representing such shares or other securities, shall be made without charge to
the Holder for any tax or other charge in respect of such issuance, other than
applicable transfer taxes. The Company shall not, however, be required to pay
any tax which may be payable in respect of any transfer involved in the issue
and delivery of any certificate in a name other than that of the Holder, and the
Company shall not be required to issue or deliver any such certificate unless
and until the person or persons requesting the issue thereof shall have paid to
the Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.
10. The Company shall file a registration statement covering
the Warrant Shares and otherwise comply with its obligations with respect to the
Warrant Shares, all as set forth in the Subscription Agreement. All expenses
incurred in connection with any such registration statement shall be paid as
provided in the Subscription Agreement.
11. (a) The Company agrees to indemnify and hold harmless the
Holder, its officers, directors, employees, shareholders, attorneys and agents,
and each person, if any, who controls any such person (within the meaning of the
Act) as provided in Sections 6 and 8 of the Subscription Agreement. The
foregoing agreement to indemnify shall be in addition to any liability the
Company may otherwise have, including liabilities arising under this Warrant.
(b) The Holder agrees to indemnify and hold harmless
the Company, its officers, directors, employees, shareholders, attorneys and
agents and each person who controls the Company (within the meaning of the Act)
as provided in Sections 6 and 8 of the Subscription Agreement.
-6-
12. Unless registered as contemplated by Section 10 hereof,
the Warrant Shares issued upon exercise of the Warrants shall be subject to a
stop transfer order and the certificate or certificates evidencing such Warrant
Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
NOT REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
SUCH SHARES MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT, OR AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT. SUCH SHARES ARE
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER CONTAINED IN A
WARRANT, DATED FEBRUARY __, 1998, COPIES OF WHICH ARE ON FILE
WITH THE SECRETARY OF THE COMPANY."
13. Upon receipt of evidence satisfactory to the Company of
the loss, theft, destruction, or mutilation of any Warrant (and upon surrender
of any Warrant if mutilated), and upon reimbursement of the Company's reasonable
incidental expenses and, if reasonably requested, an indemnity reasonably
acceptable to the Company, the Company shall execute and deliver to the Holder
thereof a new Warrant of like date, tenor, and denomination.
14. The Holder of any Warrant shall not have, solely on
account of such status, any rights of a stockholder of the Company, either at
law or in equity, or to any notice of meetings of stockholders or of any other
proceedings of the Company, except as provided in this Warrant.
15. This Warrant shall be construed in accordance with the
laws of the State of New York applicable to contracts made and performed within
such State, without regard to principles of conflicts of law.
Dated: February 17 , 1998
STERLING VISION, INC.
By:-----------------------
Name: ▇▇▇▇▇ ▇▇▇▇
Title: President
-7-
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer
the attached Warrant.)
FOR VALUE RECEIVED, ______________________
___________________________________ hereby sells, assigns, and transfers unto
__________________ a Warrant to purchase _________ shares of Common Stock, $.01
par value per share, of Sterling Vision, Inc. (the "Company"), together with all
right, title, and interest therein, and does hereby irrevocably constitute and
appoint _____________________ attorney to transfer such Warrant on the books of
the Company, with full power of substitution.
Dated:_________________
Signature __________________
Signature Guaranteed:
NOTICE
The signature on the foregoing Assignment must correspond to
the name as written upon the face of this Warrant in every particular, without
alteration or enlargement or any change whatsoever.
-8-
To: Sterling Vision, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
ELECTION TO EXERCISE
The undersigned hereby exercises his or its rights to purchase
_______ Warrant Shares covered by the within Warrant and tenders payment
herewith in the amount of $_________ in accordance with the terms
thereof; and the undersigned certifies that this Warrant is owned by the
undersigned free and clear of any and all claims, liens and/or
encumbrances and requests that certificates for such securities be issued
in the name of, and delivered to:
-----------------------------
-----------------------------
-----------------------------
(Print Name, Address and Social Security
or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the
Warrant Shares covered by the within Warrant be registered in the name
of, and delivered to, the undersigned at the address stated below.
The undersigned request that the Shares to be issued pursuant to this Election
to Exercise be issued:
CHECK ONE:
----------
[ ] by issuance of a Certificate therefor to the above entity/individual;
[ ] by DWAC to the entity/individual set forth above at the address set forth
below:
-----------------------------
-----------------------------
-----------------------------
NOTE: IF THE WARRANT SHARES (TO BE ISSUED PURSUANT TO THIS ELECTION TO
EXERCISE) ARE TO BE "DWAC'd", THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS
THAT: (I) HE/SHE/IT HAS PREVIOUSLY RECEIVED A COPY OF THE REGISTRATION STATEMENT
REFERRED TO IN SUBSECTION 3(B) OF THIS WARRANT; AND (II) A COPY OF THE
PROSPECTUS INCLUDED IN SAID REGISTRATION STATEMENT WILL BE DELIVERED, PRIOR TO
THE UNDERSIGNED'S SALE AND/OR TRANSFER OF ANY OF SUCH WARRANT SHARES, TO THE
PROPOSED PURCHASER/TRANSFEREE THEREOF OR HIS/HER/ITS AUTHORIZED AGENT.
Dated:---------------------- Name:----------------------
(Print)
Address: -----------------------------------------------------
---------------------------
(Signature)
10
FORM OF REPRESENTATION LETTER
-----------------------------
[NAME/ADDRESS OF HOLDER]
___________, 199_
VIA FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Sterling Vision, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn.: General Counsel
Re: Convertible Debentures and Warrants Subscription Agreement
Gentlemen:
Reference is made to: (i) that certain Convertible Debentures and Warrants
Subscription Agreement (the "Subscription Agreement"), dated as of February 17,
1998, pursuant to which the undersigned subscribed to purchase from Sterling
Vision, Inc. ("SVI" or the "Seller") an aggregate of $___________ principal
amount of SVI's Convertible Debentures (the "Debentures"); and (ii) the
undersigned's Election to Exercise, dated ___________, 199_ ( the "Notice"),
pursuant to which he/she/it exercised his/her/its right to purchase _______
Warrant Shares pursuant to the Warrant issued in connection therewith. All
capitalized terms used (but not otherwise defined) herein shall have the
respective, identical meanings ascribed to them in said Subscription Agreement.
With respect to the foregoing, this letter will serve to confirm and certify to
SVI that the undersigned has not, as of the date hereof, violated and/or
breached the provisions of Subsection 2(v) of the Subscription Agreement which
prohibits the undersigned, for a period of twelve (12) months from the Closing,
from offering, selling, contracting to sell, granting any options to purchase,
or otherwise disposing (collectively, a "Sale") of any Common Stock that the
undersigned does not own as of such date; provided, however, that no such
restriction will apply to any Shares to be issued to the undersigned upon the
conversion of any Debentures in the event the Seller receives from the
undersigned, within five (5) business days after any such Sale, a Notice of
Conversion with respect to such Debentures.
Very truly yours,
[NAME OF HOLDER]
By:_______________________
13
