1
EXHIBIT 10.6
SUPPLEMENTAL AGREEMENT
Supplemental Agreement dated August 7, 2000 ("Agreement") by and
between Advanced Optics Electronics, Inc., a Nevada corporation (the "Company"),
and RFL Asset Management, LLC, a Delaware limited liability company ("RFL").
Capitalized terms used herein without definition have the meaning ascribed to
them in the Securities Purchase Agreement (as such term is hereinafter defined).
WITNESSETH:
WHEREAS, the Company and RFL are parties to a Securities Purchase
Agreement dated as of March 8, 2000 (the "Securities Purchase Agreement");
WHEREAS, the Company desires to (i) sell to RFL Fifty-Eight (58) shares
(the "First Supplemental Shares") of the Company's Series A Convertible
Preferred Stock, par value $0.001 per share ("Preferred Stock"), and a warrant
(the "First Supplemental Warrant" and collectively with the First Supplemental
Shares, the "First Supplemental Securities") to purchase up to Five Thousand
Eight Hundred (5,800) shares of the Company's common stock, par value $0.001 per
share ("Common Stock"), (ii) acquire the right to require RFL to purchase an
additional One Hundred and Fifteen (115) shares (the "Second Supplemental
Shares") of Preferred Stock and a warrant (the "Second Supplemental Warrant" and
collectively with the Second Supplemental Shares, the "Second Supplemental
Securities") to purchase up to Eleven Thousand Five Hundred (11,500) shares of
Common Stock and (iii) grant to RFL the right to acquire the Second Supplemental
Securities, on the terms and conditions hereinafter set forth; and
WHEREAS, RFL desires to (i) purchase the First Supplemental Securities
from the Company, (ii) grant to the Company the right to require RFL to purchase
the Second Supplemental Securities and (iii) acquire the right to require the
Company to sell the Second Supplemental Securities to RFL, on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants and agreements hereinafter set forth, the Company and RFL, intending
to be legally bound, hereby agree as follows:
1. Purchase and Sale of First Supplemental Securities. Concurrently
with each of the Company's and RFL's execution and delivery of this Agreement,
the Company shall issue and sell to RFL, and RFL shall purchase from the
Company, the First Supplemental Securities in the manner set forth below in this
Section 1. The aggregate purchase price (the "Purchase Price") for the First
Supplemental Securities shall be Fifty-Eight Thousand Dollars ($58,000). RFL
shall pay the Purchase Price by wire transfer of immediately available funds
denominated in United States Dollars to the Company's account set forth on
Schedule I attached hereto no later than the business day immediately succeeding
the date of this Agreement. The Company shall deliver to RFL (i) a
2
certificate for Fifty-Eight (58) shares of Preferred Stock registered in the
name of RFL, which shares shall have been duly authorized and validly issued,
and shall be fully paid and non-assessable and free of preemptive rights and
(ii) the First Supplemental Warrant, which shall have been duly authorized and
validly issued, and shall be fully paid and non-assessable. The First
Supplemental Warrant shall provide for (x) the purchase of up to Five Thousand
Eight Hundred (5,800) shares of Common Stock at an exercise price equal to one
hundred and ten percent (110%) of the closing bid price for the Common Stock on
the date of this Agreement, (y) an expiration date occurring on the fifth (5th)
anniversary of the date of this Agreement and (z) otherwise contain terms and
conditions identical to those contained in the Warrant. The Company, by its
execution and delivery of this Agreement, represents and warrants to RFL that
the (i) representations and warranties set forth on Schedule II hereto are true
and correct on the date hereof and (ii) Company is in compliance on the date
hereof with the covenants contained in the Securities Purchase Agreement and the
Registration Rights Agreement.
2. Registration. The Registration Rights Agreement is hereby amended to
(i) expressly include the First Supplemental Securities and the Second
Supplemental Securities within the definition of the term "Registrable
Securities" and (ii) change the number contained in clause (x) of the proviso to
the definition of the term "Registrable Securities" from 1,250,000 to
10,000,000. Notwithstanding the terms and provisions of the Registration Rights
Agreement to the contrary, the (i) Company shall, within thirty (30) days after
the date of this Agreement, file with the Securities and Exchange Commission the
Registration Statement (as such term is defined in the Registration Rights
Agreement) covering all of the Registrable Securities and (ii) term
"Effectiveness Date" (as such term is defined in the Registration Rights
Agreement) shall hereinafter mean the one hundred and twentieth (120th) day
following the date of this Agreement.
3. Put Right. In the event that the (i) Company shall have timely filed
the Registration Statement in accordance with Section 2 hereof, (ii)
Registration Statement is declared effective on or before the Effectiveness
Date, (iii) the Company is otherwise in compliance with the covenants contained
in the Securities Purchase Agreement and the Registration Rights Agreement on
the Effectiveness Date and (iv) the representations and warranties set forth on
Schedule II hereto are true and correct on the Effectiveness Date, the Company
shall have the right (the "Put Right"), but not the obligation, for a period of
thirty (30) days after the Effectiveness Date, to require RFL to purchase the
Second Supplemental Securities for an aggregate purchase price (the "Put
Purchase Price") equal to One Hundred Fifteen Thousand Dollars ($115,000). In
the event the Company elects to exercise the Put Right, the Company shall send a
written notice (the "Put Notice"), within such thirty-day period, to RFL stating
that the Company has elected to exercise the Put Right, certifying that the
conditions set forth above in clauses (i) through (iv) of this Section 3 have
been satisfied and specifying the date (the "Put Closing Date") on which the
closing (the "Put Closing") for the purchase and sale of the Second Supplemental
Securities shall occur, which date shall not be earlier than the tenth (10th)
day after the delivery of the Put Notice to RFL or later than the sixtieth
(60th) day after the Effectiveness Date. On the Put Closing Date, (i) RFL shall,
subject to its receipt of the documents contemplated by clauses (ii)(A) through
(ii)(C) below of this Section 3, pay the Put Purchase Price by wire transfer of
immediately available funds denominated in
2
3
United States Dollars to the Company's account set forth on Schedule I attached
hereto and (ii) the Company shall deliver to RFL (A) a certificate for the
Second Supplemental Shares registered in the name of RFL, which shares shall
have been duly authorized and validly issued, and shall be fully paid and
non-assessable and free of preemptive rights, (B) the Second Supplemental
Warrant, which shall have been duly authorized and validly issued, and shall be
fully paid and non-assessable and (C) a certificate executed by an executive
officer of the Company stating that the representations and warranties set forth
on Schedule II hereto are true and correct on the Put Closing Date. The Second
Supplemental Warrant shall provide for (x) the purchase of up to Eleven Thousand
Five Hundred (11,500) shares of Common Stock at an exercise price equal to one
hundred and ten percent (110%) of the closing bid price for the Common Stock on
the date of this Agreement, (y) an expiration date occurring on the fifth (5th)
anniversary of the Put Closing Date and (z) otherwise contain terms and
conditions identical to those contained in the Warrant.
4. Call Right. RFL shall have the right (the "Call Right"), but not the
obligation, for a period of thirty (30) days after the Effectiveness Date, to
require the Company to sell the Second Supplemental Securities to RFL for an
aggregate purchase price (the "Call Purchase Price") equal to One Hundred
Fifteen Thousand Dollars ($115,000). In the event RFL elects to exercise the
Call Right, RFL shall send a written notice (the "Call Notice"), within such
thirty-day period, to the Company stating that RFL has elected to exercise the
Call Right and specifying the date (the "Call Closing Date") on which the
closing for the purchase and sale of the Second Supplemental Securities shall
occur, which date shall not be earlier than the thirtieth (30th) day after the
Effectiveness Date or later than the sixtieth (60th) day after the Effectiveness
Date. On the Call Closing Date, (i) RFL shall pay the Call Purchase Price by
wire transfer of immediately available funds denominated in United States
Dollars to the Company's account set forth on Schedule I attached hereto and
(ii) the Company shall deliver to RFL (A) a certificate for the Second
Supplemental Shares registered in the name of RFL, which shares shall have been
duly authorized and validly issued, and shall be fully paid and non-assessable
and free of preemptive rights and (B) the Second Supplemental Warrant, which
shall have been duly authorized and validly issued, and shall be fully paid and
non-assessable. The Second Supplemental Warrant shall provide for (x) the
purchase of up to Eleven Thousand Five Hundred (11,500) shares of Common Stock
at an exercise price equal to one hundred and ten percent (110%) of the closing
bid price for the Common Stock on the date of this Agreement, (y) an expiration
date occurring on the fifth (5th) anniversary of the Call Closing Date and (z)
otherwise contain terms and conditions identical to those contained in the
Warrant.
5. Call Notice Governs. In the event that both the Put Notice and the
Call Notice shall have been timely sent, the Put Notice shall be of no force or
effect and the Call Notice shall govern the purchase and sale of the Second
Supplemental Securities in all respects.
6. Condition to the Company's Obligation to Close. RFL hereby
acknowledges that the Company has entered into a separate supplemental agreement
of even date herewith (the "Triton Agreement") with Triton Private Equities
Fund, L.P. which contains terms and conditions identical to those contained
herein, other than with respect to the amounts of the
3
4
Company's securities covered thereby and the purchase price therefor. RFL
further acknowledges that the Company shall be under no obligation to engage in
the closing for the First Supplemental Securities or the Put Closing unless
concurrently therewith the corresponding closing (the "Triton Closing") provided
for in the Triton Agreement is effected. In the event that the Company shall not
engage in the closing for the First Supplemental Securities by reason of the
non-occurrence of the Triton Closing, RFL shall have no liability whatsoever to
the Company under this Agreement or otherwise.
7. Securities Purchase Agreement. The terms and conditions of Sections
4, 5, 7 and 8 of the Securities Purchase Agreement are hereby incorporated by
reference as if fully set forth herein and the First Supplemental Securities and
the Second Supplemental Securities shall be deemed to be Securities for all
purposes of such Sections of the Securities Purchase Agreement.
8. Reservation of Shares. The Company shall at all times have
authorized, and reserved for the purpose of issuance, at least 15,000,000 shares
of Common Stock, but in any case a sufficient number of shares of Common Stock
to provide for the issuance of all of the Conversion Shares, the Warrant Shares,
the Dividend Shares (if any) and the shares of Common Stock underlying the First
Supplemental Securities and the Second Supplemental Securities.
9. Release. The Company hereby releases each of RFL and its affiliates
from and otherwise waives any and all claims and causes of action the Company
may have against any one or more of RFL and its affiliates.
[REMAINDER OF PAGE INTENTIONALLY BLANK.
NEXT PAGE IS SIGNATURE PAGE.]
4
5
IN WITNESS WHEREOF, the parties hereto have caused the execution and
delivery of this Agreement on the date first written above.
Advanced Optics Electronics, Inc.
By: /s/ LESLIE ROBINS
--------------------------------------------
Name: Leslie Robins
Title: Executive Vice President
RFL Asset Management, LLC
By: /s/ SAM LEVINSON
--------------------------------------------
Name: Sam Levinson
Title: Manager
5
6
Schedule I
Account Name: Advanced Optics Electronics
Account Number: 1060397536
Bank ABA Number: 107002192
Bank Address: Indian School at Eubank
Officer: Arlene Carol
7
Schedule II
Representations and Warranties of the Company
The Company understands, agrees with, and represents and warrants to
RFL that:
(i) Organization and Qualification. The Company is a corporation
duly organized and existing in good standing under the laws of the jurisdiction
in which it is incorporated and has the requisite corporate power to own its
properties and to carry on its business as now being conducted. The Company is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted by it makes
such qualification necessary and where the failure so to qualify would have a
Material Adverse Effect (as such term is hereinafter defined). "Material Adverse
Effect" means any material adverse effect on the operations, properties or
financial condition of the Company taken as a whole. The Common Stock is
eligible to trade and is listed for trading on the OTC Bulletin Board Market.
The Company has received no notice, either written or oral, with respect to the
continued eligibility of the Common Stock for such listing, and the Company has
maintained all requirements for the continuation of such listing, and the
Company does not reasonably anticipate that the Common Stock will be delisted
from the OTC Bulletin Board Market for the foreseeable future. The Company has
complied or will timely comply with all requirements of the National Association
of Securities Dealers and the OTC Bulletin Board Market with respect to the
issuance of the Securities, the First Supplemental Securities, the Second
Supplemental Securities and the shares of Common Stock underlying the First
Supplemental Securities and the Second Supplemental Securities.
(ii) Authorization; Enforcement. (i) At the time of the Company's
execution and delivery of the Securities Purchase Agreement, the Company had the
requisite corporate power and authority to enter into and perform the Securities
Purchase Agreement, the Registration Rights Agreement and the Escrow Agreement,
to issue and sell the Securities sold at the Closing in accordance with the
terms of the Securities Purchase Agreement and to perform its obligations under
the Certificate of Designations in accordance with the requirements of the same,
(ii) the Company has the requisite corporate power and authority to enter into
and perform this Agreement, to perform the Securities Purchase Agreement and the
Registration Rights Agreement, to issue and sell the First Supplemental
Securities and the Second Supplemental Securities in accordance with the terms
hereof, and to perform its obligations under the Certificate of Designations in
accordance with the requirements of the same, (iii) the execution, delivery and
performance of the Company's obligations under this Agreement, the Securities
Purchase Agreement, the Certificate of Designations, the Warrants, the First
Supplemental Warrant, the Second Supplemental Warrant and the Registration
Rights Agreement and the consummation by the Company of the transactions
contemplated hereby and thereby have been duly authorized by the Company's Board
of Directors and no further consent or authorization of the Company, its Board
of Directors or its stockholders is required, (iv) this Agreement, the
Securities Purchase Agreement, the Registration Rights Agreement, the Securities
sold at the Closing, and on the closing dates therefor, the First Supplemental
Securities and the Second Supplemental Securities,
8
have been duly and validly authorized, executed and delivered by the Company and
(v) this Agreement, the Securities Purchase Agreement, the Securities sold at
the Closing, the shares of Common Stock underlying the Preferred Stock and the
Warrants (when issued), the Registration Rights Agreement, the First
Supplemental Securities (when issued), the Second Supplemental Securities (when
issued) and the shares of Common Stock underlying the First Supplemental
Securities and the Second Supplemental Securities (when issued) constitute the
valid and binding obligations of the Company enforceable against the Company in
accordance with their respective terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting, generally, the
enforcement of creditors' rights and remedies or by other equitable principles
of general application. The Company (and its legal counsel) has examined this
Agreement and is satisfied in its sole discretion that this Agreement is in
accordance with Regulation D and the 1933 Act and is effective to accomplish the
purposes set forth herein and therein.
(iii) Capitalization. The current capitalization of the Company is
as reflected in the Company's most recent periodic report filed under the 1934
Act and the Company has no other authorized class of capital stock. All of the
Company's outstanding shares of capital stock have been validly issued and are
fully paid and nonassessable. None of the shares of the Company's capital stock
is subject to preemptive rights or any other similar rights or any liens or
encumbrances. Except as disclosed in writing to RFL, as of the effective date of
each of the First Supplemental Securities and the Second Supplemental Securities
closings, (i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, or arrangements by which the Company or any
of its subsidiaries is or may become bound to issue additional shares of capital
stock of the Company or any of its subsidiaries, (ii) there are no outstanding
debt securities of the Company and (iii) there are no agreements or arrangements
under which the Company or any of its subsidiaries is obligated to register the
sale of any of its or their securities under the 1933 Act (except as provided
herein and in the Registration Rights Agreement).
(iv) Issuance of Securities. The Securities, the First Supplemental
Securities, the Second Supplemental Securities and the shares of Common Stock
underlying the First Supplemental Securities and the Second Supplemental
Securities are all duly authorized and, if unissued, reserved for issuance, and
if issued, are, and if unissued, upon issuance shall be, validly issued, fully
paid and non-assessable, free from all taxes, liens and charges with respect to
the issue thereof, and, if issued, are not, and, if unissued, will not be,
subject to preemptive rights or other similar rights of stockholders of the
Company.
(v) Acknowledgment Regarding RFL's Purchase. The Company
acknowledges and agrees that RFL is not acting as financial advisor to or
fiduciary of the Company (or in any similar capacity with respect to this
Agreement, the Securities Purchase Agreement or the transactions contemplated
hereby or thereby), that this Agreement, the Securities Purchase Agreement and
the transactions contemplated hereby and thereby, and the relationship between
9
RFL and the Company, are and will be considered "arms-length" notwithstanding
any other or prior agreements or nexus between RFL and the Company, whether or
not disclosed, and that any statement made by RFL, or any of its representatives
or agents, in connection with this Agreement, the Securities Purchase Agreement
and the transactions contemplated hereby and thereby is not advice or a
recommendation, is merely incidental to RFL's purchase of the Securities, the
First Supplemental Securities and the Second Supplemental Securities and has not
been relied upon in any way by the Company, its officers or directors. The
Company further represents to RFL that the Company's decision to enter into this
Agreement, the Securities Purchase Agreement and the transactions contemplated
hereby and thereby have been based solely upon an independent evaluation by the
Company, its officers and directors.
(vi) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances which would prevent the parties hereto from
consummating the transactions contemplated hereby pursuant to an exemption from
registration under the 1933 Act and specifically in accordance with the
provisions of Regulation D. The transactions contemplated hereby are exempt from
the registration requirements of the 1933 Act.
(vii) No Conflicts. The execution, delivery and performance of this
Agreement and the Securities Purchase Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(i) has not resulted and will not result in a violation of the Company's
Articles of Incorporation or Bylaws, (ii) has not conflicted or will not
conflict with, or has not constituted or will not constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party or (iii) has not resulted or will not result
in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations) applicable to the
Company or any of its subsidiaries or by which any property or asset of the
Company or any of its subsidiaries is bound or affected (except for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect). Neither the Company nor any of its subsidiaries is in violation
of its organizational documents, and neither the Company nor any of its
subsidiaries is in default (and no event has occurred which, with notice or
lapse of time or both, would put the Company or any of its subsidiaries in
default) under, nor has there occurred any event giving others (with notice or
lapse of time or both) any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, except for possible defaults or rights as
would not, in the aggregate or individually, have a Material Adverse Effect. The
business of the Company and its subsidiaries is not being conducted, and shall
not be conducted so long as RFL owns any of the Company's capital stock, in
violation of any law, ordinance or regulation of any governmental entity, except
for possible violations which neither singly nor in the aggregate would have a
Material Adverse Effect. Except as specifically contemplated by this Agreement
and the Securities Purchase Agreement, and
10
as required under the 1933 Act and any applicable state securities laws, the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency in order
for it to execute, deliver or perform any of its obligations under this
Agreement, the Securities Purchase Agreement, the Certificate of Designations,
the Registration Rights Agreement, the Securities, the First Supplemental
Securities or the Second Supplemental Securities in accordance with the terms
hereof and thereof.
(viii) SEC Documents; Financial Statements. Since at least December
31, 1998, the Company has timely filed all reports, schedules, forms, statements
and other documents to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act (all of the foregoing filed prior to the date of
the closings of the sale of the First Supplemental Securities and the Second
Supplemental Securities and all exhibits included therein and financial
statements and schedules thereto and documents (other than exhibits)
incorporated by reference therein, being hereinafter referred to as the "SEC
Documents"). The Company has delivered to RFL as requested by RFL true and
complete copies of the SEC Documents, except for such exhibits, schedules and
incorporated documents. As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with SEC, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or (ii) in
the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company to
RFL (including the information referred to in Section 2(d) of the Securities
Purchase Agreement) contains any untrue statement of a material fact or omits to
state any material fact necessary in order to make the statements therein, in
the light of the circumstance under which they are or were made, not misleading.
Except as set forth in the financial statements of the Company included in the
SEC Documents, the Company has no liabilities, contingent or otherwise, other
than (i) liabilities incurred in the ordinary course of business subsequent to
the date of such financial statements and (ii) obligations under contracts and
commitments incurred in the ordinary course of business and not required under
generally accepted accounting principles to be reflected in such financial
statements, in each case of clause (i) and (ii) next above which, individually
or in the aggregate, are not material to the financial condition, business,
operations, properties, operating results or prospects of the Company. The SEC
Documents contain a complete and accurate list of all written and oral
contracts, agreements, leases or other instruments to which the Company or any
11
subsidiary is a party or by which the Company or any subsidiary is subject which
are required by the rules and regulations promulgated by the SEC to be so listed
(each a "Contract"). None of the Company, its subsidiaries or, to the best of
the Company's knowledge, any of the other parties thereto, is in breach or
violation of any Contract, which breach or violation would, or with the lapse of
time, the giving of notice, or both, have a Material Adverse Effect.
(ix) Absence of Certain Changes. Except as disclosed in the SEC
Documents, since at least January 1, 1999, there has been no material adverse
change and no material adverse development in the business, properties,
operation, financial condition, results of operations or prospects of the
Company. The Company has not taken any steps, and does not currently have any
reasonable expectation of taking any steps, to seek protection pursuant to any
bankruptcy law nor does the Company have any knowledge that its creditors intend
to initiate involuntary bankruptcy proceedings. The Company shall, at least
until RFL no longer holds any of the Company's capital stock, maintain its
corporate existence in good standing and shall pay all taxes when due except for
taxes it reasonably disputes.
(x) Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board or body pending
or, to the knowledge of the Company, threatened against or affecting the
Company, wherein an unfavorable decision, ruling or finding would have a
Material Adverse Effect or which would adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement, the Securities Purchase Agreement or any of
the documents contemplated herein or therein.
(xi) Foreign Corrupt Practices. Neither the Company nor any of its
subsidiaries, nor any officer, director or other person acting on behalf of the
Company or any subsidiary has, in the course of his actions for or on behalf of
the Company, used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expense relating to political activity, made any
direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made
any bribe, rebate, payoff, influence payment, kickback or other unlawful payment
to any foreign or domestic government official or employee.
(xii) Brokers; No General Solicitation. The Company has taken no
action that would give rise to any claim by any person for brokerage
commissions, finder's fees or similar payments relating to this Agreement, the
Securities Purchase Agreement and the transactions contemplated hereby and
thereby, other than to Corporate Capital Management, L.L.C. The Company and RFL
both acknowledge that no other broker or finder was involved with respect to the
transactions contemplated hereby or the Securities Purchase Agreement, other
than Corporate Capital Management, L.L.C. Neither the Company nor any
distributor participating on the Company's behalf in the transactions
contemplated hereby or the Securities Purchase Agreement nor any person acting
for the Company, or any such distributor, has conducted any "general
12
solicitation," as described in Rule 502(c) under Regulation D, with respect to
the Securities, the First Supplemental Securities and the Second Supplemental
Securities. The Company has agreed to compensate Corporate Capital Management,
L.L.C., with a cash payment and certain warrants in accordance with the
Company's separate agreement with Corporate Capital Management, L.L.C.
(xiii) Acknowledgment of Dilution. The Conversion Shares and the
shares of Common Stock underlying the First Supplemental Securities and the
Second Supplemental Securities may increase substantially in certain
circumstances, including the circumstance wherein the trading price of the
Common Stock declines. The Company's executive officers and directors have
studied and fully understand the nature of the securities sold hereunder and
under the Securities Purchase Agreement and recognize they have a potential
dilutive effect. The Board of Directors of the Company has concluded in its good
faith business judgment that such issuances are in the best interests of the
Company. The Company acknowledges that its obligation to issue Conversion Shares
and the shares of Common Stock underlying the First Supplemental Securities and
the Second Supplemental Securities is binding upon it and enforceable regardless
of the dilution that such issuance may have on the ownership interests of other
stockholders.
(xiv) Eligibility to File Registration Statement. The Company is
currently eligible to file a registration statement with the SEC either on From
SB-1 or Form SB-2 under the 1933 Act.
(xv) Non-Disclosure of Non-Public Information. (i) The Company shall
in no event disclose non-public information to RFL or advisors to or
representatives of RFL unless prior to such disclosure of information the
Company marks such information as "non-public information-confidential" and
provides RFL and such advisors and representatives with the opportunity to
accept or refuse to accept such non-public information for review. The Company
may, as a condition to disclosing any non-public information hereunder, require
RFL and its advisors and representatives to enter into a confidentiality
agreement in form reasonably satisfactory to the Company and RFL.
(ii) Nothing herein shall require the Company to disclose non-public
information to RFL and its advisors or representatives, and the Company
represents that it does not disseminate non-public information to investors who
purchase stock in the Company in a public offering, to money managers or to
securities analysts; provided, however, that notwithstanding anything herein to
the contrary, the Company will, as hereinabove provided, immediately notify the
advisors and representatives of RFL and, if any, underwriters, of any event or
the existence of any circumstance (without any obligation to disclose the
specific event or circumstance) of which it becomes aware, constituting
non-public information (whether or not requested of the Company specifically or
generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in the registration statement
to be filed pursuant to this Agreement or the Registration Rights Agreement,
would cause such prospectus to include a
13
material misstatement or to omit a material fact required to be stated therein
in order to make the statements therein, in light of the circumstances in which
they were made, not misleading. Nothing herein shall be construed to mean that
such persons or entities other than RFL (without the written consent of RFL
prior to disclosure of such information) may not obtain non-public information
in the course of conducting due diligence and nothing herein shall prevent any
such persons or entities from notifying the Company of their opinion that, based
upon such due diligence by such persons or entities, that the registration
statement contains an untrue statement of a material fact or omits a material
fact required to be stated in such registration statement or necessary to make
the statement contained therein, in light of the circumstances in which they
were made, not misleading.
14
EXHIBIT
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS
(COLLECTIVELY, THE "LAWS"). THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
LAWS, OR (II) AN OPINION OF COUNSEL PROVIDED TO THE ISSUER IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT REGISTRATION IS
NOT REQUIRED UNDER THE LAWS DUE TO AN AVAILABLE EXCEPTION TO OR EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE LAWS.
ADVANCED OPTICS ELECTRONICS, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No. 04 Number of Shares: 5,800
Date of Issuance: August 7, 2000
Advanced Optics Electronics, Inc., a Nevada corporation (the
"Company"), hereby certifies that, for value received, RFL Asset Management,
L.L.C., and permitted assigns, the registered holder hereof ("Holder"), is
entitled, subject to the terms set forth below, to purchase from the Company
upon surrender of this Warrant, at any time after the date hereof, but not after
5:00 P.M. Delaware time on the Expiration Date (as defined herein) 5,800 fully
paid and nonassessable shares of Common Stock (as defined herein) of the Company
(each a "Warrant Share" and collectively the "Warrant Shares") at a purchase
price per share equal to one hundred ten percent (110%) of the closing bid price
for the Common Stock on the date of this Warrant (the "Exercise Price") in
lawful money of the United States. The number of Warrant Shares purchasable
hereunder and the Exercise Price are subject to adjustment as provided in
Section 9 below.
Section 1.
(a) Definitions. The following words and terms used in this Warrant
shall have the following meanings:
"Common Stock" means (a) the Company's common stock and (b) any capital
stock into which such Common Stock shall have been changed or any capital stock
resulting from a reclassification of such Common Stock.
15
"Convertible Securities" mean any securities issued by the Company that
are convertible into or exchangeable for, directly or indirectly, shares of
Common Stock.
"Expiration Date" means the date which is five (5) years from the date
of this Warrant or, if such date falls on a Saturday, Sunday or other day on
which banks are required or authorized to be closed in the State of Delaware (a
"Holiday"), the next preceding date that is not a Holiday.
"Market Price" means the closing bid price on the day prior to the date
on which the Exercise Form is delivered to the Company, as quoted on the
National Association of Securities Dealers' OTC Bulletin Board Market or such
other national securities exchange or market on which the Common Stock may then
be listed.
"Registration Rights Agreement" shall have the meaning assigned to it
in the Securities Purchase Agreement (defined below).
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Purchase Agreement" shall mean the Securities Purchase
Agreement between the holder hereof (or its predecessor in interest) and the
Company for the purchase of this Warrant and the other Securities (as defined in
the Securities Purchase Agreement).
"Transfer" shall include any disposition of this Warrant or any Warrant
Shares, or of any interest in either thereof which would constitute a sale
thereof within the meaning of the Securities Act of 1933, as amended, or
applicable state securities laws.
"Warrant" shall mean this Warrant and all Warrants issued in exchange,
transfer or replacement of any thereof.
"Warrant Exercise Price" per share shall be equal to one hundred ten
percent (110%) of the closing bid price for the Common Stock on the date of this
Warrant.
(b) Other Definitional Provisions.
(i) Except as otherwise specified herein, all references herein (A) to
the Company shall be deemed to include the Company's successors; and (B) to any
applicable law defined or referred to herein, shall be deemed references to such
applicable law as the same may have been or may be amended or supplemented from
time to time.
(ii) When used in this Warrant, unless the otherwise specified in a
particular instance, the words "herein," "hereof," and "hereunder," and words of
similar import, shall refer to this Warrant as a whole and not to any provision
of this Warrant, and the words "Section," "Schedule," and "Exhibit" shall refer
to Sections of, and Schedules and Exhibits to, this Warrant unless otherwise
specified.
16
(iii) Whenever the context so requires the neuter gender includes the
masculine or feminine, and the singular number includes the plural, and vice
versa.
Section 2. Exercise of Warrant.
(a) Subject to the terms and conditions hereof, this Warrant may be
exercised by the Holder, as a whole or in part, at any time prior to 5:00 P.M.
Delaware Time on the Expiration Date. The rights represented by this Warrant may
be exercised by the Holder, as a whole or from time to time in part (except that
this Warrant shall not be exercisable as to a fractional share) by (i) delivery
of a written notice, in the form of the exercise form attached as Exhibit I
hereto (an "Exercise Form"), of the Holder's election to exercise this Warrant,
which notice shall specify the number of Warrant Shares to be purchased, (ii)
payment to the Company of an amount equal to the Warrant Exercise Price
multiplied by the number of Warrant Shares as to which the Warrant is being
exercised (plus any applicable issue or transfer taxes) in immediately available
funds (either by wire transfer or a certified or cashier's check drawn on a
United States bank), for the number of Warrant Shares as to which this Warrant
shall have been exercised, and (iii) the surrender of this Warrant, properly
endorsed, at the principal office of the Company (or at such other agency or
office of the Company as the Company may designate by notice to the Holder).
In addition, and notwithstanding anything to the contrary contained in
this Warrant, this Warrant may be exercised by presentation and surrender of
this Warrant to the Company in a cashless exercise, including a written
calculation of the number of Warrant Shares to be issued upon such exercise in
accordance with the terms hereof (a "Cashless Exercise"). In the event of a
Cashless Exercise, in lieu of paying the Exercise Price, the Holder shall
surrender this Warrant for, and the Company shall issue in respect thereof, the
number of Warrant Shares determined by multiplying the number of Warrant Shares
to which the Holder would otherwise be entitled by a fraction, the numerator of
which shall be the difference between the then current Market Price per share of
the Common Stock and the Exercise Price, and the denominator of which shall be
the then current Market Price per share of Common Stock.
The Warrant Shares so purchased shall be deemed to be issued to the
Holder or Holder's designees, as the record owner of such Warrant Shares, as of
the date on which this Warrant shall have been surrendered, the completed
Exercise Form shall have been delivered, and payment (or notice of an election
to effect a Cashless Exercise) shall have been made for such Warrant Shares as
set forth above.
In the event of any exercise of the rights represented by this Warrant
in compliance with this Section 2(a), a certificate or certificates for the
Warrant Shares so purchased, registered in the name of, or as directed by, the
Holder, shall be delivered to, or as directed by, the Holder within three (3)
business days after such rights shall have been so exercised.
(b) Unless this Warrant shall have expired or shall have been fully
exercised, the Company shall issue a new Warrant identical in all respects to
the Warrant exercised except (i) it shall represent rights to purchase the
number of Warrant Shares purchasable immediately prior to such exercise under
the Warrant exercised, less the number of Warrant Shares with respect to which
such Warrant is exercised, and (ii) the holder thereof shall be deemed to have
become the holder of record of such Warrant Shares
17
immediately prior to the close of business on the date on which the Warrant is
surrendered and payment of the amount due in respect of such exercise and any
applicable taxes is made, irrespective of the date of delivery of such share
certificate, except that, if the date of such surrender and payment is a date
when the stock transfer books of the Company are properly closed, such person
shall be deemed to have become the holder of such Warrant Shares at the opening
of business on the next succeeding date on which the stock transfer books are
open.
(c) In the case of any dispute with respect to an exercise, the Company
shall promptly issue such number of Warrant Shares as are not disputed in
accordance with this Section. If such dispute only involves the number of
Warrant Shares receivable by the Holder under a Cashless Exercise, the Company
shall submit the disputed calculations to an independent accounting firm of
national standing via facsimile within two (2) business days of receipt of the
Exercise Form. The accountant shall audit the calculations and notify the
Company and the Holder of the results no later than two (2) business days from
the date it receives the disputed calculations. The accountant's calculation
shall be deemed conclusive absent manifest error. The Company shall then issue
the appropriate number of shares of Common Stock in accordance with this
Section.
Section 3. Covenants as to Common Stock. The Company covenants and
agrees that all Warrant Shares which may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be validly issued, fully
paid and nonassessable. The Company further covenants and agrees that during the
period within which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized and reserved a sufficient number of
shares of Common Stock to provide for the exercise of the rights then
represented by this Warrant and that the par value of said shares will at all
times be less than or equal to the applicable Warrant Exercise Price.
Section 4. Taxes. The Company shall not be required to pay any tax or
taxes attributable to the initial issuance of the Warrant Shares or any
permitted transfer involved in the issue or delivery of any certificates for
Warrant Shares in a name other than that of the registered holder hereof or upon
any permitted transfer of this Warrant.
Section 5. Warrant Holder Not Deemed a Stockholder. No holder, as such,
of this Warrant shall be entitled to vote or receive dividends or be deemed the
holder of shares of the Company for any purpose, nor shall anything contained in
this Warrant be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the holder of this Warrant of the Warrant
Shares which he or she is then entitled to receive upon the due exercise of this
Warrant. Notwithstanding the foregoing, the Company will provide the holder of
this Warrant with copies of the same notices and other information given to the
stockholders of the Company generally, contemporaneously with the giving thereof
to the stockholders.
Section 6. No Limitation on Corporate Action. No provisions of this
Warrant and no right or option granted or conferred hereunder shall in any way
limit, affect or abridge the exercise by the
18
Company of any of its corporate rights or powers to recapitalize, amend its
Certificate of Incorporation, reorganize, consolidate or merge with or into
another corporation, or to transfer all or any part of its property or assets,
or the exercise of any other of its corporate rights and powers.
Section 7. Representations of Holder. The holder of this Warrant, by
the acceptance hereof, represents that it is acquiring this Warrant and the
Warrant Shares for its own account for investment and not with a view to, or for
sale in connection with, any distribution hereof or of any of the shares of
Common Stock or other securities issuable upon the exercise thereof, and not
with any present intention of distributing any of the same. Upon exercise of
this Warrant, the holder shall, if requested by the Company, confirm in writing,
in a form satisfactory to the Company, that the Warrant Shares so purchased are
being acquired solely for the holder's own account and not as a nominee for any
other party, for investment, and not with a view toward distribution or resale.
If such holder cannot make such representations because they would be factually
incorrect, it shall be a condition to such holder's exercise of the Warrant that
the Company receive such other representations as the Company considers
reasonably necessary to assure the Company that the issuance of its securities
upon exercise of the Warrant shall not violate any United States or state
securities laws.
Section 8. Transfer; Opinions of Counsel; Restrictive Legends.
(a) The holder of this Warrant understands that (i) this Warrant and
the Warrant Shares have not been and are not being registered under the
Securities Act or any state securities laws (other than as described in the
Securities Purchase Agreement and the Registration Rights Agreement), and may
not be offered for sale, sold, assigned or transferred unless (a) subsequently
registered thereunder, or (b) pursuant to an exemption from such registration;
(ii) any sale of such securities made in reliance on Rule 144 promulgated under
the Securities Act may be made only in accordance with the terms of said Rule
and further, if said Rule is not applicable, any resale of such securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the Securities
Act) may require compliance with some other exemption under the Securities Act
or the rules and regulations of the Securities and Exchange Commission
thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such securities (other than as described in the
Securities Purchase Agreement and the Registration Rights Agreement) under the
Securities Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.
Section 9. Adjustments.
(a) Reclassification and Reorganization. In case of any
reclassification, capital reorganization or other change of outstanding shares
of the Common Stock, or in case of any consolidation or merger of the Company
with or into another corporation (other than a consolidation or merger in which
the Company is the continuing corporation and which does not result in any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock), the Company shall cause effective provision to be made so that
the Holder shall have the right thereafter, by exercising this Warrant, to
purchase the kind and number of shares of stock or other securities or property
(including cash) receivable upon such reclassification, capital reorganization
or other change, consolidation or
19
merger by a holder of the number of shares of Common Stock that could have been
purchased upon exercise of the Warrant immediately prior to such
reclassification, capital reorganization or other change, consolidation or
merger. Any such provision shall include provision for adjustments that shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 9. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and other changes of outstanding
shares of Common Stock and to successive consolidations or mergers. If the
consideration received by the holders of Common Stock is other than cash, the
value shall be as determined by the Board of Directors of the Company acting in
good faith.
(b) Dividends and Stock Splits. If and whenever the Company shall
effect a stock dividend, a stock split, a stock combination, or a reverse stock
split of the Common Stock, the number of Warrant Shares purchasable hereunder
and the Warrant Exercise Price shall be proportionately adjusted in the manner
determined by the Company's Board of Directors acting in good faith. The number
of shares, as so adjusted, shall be rounded down to the nearest whole number and
the Warrant Exercise Price shall be rounded to the nearest cent.
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this
Warrant is lost, stolen or destroyed, the Company shall, on receipt of an
indemnification undertaking reasonably satisfactory to the Company, issue a new
Warrant of like denomination and tenor as the Warrant so lost, stolen or
destroyed. In the event the holder hereof asserts such loss, theft or
destruction of this Warrant, the Company may require such holder to post a bond
issued by a surety reasonably satisfactory to the Company with respect to the
issuance of such new Warrant.
Section 11. Notice. Any notices required or permitted to be given under
the terms of this Warrant shall be sent by mail or delivered personally or by
courier and shall be effective five days after being placed in the mail, if
mailed, certified or registered, return receipt requested, or upon receipt, if
delivered personally or by courier or by facsimile, in each case properly
addressed to the party to receive the same. The addresses for such
communications shall be as provided in the Securities Purchase Agreement (Holder
is defined therein as the "Buyer"). Each party shall provide notice to the other
party of any change in address.
Section 12. Registration Right. Notwithstanding anything herein to the
contrary, unless the Warrant Shares have been registered in accordance with the
Registration Rights Agreement, during the five (5) year period commencing on the
date of this Warrant, if the Company proposes to file a registration statement
for a public offering of any of its securities under the Securities Act of 1933,
as amended, it will give written notice, at least twenty (20) days prior to the
filing of each such registration statement, to the holder of the Warrant and/or
the Common Stock previously received upon exercise hereof (and not previously
sold by such holder) of its intention to do so. Upon the holder's request within
ten (10) days after it has received such notice from the Company, the Company
shall include the Common Stock received or receivable upon exercise of this
Warrant owned in such registration statement such that said Common Stock
received or receivable upon such exercise shall be registered or qualified under
such registration statement. This provision is not applicable to a registration
statement filed on Form S-4 or Form S-8, nor is it applicable to the Warrant
once it has expired under the terms hereof or has been exercised and the holder
received non-restricted Common Stock upon such exercise.
20
The rights described in this Section 12 are in addition to the rights afforded
the Holder by the applicable provisions of the Securities Purchase Agreement.
Section 13. Miscellaneous. This Warrant and any term hereof may be
changed, waived, discharged, or terminated only by an instrument in writing
signed by the party or holder hereof against which enforcement of such change,
waiver, discharge or termination is sought. This Warrant shall be governed by
and interpreted under the laws of the State of Delaware. Headings are for
convenience only and shall not affect the meaning or construction of any of the
provisions hereof. This Warrant shall be binding upon the Company and its
successors and assigns and shall inure to the benefit of the Holder and its
successors and assigns. The Holder may not assign this Warrant except in
accordance with applicable federal and state securities laws. The Holder shall
immediately notify the Company with respect to any permitted assignment of this
Warrant.
Section 14. Date. The date of this Warrant is March 8, 2000. This
Warrant, in all events, shall be wholly void and of no effect after the close of
business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 8 shall continue in full force and
effect after such date as to any Warrant Shares or other securities issued upon
the exercise of this Warrant.
ADVANCED OPTICS ELECTRONICS, INC.
By:
-------------------------------------------
Mr. Leslie Robins, Executive Vice President
21
EXHIBIT I TO WARRANT
EXERCISE FORM TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT
ADVANCED OPTICS ELECTRONICS, INC.
The undersigned hereby exercises the right to purchase the number of
Warrant Shares covered by the Warrant attached hereto as specified below
according to the conditions thereof and herewith makes payment of U.S. $______
(unless effected by a Cashless Exercise in accordance with the terms of the
Warrant), the aggregate Warrant Exercise Price of such Warrant Shares in full
pursuant to the terms and conditions of the Warrant.
(i) The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Common Stock obtained upon exercise of the Warrant, except under
circumstances that will not result in a violation of the 1933 Act or applicable
state securities laws.
(ii) The undersigned requests that the stock certificates for the
Warrant Shares be issued, and a Warrant representing any unexercised portion
hereof be issued, pursuant to the terms of the Warrant in the name of the Holder
(or such other person(s) indicated below) and delivered to the undersigned (or
designee(s)) at the address or addresses set forth below.
Dated:_____________, _____.
HOLDER:
---------------------------------------
By:
-------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------
Address:
--------------------------------------
--------------------------------------
--------------------------------------
Number of Warrant Shares
Being Purchased:________________________