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EXHIBIT 10
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SECURITIES PURCHASE AGREEMENT
BETWEEN
COMPUTER MOTION, INC.
AND
THE PURCHASERS LISTED
ON ANNEX A HERETO
DATED AS OF
FEBRUARY 16, 2001
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of February
16, 2001, between COMPUTER MOTION, INC., a Delaware corporation (the "Company"),
and the Purchasers listed in Annex A hereto (collectively, the "Purchasers").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue and sell an aggregate of (x)
10,024 shares (the "Preferred Shares") of the Company's Series B Convertible
Preferred Stock (the "Series B Preferred Stock"), which Preferred Shares will be
convertible into shares of common stock, par value $.001 per share, of the
Company (the "Common Stock"), pursuant to the terms set forth in the Certificate
of Designations Setting Forth the Preferences, Rights and Limitations of the
Convertible Preferred Stock of Computer Motion, Inc. (the "Certificate of
Designation"), the form of which is annexed hereto as Exhibit A, and (y)
warrants (the "Warrants") to purchase up to an aggregate of 557,931 shares of
Common Stock pursuant to the terms set forth in the Warrants, the form of which
is annexed hereto as Exhibit B, on a private placement basis pursuant to an
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended, and the Purchasers severally and not jointly desire to purchase the
Preferred Shares and the Warrants in the respective amounts set forth opposite
their name in Annex A from the Company on such basis, on the terms and subject
to the conditions set forth herein; and
WHEREAS, the registered holders of the Preferred Shares and the Warrants
will have registration rights with respect to such shares of Common Stock
and/or, if applicable, other securities issuable upon conversion of the
Preferred Shares or exercise of the Warrants (such shares of Common Stock
and/or, if applicable, other securities, the "Conversion Shares") pursuant to
the terms of the Registration Rights Agreement between the Company and the
Purchasers (the "Registration Rights Agreement").
NOW THEREFORE, in consideration of the premises, representations,
warranties, covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINITIONS. For purposes of this Agreement,
capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to such terms in the Certificate of Designations. In addition, the
following terms shall have the following respective meanings:
"Affiliate" of a Person means another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first- mentioned Person. The term "control"
(including the terms "controlling," "controlled by" and "under common control
with") means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
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"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of corporate
stock, including each class of common stock and preferred stock, of such Person.
"Closing" has the meaning set forth in Section 2.02.
"Commission" means the United States Securities and Exchange Commission.
"Escrow Agent" means the escrow agent under the Escrow Agreement.
"Escrow Agreement" means the Escrow Agreement to be executed at the
Closing by the Company, SG and the Escrow Agent.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Governmental Authority" means any federal or state government or
political subdivision thereof and any agency or other entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Material Adverse Effect" has the meaning set forth in Section 3.01.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
Governmental Authority or other entity of any kind.
"SEC Reports" means, collectively, the Company's Annual Report on Form
10-K for the year ended December 31, 1999, the Company's Quarterly Reports on
Form 10-Q for the quarters ended March 31, 2000, June 30, 2000 and September 30,
2000.
"Securities Act" means the Securities Act of 1933, as amended.
"Transaction Documents" means, collectively, this Agreement, the
Registration Rights Agreement, the Escrow Agreement, the Warrants and the
Certificate of Designation.
"United States" has the meaning ascribed to such term in Rule 902(p) of
Regulation S under the Securities Act.
"U.S. Person" has the meaning ascribed to such term in Rule 902(o) of
Regulation S under the Securities Act.
"Year 2000 Compliant" means, with respect to a Person's information
technology, the information technology is designed to be used prior to, during,
and after the calendar Year 2000 A.D., and the information technology used
during each such time period will accurately receive, provide and process
date/time data (including, but not limited to, calculating, comparing and
sequencing) from, into and between the twentieth and twenty-first centuries,
including the years 1999 and 2000, and leap year calculations and will not
malfunction, cease to function or provide invalid or incorrect results as a
result of date/time data, to the extent that other information technology, used
in combination with the information technology being acquired, properly
exchanges date/time data with it.
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ARTICLE II
SALE AND PURCHASE
SECTION 2.01. AGREEMENT TO SELL AND TO PURCHASE; PURCHASE PRICE. On the
terms and subject to the conditions set forth in this Agreement, the Company
hereby agrees to issue and sell to each Purchaser, and each Purchaser severally
and not jointly hereby agrees to purchase from the Company, the number of
Preferred Shares set forth opposite such Purchaser's name on Annex A at the
purchase price set forth opposite such Purchaser's name on Annex A, payable in
immediately available funds to the Company (such purchase price with respect to
any Purchaser, the "Purchase Price").
SECTION 2.02. CLOSING. (a) The closing of the sale and purchase of the
Preferred Shares and the Warrants (the "Closing") shall be deemed to take place
concurrently with the execution and delivery of this Agreement by the parties
hereto. At the Closing, the following closing transactions shall take place,
each of which shall be deemed to occur simultaneously with the Closing: (i) the
Company shall deliver to the Purchasers evidence of the filing of the
Certificate of Designation with, and the acceptance thereof by, the Secretary of
State of the State of Delaware; (ii) the Company shall execute, issue and
deliver to each Purchaser certificates evidencing the Preferred Shares
deliverable to such Purchaser as set forth on Annex A in such denominations as
such Purchaser shall reasonably request; (iii) the Company shall execute, issue
and deliver to each Purchaser Warrants to purchase the number of shares of
Common Stock as set forth on Annex A; (iv) each Purchaser shall pay the Purchase
Price as set forth on Annex A by wire transfer to the account designated by the
Company in writing prior to the Closing; (v) the Company shall deliver to the
Escrow Agent by wire transfer to the account designated by the Escrow Agent in
writing prior to the Closing the amount of $2,000,000 as partial security for
the Company's redemption obligation pursuant to Section 6.07 hereof; (vi) the
Company shall pay the expenses set forth in Section 7.02 hereof by wire transfer
to the account designated by Societe Generale, a bank organized under the laws
of France ("SG"), in writing prior to the Closing; provided that, if SG so
elects, such expenses may be netted against payment of SG's Purchase Price
payable to the Company pursuant to clause (iv) above; (vii) the Company and the
Purchasers shall execute and deliver the Registration Rights Agreement; (viii)
the Company, SG and the Escrow Agent shall execute and deliver the Escrow
Agreement; (ix) the Company shall deliver to the Purchasers a certificate
executed by the Secretary of the Company, signing in such capacity, dated the
date of the Closing (A) certifying that attached thereto are true and complete
copies of the resolutions duly adopted by the Board of Directors of the Company
authorizing the execution and delivery of the Transaction Documents and the
consummation of the transactions contemplated thereby (including, without
limitation, the issuance and sale of the Preferred Shares and the Warrants and
the reservation and issuance of the Conversion Shares upon conversion of the
Preferred Shares and exercise of the Warrants), which authorization shall be in
full force and effect on and as of the date of such certificate, and (B)
certifying and attesting to the office,
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incumbency, due authority and specimen signatures of each Person who executed
any Transaction Document for or on behalf of the Company; (x) Stradling, Yocca,
▇▇▇▇▇▇▇ & ▇▇▇▇▇, counsel to the Company, shall deliver to each Purchaser an
opinion, dated the date of the Closing and addressed to the Purchasers, covering
customary matters; and (xi) the following stockholders of the Company shall each
deliver an irrevocable commitment to vote all of their shares of Capital Stock
of the Company in favor of the proposal described in Section 6.07: ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, M. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
(b) If the purchase price for less than all of the Preferred Shares is
paid at the Closing, then such subscriber may tender the purchase price
therefore no later than February 28, 2001; in such event the subscribers shall
be deemed to have purchased the Preferred Shares at the Closing. In the event
that all of the Preferred Shares are not paid for by February 28, 2001, the
Company shall redeem the Preferred Shares paid for by the purchasers which did
pay the purchase price at the Closing, at such purchasers' option, at 101% of
their face amount plus accrued dividends thereon.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As a material inducement to the Purchasers to purchase the Preferred
Shares and the Warrants, the Company hereby represents and warrants to each
Purchaser that, except as set forth in the Disclosure Schedules delivered by the
Company to the Purchasers and attached hereto, on and as of the date hereof:
SECTION 3.01. ORGANIZATION AND STANDING. The Company and each of its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority, and all authorizations, licenses,
permits and certifications necessary for it to own its properties and assets and
to carry on its business as it is now being conducted (and, to the extent
described therein, as described in the SEC Reports) and proposed to be
conducted. The Company and each of its subsidiaries is duly qualified to
transact business and is in good standing in each jurisdiction in which the
character of the properties owned or leased by it or the nature of its
businesses makes such qualification necessary, except where the failure to so
qualify or be in good standing would not have a material adverse effect on the
business, assets, operations, properties, condition (financial or otherwise) or
prospects of the Company and its subsidiaries, taken as a whole, or any adverse
effect on the Company's ability to consummate the transactions contemplated by,
or to execute, deliver and perform its obligations under, each of the
Transaction Documents (a "Material Adverse Effect").
SECTION 3.02. SECURITIES OF THE COMPANY. The authorized Capital Stock of
the Company consists of 25,000,000 shares of Common Stock and 5,000,000 shares
of preferred stock; as of January 31, 2001, 10,179,563 shares of common stock
and no shares of preferred stock were outstanding and 3,804,485 shares of Common
Stock were reserved for issuance upon exercise of outstanding warrants or
pursuant to the Company's Tandem Stock Option Plan or 1997 Stock Incentive Plan.
Except as set forth in the SEC Reports or disclosed in Schedule 3.02,
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the Company has no other authorized, issued or outstanding equity securities or
securities containing any equity features, or any other securities convertible
into, exchangeable for or entitling any person to otherwise acquire any other
securities of the Company containing any equity features. The Company has no
stock option, incentive or similar plan other than the Tandem Stock Option Plan
and the 1997 Stock Incentive Plan under which the issuance of 2,440,000 shares
of Common Stock may be issued. All of the outstanding shares of Capital Stock of
the Company have been duly and validly authorized and issued, and are fully paid
and nonassessable. The Preferred Shares and the Warrants and all of the
Conversion Shares have been duly and validly authorized. When issued against
payment therefor as provided in this Agreement, the Preferred Shares and the
Warrants will be validly issued and will constitute valid and enforceable
obligations of the Company, enforceable against the Company in accordance with
their respective terms (subject to the effects of applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and general principles of equity). When issued
upon conversion of the Preferred Shares or exercise of the Warrants (in the case
of the Warrants, assuming payment of the exercise price therefor), the
Conversion Shares will be validly issued, fully paid and nonassessable, free and
clear of all preemptive rights, claims, liens, charges, encumbrances and
security interests of any nature whatsoever. A sufficient number of shares of
Common Stock has been duly reserved and will remain available for issuance upon
conversion of the Preferred Shares and exercise of the Warrants. Except as set
forth in this Section 3.02, the SEC Reports or Schedule 3.02 hereto, there are
no outstanding options, warrants, conversion rights, subscription rights,
preemptive rights, rights of first refusal or other rights or agreements of any
nature outstanding to subscribe for or to purchase any shares of Capital Stock
of the Company or any other securities of the Company of any kind binding on the
Company. Neither the issuance of the Preferred Shares or the Warrants nor the
issuance of the Conversion Shares is subject to any preemptive rights, rights of
first refusal or other similar limitation. Except as otherwise required by law,
there are no restrictions upon the voting or transfer of any shares of the
Company's Capital Stock pursuant to the Company's Certificate of Incorporation,
bylaws or other documents. Except as provided herein or in the other Transaction
Documents, there are no agreements or other obligations (contingent or
otherwise) that may require the Company to repurchase or otherwise acquire any
shares of its Capital Stock.
SECTION 3.03. AUTHORIZATION; ENFORCEABILITY. The Company has the
corporate power and authority to execute, deliver and perform the terms and
provisions of each of the Transaction Documents to be executed, delivered or
performed by it and has taken all necessary corporate action to authorize the
execution, delivery and performance by it of, and the consummation of the
transactions contemplated by, the Transaction Documents. No other corporate
proceeding on the part of the Company is necessary, and no consent of any
shareholder of the Company is required, for the valid execution and delivery by
the Company of the Transaction Documents, and except as described in Section
6.07 hereof, the performance and consummation by the Company of the transactions
contemplated by the Transaction Documents to be performed by the Company. The
Company has duly executed and delivered, or concurrently herewith is executing
and delivering, each of the Transaction Documents and has filed the Certificate
of Designation (or caused it to be filed) with the Secretary of State of the
State of Delaware. Assuming the due execution of this Agreement, the
Registration Rights Agreement and the Escrow Agreement by the Purchasers (and in
the case of the Escrow Agreement, the Escrow Agent), this Agreement, the
Registration Rights Agreement, the Escrow
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Agreement, the Series B Preferred Stock (including the terms set forth in the
Certificate of Designation) and the Warrants constitute the valid and binding
obligations of the Company, enforceable against the Company in accordance with
each of their respective terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
SECTION 3.04. NO VIOLATION; CONSENTS.
(a) The execution, delivery and performance by the Company of the
Transaction Documents and the consummation of the transactions contemplated
thereby to be performed by the Company do not and will not (i) contravene the
applicable provisions of any law, statute, rule, regulation, order, writ,
injunction, judgment or decree of any court or Governmental Authority to or by
which the Company or any of its subsidiaries or any of its respective property
or assets is bound, (ii) violate, result in a breach of or constitute (with due
notice or lapse of time or both) a default or give rise to an event of
acceleration under any contract, lease, loan or credit agreement, mortgage,
security agreement, trust indenture or other agreement or instrument to which
the Company is a party or by which it or any of its subsidiaries is bound or to
which any of its respective properties or assets is subject, nor result in the
creation or imposition of any lien, security interest, charge or encumbrance of
any kind upon any of the properties, assets or Capital Stock of the Company or
any of its subsidiaries, or (iii) violate any provision of the organizational
and other governing documents of the Company or any of its subsidiaries.
(b) No consent, approval, authorization or order of, or filing or
registration with, any court or Governmental Authority or other Person is
required to be obtained or made by the Company for the execution, delivery and
performance of the Transaction Documents or the consummation of any of the
transactions contemplated thereby (other than (i) the filing of the Certificate
of Designation with the Secretary of State of the State of Delaware, (ii) the
registration of the resale of the Conversion Shares with the Commission and
pursuant to any state "blue sky" laws as contemplated by the Registration Rights
Agreement, and (iii) the stockholder approval required by the rules applicable
to companies whose common stock is quoted on NASDAQ described in Section 6.07
hereof), except for those consents or authorizations previously obtained and
those filings previously made.
SECTION 3.05. SECURITIES ACT REPRESENTATIONS. The Company has not
offered or sold and will not offer or sell any shares of its Capital Stock
(including any shares of Series B Preferred Stock or any warrants) in this
offering other than the Preferred Shares and the Warrants. Assuming the accuracy
of each Purchaser's representations pursuant to Section 4.02 hereof, the sale of
the Preferred Shares and the Warrants hereunder is, and the issuance of the
Conversion Shares upon conversion of the Preferred Shares and exercise of the
Warrants will be, exempt from the registration requirements of the Securities
Act. Neither the Company, nor any of its Affiliates, or, to its knowledge, any
Person acting on its or their behalf has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) in connection with the offer or sale of the Preferred
Shares, Warrants or Conversion Shares. Neither the Company, nor any of its
Affiliates, nor to its knowledge, 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 other than pursuant to this Agreement under
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circumstances that would require registration under the Securities Act of the
Preferred Shares or Warrants to be issued under this Agreement. The Company is
eligible to use Form S-3 under the Securities Act to file the Registration
Statement (as defined in the Registration Rights Agreement). The Company has not
provided any Purchaser with any material non-public information that, according
to applicable law, rule or regulation, should have been disclosed publicly by
the Company prior to engaging in the transactions contemplated by the
Transaction Documents but that has not been so disclosed.
SECTION 3.06. SOLVENCY; NO DEFAULT. (a) The Company is, and upon giving
effect to the transactions contemplated hereby to be performed by it as of the
Closing will be, Solvent. "Solvent" means that, as of the date of determination,
(i) the then fair saleable value of the assets of the Company (on a consolidated
basis) exceeds the then total amount (on a consolidated basis) of its debts and
other liabilities, (including any guarantees and other contingent, subordinated,
unmatured or unliquidated liabilities whether or not reduced to judgment,
disputed or undisputed, secured or unsecured), (ii) the Company has sufficient
funds and cash flow to pay its liability on its existing debts as they become
absolute and matured, (iii) final judgments against the Company in pending or,
to the Company's knowledge, threatened actions for money damages will not be
rendered at a time when, or in an amount such that, the Company will be unable
to satisfy any such judgments promptly in accordance with their terms (taking
into account (a) the maximum reasonable amount of such judgments in any such
actions (other than amounts that would be remote), (b) the earliest reasonable
time at which such judgments would be rendered and (c) any reasonably expected
insurance recovery with respect thereto), and (iv) the Company does not have
unreasonably small capital with which to engage in its present business.
(a) The Company is not, and immediately after the consummation of the
transactions contemplated hereby to be performed by the Company will not be, in
default of (whether upon the passage of time, the giving of notice or both) its
organizational and other governing documents, or any provision of any security
issued by the Company, or of any agreement, instrument or other undertaking to
which the Company is a party or by which it or any of its property or assets is
bound, or the applicable provisions of any law, statute, rule, regulation,
order, writ, injunction, judgment or decree of any court or Governmental
Authority to or by which the Company or any of its property or assets is bound,
which default or violation, either individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
SECTION 3.07. NO BROKERS. Other than Brighton Capital Ltd., no broker,
finder, agent or similar intermediary is entitled to any broker's, finder's,
placement or similar fee or other commission in connection with the transactions
contemplated hereby based on any agreement, arrangement or understanding with
the Company.
SECTION 3.08. SEC REPORTS; FINANCIAL CONDITION; NO ADVERSE CHANGES. (a)
The audited consolidated financial statements of the Company and the related
notes thereto as of December 31, 1999 reported on by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP,
independent accountants, copies of which have heretofore been furnished to the
Purchasers and are publicly available, present fairly the financial condition,
results of operations and cash flows of the Company (on a consolidated basis) at
such date and for the periods set forth therein. The unaudited consolidated
balance sheets, consolidated statements of operations and consolidated
statements of cash flows at and for the period ended September 30, 2000 (or such
more recent financial statements as are
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included in the SEC Reports) (such audited and unaudited consolidated financial
statements, collectively, the "Financial Statements"), copies of which have
heretofore been furnished to the Purchasers and are publicly available, present
fairly the financial condition, results of operations and cash flows of the
Company (on a consolidated basis) at such date and for the periods set forth
therein, subject to normal year-end adjustments with respect to the September
30, 2000 financial statements (or such more recent financial statements as are
included in the SEC Reports). The Financial Statements, including the related
schedules and notes thereto (if any), have been prepared in accordance with
generally accepted accounting principles as set forth in the opinions and
pronouncements of the Accounting Principles Board of American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board as in effect on the date of filing of such documents
with the Commission, applied on a consistent basis (except for changes concurred
in by the Company's independent public accountants) unless otherwise expressly
stated therein. Except as disclosed in the SEC Reports, during the period from
January 1, 2000 to and including the date hereof, there has been no sale,
transfer or other disposition by the Company of any material part of the
business, property or securities of the Company and no purchase or other
acquisition of any business, property or securities by the Company material in
relation to the financial condition of the Company.
(b) Except as are fully reflected or reserved against in the Financial
Statements and the notes thereto, there are no liabilities or obligations with
respect to the Company or any of its subsidiaries of any nature whatsoever
(whether absolute, accrued, contingent or otherwise and whether or not due)
that, either individually or in the aggregate, after taking into account (a) the
maximum reasonable amount of any liability that may arise on account of any
litigation or any other contingent liability or obligation (other than amounts
that would be remote), (b) the earliest reasonable time at which any such
liability or obligation may become due and (c) any reasonably expected insurance
recovery with respect thereto, could reasonably be expected to have a Material
Adverse Effect.
(c) Since December 31, 1999, except as set forth in the SEC Reports,
there has been no development or event, nor any prospective development or event
known to the Company or any of its subsidiaries, or any litigation, proceeding
or other action seeking an injunction or other restraining order, damages or
other relief from a court or administrative agency of competent jurisdiction
pending, threatened or, to the knowledge of the Company, contemplated, or any
action of any Governmental Authority, that has had or could reasonably be
expected to have a Material Adverse Effect.
SECTION 3.09. USE OF PROCEEDS; FEDERAL REGULATIONS. No part of the net
proceeds from the sale of the Preferred Shares and the Warrants will be used in
a manner that would violate the provisions of Regulation T, U or X of the Board
of Governors of the Federal Reserve System. The Company will not use such
proceeds other than for or in connection with general working capital and
repayment of existing debt and to fund the Escrow Agreement.
SECTION 3.10. SUBSIDIARIES. As of the date hereof, the Company has no
subsidiaries other than Computer Motion, S.A., a French corporation.
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SECTION 3.11. YEAR 2000 COMPLIANCE. The Company and its subsidiaries are
Year 2000 Compliant. To the knowledge of the Company each of the suppliers,
vendors and customers material to the operations of the Company and its
subsidiaries is Year 2000 Compliant.
SECTION 3.12. NO INTEGRATED OFFERING. Neither the Company, nor any of
its Affiliates, nor to its knowledge 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 that would require
registration under the Securities Act of the offer and sale of the Preferred
Shares and the Warrants.
SECTION 3.13. NO LITIGATION. Except as set forth in Schedule 3.13,
hereto, no litigation or claim (including those for unpaid taxes), or
environmental proceeding against the Company or any of its subsidiaries is
pending, threatened or, to the Company's best knowledge, contemplated that, if
determined adversely, would (after taking into consideration any reasonably
expected insurance recovery with respect thereto) have a Material Adverse Effect
on the Company.
SECTION 3.14. ENVIRONMENTAL MATTERS. The Company and each of its
subsidiaries is in compliance in all material respects with all applicable state
and federal environmental laws, and no event or condition has occurred that may
interfere in any material respect with the compliance by the Company or any of
its subsidiaries with any environmental law or that may give rise to any
liability under any environmental law that, individually or in the aggregate,
would have a Material Adverse Effect.
SECTION 3.15. INTELLECTUAL PROPERTY. The Company (and/or its
subsidiaries) owns or has licenses to use certain patents, copyrights and
trademarks ("intellectual property") associated with its business. The Company
and its subsidiaries have all intellectual property rights that are needed to
conduct the business of the Company and its subsidiaries as it is now being
conducted as disclosed in the SEC Reports. The intellectual property rights that
the Company (and/or its subsidiaries) owns are valid and enforceable. The use of
such intellectual property by the Company (and/or its subsidiaries') does not
infringe upon or conflict with any right of any third party, and neither the
Company nor any of its subsidiaries has received notice, written or otherwise,
of any such infringement or conflict. Except as set forth in the SEC Reports,
the Company has no knowledge of any infringement of its (and/or its
subsidiaries) intellectual property by any third party.
SECTION 3.16. INSURANCE. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
subsidiaries are engaged. The Company has no reason to believe that it and its
subsidiaries will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business without a significant increase in
cost.
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SECTION 3.17. RELATED PARTY TRANSACTIONS. Except as disclosed in
Schedule 3.17 none of the officers, directors, employees or 5% or greater
shareholders of the Company is presently a party to any transaction with the
Company or any of its subsidiaries (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or the advances of money or otherwise requiring
payments to or from any such officer, director, employee or shareholder or, to
the knowledge of the Company, any corporation, partnership, trust or other
entity in which any such officer, director, employee or shareholder has a
substantial interest or is an officer, director, trustee or partner.
SECTION 3.18. PERMITS. The Company and each of its subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted (collectively, the "Company Permits"), and there is
no action pending or, to the knowledge of the Company, threatened regarding
suspension or cancellation of any of the Company Permits except for such Company
Permits the failure of which to possess, or the cancellation or suspension of
which, would not, individually or in the aggregate, have a Material Adverse
Effect. To the best of its knowledge neither the Company nor any of its
subsidiaries is in material conflict with, or in material default or material
violation of, any of the Company Permits.
SECTION 3.19. INTERNAL ACCOUNTING CONTROLS. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient, in
the judgment of the Company's board of directors, to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
SECTION 3.20. TAX RETURNS. The Company has filed or caused to be filed
all Federal tax returns and all material state and local tax returns required to
have been filed by it and has paid or caused to be paid all taxes shown to be
due and payable by it on such returns or on any assessments received by it,
except any such tax, the validity or amount of which is being contested in good
faith by appropriate proceedings and as to which the Company has set aside on
its books adequate reserves with respect thereto in accordance with generally
accepted accounting principles. Neither the Company nor its subsidiaries has
received any tax assessment, notice of audit, notice of proposed adjustment or
deficiency notice from any taxing authority.
SECTION 3.21. DISCLOSURE. The representations and warranties of the
Company in this Agreement and the statements contained in the SEC Reports and
the schedules, certificates and exhibits furnished to the Purchasers by or on
behalf of the Company in connection herewith do not contain any untrue statement
of a material fact and do not omit to state any material fact necessary to make
the statements herein or therein not misleading. The SEC Reports contain all
material information concerning the Company required to be set forth therein,
and no event or circumstance has occurred or exists since September 30, 2000,
that would require the Company to disclose such event or circumstance in order
to make the statements in the SEC Reports not misleading as of the date of the
Closing but that has not been so disclosed. The Company hereby acknowledges that
the Purchasers are and will be relying on the SEC Reports and the Company's
representations, warranties and covenants contained herein in making an
investment decision with respect to the Preferred Shares and the Warrants and
will be relying thereon (together with future reports filed with the Commission)
in connection with any transfer of Preferred Shares, Warrants and Conversion
Shares or any acquisition of Conversion Shares upon the conversion of the
Preferred Shares or exercise of the Warrants.
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ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS
Each Purchaser hereby acknowledges, represents, warrants and covenants,
severally and not jointly, to the Company as follows:
SECTION 4.01. AUTHORIZATION; ENFORCEABILITY; NO VIOLATIONS.
(a) Such Purchaser (unless such Purchaser is an individual) is duly
organized, validly existing and in good standing under the laws of its
jurisdiction, has all requisite power and authority to execute, deliver and
perform the terms and provisions of this Agreement, the Registration Rights
Agreement and the Escrow Agreement and has taken all necessary action to
authorize the execution, delivery and performance by it of this Agreement, the
Registration Rights Agreement and the Escrow Agreement and to consummate the
transactions contemplated hereby and thereby to be performed by it.
(b) The execution, delivery and performance by such Purchaser of this
Agreement, the Registration Rights Agreement and, in the case of SG, the Escrow
Agreement, and the consummation by such Purchaser of the transactions
contemplated hereby and thereby to be performed by it do not and will not
violate any provision of (i) such Purchaser's organizational documents or (ii)
any law, statute, rule, regulation, order, writ, injunction, judgment or decree
to which such Purchaser is subject. Such Purchaser has duly executed and
delivered this Agreement and has executed and delivered, or concurrently
herewith is executing and delivering, the Registration Rights Agreement and, in
the case of SG, the Escrow Agreement. Assuming the due execution hereof and
thereof by the Company and by each other Purchaser, each of this Agreement, the
Registration Rights Agreement and, in the case of SG the Escrow Agreement
constitutes the legal, valid and binding obligation of such Purchaser,
enforceable against such Purchaser in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law).
SECTION 4.02. SECURITIES ACT REPRESENTATIONS; LEGENDS.
(a) Such Purchaser understands that: (i) the offering and sale of the
Preferred Shares and the Warrants to be issued and sold hereunder is intended to
be exempt from the registration requirements of the Securities Act; (ii) neither
the Preferred Shares or the Warrants nor the Conversion Shares have been
registered under the Securities Act or any other applicable
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securities laws and such securities may be resold only if registered under the
Securities Act and any other applicable securities laws or if an exemption from
such registration requirements is available; and (iii) the Company is required
to register any resale of the Preferred Shares, the Warrants or the Conversion
Shares under the Securities Act and any other applicable securities laws only to
the extent provided in the Registration Rights Agreement.
(b) The Preferred Shares and the Warrants to be acquired by such
Purchaser pursuant to this Agreement are being acquired for its own account, for
investment purposes, and not with a view to, or for sale in connection with, any
distribution thereof or (other than the resale of Conversion Shares pursuant to
an effective registration statement as contemplated by the Registration Rights
Agreement) of Conversion Shares issuable upon conversion of the Preferred Shares
or exercise of the Warrants in violation of the Securities Act or any other
securities laws that may be applicable.
(c) Such Purchaser is not an affiliate (as such term is defined in the
Securities Act) of the Company.
(d) Such Purchaser (i) has sufficient knowledge and experience in
financial and business matters so as to be capable of evaluating the merits and
risks of its investment in the Preferred Shares and the Warrants and is capable
of bearing the economic risks of such investment, including a complete loss of
its investment in the Preferred Shares and the Warrants; (ii) believes that its
investment in the Preferred Shares and the Warrants are suitable for it based
upon its objectives and financial needs, and such Purchaser has adequate means
for providing for its current financial needs and business contingencies and has
no present need for liquidity of investment with respect to the Preferred Shares
and the Warrants; (iii) has no present plan, intention or understanding and has
made no arrangement to sell the Preferred Shares, the Warrants or the Conversion
Shares at any predetermined time or for any predetermined price; (iv) has not
purchased, sold or entered into any put option, short position or similar
arrangement with respect to the Common Stock, and will not, for so long as it
owns any Preferred Shares, Warrants or Conversion Shares, purchase, sell or
enter into any such put option, short position or similar arrangement in any
manner that violates the provisions of the Securities Act or the Exchange Act.
(e) No oral or written statements or representations have been made to
such Purchaser by or on behalf of the Company in connection with the offering
and sale of the Preferred Shares and the Warrants hereunder other than those set
forth in the SEC Reports, or as set forth herein or in the other Transaction
Documents, and such Purchaser is not subscribing for the Preferred Shares and
the Warrants as a result of, or in response to, any advertisement, article,
notice or other communication published in any newspaper, magazine or similar
media or broadcast over television or radio, or presented at any seminar or
meeting.
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(f) Such Purchaser acknowledges that the Securities Act restricts the
transferability of securities, such as the Preferred Shares, Warrants and
Conversion Shares, issued in reliance upon the exemption from the registration
requirements of the Securities Act provided by Section 4(2) thereunder, and
that, subject to Section 6.02 hereof, the certificates representing the
Preferred Shares, the Warrants and the Conversion Shares will bear a legend in
substantially the following form, by which such Purchaser and each subsequent
holder of such securities will be bound:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (AND AS OF THE DATE OF
ORIGINAL ISSUANCE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE, ANY
UNDERLYING SECURITIES) HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE
SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH SECURITIES
LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR ANY SECURITIES
ISSUABLE UPON THE CONVERSION HEREOF MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED OTHER THAN (A) TO COMPUTER MOTION, INC. (THE
"COMPANY") OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO RULE 144 UNDER THE
SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION
IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO
ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT. THE HOLDER OF THIS CERTIFICATE AGREES THAT IT
WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY OR ANY SECURITY ISSUED
UPON CONVERSION HEREOF IS TRANSFERRED (UNLESS SUCH SECURITY IS
TRANSFERRED PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT) A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY PROPOSED TRANSFER PURSUANT TO CLAUSES (B), (C) OR
(D) ABOVE, THE COMPANY MAY REQUIRE THAT THE TRANSFEROR FURNISH IT WITH
AN OPINION OF COUNSEL CONFIRMING THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE RESPECTIVE
MEANINGS ASSIGNED TO THEM IN REGULATION S UNDER THE SECURITIES ACT.
SECTION 4.03. NO BROKERS. No broker, finder, agent or similar
intermediary is entitled to any broker's, finder's, placement or similar fee or
other commission in connection with the transactions contemplated hereby based
on any agreement, arrangement or understanding with such Purchaser.
ARTICLE V
COVENANTS OF SOCIETE GENERALE
SECTION 5.01. NO INFLUENCE ON BUSINESS. Societe Generale ("SG") (whether
in its capacity as holder of the Preferred Shares, the Warrants and/or the
Conversion Shares or otherwise) covenants and agrees with the Company that it
will not: (a) in any manner exercise or attempt to exercise a controlling
influence over the management or policies of the Company or attempt to influence
the business activities or decisions or the Company; (b) propose a director or
slate of directors to serve on the board of directors of the Company; (c) have
or seek to have a
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representative of SG be appointed to serve as a director of the Company or
participate as an observer at meetings of the board of directors (or committees
thereof) or have or seek to have any employee or representative of SG serve as
an officer, agent or employee of the Company; (d) attempt to influence the
dividend policies or practices of the Company; (e) solicit or participate in
soliciting proxies with respect to any matter presented to the shareholders of
the Company; (f) dispose or threaten to dispose of the Preferred Shares,
Warrants or Conversion Shares to any third party in any manner as a condition to
specific action or non-action by the Company; or (g) enter into any joint
venture, enterprise or undertaking of any kind with the Company.
SECTION 5.02. LIMITATIONS ON RESALES. SG covenants and agrees that it
(together with its Affiliates) will not transfer the Preferred Shares or the
Warrants to any Person (together with such Person's Affiliates), other than the
Company or Affiliates of SG, in a transaction or series of transactions, in an
aggregate principal amount in excess of such principal amount as would be
convertible or exercisable at the date of transfer into in excess of 2% of the
issued and outstanding shares of Common Stock of the Company (based upon, in the
case of the Preferred Shares, the applicable Conversion Price (as defined in the
Certificate of Designation) and number of shares of Common Stock of the Company
issued and outstanding on the applicable date of transfer and without giving
effect to any limitations on conversion or exercise set forth in the Certificate
of Designation and the Warrants). SG further covenants and agrees that it will
not knowingly transfer to any Person (together with such Person's Affiliates),
other than the Company or Affiliates of SG, in a transaction or series of
transactions, Conversion Shares in an aggregate amount in excess of 2% of the
issued and outstanding shares of Common Stock of the Company (based upon the
number of shares of Common Stock of the Company issued and outstanding on the
applicable date of transfer); in furtherance thereof, SG covenants and agrees
that it shall not during any five (5) consecutive trading days transfer
Conversion Shares in secondary market transactions in which the identity of the
acquiror is not known to SG in an amount in excess of 2% of the issued and
outstanding shares of Common Stock of the Company (based upon the number of
shares of Common Stock of the Company issued and outstanding on the applicable
date of transfer). SG covenants and agrees that the foregoing transfers to third
parties shall be made in bona fide, arms-length transactions and that upon any
such transfer, it will not retain the power to control the disposition of the
securities transferred or, in the case of Conversion Shares, to direct the
voting with respect thereto.
ARTICLE VI
COVENANTS
SECTION 6.01. EXEMPTION FROM REGISTRATION; LIMITATION ON ISSUANCE OF
SECURITIES; RIGHT OF PARTICIPATION.
(a) The Company will not make any offer to sell, solicit any offer to
buy, agree to sell or sell any security or right to acquire any security, except
at such time and in such manner so as not to cause the loss of any of the
exemptions for the offer and sale of the Preferred Shares or the Warrants
hereunder and for the issuance of the Conversion Shares upon conversion of the
Preferred Shares or exercise of the Warrants from the registration requirements
under the Securities Act or under the securities or "blue sky" laws of any
jurisdiction in which such offer,
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sale or issuance is made. Without limiting the generality of the foregoing, the
Company will not make any offer to sell, solicit any offer to buy, agree to sell
or sell any securities similar in tenor to the Preferred Shares or the Warrants
or right to acquire any securities similar in tenor to the Preferred Shares or
the Warrants during the period commencing on the date of the Closing and ending
one hundred and eighty (180) days thereafter.
(b) In addition to the foregoing limitation on the issuance of
securities, for a period commencing on the date of the Closing and ending 18
months thereafter, without obtaining the prior written consent of the
Purchasers, the Company will not issue any type of security convertible into
shares of Common Stock with a floating conversion price which provides for a
minimum conversion price that could be lower than $2.72.
(c) Each Purchaser, for so long as it owns Preferred Shares, shall have
the right to participate, on a pro rata basis and on the same terms as other
investors, in issuances by the Company for capital raising purposes of equity
securities (or securities convertible into or exercisable for, equity
securities) other than bona fide underwritten offerings registered under the
Securities Act or issuances of securities in connection with strategic
transactions. Such Purchaser's pro rata participation right shall be equal to a
fraction, the numerator of which shall be the number of shares of Common Stock
into which such Purchaser's then outstanding Preferred Shares are convertible
(inclusive of accrued dividends) based upon the lower of (A) the then applicable
conversion price or (B) in the event notice of such issuance occurs prior to the
passage or elimination of the Reset Dates, the Market Price per share of Common
Stock (subject to a floor equal to the Conversion Price Floor, in each case at
the time notice of such proposed issuance is given as set forth below,
calculated irrespective of any limitation on conversion set forth in any
Transaction Document, (the "Purchaser Proportionate Interest") and the
denominator of which shall be the sum of the Purchaser Proportionate Interest
and the number of shares of Common Stock outstanding at the time notice of such
proposed issuance is given as set forth below. In the event the Company proposes
to issue a security to which Purchasers' would be entitled to participate
pursuant to the foregoing, the Company shall notify each Purchaser in writing at
least 30 days prior to the issuance date of the proposed issuance date, the
terms of such offering and the Purchaser's pro rata right up to which it is
entitled to participate. In order to participate in such offering, a Purchaser
must notify the Company in writing at least 10 days prior to the designated
issuance date and specify the amount of securities, up to its pro rata amount,
that it wishes to purchase. If the Purchaser does not so notify the Company, the
Company may issue such securities on the terms set forth in the notice to
Purchasers. In the event the terms of the offer are subsequently varied by the
Company, the Company must then again notify Purchasers as set forth above.
SECTION 6.02. TRANSFER RESTRICTIONS; DELIVERY OF CONVERSION SHARES.
(a) Each Purchaser acknowledges that any proposed offer, sale, pledge or
other transfer of Preferred Shares, Warrants or Conversion Shares prior to the
date that is two (2) years from the Closing (or such other date as may be
required pursuant to Rule 144 under the Securities Act (or similar successor
provision) as in effect from time to time), in the absence of registration under
the Securities Act, is limited. Accordingly, prior to such passage of time or
such registration, the Preferred Shares, the Warrants or the Conversion Shares
may be offered,
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sold, pledged or otherwise transferred only (i) to the Company, (ii) in an
offshore transaction in accordance with Rule 904 under the Securities Act, (iii)
pursuant to any other exemption from registration provided by the Securities
Act, (iv) pursuant to Rule 144 under the Securities Act or (v) pursuant to an
effective registration statement under the Securities Act; in the case of any
transfer pursuant to clause (ii), (iii) or (iv), the Company shall be entitled
to receive an opinion of the selling Purchaser's counsel, in form and substance
reasonably satisfactory to the Company, to the effect that registration is not
required in connection with such disposition. Any Preferred Shares or Warrants
sold to the Company may not be reissued or resold.
(b) The Company agrees to issue certificates representing the Preferred
Shares, Warrants or Conversion Shares without the legend referenced in Section
4.02(a) above at such time as (i) the holder thereof is permitted to dispose of
such Preferred Shares, Warrants or Conversion Shares pursuant to Rule 144 (k)
under the Securities Act (to the extent applicable), (ii) such Preferred Shares,
Warrants or Conversion Shares are sold to a purchaser or purchasers who (in the
opinion of counsel to the seller or such purchaser(s), in form and substance
reasonably satisfactory to the Company) are able to dispose of such securities
publicly without registration under the Act and such legend is no longer
required to be included on the certificates representing the Preferred Shares,
Warrants or Conversion Shares or (iii) such Preferred Shares, Warrants or
Conversion Shares are sold pursuant to an effective registration statement under
the Securities Act.
(c) In the alternative to physical delivery of certificates for
Conversion Shares, if delivery of the Conversion Shares pursuant to any
conversion thereunder may be effectuated by electronic book-entry through The
Depositary Trust Company ("DTC"), delivery of Conversion Shares pursuant to such
conversion shall, if requested by the relevant Purchaser (or holder of
Conversion Shares), settle by book-entry transfer through DTC by the third
trading day following the Date of Conversion (as defined in the Certificate of
Designation) or the date of exercise of the Warrants pursuant to the terms
thereof, as appropriate. The parties agree to coordinate with DTC to accomplish
this objective.
SECTION 6.03. RULES 144; CURRENT INFORMATION. For so long as any
Preferred Shares, Warrants or Conversion Shares are outstanding, the Company
will (i) cause its Common Stock to continue to be registered under Section 12 of
the Exchange Act, file all reports required to be filed by it under the
Securities Act and the Exchange Act and will take such further actions as any
Purchaser may reasonably request, all to the extent required from time to time
to enable any Purchaser to sell Preferred Shares, Warrants and Conversion Shares
without registration under the Securities Act pursuant to the safe harbors and
exemptions provided by Rule 144 under the Securities Act (to the extent
applicable), as such Rule may be amended from time to time, or any similar rule
or regulation hereafter adopted by the Commission, and (ii) furnish each
Purchaser with all reports, proxy statements and registration statements that
the Company files with the Commission or distributes to its securityholders
pursuant to the Securities Act and the Exchange Act at the times of such filings
and distributions (unless such documents are available electronically from the
Commission or elsewhere without charge and within a period reasonably
contemporaneous with the filing thereof with the Commission, in which case such
documents need not be provided to any Purchaser). Upon the request of any
Purchaser, the Company will deliver to such Purchaser a written statement as to
whether it has complied with the foregoing requirements.
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SECTION 6.04. RESERVATION OF CONVERSION SHARES. The Company shall at all
times reserve and keep available, free from preemptive rights, out of its
authorized but unissued shares of Common Stock or its issued shares of Common
Stock held in its treasury, or both, sufficient shares of Common Stock to
provide for the issuance of the Conversion Shares in an amount equal to the
balance of the Maximum Share Issuance (as defined in the Certificate of
Designation) not then yet issued.
SECTION 6.05. STOCK LISTING. The Company shall endeavor to have the
Conversion Shares in an amount equal to the Maximum Share Issuance approved for
quotation or listing, prior to issuance, upon the Approved Market (as defined in
the Certificate of Designation) upon which the Common Stock is listed or traded
at the time of issuance of such Conversion Shares.
SECTION 6.06. TRANSACTIONS IN RESET PERIOD. During the 30 days
immediately preceding any Reset Date (as defined in the Certificate of
Designation) (such 30-day period, a "Reset Period"), (i) the Company and its
affiliates shall not purchase, or agree to purchase, any Common Stock in an open
market transaction and (ii) the Purchasers shall not sell, or agree to sell, any
Common Stock (x) unless there has been, during the 60 days prior to or during
any Reset Period, a circumstance or event that has resulted in, or could
reasonably be expected to have, a Material Adverse Effect, (y) unless the sale
price in any such transaction is at least 150% of the Initial Conversion Price
(as defined in the Certificate of Designation), and (z) provided that if the
sale price in any such transaction is greater than 110% but less than 150% of
the Initial Conversion Price, the Purchasers may sell, or agree to sell, on any
trading day up to 20% of the average daily trading volume of the Common Stock
during the 30 trading days immediately preceding such trading day.
SECTION 6.07. STOCKHOLDER APPROVAL; MINIMUM REVENUE. In order to satisfy
Nasdaq's stockholder approval requirements, the Company will use its best
efforts to hold a stockholders meeting as soon as reasonably practicable to
obtain stockholder approval to allow for the issuance to the Purchasers of the
maximum number of shares of Common Stock which the Purchasers could acquire upon
conversion of the Preferred Shares in accordance with the terms thereof, which
maximum amount is in excess of 20% of the currently outstanding shares of Common
Stock of the Company. In addition, the Company hereby covenants that its
consolidated revenue, based on the Company's financial results for the period
determined on a basis consistent with past practices, for the three months ended
March 31, 2001 will be at least $4.5 million (the "Minimum Revenue
Requirement"). Pursuant to this Agreement and the Escrow Agreement, one-half of
the aggregate Purchase Price received by the Company at the Closing from SG will
be deposited with the Escrow Agent (the "Escrowed Funds") as partial security
for the Company's redemption obligation set forth below with respect to SG only
pending the Company's obtaining Stockholder Approval and publicly announcing its
results for the first quarter of 2001 which confirm that it has met the Minimum
Revenue Requirement (the "Minimum Revenue Confirmation"). If Stockholder
Approval is obtained, and the Minimum Revenue Confirmation occurs, by May 31,
2001, then, pursuant to the terms of the Escrow Agreement, the Escrowed Funds,
together with accrued interest thereon, will be released to the Company. If
Stockholder Approval is not obtained or the Minimum Revenue Confirmation does
not occur by May 31, 2001, (i) the Company will redeem from SG and the other
Purchasers one-half of each of its Preferred Shares originally purchased at a
redemption price of 115% of the face value of such Preferred Shares plus accrued
dividends (the "Redemption Price"), (ii) the
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Escrowed Funds, together with the accrued interest thereon, will, pursuant to
the terms of the Escrow Agreement, be released to SG as partial satisfaction of
the Redemption Price payable to SG, (iii) the Company will pay the remaining
balance of the Redemption Price to SG and the Redemption Price payable to the
other Purchasers within one business day after May 31, 2001 and (iv) upon
payment in full, SG and the other Purchasers will surrender certificates
representing such redeemed Preferred Shares for cancellation.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. PRESS RELEASES AND DISCLOSURE. No party hereto shall issue
any press release or make any other public disclosure related to this Agreement
or any of the transactions contemplated hereby without the prior written
approval of the other party hereto, except as may be necessary or appropriate in
the opinion of the party seeking to make disclosure to comply with the
requirements of applicable law or stock exchange rules. If any such press
release or public disclosure is so required, the party making such disclosure
shall consult with the other party prior to making such disclosure, and the
parties shall use all reasonable efforts, acting in good faith, to agree upon a
text for such disclosure that is satisfactory to all parties.
SECTION 7.02. EXPENSES. Except as otherwise expressly provided for
herein, the Company will pay all of SG's expenses (including reasonable
attorneys' fees and expenses) in connection with the negotiation of the
Transaction Documents and the performance of due diligence by SG (whether the
transactions contemplated hereby are consummated or not) subject to a maximum of
$35,000. Such expenses of SG shall be payable at the Closing and may be netted
against the Purchase Price otherwise payable to the Company by SG.
SECTION 7.03. NOTICES. All notices, demands, requests, consents,
approvals or other communications required or permitted to be given hereunder or
that are given with respect to this Agreement shall be in writing and shall be
personally served or deposited in the mail, registered or certified, return
receipt requested, postage prepaid or delivered by reputable air courier service
with charges prepaid, or transmitted by hand delivery, telegram, telex or
facsimile, addressed as set forth below, or to such other address as such party
shall have specified most recently by written notice: (i) if to the Company, to:
Computer Motion, Inc., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Attention: ▇▇▇▇▇▇
▇▇▇▇▇▇, Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇, with copies (which shall not constitute
notice) to: Stradling, Yocca, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇, Facsimile No.: (949)
725-4100; and (ii) if to any Purchaser, at the address of such Purchaser set
forth on Annex A. Notice shall be deemed given on the date of service or
transmission if personally served or transmitted by telegram, telex or
facsimile. Notice otherwise sent as provided herein shall be deemed given on the
third business day following the date mailed or on the next business day
following delivery of such notice to a reputable air courier service.
SECTION 7.04. ENTIRE AGREEMENT. This Agreement (together with the other
Transaction Documents and all other documents delivered pursuant hereto and
thereto) constitutes the entire agreement of the parties with respect to the
subject matter hereof and supersedes all prior and contemporaneous agreements,
representations, understandings, negotiations and discussions between the
parties, whether oral or written, with respect to the subject matter hereof.
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SECTION 7.05. AMENDMENT AND WAIVER. This Agreement may not be amended,
modified, supplemented, restated or waived except by a writing executed by the
party against which such amendment, modification or waiver is sought to been
enforced. Waivers may be made in advance or after the right waived has arisen or
the breach or default waived has occurred. Any waiver may be conditional. No
waiver of any breach of any agreement or provision herein contained shall be
deemed a waiver of any preceding or succeeding breach thereof nor of any other
agreement or provision herein contained. No waiver or extension of time for
performance of any obligations or acts shall be deemed a waiver or extension of
the time for performance of any other obligations or acts.
SECTION 7.06. ASSIGNMENT; NO THIRD PARTY BENEFICIARIES. This Agreement
and the rights, duties and obligations hereunder may not be assigned or
delegated by the Company or, prior to the Closing, any Purchaser without the
prior written consent of the other parties hereto; provided that any Purchaser
may assign or delegate its rights, duties and obligations hereunder, prior to
the Closing, to any Affiliate of such Purchaser. Subsequent to the Closing, this
Agreement may be assigned by any Purchaser to any transferee of Preferred Stock
provided that such transferee agrees to be bound by the terms hereof by
executing and delivering to the Company a counterpart of this Agreement. Except
as provided in the preceding sentence, any purported assignment or delegation of
rights, duties or obligations hereunder made without the prior written consent
of the other party hereto shall be void and of no effect. This Agreement and the
provisions hereof shall be binding upon and shall inure to the benefit of each
of the parties and their respective successors and permitted assigns. This
Agreement is not intended to confer any rights or benefits on any Persons other
than as set forth above.
SECTION 7.07. SEVERABILITY. This Agreement shall be deemed severable,
and the invalidity or unenforceability of any term or provision hereof shall not
affect the validity or enforceability of this Agreement or of any other term or
provision hereof. Furthermore, in lieu of any such invalid or unenforceable term
or provision, the parties hereto intend that there shall be added as a part of
this Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.
SECTION 7.08. FURTHER ASSURANCES. Each party hereto, upon the request of
any other party hereto, shall do all such further acts and execute, acknowledge
and deliver all such further instruments and documents as may be necessary or
desirable to carry out the transactions contemplated by this Agreement.
SECTION 7.09. TITLES AND HEADINGS. Titles, captions and headings of the
sections of this Agreement are for convenience of reference only and shall not
affect the construction of any provision of this Agreement.
SECTION 7.10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
INTERPRETED UNDER, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED WITHIN THE
STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS
THEREOF.
19
21
SECTION 7.11. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, all of which taken
together shall constitute one and the same instrument.
SECTION 7.12. ELECTION OF CERTAIN PURCHASERS. Each of Catalpa
Enterprises Ltd., BayStar Capital, LP, BayStar International, Ltd. and Mssrs.
▇▇▇▇▇▇, ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ elect to opt out of the conversion limitation
provisions contained in Section 4(b) of the Certificate of Designations and
Section 8.03(B) of the Warrants. No other Purchaser has made or after the date
hereof may make, such election.
20
22
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned, thereunto duly authorized, as of the date first set
forth above.
COMPUTER MOTION, INC.
By:
--------------------------------
Name:
Title:
SOCIETE GENERALE
By:
--------------------------------
Name:
Title:
CATALPA ENTERPRISES LTD.
By:
--------------------------------
Name:
Title:
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
BAYSTAR CAPITAL, LP
By:
--------------------------------
Name:
Title:
BAYSTAR INTERNATIONAL, LTD.
By:
--------------------------------
By:
-----------------------------
Name:
Title:
21
23
ANNEX A
PURCHASERS
------------------------------------------ ----------------------------------- ----------------
SHARES OF CONVERTIBLE PREFERRED AGGREGATE
PURCHASER NAME STOCK/WARRANTS PURCHASED PURCHASE PRICE
AND NOTICE ADDRESS FROM THE COMPANY PAID AT CLOSING
------------------------------------------ ----------------------------------- ----------------
Societe Generale 4,000 Preferred Shares $4,000,000
c/o ▇▇ ▇▇▇▇▇ Securities Corporation 221,402 Warrants
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: J. ▇▇▇▇ ▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
------------------------------------------ ----------------------------------- ----------------
CATALPA ENTERPRISES LTD. 3,000 Preferred Shares $3,000,000
c/o ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 166,051 Warrants
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇.#▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
------------------------------------------ ----------------------------------- ----------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 500 Preferred Shares $500,000
51 Monte Vista 27,675 Warrants
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
------------------------------------------ ----------------------------------- ----------------
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24
------------------------------------------ ----------------------------------- ----------------
SHARES OF CONVERTIBLE PREFERRED AGGREGATE
PURCHASER NAME STOCK/WARRANTS PURCHASED PURCHASE PRICE
AND NOTICE ADDRESS FROM THE COMPANY PAID AT CLOSING
------------------------------------------ ----------------------------------- ----------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 1,500 Preferred Shares $1,500,000
c/▇ ▇▇▇▇▇▇ and Associates 83,025 Warrants
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
------------------------------------------ ----------------------------------- ----------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 24 Preferred Shares $24,000
▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ 1,328 Warrants
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇
------------------------------------------ ----------------------------------- ----------------
BayStar Capital, LP 700 Preferred Shares $700,000
c/o BayStar Management LLC 38,745 Warrants
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Mr. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------------ ----------------------------------- ----------------
BayStar International, Ltd. 300 Preferred Shares $300,000
c/o BayStar International Management LLC 16,605 Warrants
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Mr. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------------ ----------------------------------- ----------------
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25
EXHIBIT A
FORM OF CERTIFICATE OF DESIGNATION
[See Exhibit 4.1]
26
EXHIBIT B
FORM OF WARRANTS
[See Exhibit 4.3]
